Gitcoin Treasury Diversification

Authors from Llama: @schlabach, @0xJosh, @helloshreyas

Summary

We propose that Gitcoin diversify $15 million of its treasury into stablecoins. $15m constitutes 24% of the vested treasury and 2% of the total treasury (vested + unvested). The goals of the treasury diversification are to de-risk Gitcoin’s treasury, make sure the treasury has sufficient stablecoins to cover one year of operating expenses, and ensure that GTC tokens are held by long-term partners. This post outlines the need and process for the treasury diversification. We are also seeking members to fill four spots in a treasury diversification working group. Please respond to this post if you are interested!

Need for Stablecoins in the Gitcoin Treasury

As of January 13, Gitcoin’s treasury stood at $62 million, 99% of which was held in GTC tokens. Gitcoin’s treasury vester wallet contains $543 million worth of GTC tokens. Additionally, working group wallets contain a small amount of DAI used to pay contributors.

Gitcoin’s operating budget has grown significantly since the launch of the DAO and is now approximately $3-4 million per quarter. This budget is used to fund the FDD working group, Moonshot Collective, Gitcoin’s public goods effort, marketing expenses, Gitcoin decentralization efforts, and the DAO Ops workstream. More details on Gitcoin’s spending can be seen in Llama’s monthly financial statements for the DAO. (s/o to @Elliott)

At the same time, Gitcoin’s governance token continues to be volatile. From September 28 to November 27, the price of GTC rose from $6.30 to $28.04, more than quadrupling. Since its high in late November, the token has fallen and now trades around $11.75. This volatility in price affects Gitcoin’s treasury and makes it difficult to forecast and address future spending.

Gitcoin’s annual operating budget ($15m) currently constitutes 24% of the vested treasury. If GTC’s price falls by 50%, Gitcoin’s treasury will also decrease by 50%, which would make it difficult to meet or increase operating expenses. Gitcoin’s growth should not be hampered by short term swings in its token price. Gitcoin should have at least 1 year of operating expenses in stablecoins so that it has clarity on its budget and is able to comfortably pay its contributors.

Additionally, paying contributors in GTC could put downward pressure on the price of the GTC token. Contributors may choose to sell their tokens at a later date, pushing the price of GTC down.

Diversifying a portion of Gitcoin’s treasury will give the following benefits:

  • De-risk the Gitcoin treasury and lower its volatility
  • Allow Gitcoin workstreams and contributors the option to get paid in stables if they choose
  • Allow Gitcoin to operate from a position of strength in case of a market downturn
  • Lower operational costs required to sell GTC for stables each quarter in order to pay contributors
  • Ensure that GTC tokens are held by long-term partners

Proposal

Given the rationale outlined above, we propose that the Gitcoin treasury exchange $15m in GTC for USDC or DAI to strategic partners and individuals chosen by the community. In order to carry out this diversification of the Gitcoin treasury, we propose the following process as an actionable roadmap:

  1. Form a 5-person working group from the DAO to work on the plan for diversifying the Gitcoin treasury.
  2. Draft a comprehensive governance forum post, detailing the logistics of the diversification of the Gitcoin treasury and the types of strategic partners desired. Additionally, it will explain how potential strategic partners should express their interest via a response to the forum post.
  3. Vet strategic partners based on select criteria established by the DAO and ask these partners to speak to the community (on a platform such as Discord or Twitter Spaces) and elaborate on their interest, their value add, their vision, etc. The working group will deliberate and form a shortlist of potential strategic partners.
  4. Share the working group’s shortlist with the community via a forum post to gather input.
  5. Come together as a working group to draw up the final details following community feedback. The diversification plan and the proposed new strategic partners will be put to an on-chain governance vote.

This process is purposefully designed with the objective of being open, transparent, and community-led. The Gitcoin community will be involved across the process and is integral to the decision making.

Taking this into consideration, the working group will arrive at a price at which to sell GTC to the new strategic partners based on community feedback and market reaction to the announcement.

Additionally, the working group will speak with lawyers to incorporate any relevant disclosures in the treasury diversification process. For tax purposes, Gitcoin should set aside a reserve and account for any tax liabilities resulting from the treasury diversification.

Potential Strategic Partners

Overall, GitcoinDAO is looking for long-term strategic partners that bring a diverse set of experience, competencies, and ideas to the table. They should see this as a partnership, whereby all parties will work together to nurture Gitcoin into the stellar project it aims to be. We invite participation from DAOs, Gitcoin community members, highly integral individuals in the crypto ecosystem, and groups that align with Gitcoin’s mission of funding public goods. We want to cultivate a robust group of entities and individuals from all parts of the crypto landscape.

Further detail is to be outlined in a follow-up forum post after forming the working group.

Treasury Diversification Working Group

As outlined in the Proposal section, the first step is to establish a 5-person working group to focus on the treasury diversification. We ask that interested members please respond to this forum post to submit their candidacy. We welcome and urge members from all walks of the community to apply. If you are interested, please respond to this post with the following: involvement in the Gitcoin community, pertinent knowledge on treasury diversification / strategic partners / DAOs, and valuable experience across crypto and non-crypto roles that may be applicable. We propose that Llama fills one of the five working group seats.

Execution

Once the treasury diversification working group establishes the details of the process, including execution price and possible new strategic partners, Llama can build smart contracts needed to execute the sale. The contracts will enable GitcoinDAO to enter counterparty addresses, token amounts, and the vesting schedule. The smart contracts will then stream GTC to the strategic partners according to the agreed-upon vesting schedule in exchange for USDC or DAI. These contracts should also immediately unlock the voting power for the new strategic partners for both vested and unvested tokens. This will help Gitcoin execute the diversification entirely on-chain and trustlessly after the governance vote passes. Implementation details may change based on feedback from the Gitcoin community and our strategic partners.

Compensation

Working group members will be compensated on a basis of $150/hr, with a maximum number of hours for an individual being 30.

Additionally, we propose that the working group be compensated for any legal expenses or security audits incurred from the operations pertaining to smart contract engineering and legal review of the process.

Conclusion

As noted above, this process is designed to be open, transparent, and community-led.

Gitcoin is not alone in facing this challenge; many other DAOs are heavily concentrated in their native tokens, resulting in issues with budgeting and paying contributors. A treasury diversification should be a win-win for both the DAO/community and incoming strategic partners. Ideally, Gitcoin’s treasury diversification should serve as a template for other DAOs facing the same challenges.


Disclaimer: This post has been provided for informational and discussion purposes only. It is not intended to, and does not, constitute legal, financial, business, or tax advice. This post should not be relied upon to provide any form of protections or business advice. No decision to buy, sell, exchange, or otherwise utilize any digital asset is recommended based on the content of this framework.

18 Likes

I think this is a good idea. Thanks for getting it moving forward and addressing all my feedback on the doc before posting! I would like to nominate @ChrisDean who has been handling FDD & DAOops payroll and day to day accounting to be on the working group.

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Thanks @HelloShreyas and team for a clear and thorough proposal.

I’m supportive of this proposal and would love to be considered for the Working Group.

Involvement in the Gitcoin community: I’ve been involved with Gitcoin since August 2021 as part of the Public Goods Funding workstream, and am now involved in a dedicated capacity as Grants Program Lead.

Pertinent knowledge: I’m well-connected with Web3 VCs, angels, and other DAOs, and out of personal interest I’ve closely followed the treasury diversification efforts of other DAOs over the past year. I’ve written on this topic.

Other experience: Prior to my involvement with Gitcoin, I spent two years in Institutional VC and six years at a Fortune 500 bank.

11 Likes

I’m very supportive of this proposal since I think it’s important to diversify the treasury into stablecoins and it would be great to bring in strategic partners as part of the process. Thank you for putting it together.

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I think this is long overdue so yes, definitely support this proposal.
I would also nominate @ChrisDean who’s focusing on the financial side of things for DAOOps & FDD plus definitely also supporting/nominating @annika with her background and as Public Goods Funding delegate.

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Great move, I suggest we give the treasury team some power and authority to do it in a timely manor. We approved this process for MetaCartel 2 months ago and due to market fluctuations we lost about 30% of our budget capacity :grimacing:

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This is a great initiative. Really love the mission to diversify treasury into stable coins + think it’s a good approach to discovering and executing the idea. Saw a post from LLama and thought I’d jump in to see how things progress. Cheers!

A treasury diversification team that can, as @Yalor also mentioned above, quickly adapt to market conditions would be something really needed.

Right now this DAO does not seem to have anything like that. What’s more to do anything with the treasury a public discussion and a public vote seems to need to happen which could put us at a huge disadvantage if a trade is involved.

$150/hr

This is the only thing that just seems bit odd to me. As a European this look like a very high hourly compensation.

2 Likes

I really applaud this proposal coming forth, as its hugely necessary for the longevity of the DAO. I’m coming in from Hedgey Finance, where we create tools specifically targeted towards helping DAOs diversify their treasury in responsible and transparent ways that benefit both the DAO and the community. I would be happy to sit on the diversification team, or even just advise from the side (but no need for compensation), and create a cohesive strategy utilizing various tools I’m familiar with and have used in advising other DAOs on diversification programs. Pre web3 I was a sr treasury manager at WeWork for 5+ years dealing with this sort of FX exposure & cash flow diversification on a daily basis, and trying to bring traditional corp finance & treasury to the web3 world.

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hey @HelloShreyas - as usual, nice work on the thoughtful proposal and love all the work you and the team do. UMA community and I would be happy to help anywhere we can especially in the design of an instrument for diversification. I think you are familiar with success tokens. This would be a good way to raise funds. Essentially sell GTC with a lock-up and no discount, but in return reward the holder a call option. This would properly align incentives and ensure cooperation with the strategic partners. Contracts are all audited and our DAO products such as KPI options have been used by many DeFi projects. The Gitcoin treasury just needs to decide the parameters and we can deploy.
Also, I would be happy to share our experiences diversifying and managing our treasury. We were fortunate, but did make some good decisions over the last year and a half and have almost $50MM of non-UMA assets accumulated.

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Appreciate your interest, @annika. Your experience is definitely valuable.

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Thanks for your support and feedback, @lefterisjp. Re. compensation - we think $150/hr is reasonable compensation in DeFi to attract strong people to serve in this working group. It is hard to find comparables that are apples-to-apples, but grants programs such as Uniswap Grants and Aave Grants pays members $150/hr.

@DisruptionJoe and @krrisis - thanks for your nomination of @ChrisDean, would be great to have him on board. Chris - can you confirm your interest?

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a pleasure, I agree to distribute the funds, I think it is a rule of large companies not to have all their money in one place, and looking at the issue of cryptos there are old currencies which hardly change in value, but always we will be subject to the volatility caused by some news or companies with other currencies.

I would gladly support the work team

Appreciate the thoughtfulness of this proposal and excited to see this move forward.

I would love the opportunity to be a part of this Working Group.

In Q3 and Q4 of 2021, I contributed to Gitcoin’s Public Goods Funding workstream, helping to raise funds for GR12 and find ecosystem partners. Additionally, I have been a Core Contributor at Forefront since May 2021 and helped lead the DAO’s Treasury Diversification process. Finally, my work at Syndicate Protocol has given me the opportunity to support and advise on the treasury raises and allocations of a variety of new DAOs, helping navigate many common roadblocks.

Thanks again to @HelloShreyas and the Llama team for the proposal!

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Glad you’re interested, @jihad! You’ve added a ton of value to Gitcoin already and Forefront’s treasury diversification is a model I have in mind for Gitcoin.

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This is an invaluable proposal to long term health and sustainability of the DAO. I would love to participate. A bit of details about me:

involvement in the Gitcoin community - I am currently Gitcoin Holdings COO, but I have resigned (effective Jan 31, 2022) and plan to work full time in the DAO starting Feb 1. I have worked to spin Gitcoin out of Consensys, fund raise, support our DAO launch, and now move full time to a contributor in the DAO.

pertinent knowledge on treasury diversification / strategic partners / DAOs - I have observed a number of other DAO diversifications and bring lots of learning from Gitcoin’s initial fund raise to capitalize the company ahead of the spin out from Consensys.

valuable experience across crypto and non-crypto roles that may be applicable - Well, I hold a forgotten rune wizard, and a few moonshot bots :smiley: In my non-crypto world I was a product lead at Twitter for a number of years, and have been in the tech space for a while.

6 Likes

Celebrating this finally being out in the wild and the diversification process getting underway asap. Echo @lefterisjp & @Yalor’s points re process and perhaps we need to discuss this @HelloShreyas re one of the TD working group being included in the steward forum…

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Gm,

Thank you for posting this thoughtful proposal @HelloShreyas !

I’ve been chatting with Stewards about the matter in DMs, so I’m excited it has become a proposal. (Here’s an example of a stable+governance coin strategy I shared with them in December used by SeedClub, found at audio position 3:40 Goodbye bosses, hello voting and crypto pay: A new kind of company is taking hold | WBUR News .)

I would like to be part of this WG.

  • I’m a KERNEL Fellow KB3 and and I’ve been a community member of Gitcoin since August 2021 in various WGs (mostly Public Goods Library).

  • I’m the (LEETH certified) Chair of LexDAO’s “Performing Rights DAO” project that will draft Ethereum metadata standards “backwards compatible” with DDEX. And I’ll likely be able to access LexDAO’s expertise about treasury diversification if I’m included in this WG (potentially save on legal fees? At least get a second opinion).

  • I’m the Liaison for the Pluriverse/Multiverse DAO that RaidGuild is building for Gitcoin and, if all goes well, I might have to deal with this issue there as well.

  • I’m a “test subject” in that I’m still living month-to-month like many of the contributors most affected by volatility; here’s when I was a test subject in the past, to help explore apartment renting solutions for Web3 contributors https://twitter.com/owocki/status/1459300439422222336 .

  • I’m helping prepare for https://schellingpoint.gitcoin.co , and secured a $10k sponsorship from nfDAO. Additionally, over 50% of the proceeds from the 3D statue https://cheerbot.org 's I’m auctioning at Schelling Point will go to public goods, made possible by grants from nfDAO, dGrants and Schelling Point.

  • I’m a graduate of New Ventures BC’s Venture Accelerator Program, have a background in corporate music publishing, a JD from Western Law, a BBA in music management from Belmont University, hold a patent in a novel software architecture (“Hierarchical Script Database and Database Applications”), created a new kind of software syntax (see https://ape.mirror.zyz ) and discovered multiple mathematical facts including recursive/fractal tilings of the Euclidean plane (e.g. PythagMetal - Alchemy ) and Fibonacci-like integer sequences (e.g. A328604 - OEIS ).

If I am not able to join this WG, I hope that I can in the least be an observer in order to apply what I learn to Gitcoin’s Pluriverse/Metaverse DAO.

Thank you for your time and consideration,
Kyle

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Actually, @HelloShreyas you are in the top 5 delegated to so you will be included in the forum.

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