Posted on behalf of @Jeshli
This charter describes the purpose, key activities, responsibilities, and sub-committees of the Treasury DAO.
The TreasuryDAO is tasked with investing mStable Treasury assets. Quality investment strategies start with sound financial management. The risk which can be taken is inversely proportional to the runway available. This charter provides a framework for guiding TreasuryDAO actions in terms of runway.
The charter provides guiding principles under which the signers base their decision-making process on when it comes to managing funds, securing runway, as well as ensuring the appropriate custodianship over the mStableDAO treasury side. This increases the TreasuryDAO’s efficiency. The TreasuryDAO can act more swiftly when its actions fall in line with its guidelines and the TreasuryDAO’s efforts can focus on achieving agreed upon goals saving debate on vision for larger and less frequent discussions which are not limited to the TreasuryDAO. A charter also serves the mStableDAO members by providing clarity about the framework of the Treasury’s actions and enables users a reference tool when applauding or critiquing either the TreasuryDAO’s guidelines or its actions.
It is the mission of the TreasuryDAO to secure runway to ensure that the mStableDAO operations are sufficiently funded while investing a portion of its assets into key opportunities in the ecosystem if the budget permits. As an overall guideline, Capital Preservation takes priority over Capital Generation, due to the importance and requirement to have a perpetual runway available to continuously and easily fund the operational side of mStable. It does this by maximizing the potential of the assets the treasury owns and receives to ensure the protocol can grow sustainably with risk aversion in mind.
It is proposed to have the TreasuryDAO review the Treasury Charter once per fiscal quarter to account for the fast-paced nature of the overall DeFi and crypto ecosystem, during which any amendments and changes will be communicated via our official forum and are subject to a veto process by all participants. Due to the unavoidable lag induced with this, the Treasury will do their best to rely on mainly passive strategies that only require compounding as a primary means of action.
To achieve this goal, the TreasuryDAO will follow specific strategies thereafter mentioned “Key Activities” in order to turn the process into transparent and easily verifiable actions by all stakeholders and otherwise interested parties.
This next section outlines the Key Activities the TreasuryDAO performs on a day-to-day basis and highlights the means and ways in which those activities are to be governed and steered when making decisions relating to capital preservation and capital generation alike.
The key activities of the TreasuryDAO can broadly be divided into three categories (General Strategy Investing Reporting), which are then further divided into Capital Preservation (securing runway) as well as Capital Generation (Investing into the DeFi ecosystem).
The following section outlines in detail the strategy that the TreasuryDAO is proposing in order to manage the available funds in the Safe Multisig for both Capital Preservation, and Capital Generation alike.
For the purposes of this section, runway is defined as the number of months that the project can continue to fund operations with a specific pool of funds, based on projected monthly burn-rate. The funds required to achieve a specific length runway will be calculated by multiplying the number of months by the projected burn rate, taking into account subDAO funding proposals, projected protocol expenses and TreausuryDAO and ProtocolDAO operational costs, and conservative revenue estimates.
Secure immediate runway (minimum 12 months) (Capital Preservation):
It is proposed to secure at the very least 12 months of operational runway in a risk-minimized USD based stablecoin, as well as secure a sufficient ETH bank for funding core operations via the Builder subDAO and cover protocol based gas costs for 12 months. These funds are to be held either in the TreasuryDAO multisig wallet or be deposited in trusted and long-standing DeFi protocols. These funds should be invested in non-volatile strategies since they will need to be accessed in the short term.
Low risk investments for mid-term runway (12 - 30 months) (Capital Generation):
It is proposed to secure an additional 18 months of runway consisting of USD based stablecoins and ETH which are free to be invested in one of our previously whitelisted protocols 1 (in a diversified way in order to reduce smart contract risk) as long as they adhere to the stablecoin and ETH requirements defined above. Given the longer time horizon, there is scope for slightly more volatile investment strategies since there won’t be pressure to sell these assets in the short term.
MTA plays a crucial role in the mStable ecosystem and with the recent movement of all remaining Emissions Controller MTA into the smart contract, the treasury now only custodies non-earmarked MTA, except for the MTA reserved for Market Making originally defined in TDP 31. As part of these custodied MTA, the Treasury should engage in deployment strategies that will further the mStable ecosystem. Treasury will deploy MTA into liquidity positions in order to earn additional revenue and stabilize MTA price. The exact amount of MTA deployed and price bands set will be determined by the amount of USD and ETH in runway and the price of MTA at the time. Treasury MTA is the lender of last resort for mStable developers and infrastructure. The Treasury is committed to not selling MTA, however it will have to examine the runway of the project and take actions to ensure the longevity of the protocol.
This section outlines the behaviour in which the TreasuryDAO is committed to investing via the above described strategy. This serves to account for the treasury maximizing the potential of the available ETH gas bank to cover 12 months of operations, as well as to remain efficient and precise when executing their asset management manoeuvres.
This ensures that assets are being bought when the market is behaving at a time that is beneficial to acquire such assets, as well as doing so at a time during which the purchase itself is economically sound and valuable to the mStable ecosystem. By doing so, the TreasuryDAO is also positioned for an eventual return of an increase in value of ETH and other tokens, by which time a purchase with be economically unsound and result in a net negative value return for the project. Lastly, the TreasuryDAO also is committed to manage it’s own liquidity that is owned by the protocol, or have this liquidity managed by an active liquidity management project like Gamma or Arrakis if the value proposition outweighs the time commitment of manually performing this task.
This section is concerned with the reporting behaviour of the TreasuryDAO to inform stakeholders, community members, and core team members of the actions performed on a monthly basis.
The treasury will utilize both the official forum, as well as provide a Dune Analytics Dashboard, showing the current runway of the project. Runway is defined as Treasury Holdings / (mStable expenditures - mStable revenue) and it is the duty of the mStable Operations Manager to provide the treasury with a report of expenses which can then be subsequently uploaded into DUNE (Only expenses that can be tracked on-chain will be part of this). DUNE can be used to calculate protocol revenue and track the value of the mStable treasury, and given that expenditures and revenue are variable, estimates will be derived from historical numbers and the methodology will be approved by the mStableDAO. The dashboard can be divided into four sections:
- Current multisig wallet holdings in USD and ETH
- Current treasury investments based in USD or ETH and what yields each investment is producing. Other assets:
- A list of every asset held and its allocation in the holdings and its average purchase and sale price.
- A description of additional yield and/or produced by the non-ETH or USD investment.
- An overall summary of treasury growth for this tier.
Sub Committees This last section outlines the sub committees to reside within the wider TreasuryDAO signer group in order to create a point of contact for each of the above tasks, and be able to leverage subject matter experts within the DAO to have their primary workloads directed towards the topics they’re best suited for.
The TreasuryDAO is committed to schedule a meeting once every fortnight for an official Treasury Call during which each sub committee will present their findings for the epoch, and advise the rest of the group on potential next steps forward and decisions to be made as a whole. It is therefore proposed to have one team lead for each committee (Investing / Reporting / Strategizing) elected internally, that will serve as a main Point of Contact for any related queries or issues during these meetings.
Pending no significant changes to its content, this proposal will be taken to a Snapshot vote on Monday, the 24th of October 2022.
Voting will be open for a 5 days window to give adequate time for a concurrent discussion. Governors can change their vote at any time should the discussion sway their decision. We look forward to hearing what MTA token holders have to say and seeing how they cast their votes.