[Proposal] - SGTM 001: Converting $5M GTC to Stables

[deltajuliet]

NB: This is one proposal of many, following the Treasury Mgmt discussion shared on 09 April here

Kudos

Thanks to @owocki for lighting the fire + co-authoring this post, @Jeremy for spot-checking, and @darwinmvr and @Sor03 for supporting the numbers.

TL;DR:

The bull market is here.

We are asking for $5M in GTC from the treasury to swap into stables and put back into the treasury to be prepared for the next bear market.

We’ll repeat this cycle with additional proposals once the cycle from this proposal has been completed. We aim to lay the tracks for a longer Gitcoin runway.

Background

With approximately 30M GTC in our timelock, we want to strategically expand our stablecoin reserves.

How we see it:

• 1 year of bull market

• 1 year of bear market

• 2-3 years of boring sideways chop.

• (repeat)

To achieve sufficient runway over the next 12 to 18 months, we’re proposing the following approach to incrementally divest our GTC holdings:

• For a 12-month strategy: We propose to methodically sell approximately ~300K GTC each week.

• Extending to an 18-month timeline: A more gradual approach would involve selling around ~200K GTC weekly.

*NB - this is unrelated to the current swaps we execute for workstreams, business units, and the Foundation wallets. We’ll be monitoring prices and liquidity (hawkishly) to maintain a steady uptick in these transactions.

Treasury Diversification Plan

• Incremental Sales: Utilize a Dollar-Cost Averaging approach to sell GTC, aligning sales with market conditions to avoid significant impact.

• Price-Optimized Selling: Implement limit orders for a portion of the GTC, aiming to capture value while managing market dynamics efficiently.

• OTC Transactions: Over-the-counter deals to move larger amounts of GTC without affecting exchange prices, ensuring our actions don’t disrupt the market.

• Liquidity Management: Conduct these sales during high liquidity periods to minimize slippage, aligning with our commitment to market stewardship.

NB: These swaps will all be on-chain to remain transparent and trackable to the community.

Proposal for Management of funds:

Option A: Gitcoin’s Foundation can spearhead these initiatives, repeating proposals until we hit targets.

• This would ensure speedier transactions, still go through governance, and hold a singular accountability
• Cons: Given current capacity, more challenging to report (however, everything will be on-chain and we can include in the Foundation’s monthly financial report).

Option B: Form a council for executing these swaps and managing updates, using a 3/5 multisig.

• This ensures strategic and democratic use of these funds
• Cons: Slows down the process by chasing a group of people to propose, review and execute swaps

We can facilitate the formation of yet another council to oversee the swaps for the funds being requested and be stewards of future cycles. This group would oversee the direct diversification efforts of the treasury and coordinate with DAO multi-sig signers to ensure all financial movements align with our overarching strategy (as mentioned above). This council’s could responsibilities include:

• Submitting DAO proposals for reallocating funds, similar to this proposal’s initial $5M to be approved.

• Proposing and executing swaps in a staggered and strategic manner.

• Report back to the community with status of reserves and yields.

The council is not permitted to do anything other than the above responsibilities.

Community Engagement and Governance

This proposal is a collaborative effort. We invite the Gitcoin community to actively participate in refining, endorsing, and implementing this strategy, ensuring its alignment with our collective goals.

Looking Forward

By securing additional reserves in USDC, we’re taking Gitcoin out of survival mode and planning for sustained innovation and growth, even in challenging market conditions.

Calling out loud and clear one final time, this is not the only proposal that will be brought forward for treasury diversification.

This strategy falls within a lower risk/easier execution vector - expect more proposals to follow, and further (meatier) discussions to come out of it @ccerv1 .

Clarifications and Final Thoughts

• For direct execution, funds will be sent to Coinbase, avoiding the need for an intermediary multisig. This is an option though, and feels more effective for the initial execution.

• IF deemed imperative by this group - We invite community nominations for council members, seeking individuals committed to transparency, strategic financial oversight, and regular communication.

• While optimistic, we’re aware of market volatility risks. Our strategy includes constant market monitoring and flexibility in our approach to adapt as necessary. We’d (I) would love to keep GTC within our coffers as much as possible, and welcome feedback on holding our governance token in high regard.

Once we’ve received feedback from the community - we will move to a formal proposal with the following votes:

• Yes, fund the $5M and execute directly via Coinbase.

• Yes, fund the $5M and form a council for execution.

• No, do not fund the swaps

• Abstain

[mars]

@deltajuliet

We invite the Gitcoin community to actively participate in refining, endorsing, and implementing this strategy, ensuring its alignment with our collective goals.

1st thought: robust proposal, I generally support this course of action.

Have you considered $2.5m into stables (ideally generating some yield) and $2.5m into more liquid and less volatile crypto assets like BTC?

GTC is listed on Coinbase but it is Binance that is responsible for 50% of the overal volume, screenshot from Coingecko:

I know too little about Gitcoin legal structure and availability of the Binance in the US.

Not sure if I should comment here or the orginal thread (or both): [TEMP CHECK] SGTM 000 - Treasury Management Strategy for Gitcoin - V1

[OPdelegate41]

I think this proposal aligns with Gitcoin goals which stretch way farther than a single market cycle.
Gitcoin should take advantage of up waves to make sure the public funding mission it carries stays well funded.

@deltajuliet

For direct execution, funds will be sent to Coinbase, avoiding the need for an intermediary multisig. This is an option though, and feels more effective for the initial execution.

Have you considered Binance or splitting, to maximize the available liquidity?

I want also to add that - without knowing about Gitcoin legal structure and limitations - i think Gitcoin should look into investing those USDC in on-chain T bills, to secure and minimum of interest on that capital, given that it could be a long time before it needs to use it.
I would suggest considering one of the many solutions already available (Ondo, Openeden…) or Maker’s sDAI

[yosemitesam]

This post is a few days old and $gtc in treasury is already down from 60m$ to 30m$, during a 3 month bull cycle $GTC almost gained 0 value.

Instead of using $GTC as fuel, you should come up with some reasonable ideas to get $GTC gain value. Otherwise, in a few years gitcoin will hardly find money to make payments as $GTC value will likely drop to a few cents.

[PaigeDAO]

Converting to stables is a good move.

Agree w/ this:
@deltajuliet By securing additional reserves in USDC, we’re taking Gitcoin out of survival mode and planning for sustained innovation and growth, even in challenging market conditions.

@mars Raises an interesting point about diversifying into BTC. If not 50% then perhaps a portion?

I also fully support diversifying into RWA/ hard assets (such as property and real estate). It seems the responsible path to take at least if we’re playing the long game here.

Either way I agree with this statement: Yes, fund the $5M and execute directly via Coinbase.

[CoachJonathan]

I’m in favor of this proposal and trust that the Stewards leading the charge will take the necessary steps to put Gitcoin in the best financial position possible over the long run.

[Viriya]

I trust that @deltajuliet and the financial team are making recommendations that they believe are best for the DAO and, therefore, I am in support of this proposal.

[M0nkeyFl0wer]

Very much support this idea. Thanks for bringing this forward.

[jengajojo]

Glad to see the diversification agenda rapidly evolving. However, I’d like to vote ‘Abstain’

In the beginning it is stated that:

@deltajuliet

These swaps will all be on-chain to remain transparent and trackable to the community.

but then this initial execution strategy does not align with these initial objectives.

@deltajuliet

funds will be sent to Coinbase, avoiding the need for an intermediary multisig. This is an option though, and feels more effective for the initial execution.

We need to agree on if these will be onchain or offchain in general before moving forward. Diversification plans solely oriented on token sales can give the community an impression of ‘ceiling price’, and it’s important to manage that. In other DAOs, much of the OTC deals happen on the Foundation level (where they can keep it confidential) for that exact same reason.

[deltajuliet]

Thanks, @jengajojo!

I appreciate you highlighting the need for clarity around our swapping mechanisms, especially concerning the potential ‘ceiling price’ impression from token sales. I acknowledge I could have been clearer in my wording.

On-chain swaps def ensure transparency and are trackable by the community, while off-chain methods like using Coinbase offer reduced costs and can handle large volumes securely.

It’s worth noting as well - we are not solely relying on this for our diversification strategy. I’m currently exploring solutions with over a number of partners and would love community input (including yours) on what would be an amenable solution.

Should we continue with an option like Coinbase for these swaps and update the proposal, or would another platform better align with the community? Now that you’ve outlined the considerations you have - What are some proposed solutions that would change your vote to a ‘yes’?

[jengajojo]

Thank you for the clarification. I’d suggest keeping all native token sales private, the swap venue is not a concern as long as the foundation does it’s due diligence. Any other token swaps or yield farming opportunities could be onchain. Infact, I do recommend the foundation to deploy some of the stables and ETH which is not needed immediately into yield farming.

Since these operations require quick response the best course is usually to gauge the risk appetite of the community and deploy according to those parameters as opposed to asking the community for each operation the foundation wants to make.

[PaigeDAO]

Adjacent but relevant imo - ICYMI (RWA Endowment by Arbitrum) Tally | Arbitrum Proposal

[Sov]

I’m in favor of this proposal and appreciate the forward-looking approach to keep us financially viable in the long term.

[system]

This proposal has gathered sufficient support @deltajuliet would you like to proceed to snapshot?

[garm]

Excited to see this level-headed initiative to ensure Gitcoin’s continuity during an inevitable future bear market @deltajuliet!

I’m wondering whether it makes sense to use a mix of stablecoins instead of just USDC. It’d further diversify treasury and boosts Ethereum’s resilience (see page on Stablecoin Diversity).

As Glo Dollar’s CTO, I’d love to explore if all or part of the $5M could be swapped into Glo Dollars (USDGLO) instead of USDC. It ticks the boxes for treasury diversification and Ethereum resilience + after our upgrade to Glo Dollar 2.0 the holdings could generate up to $250K in funding for Web3 Public Goods each year, at no cost to Gitcoin

Getting Gitcoin’s endorsement has been pivotal for us; since the previous swap, we’ve doubled our market cap and welcomed other leading Web3 orgs like Polygon as holders of Glo Dollar.

In other news, we recently received our Bluechip stablecoin safety rating, with an initial B grade—positioning us as a top 10 fiat-backed stablecoin, deemed safer than the likes of USDT, FDUSD, and FRAX.

[SpikeWatanabe.eth]

Hello Gitcoin fam!

I’m Spike from Avantgarde Finance and my role is to cover DAO governance.

GITCOIN is a cornerstone project and its importance for the ecosystem cannot be overstated. We believe the discussion around treasury management is an extremely valuable one and are happy to provide some insights which we hope the community will find useful.

As @deltajuliet put in her post

@deltajuliet

The simple goal is to fortify Gitcoin’s assets.

We certainly agree on the direction and would like to see discussion around the practical nuances of implementing this. What we particularly liked is that:

@deltajuliet

We are actively reviewing multiple asset sources for strategic management, including:

• The Matching Pool

• DAO Treasury

• CSDO Wallet

• Workstream Multi-sig Wallets

And this is one of the critical considerations throughout this discussion - to understand the “uses” and “sources” of funding. We would suggest that additional quantitative analysis should go into the amount of stables conversion (or if this has already been done, we feel it would be useful to share with the community from an auditability and accountability perspective how the figure of 5mUSD has been reached).

Additionally

@deltajuliet

Most notable is yield generation strategy

Is also a certainly important point for analysis, and though we appreciate this might be under consideration in subsequent proposals, a more holistic approach that takes potential revenue from yield and the final composition of the treasury as a whole into account may better define the optimal size and choice of stablecoin(s).

We believe the final composition of the treasury and choice of strategies should be informed by the risk capacity and tolerance of the DAO, which is itself formed by its financial position and objectives. In our experience, establishing a comprehensive framework incorporating these elements and agreed upon by the community can lead to a more sustainable treasury management operation rather than ad hoc proposals for each individual decision around the treasury.

@deltajuliet

We aim to improve our financial resilience against downturns by carefully selecting swap partners and terms.

Another important consideration when implementing treasury diversification is managing price impact on the DAO’s native token - given the liquidity of GTC, we feel it is prudent that market depth should be factored into the sizing and timing of swaps.

@deltajuliet

should we consider the formation of the GTMC to oversee and execute our financial strategies?

There are many advantages to having a body oversee effective execution of treasury management (and many DAOs choose this approach) - this can be an internal committee / external treasury manager or a combination of both depending on the preferences of the community.The scope of work for a proposed committee is very large in terms of expertise required, which is why GITCOIN may engage external service providers and/or consultants (though each DAO is unique, and the nature of engagement differs based on their goals & objectives).

We fully commend the importance and intent of the initial post, though from our perspective we would caution against executing this 5mUSD transaction before a holistic treasury management framework is considered, which is in line with the intent in the extremely well-written SGTM 000 temp check.

We appreciate that a lot of thought has undoubtedly gone into this initiative and that the breadth of talent across the GITCOIN community can lead to successful execution on this. From Avantgarde’s perspective, we would be happy to provide any insights, analysis, or assistance with implementation where the community might find it beneficial.

[deltajuliet]

Thanks so much @SpikeWatanabe.eth - I’m already in direct contact w/ the Avantgarde team. Will keep you and the community updated as conversation(s) continue.

[deltajuliet]

As per input received from our Gov Gurus @CoachJonathan and @jengajojo I have amendments to make to this proposal before moving to Snapshot.

@mars @OPdelegate41 @yosemitesam @CoachJonathan @PaigeDAO @Viriya @M0nkeyFl0wer @Sov - tagging you for visibility as you initially participated on this post and would like you to have context on edits.

TL:DR - we won’t move funds to Coinbase or leverage a council (just now) if not agreed on by vote. Instead we propose to set up a diversification multi-sig (3/5) to execute the swaps at the appropriate time. I’m open to who those signers would be, and would request that one of our finance team @Sor03 or @darwinmvr be included for reporting. I can give an update once this proposal is ready to be executed on (again).

Updates

Change in Execution Method

• We are moving away from using Coinbase for direct execution. Instead, proposing establishment of a new 3/5 multisig wallet.

Revised Community Voting

• Reflecting the change in execution strategy, the updated voting option will be:
  “Yes, fund the $5M and transfer it to the newly established diversification wallet.”

Given the current state of the market, we’ve missed the current window but will be ready to execute when favorable market conditions arise - once the funds are in the MS. I still intend to engage partners in a Phase 1/2 of the diversification, however want to make sure we’re not losing steam in the interim.

I appreciate everyone’s feedback on this post! There are some great learnings, and I’ll endeavour to breakdown more context (like platforms we can/can’t work with as a Cayman entity) and partners/strategies we’re evaluating. I’ll also use the initial post to track these proposals and partners in the future.

[mars]

@deltajuliet

I have amendments to make

Me too.

Maybe possible to make such a voting structure:

1. No: do not diversity
2. Yes, diversify: all in stables
3. Yes, diversify: 50% stables 50% BTC
4. Yes, diversify: 50% stables, 25% BTC, 25% ETH
5. Yes, diversity: 50% stables, 16.66% BTC, 16.66% ETH, 16.66% SOL (0.02% rounding error towards gas fees)

My logic is that either BTC / ETH / SOL offer access to instant liquidity without affecting prices and it is “in the spirit” of the original proposal of diversfication and thriving throug multiple market cycles.

How to reconcile multiple voting options?

Step : is option 1 more than 50%? If yes: it is the winning option.

Step : assuming option 1 is less than 50%, then check if option 2 (all stables) is more than 3 + 4 + 5 combined.

Step : assuming option 2 is less than 3 + 4 + 5 combined, then pick the strategy among 3 or 4 or 5 that received the most vote.

Game theory, strategic voting, 2nd 3rd 4th order effects

I do not anticipate any strategic voting, I think the proposal is simple to explain and simple to understand. I’ve seen similar mechanics (combining multiple options) already in the wild. Not sure how easy / how hard to describe using Snapshot syntax. My personal market condition assessment is that with 10x ETF and halving, inflation, interest rates, global geopolitical instability, multipolar world, reducing dependency on USD and petrodollar I think that over long time horizon the number will go up while “just stables” will lose the purchasing power.

EDIT / UPDATE: decision fatigue. I don’t know which diversification option to choose, too complicated, I’ll just pick “no”. Unlikely, the options are not that complicated.

[PaigeDAO]

The multi-sig seems like a plausible solution and one that can fit into an ‘all things being equal’ vein.

For your initial concern @deltajuliet Option B: Form a council for executing these swaps and managing updates, using a 3/5 multisig.

• This ensures strategic and democratic use of these funds
• Cons: Slows down the process by chasing a group of people to propose, review and execute swaps

Perhaps whomever is tapped, or steps up, for the multi-sig be required to sign a formal agreement with Gitcoin/DAO that they be responsive to all action items within a 36 hour window, for example? Your concern about having to ‘chase people’ is valid and should not have to be a concern when dealing with responsible and conscientious members of a professional organization.

I do, still, find that @mars suggestions resonate. Stables are great but also BTC, SOL and ETH. As well as some hard asset holdings such as prime real estate (my suggestion).

In any case, this seems acceptable: Yes, fund the $5M and transfer it to the newly established diversification wallet.” w/ the caveat of your note ‘when favorable market conditions arise.’

Thank you for all the reflection and thoughtful considerations that have gone into, and is going into, this.

Longevity for Gitcoin is certainly the desired goal and outcome.