[DAO:4a00227] 1% Strategic Diversification of DCL DAO Holdings

by 0xd6e62a97a55537cd04847bb73e22208bd20106aa (DCLCurations)

Abstract:
Decentraland is the oldest, and one of the most prominent metaverse platforms in the world. With a 10yr, 220M MANA vesting contract, the DAO is able to support a multi-million dollar grants program and multiple DAO teams including: DAO Committee, DAO Governance Squad, Grant Support Squad, Revocations Committee, Facilitations Committee, Moderators, and more.

Yet, with a current treasury value of $22,308,022 US Dollar value (98% held in $MANA), there is no finance committee and very little interest in financial management.

This is intended to persuade the Decentraland Community that diversification is a necessity in order to manage risk, explore growth opportunities, and achieve long-term sustainability that does not rely on the 10yr vesting contract.

DAO Financial Guiding Principles:

  1. Maintain Grant Fund sustainability quarter-over-quarter in perpetuity
  2. Invest, where possible, in tangential platforms or cryptocurrencies
  3. Have negligible impacts to the $MANA market price

Short-term Goals: 1-3months

  1. Convince the Decentraland DAO that financial management and planning is a necessity
  2. Achieve DAO consensus on a 1% diversification plan ($223,080)
  3. Establish a framework for investing

Long-term Goals: 2-5yrs

  1. Become the World’s greatest DAO
  2. Achieve positive cashflow

Current State:
The current position of the DAO is to do nothing with the $MANA they hold; however, within the Decentraland DAO 2 topics of discussion are top of mind:

  1. The downtrend of $MANA which decreases the ability for the DAO to operate and fund growth

  2. Competing platforms (Hyperfy, Mona, Spatial, etc.)
    I argue that 1% ($223,080) of our current treasury can be used as a starting point to 1. Help mitigate risks of external factors bringing down the value of $MANA and 2. Build relationships and integrations with current “competitors”

Example Scenario:
Hyperfy has attracted a lot of attention, especially from the DCL community, for its VRMs and ease to build and host events. 1674/9500 hyperfy LAND has been purchased at a price of .09 ETH (~$168USD).

For $159,201USD, the Decentraland DAO could take a 10% position in hyperfy land. This can be used by the DCL Community to develop cross-platform integrations and can be leveraged to insert the DCL DAO into conversations with other metaverse platforms about forming collaborations moving forward.

The Additional ~45k USD can be put onto liquidity platforms such as Uniswap to provide more liquidity, earn yield, and provide some market stabilization for individuals looking to invest in our platform.

  • Pursue Further
  • Don’t do this
  • Invalid question/options

Vote on this proposal on the Decentraland DAO

View this proposal on Snapshot

1 Like

Thanks for a Great proposal ! :sparkles:

1 Like

It’s about time. I definitely believe we need to diversify and find ways to bring in funds. A question I have (as I know this is a starting point) is the 1% the highest we can start with without impacting the price of MANA drastically? Is 2% feesible or even 5%? I’d like to see some of this also swapped for other tokens (BTC for 1) and I would also like to see a build in Spatial, Oncyber (both of which are free) and possibly Cryptovoxels and Somnium Space to name a few. I would even go so far as to donate a piece of land in a platform that is still being created (I’ve participated in 2 playtests thus far) called CryptoverseVIP. That could strengthen our collaborations with those platforms as well.

1 Like

There’s no situation where we should open the DAO up to ‘active’ investing, it’s a terrible concept given that the general public, let alone an anonymous DAO, generally make poor investment decisions.

Buying out 10% of another platforms mint is an interesting way of wanting to try partner with them, but I don’t think its a good idea - partnerships arise from mutual understanding and building trust, us owning 10% of their platforms worlds could affect their decisions and may even lead to DCLDAO being forced to take actions that would actively hurt our relationship with them (I.e. needing to sell the land). Hyperfy doesn’t even have a floor/liquidity atm for these NFTs, it’s insanely high risk and speculative.

I guess what I’m confused about, is how this is diversification? It’s basically just sliding up our risk tolerance and spending more MANA to take gambles on another metaverse - if DCL fails, we don’t need some backup investments, that’s it, the experiment is over, DCLDAO exists to bet on and continue the growth of DCL, not to start taking speculative risks with the treasury we’ve been given.

This opens us up to an extremally problematic precedent where people will begin to calculate how they can use mana to attack the DAO and direct the speculative investments towards self-beneficial results.

What’s worse, is this method does not even provide a yield. Which takes us further away from our goal of sustainability, so that a group of users can play investment and speculate with other peoples money.

Voting no, and would encourage everyone to have a long hard think if this is where we want the DAO to go, if both the speculative investments and DCL succeeds, we will lose massive amounts of opportunity cost from the spent mana. If DCL fails, but the speculative investments succeed, it’s still over, and the ‘diversification’ isn’t going to magically return the platform.

What’s worse, is if DCLDAO begins to fail, and we do need the funds that we speculatively invested, they will be locked up what seems to be illiquid NFTs, LPs (imperative loss in downward mana price would ensure we lose whatever reserves we would have had if we had just kept the 50% USD from LP).

Let’s matrix:
DCL fails x Speculation fails = DAO fails
DCL fails x Speculation wins = DAO fails (no DAO without DCL)
DCL succeeds x Speculation succeeds = DAO has less money, because MANA would have outperformed speculative investments in cases of DCLs success
DCL succeeds x Speculation fails = ok well the platform succeeded, but now we have no treasury to build with because people wanted to take risks on ‘diversifying’ and failed.

Logically, none of this makes sense.

Instead, let’s by Eth & matic nodes with that money, we depend on that tech anyway, so we are betting on DCLs success instead of speculating, AND they return a yield + positively low risk verse alternative crypto options.

$223k could buy FOUR Ethereum validators alone, earning us ~6 eth a year in yield that is likely to appreciate vs our USD investment.

What’s more, if the bull market returns, we are guarantied that Eth/Matic should AT LEAST correlate in the same direction as mana, with much stronger fundamentals protecting it from losing value.

While I am against investment and yield, nodes are at least a sensible, aligned, safe risk to take on to earn a yield

There is simply no room for this level of speculation with DAO funds, and I say this as someone who has used and is extremely bullish on Hyperfy since Oct '22.

Are you asking if the Dao should spend 150k~ on 900 of something that has minimal demand? I might be confused.

Thanks for the comment Morph!

The hyperfy example was just to show how much could be done with as little as 1% of this DAO treasury. I am not recommending we take a 10% stake in hyperfy. But the fact that we could do that with less than 1% of our unallocated funds should illustrate how influential the DCL DAO can be in forming the future of the metaverse.

Your matrix doesnt make sense because there are no metrics to determine whether or not DCL fails or succeeds. DCL was created to be a decentralized platform controlled by its users. In my view it is already succeeding. And if it becomes a barren land then it will still be succeeding.

In short, DCL has already succeeded because it exists.

Your point about Eth validators is a great one!

The main goal is for the DAO to be open to positions outside of MANA

This is also a response to your comment @jar0d lol. I started writing a separate one but they are basically the same

1 Like

We can reasonably assume that mana price = success, because a situation where mana loses value means that our entire economy becomes worthless.

Given that, revisit the matrix and you will see that any diversification from Mana is a bet on mana to fail.

If we were going to bet on mana to fail, it might have been a good idea during bull market froth, not after a 90% slide down.

The fact we are even entertaining this here, when mana is at $0.40 instead of any time previously where it had been at a new all time high consistently shows that we simply aren’t capable of making good decisions in regards to this.

I’d have to agree with Morph in terms of the concept of investing DAO funds into other platforms, or traditional financial instruments for that matter.

My first and main concern, is why are we thinking to execute this at current levels? i.e MANA and MANA/ETH ratio at close to 3 year lows. I’d say that even a novice investor would understand the notion of buy low sell high, and yet we are choosing to sell our MANA for USD/BTC/ETH at multi year lows? This 1 issue that I have is enough for me to lose confidence on the idea of “investing” our MANA.

Look at the charts and tell me which is a higher possibility in the next year, or two.
For MANA to go from 38 cents to 76 cents (2x) or
SP500 to go from 4400 to 8800 (2x) or
XAU to go from 1900 to 3800 (2x)

And then answer me this too, we already have selling pressure from MANA that is sold by both the foundation and grantees, what do you think will happen to both price action as well as sentiment if we were to consider selling MANA to “invest”.

I’ll tell you how I’d view the DAO as an outsider.
A fool.

The time to consider selling/ investing is when we are back at ATHs, not now. Timing is everything, for both risk to reward, as well as optics.

1 Like

We could consider diverting a portion of the grant funds towards investment purposes. Why couldn’t we allocate some of the grant money towards strategic investments ? We could possibly use funds from the accelerator grants category, which is intended to generate revenue for the DAO.

In my view, our focus should be on long-term sustainability. Even if we only implement this strategy during all-time market highs, it’s crucial that we’re prepared and have considered this approach in advance.

Would like to invite Community to discuss DAO financial topics,issues and concerns in financial-planning working group in Decentraland DAO Discord. :sparkles: :handshake:

https://discord.gg/tR9KAKVKMj

Honest Personal Opinion:

  1. DCL’s tokenomics looks weak to me.
  2. We will see more experienced investors to propose a diversification to Ethereum or Bitcoin.
  3. Burning mechanism is gone .
  4. Revenue is very weak while spending remain high.
  5. I believe MANA is still overvalued despite plummeting from $5 to $0.28~$0.40 range.

For now, the metaverse LAND backs the MANA price, that’s why it has VALUE so diversifying to Ethereum or Bitcoin is just OPTIONAL.
Other DAO’s need ETH or BTC because they have nothing to back the price of their DAO token.
So diversification is not really required but only optional in my opinion.

As for this proposal, “Strategic Diversification” to higher risk assets such as the proposal’s example is a noob move than any newbie hahaha. Help mitigate risk by investing to higher risk? GG bru

I welcome criticism so feel free to tag me.

Yours truly

akasya.eth

1% Strategic Diversification of DCL DAO Holdings

This proposal is now in status: FINISHED.

Voting Results:

  • Pursue further 28% 1,028,412 VP (33 votes)
  • Don’t do this 72% 2,574,949 VP (60 votes)
  • Invalid question/options 0% 0 VP (3 votes)

1% Strategic Diversification of DCL DAO Holdings

This proposal has been REJECTED by a DAO Committee Member (0xbef99f5f55cf7cdb3a70998c57061b7e1386a9b0)