Ideation post - [SCP-62]Proposal to continue the Treasury Management and Diversification Committee

Proposal Discussion
1

Proposal to continue the Treasury Management and Diversification Committee past 16 Feb 2022

Summary:

The Treasury Management and Diversification Committee (TMDC) was established on a trial basis by [SCP-36]. The trial period will end on 16 February 2022 and without a new proposal the TMDC will dissolve.

Based on the successful performance of the TMDC during the trial period this proposal is for the DAO to authorize the continuance of the TMDC from 17 February 2022 on an indefinite basis with the proposed amendments to its mandate below which are based on the lessons observed during the trial period.

Abstract:

If the proposal is passed, the TMDC will continue to manage the treasury for the long term benefit of the DAO to seize opportunities and mitigate risks by using measured decision processes. TMDC committee members will be compensated and the committee member slate will adopt a six month renewal cycle.

Motivation:

The original impetus to form the TMDC was that we did not want to have every tokenomics decision have to go through full governance because of the delay of time from ideation to execution limited the DAO’s ability to respond to opportunities and risks to the treasury. Specifically, to seize opportunities to diversify and accrue stable coins in our treasury. Concurrently, the TDMC was also directed to provide a layer of due diligence and to take measured decisions.

Without a continuance, the TMDC will dissolve at the end of the trial period on Feb 16, 2022. After that date, the DAO will revert to its previous risk profile without a time-agile response capability to accrue stable coins and it could take too long to take advantage of opportunities to diversify our treasury.

Specifications:

The specifications of the continued committee will be the same as [SCP-36] with the following amendments:

Amendment #1: Members of the committee (with the exception of Kent, who is already compensated as the Tokenomics Workstream leader) will be compensated in FOX at a rate of 4000 FOX per month.

During the trial period, committee members were not compensated. This was because the level of effort was unknown and the value of the committee was unproven. The TMDC met not less than 16 times, studied, deliberated and made asset assignments 15 times. The level of effort and responsibility is substantial. As explained in the State of the Treasury section below the Fox Treasury position is now streaming approximately $100,000 USDC per day into the treasury as a benefit from the TMDC work.

TMDC should be compensated in FOX to incentivize members to be long Fox; and a study of fair compensation suggests a range of 3000-4000 FOX per month as reasonable for the level of effort and responsibility. Given the positive performance of the TMDC the value should be at the upper range.

Amendment #2: TMDC will track its activities and provide the DAO with a monthly status of activities within 7 days of the last day of the month each month. Compensation will be conditional upon the production of the monthly summary.

Amendment #3: Pending governance approval and deployment of the FOXy token/contract, the TMDC will be tasked with managing token swaps and other relevant mechanics in order to generate rewards (which will in turn be distributed to FOXy holders).

Governance of the Committee:

The governance of the continued committee will be the same as [SCP-36] with the following amendments:

Amendment #4: The slate of committee membership will be approved by the DAO on a six month cycle from the approval date.

Amendment #5: The proposed slate of members for the continued committee for the first six month cycle are:

Amicus.eth / Rotorless | albitrage / Al | profMcC | seven7hwave/ Kent | JonisJon

State of the Treasury:

Tl;dr - the FOX treasury is receiving yield from TMDC work.

The most significant achievement during the trial period is incoming stablecoin streams to the Fox treasury achieving its mandate.

For example:

This link shows $748,000 USDC accumulated yield from TMDC assignments to the initial FOX/USDC Bond, Increasing by ~ $40,000 per day.

https://etherscan.io/tokenholdings?a=0xe2ae37b8077cd3bc7ef1c6580f6dc93673078a01

Additionally, TMDC has increased the assignment to the fund to yield an estimated $100,000 USDC per day for the next 3 months.

Most, but not all (limitations of aggregation) of the treasury positions can be viewed here:

https://zapper.fi/account/0x90a48d5cf7343b08da12e067680b4c6dbfe551be?tab=dashboard

The Fox and Frens Rari pool can be viewed here: https://app.rari.capital/fuse/pool/79/info

The Fox Tokemak reactor can be viewed here: https://www.tokemak.xyz/

The Olympus Fox/USDC bond offer can be viewed here: Olympus Pro - Bond marketplace for protocol owned liquidity

If you are into it you can track these other activities on etherscan (see my comment above on producing a monthly summary):

Deposit $5M FEI

Deposit $50,000 Silo Finance

Deposit $3M In Tokemak

Deposit $ 1M FOX/USDC BOND for 1 month at payout of $40,000 FOX

Deposit $1.7M FOX to increase collateral in Rari Fox & Frens

Borrowed $1M in FEI, swapped for $1M USDC

Sold $150,000 of Toke for $150,000 USDC

Deposit $3.5M Fox into Angel Vault

Deposit $1M FOX/USDC BOND Increase monthly payout to $100,000 FOX

Delegated authority to manage FOX/USDC Bond to the Bond Committee.

Added FOX/ETH LP to the the FOX & Frens Rari Pool

Extended the FOX/USDC $2M Bond at $100,000 FOX payout for 3 months

Deposit 39,920 USDC to Pendo

Re-collateralize $900K worth of FOX and 450K USDC in Angel Vault.

Requirements:

The TMDC priority will continue to take a holistic approach to DAO treasury management, and act toward the long-term success of FOX token and the ShapeShift DAO. The committee will remain a dedicated team of FOX members carefully watching, acting and working with each other on a weekly basis.

At the time of writing there was 198M FOX in the Sablier wallet and 237M FOX in the Shapeshift treasury wallet. The initial allocation to the TMDC was 60M FOX. Approximately 15.5M FOX remains. No increase in control over additional funds is proposed for the next cycle.

The committee will administer the pools the community owns. If the committee should want to sell FOX: The committee’s actions should have limited price impact on the FOX token, no one tactic can drop the price by more than 2%.

Roadmap:

TMDC continues to develop tools and processes for treasury management with a view towards continuity of knowledge to enable succession of committee members.

Benefits:

To continue to be capable 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. To leverage the lessons of the trial TMDC period going forward.

Every FOX holder can vote to add or remove committee members and can bring treasury management suggestions and comment on proposals before the committee.

Drawbacks:

Not every FOX holder can vote on the committee.

Vote:

Yes- I support the continuance of the Treasury Management and Diversification Committee and to elect the following members to the committee: Amicus.eth / Rotorless, albitrage / Al, profMcC, seven7hwave/ Kent + 1 person

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

2

Thanks for posting this! As a member of the current TDMC, I fully support the next phase as outlined here. To date the Committee has added a lot of value (IMHO), and as mapped out in this proposal would be on the path to add even more value in the months ahead–especially in light of its role in managing key elements of the FOXy rewards system.

4

After some discussions I would add another another amendment to future proof the committee:

Amendment #6: If a vacancy arises on the committee before the end of the six month term, the committee may appoint a replacement committee member by acclamation for the remainder of the six month term.

5

Thanks . I fully support this. I think the TMDC has done a great job.

I don’t see falsifiable goals listed here. I would like to see the stable coin goal explicitly stated here, with an amount of stables and a target date.

Also, the link to the Olympus contract currently does not have 748k USDC any longer, which you stated. We claimed that to the Treasury. Ethereum Token Holdings 0xe2ae37b8077cd3bc7ef1c6580f6dc93673078a01 information Can you correct that in the final proposal that goes to vote?

6

Thanks for this input .

Yes, I see that on 7 Feb $830K was transferred to the treasury and currently we are still streaming $40k per day. At the snapshot proposal I will update the information to reflect the changes.

WRT to targets

Td;lr - It’s premature to set a stablecoin target. The benefits of early entry to opportunities would be limited by directed asset allocation and create a friction between balancing long term health of the treasury and shorter term needs of the DAO. Also at present, the TMDC does not determine the short terms needs of the DAO. The AUM is limited to 60M to limit the consequence of poor TMDC risk management. In the future, when and if the AUM increases from 60M, with fewer unknowns and reliable baseline data available, more specific targets may be appropriate.

I agree it can be helpful to have targets in circumstances, WRT to setting a stablecoin target here, I am less confident that it is advisable for the following reason ( though I am totally open to suggestions):

The problem the committee is challenged with resolving is “the how” to effect asset placement for the long term health of the treasury and concurrently balance the emergent shorter term needs of the DAO, within the evolving fast changing crypto environment.

If we were to specify a stablecoin streaming target in quantum and time, this can ( and likely will) result in chasing a number instead of responding to the needs of the DAO and substitutes for “the how” the TMDC is charged with balancing and resolving.

Another reason that comes to mind is that the TMDC is limited (for now) to exploiting the residual amount of the original 60M, and, it will add the task of housekeeping and monitoring the prior asset allocations, and, add a new effort of managing the FoXy.

I think assigning a stablecoing number now would be arbitrary and easily blown through or fallen short , neither meaningfully measuring the contribution to the health of the treasury not because it’s not possible, but because its still early and TMDC is still discovering paths ahead to meet its mandate and determining what is in its wheelhouse.

Please, I do invite comments on the above. 1f642

7

What is interesting here in my experience is that from leading Engineering for so many years, I am very familiar with the push from outside of Engineering to set a target date for a certain deliverable, feeling very uncomfortable with any statements regarding such because of all the unknowns, and ultimately not giving a date. And then there were the times that I would give a target date, with a set of caveats as to why that date might not be hit for the given deliverables.

I think something like the latter would be very useful here. A statement of what the TMDC would like to see happen, and then a list of reasons that may prevent that from happening. It shows a lot of forethought by the committee, and more important than that it educates others who would read the proposal.

I think I’ve heard a couple times that we have a general goal of $10M in stablecoins by the end of the second quarter. I thought that was all in the context of the TMDC. But thinking about this now the Success Token will have a big impact on that goal and the Success Token is not under the purview of the TMDC.

What if the TMDC set a goal of adding $5M in stable coins to the treasury by the end of June. If the USDC Olympus bond program runs as is through the end of June, that alone will make this goal a reality. That of course depends on the price of FOX remaining at or above it’s current price. I’m sure there are other possible unknowns that can get in the way of it.

The idea is not so much that if the goal is not met, there is some kind of penalty. The idea is that there is an agreed on goal that everyone is aligned on, and if we miss the goal, we then look at why, not with the notion of finding blame, but as a means to understand. If there is no goal, many valuable conversations about performance of our treasury initiatives might not be had.

Okay, that’s all I’m going to say about it. I also heard Kent have resistance to have a goal. Eventually, I think all proposals need falsifiable goals. But if this next one does not, I would still vote for it, as I think we need the TMDC.

Thanks.

8

Thanks again for sharing your thoughts. I agree with everything you write and I see your points. Your comments are helpful.

WRT to the DAO setting a stable coin goal my thoughts are if there is a stable coin goal, then it should be communicated to the TMDC in one form or another from whichever branch of the DAO set the number, and, also that the goal can be requested/set at anytime, not just at TMDC proposal time. There is definitely a disconnect between different organs of the DAO but that can be remedied in the normal course of business as the TMDC matures.

WRT setting a number. I am happy to do so but I would set it along the lines of not doing worse than we are already doing to start. like $4M and I would phrase it as the TMDC will strive to accumulate $4M in stablecoin. ( random $44,000 x90)