Discussion: Radicle Treasury Framework

Summary:

This post outlines a framework for the Radicle Treasury as a means to grow and nurture the Radicle Ecosystem. There has been much recent discussion on treasury management and how best to deploy and utilize the Radicle Treasury. This post is an attempt to synthesize these discussions, and to provide additional context on what the Radicle Treasury is and what its objectives are. Additionally, we share some initial ideas on how to deploy, operate, and manage the treasury. There’s a large number of cool things for the treasury to work on, and we think it’s time to formalize these discussions and processes. This is not meant to be an exhaustive post, and we welcome any and all feedback and suggestions from the community!

Who we are

Myself and Larry are the founders of Reverie, an organization dedicated to helping DAOs scale and operate more effectively than traditional companies. We’ve been deeply interested in crypto-governance and open-source funding for many years, and have been working full-time in the crypto space for the past five years, including participating in governance of numerous projects such as Compound, Uniswap, and others. In my past life I was a crypto investor and researcher at Blockchain Capital, while Larry was an investor at Digital Currency Group.

Background on Radicle Treasury

What is the Radicle Treasury?

The Radicle Treasury is a community owned and governed pool of capital that can be used to develop and grow the Radicle network and community. Using the financial firepower provided by the treasury, Radicle’s community of tokenholders can propose, vote on, and implement initiatives that make Radicle a core piece of internet infrastructure.

As detailed in a recent post, Radicle has been primarily developed by a core team of contributors supported by the Radicle Foundation and (previously) Monadic. While the Radicle Foundation will continue to fund contributors in the very short term, in the medium term, the Treasury will be the main pool of capital that will be deployed by the community to fund development of the Radicle project & ecosystem.

How large is the treasury?

The Radicle Treasury currently holds 51.6M RAD tokens and 21.6M USDC. At current prices, this amounts to approximately $300M+ ​​— a significant pool of money that the community can use to build powerful things. The source of these funds is the genesis allocation and proceeds from the Radicle Liquidity Bootstrapping event.

  1. Genesis Allocation (50M RAD)
  • At genesis of the RAD token, 50% of the RAD supply (50M RAD) was allocated to the community treasury. At current prices, the genesis allocation comes out to roughly $300M.
  1. Radicle Bootstrapping (1.6M RAD, $21.6M USDC)

What should the treasury be used for?

There is no shortage of things for the treasury to fund. To help the community find funding priorities, it’s helpful to review the goals of the Radicle project.

What are the goals of the Radicle project?

Radicle’s main goal is to provide a robust platform for code collaboration on the internet. To this end, success for Radicle can be defined by how many projects leverage Radicle’s neutral, robust infrastructure for sustainable, collaborative, and trust-minimized development. Thus, success can be measured by the breadth and depth of developers and users building on top of Radicle’s infrastructure.

A recent post on Radicle’s 2021 objectives lays out objectives for the next year. Broadly speaking, improvements and progress can be segmented under two main categories: Product and Community.

Product

  • Development of the core Radicle stack
  • Applications built on top of Radicle` to facilitate effective collaboration experiences
  • Maintenance of a healthy and resilient p2p stack
  • A low-friction, accessible Radicle experience

Community

  • Active set of contributors improving and maintaining core infrastructure
  • Developers building on top of Radicle stack
  • Active and engaged governance participants

Deeply understanding these objectives can help the community align itself and decide what to work on.

How can the treasury be deployed?

Receiving RAD or USDC from the treasury should not be a difficult process, as that would prevent contributors from applying for funding. At the same time, it shouldn’t be too easy to receive funding from the treasury either, as that would result in its abuse. Balancing these two conflicting points is necessary.

A simple and effective approach to balancing these two points is to allow contributors to apply for funding in two ways:

Grants program (<$250k)

Grants programs are a proven way to quickly get funds from the treasury into the hands of contributors. Here’s how they typically work: a group of trusted community members come together to form a grants program which then receives funding from the treasury via a vote by tokenholders. These funds are held in a multisig controlled by trusted community members. When contributors need funding, they can apply to the grants program. The grants program is best used for smaller, sub-$250k grants; larger funding requests are best done through a tokenholder vote in order to give tokenholders a say on major treasury expenses.

Tokenholder vote ($250k+ or continuous)

Requests for a large amount of funds ($250k+) are best done through a tokenholder vote. As briefly mentioned above, the intuition behind this approach is to allow tokenholders to express their opinion on large expenses incurred by the treasury. While this process is more time-consuming than a grant from the grants program, this delay serves as a feature rather than a bug: it allows the community to review the funding request, process it, and come to an independent conclusion without being rushed.

In creating two entrances into the treasury — a grants program and tokenholder vote — Radicle is able to get the best of both worlds: it can fund smaller grants rapidly and allow for larger fund requests through a more rigorous governance process.

As the treasury grows in size, it will make sense to recalibrate the admission sizes for the grants program and the tokenholder vote. For example, if the Radicle Treasury grows 10x in size, it’s likely the grants program mandate will expand from <$250k to a larger amount.

Ideas for early treasury uses

Since there are an incredible amount of things a treasury can be used for, it’s sometimes difficult for communities to know where to begin. To help the community start tapping into the treasury, we highlight several ideas that serve as initial use-cases.

  1. Radicle Grants Program (RGP)
  • Why: provide a quick source of funding to individuals and teams looking to work on specific initiatives.
  • How: allocate $1-2M from the treasury to a trusted group of Radicle community members to allocate funds over 3-6 months.
  • Benefit: empowers the community by funding development, governance participation, marketing, design, and growth.
  • Examples: Uniswap Grants, Compound Grants, and Aave Grants.
  1. Growth Initiatives

The two ideas above aren’t meant to be exhaustive; rather, they’re there to show the community two early examples of what the treasury can be used for today. We welcome any feedback or suggestions on other treasury use cases - there are many of them!

Conclusion

Radicle’s treasury is an incredibly important asset that’s owned and governed by RAD tokenholders. Using it productively can turbo-charge Radicle’s growth by providing funding to users, contributors, and partners.

Things are still early for Radicle Governance and there’s lots of opportunity to get involved for anyone that is interested. Governance is an open forum: anyone can contribute feedback, ideas, or suggestions on new initiatives.

We’re interested to hear your feedback on the proposed ideas, and on any other suggestions or best practices for the treasury, or governance more broadly. Governing a DAO’s treasury is a difficult task, and should be a process done with feedback from a broad set of community stakeholders. In particular, as ideas bubble up from the community, we think it makes sense to set up workstreams focused on specific areas (e.g., marketing, growth initiatives, treasury management). To this end, we think it makes sense to create a “Governance Working Group” that can meet regularly to discuss all things Radicle Governance, including treasury management. We will share more thoughts on this concept in a future post.

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Hi! Thanks a bunch for writing this up.

I have a few small detailed questions.
I’ve paraphrased each section I have questions about with the Qs below each section.

Grants program (<$250k)

  • “a group of trusted community members come together to form a grants program”
  • “which then receives funding from the treasury via a vote by tokenholders”
  • “These funds are held in a multisig controlled by [those] trusted community members.”

Qs:

  • How might this group of trusted community members be chosen?
  • How often would tokenholder votes for funding be made and are they separate from community proposals? I think any sort of explicit examples might help to explain this a bit (e.g. “Funding is directly tied to community proposals. Once a community proposal is passed via tokenholder voting, the grant program members will allocate funds as they see fit.” OR “Funding is not directly tied to community proposals. Once a community proposal is approved in a tokenholder vote, it will go through an additional round of tokenholder voting to approve or disapprove the funding being asked for.”)

Tokenholder vote ($250k+ or continuous)

  • Requests for a large amount of funds ($250k+) are best done through a tokenholder vote.

Qs:

  • How would the tokenholder vote related to large funding amounts any different from a tokenholder vote for a proposal? Would the project’s proposal and funding be directly or indirectly tied to each other (Related to my questions above)

For reference, here is an example of a past proposal:

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Hi @bordumb, thanks for taking a look and sharing your thoughts! First off I’d be remiss if I did not compliment you on your Seinfeld pic, seeing as how mine is anime Larry David.

You bring up some great observations/thoughts - I’ll try and give my thoughts on each one.

GRANTS PROGRAM:

  • How might this group of trusted community members be chosen?
  • How often would tokenholder votes for funding be made and are they separate from community proposals? I think any sort of explicit examples might help to explain this a bit (e.g. “Funding is directly tied to community proposals. Once a community proposal is passed via tokenholder voting, the grant program members will allocate funds as they see fit.” OR “Funding is not directly tied to community proposals. Once a community proposal is approved in a tokenholder vote, it will go through an additional round of tokenholder voting to approve or disapprove the funding being asked for.”)

Setting up a new grants program would be a separate proposal entirely, but would ideally consist of a variety of community stakeholders with a diverse set of interests and viewpoints. Additionally, they’re long-term aligned with Radicle and have skin-in-the-game to be active, participating members of the community.

Tokenholder votes for funding would be separate, individual proposals. A grants program could be created through an individual proposal with a 3-6 month horizon, and revisited every quarter or biannually. For the sake of speed, we’ve seen other grants programs allow committee members to issue grants (within a predetermined budget and focus). Specific parameters like grants budget, focus, committee members can be discussed and voted upon on-chain.

Funding requests for specific projects past a certain size (e.g. $250k+) could go through an on-chain vote. They would happen on a case by case basis, and can be proposed by any community member. See here and here for some examples from other projects.

TOKENHOLDER VOTE

  • How would the tokenholder vote related to large funding amounts any different from a tokenholder vote for a proposal? Would the project’s proposal and funding be directly or indirectly tied to each other (Related to my questions above)

It wouldn’t be too different in practice, and could probably follow a similar pattern of 1) temp check → consensus check → on-chain vote. If it goes through an on-chain vote the proposal + funding would be tied together.

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Hi Derek!

Thanks a bunch for the detailed response.

The example from Compound was particularly edifying.

I don’t have any further questions.
This all sounds good to me.

Thank you for this post. I am supportive of the initiative and will join the Governance Working Group. I specifically like that the framework you propose appears to balance quite well community control with flexibility on execution, so I think that it’s a good start.

Some random thoughts below:

  1. Concerning the committee members that will be overseeing grants, do you imagine that as a paid role by the treasury? or no? If yes, then I can imagine that a lot more folks from the community might be interested in being considered for the role, so I think that it’s important that the community reaches consensus about that point before members are selected. Any best practices you saw there in other communities that you could share?

  2. Concerning grants, I feel that a big part of the work that we would have to do as a community will be to provide principles / guidelines that any potential solutions need to satisfy. For instance see section “Designing by principles” on our previous post Towards decentralized code collaboration I am not concerned by it, I am just calling it out as something that we collectively need to spend more time on, as Radicle gets its value & differentiation from some of those principles.

  3. Concerning growth initiatives I have a number of ideas:

  • in order to drive adoption of Radicle Orgs, the treasury could potentially subsidize the cost of creating an org today (you get your money back for org creation + first checkpoint)
  • when Radicle Funding launches later this year, potentially the treasury could provide matching in RAD or USDC for projects that are being funded through Radicle
  • finally I really think that we need to start the conversation around incentivization of seed node providers. It’s a very complex topic, but I am curious if there are community members that would like to take it on and propose something more concrete. Conversations have been popping up left and right but there hasn’t been much progress.

Thanks again for starting the conversation!

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Woooo! Very excited to see this conversation get started. I’m looking forward to discussing this framework during the first Governance Working Group session today, but thought I’d capture some thoughts here first.

Here’s a couple outstanding questions & thoughts I have regarding next steps with the Radicle Treasury.

  • I personally believe a grants program is a natural next step for the project. Getting people funded to build on/with Radicle funded is usually a win-win for all involved. Here’s where my heads at regarding what we’d need to figure out for next steps:

    • Who is the committee & how are they sourced?

      As @lftherios said, I’d also look to others for their best practices regarding committee formation and maintanence. I’d see value in some Radicle maintainers/contributors being a part of the committee to provide guidance on how potential grants align with core project development & objectives, but I’m not sure if that’s how others do it?

      I think it would make sense for this role to be funded via the Treasury and would probably want to encourage the community to delegate to these individuals to increase their governing power.

      I definitely would like the grants committee to operate public by default. I’d hope we could have open calls and publicly available notes + progress reports + applications.

    • How could our Core Teams utilize the grants program to coordinate development?

      Since Radicle is a distributed open-source project with multiple Core Teams, I could imagine a world in which a grants program could be used to fund bounties / RFPs published by core maintainers & contributors. Maybe this already happens naturally with other grants programs? (would look to others with experience in this :eyes:). The process of submitting RFPs & bounties would have to be built into the committee’s workflows.

    • How can we use Radicle Orgs to create more transparency into the Grants process?

      I’d love for the Grants Program to be run via a Gnosis Safe + Radicle Org. It can then operate as a “Grants DAO” by the committee. Grant applications & progress reports can be version-controlled and hosted on the Radicle network. On-chain anchors can be used as an official signal in fund distribution (meaning, funds are only distributed from the multi-sig after a grant repository has been officially “anchored”)

  • In terms of Growth Initiatives:

    • How do we create public and productive discussion around which growth initiatives to pursue?

      While the applicant is responsible for creating a proposal for a grant, I predict that proposals for growth initiatives require more coordination & consensus. Who will be leading the strategy and decision-making on which initiatives to pursue? It seems like these initiatives will more likely fall under Tokenholder votes than Grants, but I feel like it’s best to be continuously discussing and prioritizing growth initiatives instead of dealing with them proposal by proposal.

    • How and when do we measure success & progress?

      Who’s priority will it be to reflect on the success of growth initiatives and when will this happen? How will the community provide their feedback for consideration? I could see this lining up with the Radicle Foundation’s yearly report outlining strategy and objectives, but would probably be better to have a more frequent cadence for discussing these topics. Is it something the Radicle Governance Working Group is in charge of?

I have some more thoughts developing, but excited to start discussing this in real-time with the working group :seedling:

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@lftherios and @abbey, thanks for the thorough feedback! I’ve had some great conversations around these topics over the past week, and have had a chance to compile feedback and thoughts! Yesterday’s governance call was also particularly helpful in getting a sense of other suggestions on these topics.

In general, the biggest takeaways from feedback has been around two main themes: 1) Managing transparency and conflicts, and 2) increasing adoption for Radicle Orgs and leveraging it for Radicle’s own working groups (e.g. grants or growth initiatives). More detailed thoughts on these areas as it pertains to grants and growth initiatives below:

Radicle Grants

  1. How is Radicle Grants structured/funded, and who should be on the committee?

We can draw inspiration from other grants programs here. There are small differences between them, but broadly all are treasury-funded programs with a Grants “lead” that manages the program, and 5-6 other reviewers who contribute on a part time basis.

Finding the right mix of committee members is important. It should ideally involve a mix of core contributors that are deeply knowledgable about Radicle’s needs and roadmap, and outside, independent contributors. Core contributors familiar with Radicle’s existing working groups can ensure grants applicants don’t end up doing work that overlaps with existing core team workstreams, while outside contributors unaffiliated with Radicle can offer a diverse set of opinions and learnings gained from helping other projects. We could post a Grants committee “temp check” that includes an application to join the Grants committee, with token-holder approval.

In terms of structure, grants should definitely leverage Radicle’s own open-source tooling and orgs. Most existing grants programs leverage some combination of gnosis multi-sig and payments streaming tools like Parcel or Multisafe. Radicle Orgs could be a great tool used here, and could also serve as a cool case study for other projects to see! @jennyp might also have some thoughts here.

On transparency: Transparency in any committee formation process is important - approval from token-holders should be necessary, and there could even be some sort of public “application” process on the forums where interested folks can apply to be a Grants reviewer. I agree with the general idea that grants should operate as transparently as possible, with publicly available notes and progress reports.

I have mixed feelings about public grants applications for. Practically, it can be a challenging process for people that apply and end up getting rejected, and can discourage certain contributors. Ken Ng’s excellent guide for UNI Grants sheds some additional color on the private vs public application debate. Regardless, I think the baseline philosophy should be to operate with as much transparency as possible! A good start is to have quarterly updates, and quarterly/bianuall changes to committee makeup and membership.

Growth Initiatives

  1. *How should Radicle structure and vote on growth initiative programs?

Growth initiatives will definitely require more coordination & consensus compared to grants. Whereas there may be tens or hundreds of fundable grants applicants and ideas, there might be a few growth initiatives at any one time,

I think of growth incentives as its own independent category and workstream. Empirically, it seems like most projects deal with growth initiatives on a “proposal by proposal” basis, which can work ok because there generally are only 1 or 2 of these a year, and mostly targeted after general liquidity mining for trading/lending volume. However, Radicle might have a broader set of behaviors to incentivize, and it would be good to have continuous discussion, feedback, and post-mortums on these programs. This could be its own workstream with a lead, and can be a topic discussed in every monthly governance call.

2. What growth initiatives should Radicle fund?

There are many potential designs for a Radicle incentive program, and Orgs and seed nodes seem like a good start. This can be achieved multiple ways, through direct protocol-level incentives, as well as through other projects like Rabbithole, which has “Quests” that expand the top of funnel to help developers learn about Radicle. From community discussion and the call yesterday, it feels like there is strong community consensus that these programs are necessary, and it’s more of a question on how to structure them fairly and effectively in a community-driven manner.

Nexts Steps:

It feels like the next step is to have community discussion and feedback on two main areas: 1) Grants and 2) Growth. It could be good to set up dedicated threads to these topics and garner feedback on the specific aspects below.

  1. Radicle Grants: Structure, scope, committee, philosophy

  2. Radicle Growth: Structure, scope, committee, core KPIs, reporting, decision-making process.

Hi everyone, this is really evolving into a great framework.

I’m also in support of both the Radicle Grants and Growth Initiatives, in so far as each maintains a selective scope with definable goals/outcomes. The SubDAO or Grant Committee seems most appropriate for the issuance of funding, so I would be in favor of that approach.

As it stands today, the Treasury offers a great deal of flexibility for deploying funding across these growth verticals, as well as sustaining runway for the core teams and contributors. When Radicle Funding launches later this year, it will be exciting to see how much impact this can bring to the overall growth of the project.

The topic I wanted to bring up is in regards to the long-term allocation strategies of the Radicle Treasury. As an early-stage organization/DAO, having such a high-concentration of native tokens is all but typical. On one end, it shows a high level of confidence in the project’s success, but it also presents a set of concentration risks we can aim to mitigate over time (without sacrificing on that core conviction).

The $21.6m in USDC should be sufficient for funding the core team and some of the early growth/grant initiatives for at least 18-36 months. More clarity on the expected monthly/quarterly expenses and other initiatives would allow us to determine a more accurate picture, but I feel it’s safe to assume expenses would fall <$250k/month.

With that, the question arises on allocation strategies within our treasury reserves - both those in USDC and RAD. Considering the long-term mission of Radicle (and its stakeholders), it is in our interest to consider risk-adjusted strategies to maintain and grow the treasury holdings over the foreseeable future.

So, I wanted to bring up the conversation on this topic now, and throw it out to anyone who might have thoughts on it. Again, this should be considered as a medium-long term strategy. Fortunately, Radicle has absolutely no short-term liquidity needs; but given the significant ‘on-paper’ value of the treasury, it’s definitely worthy of discussion.

Thanks for reading!

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Thanks for the response! I agree with almost everything you said. Finding the optimal balance between risk hedging and maintaining alignment is an important question that all treasuries should think about on an ongoing basis.

The 21.6m in USDC should be more than sufficient for 1-2+ years of ongoing expenses, possibly even more. That said, even if the treasury was all in RAD, programs such as Grants or paying contributors could be paid in RAD tokens, giving the user to hold or sell if they need cash. This gives them optionality and maintains alignment. I agree that at this stage Radicle doesn’t have an urgent need for risk/price hedging, and it’s more important for the treasury to maintain alignment. That said, the decision to when and how to diversify should be an ongoing discussion, and thanks for bringing it up.

Question for you:What are the conditions (e.g. market or project) that it could make sense to diversify?

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Indeed a great question.
A blanket answer is probably inappropriate given the differences in treasury holdings/goals amongst difference projects. But one general approach for determining allocation sizes within treasuries is through the ‘basket approach.’

Taking into account the project’s vision, growth initiatives, short-term liquidity needs, and long-term objectives, one can determine rough sizes, goals, and holding periods of each ‘basket’ - then manage and monitor each accordingly.

Radicle’s case is actually fairly unique, with it holding 8 figures worth of USD denominated stable coins - weighing in at ~4.7% of the main treasury wallet, with the 95%+ remaining in RAD and 60 wETH (.04%). Most DAOs are 99% concentrated in their native tokens, so this actually demonstrates the advantage of Radicle’s split fundraising.

Illustrations help, so I spent some time drawing out the current situation :grin:

  • The first images show the current treasury breakdown; I do recognize I may be missing RAD held on other DAO-owned wallets, but nevertheless:

As is known, the treasury holds a very large ‘on-paper’ sum of RAD, and single-digit percentage in stable coin.


Modification

  • These next images shows a modified treasury, breaking down the allocations into different ‘baskets’ based on the specific goals. These are somewhat rough numbers, but I included 3 new baskets and modified sizing:
  1. Grant Funding
    Likely budgeted with RAD, like you mentioned.

  2. Growth Initiatives (RAD)

  3. Investments (Index Token)
    An index basket/allocation offers passive exposure to compounding growth with essentially zero correlation to RAD. Other investments could include actively managed strategies like yield generation, or individual crypto allocations - but that can quickly evolve into more labor-intensive management and introduce a number of other risks.

Through this modification, the concentration of RAD would still be >93%, but we have a better picture on how to structure the treasury allocations to the SubDAOs and expectations for each.

And IMO as long as liquidations don’t disrupt market pricing, this small index diversification falls within project alignment - giving uncorrelated growth to the broader growth of the digital asset market, and also acting as backup reserve wallet with very-high liquidity.

From experience, I can say that establishing a straightforward strategy early on can mitigate a lot of future angst/stress within market pricing, valuation, expenses, and general financing ops. Over time, regardless how native tokens perform, DAOs will begin to appreciate the purpose of diversification and such portfolio management strategies - but that’s a much longer conversation.

To your original question - In short, I think now is always the time to consider ways to optimize protocol treasuries. Waiting to act based on timing or certain conditions can end poorly, especially if there’s high-emotion involved. Radicle is in a great position as an early-stage project with plenty of resources, but I think it’s our responsibility as stakeholders to always stay diligent towards new ways to improve Radicle’s sustainability and growth.

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Nice one @0x-meta I totally agree that it’s a good idea to try to think about these topics early.

As I am starting to look into this topic, can you you point to any DAOs that have done this effectively and the process they followed?

Dear Radicle community, I work as a portfolio manager for a fintech investment fund licensed and regulated in Zurich, Switzerland. Recently we developed treasury management solutions for DAO’s across the digital asset space. I’d like to pitch two possible solutions to the community, which I think will fit into @0x-meta’s latest post. Specifically, I think we (Vestun) could work synergistically with Radicle on number 3. Investments (Index Token).

Kindly let me know if this is appropriate to discuss and I’ll attach a slide deck. I’m also here to answer any/all questions.
Regards,
Peter

Hi Peter, would love to learn more about your firm’s treasury management solutions for DAOs! Index tokens are an interesting concept, and certainly something worth evaluating for Radicle’s treasury.

Thanks for the feedback Derek. I linked a slide deck which provides a general overview of our activity and outlines how we provide a share in investment performance with provided liquidity and/or guarantee competitive yields.

Again, I’m here to respond to any questions/comments from the community. If there’s enough interest I would suggest a call where myself and our CEO would be available for further discussion.

https://drive.google.com/file/d/1feh0MCcD76b5x0hQA4OnqxOFAJC9Lj38/view?usp=sharing