Establish a Treasury Management and Diversification committee under the Tokenomics Workstream

Workstream Discussion FOX Tokenomics
1

Summary:

The Treasury Management and Diversification committee’s priority is to take a holistic approach to DAO treasury management, and must act toward the long-term success of FOX token and the ShapeShift DAO. The committee will be a dedicated team of members carefully watching, acting and reporting on a weekly basis.

The members of the committee will be: X, Y, Z (TBD)

Motivation:

To be able to act quickly, manage and execute on treasury management and diversification strategies to allow for a more active, holistic and long-term approach to treasury management.

Specifications:

  • Establish a Treasury Management and Diversification committee under the Tokenomics Workstream.
  • Committee would consist of 5 qualified community members. The number of members should be odd to break ties when voting.
  • The committee would be governed by a simple majority rule.
  • The committee meetings will be open to the ShapeShift DAO community but only the 5 members will vote.
  • This proposal would be an initial test of the committee
  • Trial basis for 3 months. November 16th, 2021 - February 16, 2022
  • There is no compensation for these roles for the trial basis
  • A subsequent proposal is required for the committee to continue on
  • During the trial basis the committee will not have any direct access to the DAO treasury, there will be a check and balance in place with the current trusted signers of the DAO.
  • If a majority of the committee vote to approve the X, then this committee will work with the trusted signers of the DAO to execute the trade, project etc.
  • Governance of the committee:

    The ShapeShift DAO can vote to replace the committee or remove their power at any time.

  • The DAO can vote to replace any single member on the committee at any time.
  • If a member of the committee quits their duties before the end of the trial period, a new committee member must be elected by community vote.

State of the Treasury (11/2/21)

  • At the time of writing this proposal the DAO has the following treasury makeup

    Restricted Treasury via Sablier Stream

  • 242 million FOX was initially granted
  • 221,000 FOX per day is available to claim
  • Withdrawn 25 million FOX so far
  • 242,000,000 - 24,000,000 = 218,000,000 FOX Restricted Treasury via Sablier Stream
  • 600,000 FOX available to claim (11/2/21)

329,518,327 FOX

  • ← Available DAO Treasury
  • ~325 million from airdrop
  • ~25 million from sablier stream

“Expenses” ~19 million FOX so far: Treasury disbursements

  • Fairdrop Contract

Passed Proposals:

Olympus bonds

Approved by governance but not executed yet

Honeyswap

  • -ShapeShift DAO and 1Hive DAO will execute a community swap of approximately $100,000 in equivalence of FOX and HNY (1Hive’s native token).

Draft proposals

Thorchain Token Swap

  • ← $2 million FOX = $1 mil RUNE and $1 mil FOX
  • Rari
  • Index Co-Op - Opportunity - Buy and hold FOX for set amount of time with a 5% discount

Requirements of the Treasury Management and Diversification committee:

  • The Treasury Management and Diversification committee’s priority is to take a holistic approach to DAO treasury management, and must act toward the long-term success of FOX token and the ShapeShift DAO.
  • The committee will be a dedicated team of members carefully watching, acting and reporting on a weekly basis.
  • 40,000,000 FOX is available to the committee to implore strategies as they see fit. Examples: collateralization/ debt, liquidity provision, yield farming, and other defi strategies.
  • The committee will administer the pools the community owns. (adding assets, ltv ratios, admin fees, recommending liquidity incentives etc)
  • If the committee should want to sell FOX: The committees tactics should have limited price impact on the FOX token, no one tactic can drop the price by more than 2%

The committee has a current roadmap/plan:

  • Participate in all active discussions currently happening in the forum and make sure on day 1 we can be effective stewards of the Treasury.
  • Vote on and execute a FOX:RUNE tokenswap and LP to help kickstart the pool with liquidity while also diversifying the DAO’s treasury with revenue-generating assets.
  • Swap $1M of FOX tokens for $1M of RUNE with the THORChain Treasury, then deposit $2M of FOX & RUNE to kickstart the FOX:RUNE Pool 4 on THORChain.
  • Details
  • ShapeShift DAO sends $1M in FOX directly to the THORChain deployer
  • THORChain sends $1M of RUNE to ShapeShift DAO
  • Both Treasuries deposit $2M of FOX & RUNE to seed the pending FOX:RUNE Pool 4 on THORChain with $4,000,000 of liquidity
  • Research and vote on Rari
  • Follow through on the Index Co-Op - Opportunity - Buy and hold FOX for set amount of time with a 5% discount
  • Assist the Support Workstream in finding a way to execute on their Fox’ed up fund
  • Things this committee should consider and that have support:

    Obtain enough Stablecoins for 1 year of runway

  • Diversify the treasury
  • To be able to support the work streams in salary, promotional giveaways and pay for subscriptions/services. (ETH, Stables, etc)
  • Design and implement a strategy that manages assets and debts to achieve 2+ years runway

Call to action:

  • If you are interested in being on this committee submit the following in a comment on this forum post.

    Your background and qualifications that are relevant to the committee. Full resume not required. Please specify any experience with large scale treasury management, financial modelling/forecasting and defi protocols.

  • Include a poll: Is this candidate qualified for the committee? Yes and No

Community members, please vote on these candidates if you think they are qualified.

We will have a follow up poll on those that have applied and we will take the top 5 performing members and recommend them in the proposal.

Timeline:

  • 11/2 - Present in Tokenomics Workstream Office Hours
  • 11/2 - 11/3 - Post to forum and get interested committee members to put themselves out there
  • 11/3- 11/6 Vote on members of the committee
  • 11/4 - Discuss in the governance call, have a follow up call for any questions/ concerns/ continued discussion
  • 11/5 - Tokenomics Meeting 2pm - Are there any final changes to the proposal before it goes to ideation?
  • 11/8 - Put proposal to ideation
  • 11/13- Put to 3 day vote
  • 11/16- Passes or Fails
  • 11/17 - Committee meets to vote and execute on Thorchain Pool

Benefits:

To be able to act quickly, manage and execute on treasury management and diversification strategies to allow for a more active, holistic and long-term approach to treasury management.

Drawbacks:

There are risks in trusting in 5 committee members of 40,000,000 FOX. We have tried to combat them by having a check and balance with the signers of the DAO being separate. We also have limited the risk to only 6% of the overall treasury.

Vote:

Yes- I support the establishment of the Treasury Management and Diversification Committee and elect the following members to the committee: X, Y, Z

No- I do not support this proposal in its current form

2

I’d like to nominate myself for this committee. I obviously have an interest in the establishment of the Treasury Management and Diversification Committee, I have written the proposal and gotten feedback from many in preparation of proposing this.

My name is Danielle Wall - I have worked at ShapeShift for the last 5+ years and have been a part of the Treasury Management team for 4.5 of those years.

My relevant experience and qualifications:

Oversees ~$100 million dollars in operational cryptocurrency and the controls in place to secure it. Including whitelists and balances across 12 exchanges, OTC desks, lending platforms, and hot and cold wallets.

Trusted member of the sending team, have experience regularly sending millions of dollars at a time of irreversible cryptocurrency.

Participated in the weekly market risk meeting for the last 3 years. I have kept a close eye on the market and am able to make recommendations of how we should diversify our treasury.

Led 4 successful audits and year end snapshots, where we had to close the exchange, move all funds off of third party services, account for every satoshi and move it all back, to limit the amount of down time.

Have historical knowledge of FOX token, I know where the FOX is. I understand what addresses hold the most FOX, how much FOX was allocated to the DAO etc.

I have personal experience with Sablier contracts, Liquity, Ribbon Finance, Thorchain pools, Uniswap, AAVE, Compound.

I bought my first Bitcoin in 2014 and have been hooked ever since. I am a proud decentralization advocate. I have a strong eye for detail and would be a beneficial member of the committee, to organize, clearly report and keep up with the fine details of many moving parts of this treasury.

3

I’d like to nominate myself for this committee. My name is Chris McCarthy - I am a PhD economist, specializing in international monetary systems.

My relevant experience and qualifications:

Assistant Professor of Economics for 5 years (tenure-track). Taught econometrics (the statistics of economics), history of economic thought, political economy, international trade, and international monetary systems (in addition to the standard econ classes) at three institutions in the past ten years.

Former employee of the International Monetary Fund, for the Central Banking Operations division of the Monetary and Capital Markets Department. Wrote a white paper and assisted on international reserve adequacy metrics, exceeding those metrics, and best practices for central banks and monetary authorities for the management of those reserves.

In addition to teaching, I have also been consulting for the past 5 years, helping companies in the cannabis and crypto space to develop business plans, evaluate the profitability and risks associated with new product lines, assess co-op opportunities, and provide financial support and analysis on a variety of other deals.

I’ve helped over 50 start-ups, small businesses, family offices, non-profits, and entrepreneurs with planning for the future, raising capital, optimizing performance, and investment decisions.

I am experienced in developing complex financial projections, multilayered scenario analyses, and simulation models (macro and micro). I successfully developed business plans and projections for various commercial and retail entities, have won merit-based municipal licensing applications, and excel at evaluating profitability and risk.

I am quick, concise, and well-read. I have a great ability to upload new information quickly and synthesize novel solutions.

I’ve been an advocate and educator in the space, only recently involving myself in different wallet and blockchain projects (again, mostly financial modeling). I would be able to bring a more monetary-leaning, economics-centered approach to the committee, to balance the trad finance influence. I am currently teaching entirely online, so my time is relatively free and I will be able to be an active participant of this committee from day one.

5

I support the establishment of a Treasury Management and Diversification committee. I see the proposed value and appreciate the time, discussion, and thought that went into putting this together. And lastly let me include that I am also very excited to see both established and new members step forward, introducing themselves and offering their ability to the betterment of the DAO.

6
  • Hi there, just to put up my name here. Not necessarily for the committee nomination. More than happy to help on this important function.

    Background and experience:

    six years in audit and financial due diligence in big 4 accounting.

  • six years in private equity transactions.
  • Two blockchain projects: BD lead (Ont)/CEO (DVP)
  • Decent financial modeling skills.
  • Mandarin/Cantonese/English.
  • Currently IT/Law student

Cheers,

Daniel W

7

I would like to nominate myself to join this committee. (@ rotorless at discord)

I am an entrepreneur, lawyer and corporate director.

My strengths are strategic thinking and designing risk management frameworks to help members of boards take a measured approach to evaluate asymmetric opportunities. I have been a board member at a large credit union with a $1B treasury where I was a member of the credit, risk and compensation committees. I am also the chair of a not-for-profit where I designed a risk management framework and the balance sheet increased to the upside by 30% yr over yr. I have been in similar leadership positions for most of my career. I am disciplined, measured and collegial. I have a healthy dose of skepticism but once a decision is made, I move on.

I am knowledgeable about the crypto space. My legal background is in financial crimes, and crypto.

I am active in the DAO movement: at the Bankless DAO I am the ombudsman and a founding member of Bankless DAO legal Guild, I am a core team member at DAOist on the tokenisation team. I am also a member of the LexPunkArmy and LexDAO advancing legal engineering and developing the crypto counter regulatory narrative.

I am active in DeFi: I have skin in the game. Most of net worth is in crypto and I routinely balance acceptable risks with the preservation of capital.

I have been trading derivatives in my personal account for 12 years. I have a reasonable understanding of the influence of intermarket effects on underlying assets and the effects of derivative positions on price directionality in markets. I understand that there is someone on the other side of every trade who is taking the trade for a reason.

Lastly, I have time to give. I can assign up to 4 hrs a week to this task.

8

Just a couple of comments on the Committee framework:

I did not notice a quorum requirement for voting., which should probably be 3 or 4.

Related to this, the proposal deals with committee vacancies by way of community voting but also speaks to the need for the committee to respond and act quickly. There is a foreseeable friction in the very real possibility of not having a quorum if members leave because of the mechanics.

A solution might be for a different committee to appoint an interim acting replacement until the season/epoch is over, and then to re-vote at the start of the next epoch/season.

This an example of how some decisions require all votes, and others should not because the timing friction can increase the downside risk and decrease the upside opportunity.

Lastly, there is no expiry to the terms of membership on the committee. Prudent governance might be to expire and to re-elect a slate after a period, and to also set a maximum duration for members before they have to step aside.

I do realize this is the first draft and we are trying just trying to get it off the ground. Good framework can prevent arbitrary decisions in the future under the dress of necessity.

Not gospel, just thinking out loud 1f642

9

I would like to nominate myself for this committee as well. That being said, I already am seeing representation from centralized ShapeShift so if we have 5 stronger/more diverse candidates I am happy to just contribute to this committee without being a voting member.

I have been working for centralized ShapeShift for almost 4 years now! I have an intimate understanding of ShapeShift, Defi Protocols, and crypto in general both professionally and in my personal investing. Before ShapeShift I worked in old centralized finance (Yuck!) working for Merrill Lynch and TD Ameritrade managing a book of over $200MM. Outside of crypto, I am also an avid options investor and look forward to bringing various investing strategies to this committee!

Is this person qualified to be on this committee?

10
  • hey rotorless/amicus.eth!

    good points, I will add something about quorum for voting. If we do implement a quorum for voting I think that takes care of any issues with vacancies as well, meaning the remaining 4 members of the committee could still vote on things, keep the ball rolling until a replacement is voted in.

    This proposal would be an initial test of the committee

  • Trial basis for 3 months. November 16th, 2021 - February 16, 2022
  • There is no compensation for these roles for the trial basis
  • A subsequent proposal is required for the committee to continue on

Believe this section addresses timeframe and how to reelect the committee.

11
  • Hi all - I’m Kent, and I’d love for you to have me as a member of the Treasury Committee.

    Currently I’m creating a proposal to lead a newly-created Tokenomics workstream, of which treasury management (the overall topic, not necessarily the Committee itself) would be a subset. Should that proposal pass, my membership on the Committee would be an apt fit.

    With respect to my background/experience that’s relevant to treasury management, here are some datapoints:

    I’ve been in crypto for multiple bull/bear cycles and am familiar with the insane volatility and unique market conditions inherent in crypto markets.

  • From September 2018 to August 2021 I served as Head of R&D for (centralized) ShapeShift.

Part of my job was to help ensure that ShapeShift was never caught flat-footed in the fast-changing crypto world, and was better-positioned to spot risks and take advantage of emerging opportunities.

To this end, I carried out research around various relevant topics, such as new blockchains, NFT’s, DeFi, Layer 2, and cross-chain bridges. The resulting reports were disseminated for internal use. Several were also repurposed for public-facing “thought leadership” pieces:

Decentralized Insurance

Staking Derivatives

Algorithmic Stablecoins

Metaverse & NFT’s

Cosmos, NEAR, and Polkadot

  • IMHO this knowledge of the crypto world, in all its various facets, would be invaluable in a treasury management context. A few more relevant datapoints:

    Previously I worked at ShapeShift as a marketing strategist–a position I started in February 2017.

  • In a former life I worked in TradFi as a stock market analyst, employing both technical and fundamental analysis.
  • To expand a bit more on the approach I would bring to the Treasury Management Committee, I’m more on the conservative side of the degen spectrum. I believe YOLO’ing into DeFi protocols certainly has a place, but am also wary of the various layered risks that exist in this insane new crypto world. In fact, much of my research work at ShapeShift involved highlighting specific risks and, where relevant, finding ways to mitigate them. As such, I’d bring a strong risk management background and perspective to the Committee.

    I’ll wrap this up with thoughts on how I think we could proceed with treasury management.

    Start by bucketing these activities into two categories: diversification and growth.

Diversification is all about making sure we’re hedged against a protracted decline in our wonderful native token, whether that’s a result of token-specific weakness in FOX, or a function of the crypto bear market that is inevitably coming at some point.

Growth encompasses opportunities for the DAO to unleash the latent energy of its FOX holdings for the benefit of FOX holders and ShapeShift users. Specifically, this would entail finding opportunities to generate yield/returns on FOX, then subsequently distributing those rewards to the broader FOX ecosystem. (The mechanics for how those rewards might be distributed are part of a super-interesting broader question that pertains to the proposed Tokenomics workstream).

There’s so much we can do on both the Diversification and Growth sides of the equation, from simple token exchanges to token swaps with other DAO’s, from collateralizing FOX in lending protocols to utilizing novel “DeFi 2.0” protocols that present a double-edged sword of enticing growth possibilities alongside the inherent risk that comes with newer protocols that haven’t been battle-tested in the unforgiving crypto environment. Protocol-level staking and decentralized insurance also offer compelling ways to generate relatively low-risk returns and reliable methods to manage risk, respectively.

With so many opportunities, one of the most important questions to ask is: what shouldn’t we do?

To answer that question, we need to start with broad strategic goals for the treasury. How much of our treasury do we want to diversify away from FOX, and by what date? (Willy has already made some initial stabs at this). What sort of risk tolerance do we have with respect to growing the Treasury, and what type of growth would constitute success? With broad goals defined, we’ll be in good shape to determine our tactical moves.

Regardless of what strategy we adopt, my mantra as a Treasury Committee Member will be unchanging and steadfast: act in the best interests of FOX holders, with an unblinking eye on the fundamental principles of risk management.

Thank you for your consideration!

12

Further thought on that. As a contingency plan, it is probably worthwhile to build some redundancy into the governance structure in treasury function. Ideally there is a reserve pool who are involved in the daily operation of the treasury and can potentially take up any gap when any of the voting committee member cannot perform whatever the reason maybe.

I reckon treasury function is sth involves daily operations that cannot stop and wait for a lengthy procedure. Having a reserve is probably less costly than having interruptions.

13

I’m Al and I would like to nominate myself to be a part of this committee.

I worked at ShapeShift as a financial engineer and manager, building tools for finance, trading, and engineering. Most recently, I was responsible for the active management of $50mm deployed across defi protocols. Prior to joining ShapeShift I co-founded and built Bitfract, a crypto asset allocation exchange built on the original ShapeShift API. ShapeShift acquired and hired our team and we continued to build out the vision for simplified access to crypto assets. I am currently working on several tools for defi, including https://albitrage.com

  • which compiles and ranks DAO revenues and treasury balances.

    My career began in tradfi dedicated to the design, implementation, and accounting of asset allocation and management strategies. I researched and constructed strategies for investing across all asset classes until realizing cryptocurrency will inevitably consume all analog financial instruments.

    I have thorough experience interacting with defi and asset management, including:

    Trading and liquidity provision on AMMs (Uniswap, Curve, etc)

  • Minting stablecoin debt positions, from original SAI on MakerDAO to LUSD on Liquity
  • Lending/borrowing on AAVE, Compound, Cream, etc.
  • Minting and funding decentralized set token funds
  • Yield farming and reward incentive collection
  • Trading recommendations that outperformed all other strategies on the ShapeShift trading team.
  • As a part of this committee I would be able to:

    Contribute strategies for diversifying treasury assets.

  • Architect, engineer and deploy tools for acquiring and monitoring DAO treasury assets.

I am passionate about enabling individuals and organizations to tap into the world of decentralization. As a previous employee of ShapeShift and believer in its original vision, I would love to continue working to ensure its future success.

14

I would ask to each candidate what steps would they look to take initially to mitigate risk to the treasury activities off the bat. And on a personal note what would you say your risk tolerance is on average. Any high level replies by the candidates would be appreciated

15

Without spending time really digging into strategies, I’d say we first and foremost need to get exposure to stablecoins (in a way that doesn’t adversely impact the price of FOX). I’d suggest that we engage in both simple swaps, and collateralize FOX on various lending platforms.

Each stablecoin comes with various risks - for example, USDC doesn’t have much smart contract risk and appears to be 1:1 backed, but is vulnerable to regulatory action since it’s more centralized. Meanwhile, DAI is decentralized but is vulnerable to black swans (like when the market crashed during the onset of COVID). As such we may want to diversify into multiple stablecoins.

My risk tolerance relative to your typical degen is probably more conservative. I’m very wary of all the various risks that lurk in crypto, and have seen time and again people getting burned when they overlook these risks. On the other hand, I think there are smart ways to manage these risks (not putting too much in one protocol, using insurance like Nexus, etc.) in order to take advantage of some of the sexy yields and cool opportunities out there.

One rule of thumb should be to always carefully deliberate over any given opportunity. There’s no rush to YOLO in to XYZ protocol.

16

I think if we crawl-walk-run and take the time to build out a risk framework which might include what is unacceptable, high, med, low, or remote risk? what is our risk appetite? and what is our risk tolerance? opportunities will self-present themselves.

17

I think it is an interesting question, obviously we are in crypto, we have a bit higher risk tolerance than most. I like to buy strong assets and hold them. I think it’s important to make strong relationships with other DAO projects and act quickly. I believe also our risk tolerance on the committee can be a bit higher bc we only have access to 40 million FOX. Which is only 12% of the overall available FOX the DAO has today. and only 6% of the total FOX the DAO has and will get from its sablier stream.

Just by setting up the committee in this way where we don’t have large access to the treasury I believe we have already mitigated the risks.

18

good points, I consider that the committee will need to able to scale up to take over a larger pie eventually, and there is an opportunity to build the risk management system now, while the cost of error is lowest.

There are always upside opportunities

19

Diversification with the goal to minimize the liquidity-adjusted value-at risk. ensure that any nonlinear dependencies between interlinked factors (asset prices, their time variations, sector-specific or geo-specific market frictions) are accounted for and use out-of-sample data to verify that the strategy can handle both average and tail dependence.

Carve out some chunk (3-20%) that goes to high-risk/high-reward investments. Have that percentage grow over time as assets under management increase.

Risk-averse. Perhaps a recovering risk-averse. Trying to be more risk-seeking lol. I did go to grad school and get a PhD (takes a certain type to make sucha dumb mistake lmao)

20

Just my two satoshis.

first up I think in general the conventional wisdom in treasury management does not work well in crypto. unfortunately, or fortunately, crypto is fast paced, high system risk and you will never have enough information and you never be able to predict how a new kid in town will perform in 6-month time.

However, the committee is dealing with public money. Needless to say this requires a fine balance between safeguarding the pool and taking necessary risks to capture the best possible upside to increase the firepower of the pool.

What I personally would like to see is a committee that is openminded and proactive in terms of working with/investing in new project (with proper due diligence), but in a measured step (ie. in smaller amount, etc). I certainly hope the committee was not a risk-averse one.

On a side point, crypto is still a small world, we need to build connections. And I think treasury has an important role to playin that. For more established project like Shapeshift, I think there is a responsibility to help other projects succeed.

21

Thanks for your candidacy. You have some impressive qualifications. Have you been involved in ShapeShift Discord? If so, what is your handle there? Thanks.