[DAO: QmPCWGR] Should we convert 1/5th of the DAO’s MANA to stablecoin to diversify and stabilize the treasury?

Governance
1

by 0x4837f2542050744faf8215a5c401b86a01b6b91d

Summary

Given the amount of MANA owned by the Decentraland DAO, we should diversify these holdings between Decentraland’s native token (MANA) and stable coins to make the DAO’s treasury more secure.

The DAO should allocate one-fifth (1/5) of the treasury, or 6,115,643 MANA, to a portfolio of stable coins including equal proportions of USDT, USDC, and DAI.

The added stability resulting from this diversification will better empower the DAO to fulfill its various financial obligations (e.g. the community grants program) over a longer period of time.

While the formation of a DAO Treasury Committee might result in a more complex and performant financial strategy, this initial proposal aims to suggest a simple change that our community can make right now to immediately help to protect and sustain the DAO’s funding.

Abstract

On February 20, 2020, the Decentraland DAO was created and given 222 million MANA by means of a 10 year vesting contract. (Sign into Metamask or connect your wallet to view the DAO’s vesting dashboard.) This MANA was set aside to support the continued development of the Decentraland platform by funding decisions made by MANA holders and LAND owners through the DAO.

As of the time this proposal was published, 30,578,217 of that MANA has vested, and is now available to the DAO’s treasury.

It is risky for the DAO to keep only MANA (its native governance token) in its treasury. To help guarantee that the treasury’s balance remains wisely managed, the DAO’s treasury should diversify across bluechip assets (e.g. ETH or BTC), stablecoins (e.g. DAI or USDC), and other assets such as a DeFi index (DPI) which may enable the DAO to earn yield.

Spreading the DAO’s holdings across these different assets will help to stabilize the DAO’s entire treasury in the face of market fluctuations.

Maintaining a stable treasury is a critical step toward enabling the DAO to fulfill its obligations to the Decentraland community, e.g. grants. The recently approved Grants Framework specifies that each grant is to be paid in MANA, according to the exchange rate between USD and MANA at the time of the transaction.

Maintaining a cushion of stable coins within the treasury will help to maximize the number, size, and duration of grants that the DAO can fund in the long term.

Many other DAOs are beginning to explore initiatives such as this, as is discussed in this article and the related report from the Blockchain Capital blog.

**In conclusion, the DAO should exchange 1/5th of its treasury (or 6,115,643 MANA) for a portfolio of stable coins containing equal proportions of USDT, USDC, and DAI. **

The remaining 4/5ths of the treasury will remain in MANA.

Specification

1/5th of the DAO’s existing treasury, or 6,115,643 MANA, is to be exchanged for USDC, USDT, and DAI stable coins, with to the following distribution:

  • 2,038,547.66 USDC
  • 2,038,547.66 USDT
  • 2,038,547.66 DAI

The transaction is to be conducted by the DAO Committee’s multisig, requiring the signature of all three members.

For

Approve the proposed asset allocation and delegate the transaction to the DAO Committee.

Against

Reject the proposed asset allocation.

  • For
  • Against

Vote on this proposal on the Decentraland DAO

View this proposal on Snapshot

1 Like
2

The information provided above is not sufficient to make a decision as to a reallocation strategy.

The primary purpose of maintaining a treasury is to offset future liabilities. The treasury will need to pay out for various reasons - DAO grants, salaries, strategic investments, etc… Any conversion of assets should be performed with a lens toward be able to meet those future needs.

As such, a breakdown - at least at a high level - as to what those expected future liabilities are (as the future can’t be perfectly predicted) would be needed to even weigh in on this issue. Is the intention to put aside sufficient stable coins in order to pay out USD-denominated future payments? Is it to lock in and protect against a drop in MANA/ETH/other non-stable crypto to have more of that crypto in the future by buying a dip? Will the stable coins be invested in some kind of yield-bearing vehicle managed by a third party or providing liquidity on an exchange - and if so, has someone done the due diligence about the credit risk and protections provided by those services? If hypothetically, the grants are to be paid in MANA, then moving any funds into anything else is purely speculative. As they’re paid in USD, it would make sense to have a buffer in USD but how much? If you’re worried about MANA declining, that’s a bit worrisome. Alternatively, if MANA does appreciate (e.g. 2x from here), and your liabilities are denominated in USD, wouldn’t you end up having to buy back half the original stack? Seems like incentives are not aligned for a community that gives MANA its value.

The conclusion may be that such a diversification ends up being a good idea, but the way this is presented there’s no way of knowing. Note: If you do want help with understanding how to go about this analysis feel free to give me a shout.

1 Like
3

ouch, did this proposal get implemented?

edit: ah, I see it was :stuck_out_tongue:

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