Feedback needed: Treasury Management

Background

As ShineDAO is growing it will become even more important to create scalable and decentralised processes. Currently we are managing the ShineDAO treasury centrally and that works okay for now since we do not have that much in-/outgoings. As we grow it will become cumbersome to manage.

A solution to this is to implement a treasury management system, and here are a few benefits it might bring:

  1. Legitimacy: Today the treasury is not sufficiently decentralised, which is a risk that can inhibit further growth. Gives us legitimacy as a DAO to have our treasury sorted
  2. Yield: There’s a potential to generate yield on the treasury, which will enable further growth
  3. Scalability: By using the right tools for this, we can save a significant amount of time. Especially when we grow and will have more in and outgoings to keep track of.

Solution

After doing some research on different alternatives (Gnosis safe, Multisafe, Llama, Hedgey, tokensets) it seems like the “industry standard” and best alternative is Gnosis safe.

Some neat features of Gnosis safe are:

Details

  • Co-signees: Two out of three co-signees (i.e. key owners) need to sign each transaction
    • Treasury Manager
    • 2x contributors and or comittee
  • Selection of roles on a volunteer basis, followed by a DAO voting
  • Term length: Start with quarterly, and consider half-year basis when we’ve tried it out and had some learnings
  • Threshold for confirming a transaction: Start small (all transactions should be confirmed) and increase the threshold as we learn.
  • Multi-chain compatability: Mainnet, polygon, xDai, more info

Who can be a co-signee?

I think that we should check 3 things when considering who should be a co-signee:

  1. Credibility - How long has the person been involved in Shine and what value have they brought to the DAO?

  2. Personal stake - skin in the game? Is the person invested financially in the DAO? Do they hold tokens?

  3. Availability and commitment - We should not need to wait for someone for days in case we want approve certain transactions quickly. Not that we would require 24/7 uptime but at least I believe that they should be able to check the wallet once per day.

Roadmap

I suggest that we take an approach where we gradually upgrade our treasury management. Suggested roadmap:

  1. Integrate Gnosis safe multi sign → Result: Decentralised treasury management (#1 above)
  2. Integrate MultiSafe (Gnosis safe multi-sig account required) → Result: Yield and Scalability (#2 and #3 above)
  3. Features
    1. 1-click mass payouts - Makes it easier with salary management
    2. Manage Teams & People + Spending limits - set up teams with dedicated budgets that they can centrally manage
    3. Asset allocation - generate yield by staking idle treasury funds into various DeFi protocols. For this functionality we can also use Tokensets

Additional comments

I have talked to Nxo, Mr Rock, Drunkboy, Badgerton and Cinque to gather input. I’ve assessed this mainly from a business perspective and done some basic technical research.

I don’t think we need to have all practical questions sorted before proceeding, so I think we should just focus on the dealbreakers (listed under details ). Other dimensions of treasury, such as how we should manage teams and spending, asset allocation strategy, etc. is something we can learn about as we go.

Questions yet to be resolved

  • What is Gnosis Safes future business model? I think it is free today, but can we potentially lock ourselves in
  • How does the technical integration work?
  • Salary for treasurer and contributors
  • Does Gnosis Safe support multi-chain?



Bonus notes

  • If we like Gnosis Safe we can initiate a partnership and use it for projects that we incubate

Looking forward to hearing your input and questions on this so we can create a proposal and vote on it.

Resources
Intro to Gnosis, Multisig, etc.

3 Likes

Awesome research, @MrRealOrFake! I like how you’ve covered the topic end-to-end. :fire:

2 Likes

If there is no rush and we really care about decentralization, I rather we think of more decentralized process than multisigs if we are going to adopt something at the DAO level (I’m highly critical of multisig controlled DAOs. Yes, they are better than one person, but I don’t think its a good long term thing and I’ve see way too many protocols think about their on chain governance as an after thought wrt decentralization).

Individual teams can allocate funds however they wish (maybe thru a multisig with the steps outlined above), but I think some kind of on chain governance for initial funding of teams (even for a team that handles mass payouts) will allow for the DAO to at least avoid putting too much at risk, at any one time, for co-signees of the teams (teams would have be "topped up occasionally by the DAO, and if a team f’d up/went awol/or whatever else, the DAO might loose those funds from the top up, but the rest of the DAO funds wont be at risk compared to if the entire DAO’s funds are left to a multisig).

DOD is going in ^^^ direction with onchain governance for moving its DOD supply DOD and stablecoin balances thru on chain governance at the DAO level (all DOD holders can vote onchain on what address DOD or stablecoins can be sent to [and other assets in the future], whether those are another contract addr, multisig addr or single user addr doesn’t matter).

I would avoid any ongoing overhead costs of things like salaries and maybe stick to %cuts of the top ups a team may get or % of profits made from managing funds allocated to them (again those teams can set up gnosis safe or whatever).

5 Likes

I love this post @cinquemb, thanks for taking the time to write down your thoughts!

Two questions

  • I like the on-chain governance for the initial funding - would it be done as a one-time payment or rather on a monthly basis?
  • Wouldn’t someone still need to transfer the funds to the specific teams? How do you see this being solved in DOD? Doesn’t there have to be some kind of “super-treasurer” that manages the transfers from the DAO trasury to individual teams?
3 Likes

would it be done as a one-time payment or rather on a monthly basis?

It would happen as often as that particular team makes on chain proposals that would have to pass the governance threshold (the less proposals teams make and the more accurate they are able to define their funding requirements, the less likely “governance fatigue” will set in [maybe quorum thresholds will have to be lowered depending on participation of circulating supply overtime]).

Wouldn’t someone still need to transfer the funds to the specific teams? How do you see this being solved in DOD? Doesn’t there have to be some kind of “super-treasurer” that manages the transfers from the DAO trasury to individual teams?

No, anyone can make a proposal on chain to transfer funds to a particular address (well anyone who owns enough DOD to make a proposal), if the proposal passes DOD governance, the function in the proposal contract can be called by anyone to executes the transfer to the address defined in the proposal contract.

Over time as some teams become more predictable in their operations, one DOD governance proposal could end up voting on allocating funds to multiple teams at once (which would help mitigate against governance fatigue and potentially help pass quorum requirements faster when multiple teams being incentivized for a single proposal to pass).

Here is a example of a transfer balance proposal that can be made in DOD (this assumes that the protocol settings address has the funds to transfer to the desired address): DeFiOptions-core/TransferBalanceProposal.sol at v1-post-audit-changes · DeFiOptions/DeFiOptions-core · GitHub

2 Likes

Great input @cinquemb! Do you know any DAOs that operate like this. Would be interesting to look into their docs.

What questions do we need to answer / What research needs to be done to investigate this alternative?

Compound/Aave aren’t DAO’s, but they have on chain governance for updating the protocol and payments to other who make governance proposals (if aave corporate structure or compound labs was shutdown, the protocol can live on without them).

I think “DeFi 1.0” is very much structured like “a company incorporated somewhere has a protocol on chain that is on the spectrum of decentralization <-> centralization)” or “A bunch of (non)anons control a multisig”, so if you want “True” DAO’s that aren’t incorporated anywhere and have on chain governance for managing the treasury at the highest level (sublevels could be run by teams whose funds are controlled by mutilsig or centralized), you might have to look harder or wait for Defi Options DAO :stuck_out_tongue:

2 Likes