[DAO:c39b19f] $12MM Treasury Diversification

Governance
1

by 0x11cbb078596e5100f4cbb999c5c9b69ca2ff6477 (Bronstein)

Should the following Tier 5: up to $120,000 USD, 6 months vesting (1 month cliff) grant in the Community category be approved?

Abstract

Alastor proposes to lead a treasury diversification effort for Decentraland to diversify $12M of MANA into stables.

$12M represents a 12-24 month runway for the DAO at $500k - $1M per month of grant expenditure (DCL has averaged $640k per month over the last six months, with a high of $1.1M).

Grant size

120,000 USD

Beneficiary address

0x11cbB078596E5100F4cbB999c5C9b69cA2FF6477

Email address

sam@alastor.ooo

Description

This summer Alastor received a grant to do an analysis on DCL’s historical performance and treasury on behalf of DCL. Our analysis had a number of takeaways but our primary recommendation was to diversify MANA in the treasury into stables.

Our analysis is located here: Preparing detailed financial statements, budget, and long-range forecast

Subsequently, we proposed that Alastor be appointed to lead a strategy & finance squad, with our first priority being a treasury diversification effort. This proposal was rejected.

Since the release of our initial report on August 12th, the price of Mana has fallen from $1.07 to less than $0.42. To be clear, we did not predict this price drop - but our stance was simply that DCL had uncapped capital downside, putting the prospective runway of the DAO in jeopardy. What was at the time a >$200M treasury (including unvested MANA) is now worth just over $90M. A $20M diversification of vested MANA (our initial proposal outlined in our report) would have saved the DAO ~$12M in value, roughly 100x the compensation we asked for to lead this initiative.

We would like to ask DCL to once again consider our proposal. Today’s treasury (including unvested MANA) sits at ~$90M, with 99.8% of the value denominated in MANA. $18.5M of that MANA is vested, and we still believe that a large portion of that value should be diversified into stables, to prevent further value loss and to capitalize on the value DCL has created to date.

Decentraland is overexposed, unhedged, and undercapitalized. This was true in August, it’s still true today.

Potential counterparties for diversification include:

-Venture Capital

-Liquid Token Funds

-Market Makers

-DCA using Uniswap v3

Specification

We will contact venture capital firms and liquid token funds to assess if there is a single buyer for the $12MM in MANA. This transaction is likely to occur at a negotiated discount to current market price, with the tokens unlocking over a negotiated period of time

We will also contact market makers and explore alternative methods for diversification, such a DCA’ing on Uniswap v3

Ultimately our goal will be to secure the most favorable terms for the DAO amongst the potential options

Personnel

Sam Bronstein: https://twitter.com/Sam_Bronstein

Jordan Stastny: https://twitter.com/jstastny101

Alastor provides strategic and financial services to DAOs. Alastor has done grant work for Uniswap, Lido, Gitcoin, and others and also serves as a core contributor to Llama. Most recently, Alastor prepared a deep-dive research report for the Uniswap Foundation on their fee switch: Alastor Fee Switch Report - Uniswap Governance

Prior to founding Alastor, Sam & Jordan were M&A advisors at Qatalyst, where they advised leading technology companies on M&A and strategy across more than $150Bn of M&A and capital markets transactions, including the sales of Slack, LinkedIn, Mailchimp, Glassdoor, and others

Roadmap and milestones

We would begin reach-out to counterparties in December with the goal of having a fully fleshed out diversification plan (potentially allocated across multiple counterparties and strategies, dependent upon demand). The goal would be to have the diversification fully complete by the end of Q1 of 2023.

Vote on this proposal on the Decentraland DAO

View this proposal on Snapshot

2

I like this strategy, I like your approach, I think we need to setup a Bid for this Mission which can be submitted to by various parties to determine who would take on this task. I do believe you earn extra points for leading this effort, especially to this point. Cheers.

1 Like
3

The 120k fees charged by the firm (aka the asked grant amount) for these transactions seem way too high, it could be lower than 1k. Even though it’s 1% of 12 millions, the analysis was the main part of the job and was paid for 20k. I think the DAO need diversification, in stable coins included, but it could just be executed without fees through a governance proposal and perhaps be for more than 12 millions.

1 Like
4

you got 20k last time and missed all the updates. Now i guess you need 100k more? Lolz

https://vesting.decentraland.org/#/0x5451f9e5bf9bb64b7c3a0c56d0d4c8346a168f20

1 Like
5

Alastor, thank you for all your help in preparing the recent financial report. I agree, the treasury is definitely unhedged and undercapitalized, with material capital expenditures/grant liabilities. I can say that the 1% Management fee asked is pretty industry standard (some even charging 2%).

My question is for the Foundation, is there a current Investment Committee/Accounting Department that is already looking into this, or is analyzing this?

I am abstaining from voting for the time being until I have better clarity on the efforts being done. Great idea & an important investment the DAO and community must consider.

I appreciate your expertise thus far.

1 Like
6

Yea but they can do this themselves with proven stable coins that are not AI based and are burn based. The fee these dudes want for a guessing game is dramatically stupid. When you have multiple multi millionaires on the foundation that should be able to pull there heads out there ass and make a proposal to have a safe treasury.

7

Investment banks that raise capital charge anywhere between 3-5% of total capital raised. Our fee is significantly below that at 1%. Like I mentioned in our proposal, we would not only diversify through market makers, but would leverage our relationships with potential investors to manage a competitive process for the MANA sale. In our original report (which we were paid $20k for), we recommended a treasury diversification ASAP. No one at the DAO decided to do that, and since then, the value of the treasury has eroded by $100MM.

That was more to do with not understanding how the update process itself worked. If you look at the final report, it was delivered on time and was thorough and thoughtful. I know that the members of the grants committee we worked with would agree that we were very responsive to all of their requests and delivered what we promised we would deliver.

My response to this would be “if it’s so easy, why hasn’t someone done it so far?” This is very clearly a significant issue that the DAO has not addressed, and waiting to do this has already cost the DAO tens of millions of dollars. Waiting until someone at the foundation does will likely cost the DAO even more money. If our proposal were to be accepted, we would execute this immediately. To be blunt, the fact that virtually the entire treasury is denominated in MANA and thus far no one has taken the initiative to remedy this is a significant oversight for the DAO. To be very direct, if the price of MANA continues to erode, the DAO will lose the ability to pay contributors and all development work on the Decentraland ecosystem will cease to exist. If that is a risk that the DAO is comfortable taking, then no need to diversify the treasury.

8

Yea no two people have tried or done this [DAO:66tzgla] Should 1/4 of DAO balance converted to Eth and Btc before 2024 Bitcoin halving? and Should we convert 1/8th of the DAO’s MANA to stablecoin to diversify and stabilize the treasury?
If dao wants pay two suits 60k each to make some charts and list some probabilities thats cool. You can sell and trickle release coins. Could even hit up one them dudes you made a bil last company and have them whale the price. Point remains its business for you two grant from uniswaps grant here grant there ride the waves. If you all cared youd already be pitching a way to save the dao using your skills. Instead your locking it behind a paywall. I dont think the dao should support you. Someone from the community themselves should promote the idea like @yemel did last time. Thats just my oppinion tho. Dont blame you for trying to do what suits do and make easy money.

9

A diversification would benefit the DAO and we would do it professionally via market makers, VC firms, funds, etc. to secure competitive terms for DCL. If the DAO either 1) doesn’t want to diversify its treasury or 2) doesn’t want to hire Alastor to do it, that’s totally fine. No need to name call though.

Bottom line is that all of the DAO contributors are paid in stables, there are no stables in the treasury, and the price of MANA could continue to erode. Elementary level finance indicates that this is a significant issue that the DAO would be wise to address.

1 Like
10

Why 12 -24 months and not instantly considering sentiment is bearish till q2+ 2024? As for the suit remark you Live in NY. You take runs around Central Park and Manhattan. You deal with firms with assets in the millions. You enter dao after dao for business to make a profit on intel and market analysis. You then strategize and exercise or tell people how they should said assets. If you are not a suit I dont know what is. Either way im vote yes now cause it kinda urks me that us lil dudes with the small vp or that have been lucky enough to be delegated by the current dao whales. Have to watch this happen and only Yemel has taken some kinda measure. Until a day ago i couldnt even put my own proposal forward.

11

We would start the diversification process immediately. The $12mm represents 12-24 months of runway based on estimated grant expenditures

12

$12MM Treasury Diversification

This proposal is now in status: REJECTED.

Voting Results:

  • Yes 5% 179,860 VP (24 votes)
  • No 95% 2,968,396 VP (58 votes)