Treasury Management Strategy Brainstorm

Treasury management/diversification has been a recurring hot topic over the past few weeks on the forum and IRL discussions in Paris. Although I am not an expert on treasury management myself, I feel that this is an important topic to revisit as it seems the Radicle project has matured enough to start thinking of more diverse ways to put our massive treasury to work.

Although there have been scattered proposals in the past on how to manage or diversify the Radicle treasury (see Success Token Swap, Gro Protocol partnership, ETH investment with treasury funds), Radicle currently does not have a coordinated, long- or short-term treasury diversification vision or mission. The closest thing we have to this is the Radicle Treasury Framework post from @derek back in August 2021, but this primarily focuses on early treasury uses like funding a grants program and growth initiative, both of which Radicle has already funded (Radicle Grants, Ecosystem Growth Fund).

I believe it would be highly beneficial to revisit @derek 's Treasury Frameworks post and discuss a coordinated treasury diversification/management strategy to help make more focused decisions on diversification opportunities as new proposals come in, rather than responding to each ad hoc.

Treasury Strategy Working Group?

This is just an idea that could be set up right away with pretty low effort. Would be open to hear other ideas on how to develop this discussion though.

What: Development of treasury strategy working group to discuss short- and long-term treasury management strategy and discuss risk management. The working group could also discuss best tools/services for us to use.

I am currently imagining this as a “powerless” group of folks working together on fleshing out a clearer treasury management strategy that can be presented to and scrutinized by the broader team. I do not necessarily think they should be able to make all decisions on treasury management/diversification at this time, I just see it beneficial to have a focused group thinking about a strategy and exploring ways that would work best for Radicle. Happy to be challenged here.

Why: As DAOs still try to figure out monetization, treasury diversification is not only a good way to grow and stabilize the treasury for now, but also provides opportunities to boosts network resilience and encourages governance participation via token swaps.

How: I discussed some of the ways other projects are diversifying their treasuries in my notes from the treasury roundtable I attended a few weeks ago. Some examples from these notes include:

  • DAO2DAO: token swaps with relevant projects (share similar values/mission) boosts network resilience and encourages governance participation (see Radicle//Gitcoin Public Goods Alliance proposal from Llama)
  • Decide how much of the treasury is for strategy rather than investment. This will help determine a mix of blue chips (e.g. ETH, BTC), stables (USDC), natives, etc.
  • Explore ways to diversify with uncorrelated assets (e.g. data (via Ocean), real world assets (via Centrifuge), investing in related projects/startups, etc.)

There are also an abundance of projects and services out there looking to help DAOs find good diversification and investment strategies. Some of these include:

  • Index Coop - crypto investment vehicles for individuals & institutions
  • Element Finance 1 - provides fixed and variable yield vaults
  • Enzyme Finance - on-chain asset management
  • Karpatkey - treasury management outsourcing services
  • Llama - provides economic infrastructure for DAOs

Who: Anyone who is interested from any core teams & beyond. It would be great to have folks with some experience or knowledge around treasury management at the table, but I believe that having interest in the topic is key.

We could also think about bringing Larry & Derek from Reverie back into the discussion, as well as any other folks that might be able to contribute to a broader treasury management strategy.

From Paris offsite: This working group could eventually potentially be absorbed by the “Budget” pillar of the “Shepherd” discussed at the Paris offsite if we decide to stick with that model.

Next steps: I suggest we host an hour-long brainstorm call to start initial discussions and signify initial interests from folks. I proposed we do this sometime in early August.

I simply wanted to get the discussion started here on a higher level. I would be really happy to hear from folks who have more experience/expertise in this area share what they think about this idea!

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I fully support this! :+1:

Some runway projections/forecasts could be worth including in this too, as it would be central to any strategy. Check the work Llama did for Gitcoin for an example of this.

Also I’m guessing the foundation may have an existing strategy, at least for liquidating RAD for stables?

Hey @shelb_ee, great that you are bringing this back up, I think Reverie made some great comments about how important the treasury is, and how it can be utilized more effectively than it currently is sitting idly in treasury, and the topic of treasury management is incredibly important during these times of high volatility and uncertainties.
I’m Alex from Hedgey, previously a senior treasury manager at WeWork for 6 years, and also actively involved in a few treasury working groups in other DAOs. I’d be happy to participate and give some of my thoughts and best practices I’ve learned over the years.
Ideally the brainstorming session turns out into a working group with regular meetings and active work / contribution. I would recommend we have regular community calls to share with the community updates, performance, active strategies and deployments, and risks to the treasury / budget / forecasts in an open and transparent way.
Early August seems like the right timeline - what’s the easiest way to just setup an open meeting to get ppl involved that are interested, perhaps an open discord chat with a high level agenda (and announcements to activate and call to arms those interested)?

Good catch with the Llama proposal! Intended to add this in here but missed it. Will fix now.

Re foundation treasury strategy - I am sure but have never seen it. Would be cool to have access to that.

Hey @iceman! Thanks for the comments and interest!

This is also what I am imagining to happen as well. I want to keep the whole brainstorming & working group development process as open as possible and the discussions and findings from these sessions should be transparent and accessible to everyone.

Yes I think exactly this would be the way to go. I can just set up a call for now and the discussion can continue here until then? Maybe we aim for August 8th in the afternoon CET?

Yea lets aim for Aug 8th, and start communicating the time in the broader channels with the time details and call location (probably discord?)

@lftherios @cloudhead @abbey is there anything from the foundation side you could share on an existing treasury strategy?

Here is the link to the Discord call invite: Radicle

Great initiative kicking off the discussion again @shelb_ee and good to see that we have more knowledgeable people in the community! :slight_smile:

I also think @0x-meta 's treasury overview in the initial thread that was focused on the grant program side was super helpful. Maybe good to pull an updated version, given this was from more than a year ago? Happy to support creation of this if you agree.

And I agree 100% with the importance of having a least a minimum version of Treasury management running, esp. given current market conditions. I have started to analyze best practices in the market and am drafting an “MVP Treasury Mgmt Framework”.

See below my current mental model for thinking about setting up an MVP version of a Treasury Mgmt WG. This is in development, so obv appreciate feedback :pray:

1. Business Strategy: Having a clear view of the long-term viability of the DAOs business model and evaluating strategic directions. This is a key exercise as it influences a lot of the set-up decisions in Treasury Mgmt (e.g., short-term capital needs vs. flexibility to allocate long-term capital).

2. Treasury Research and Strategy: Researching yield strategies, allocating treasury into selected strategies, and managing these allocations to unlock the economic potential of the treasury holdings while ensuring operating expenses are covered with downside risk mitigated. This largely depends on risk appetite of the DAO, and in most cases should be treated rather conservatively.

3. Financial Reporting and Tracking: Creating standards for financial reporting and delivering periodic financial reports, incl. forecasts to establish transparency for the DAO members and act as decision-making support. This is largely underdeveloped for many DAOs and holds uncanny potential for creating clarity

Would love to get involved and learn more about the current set-up in Radicle and what of this is already in place @shelb_ee

Hey @Bernard thanks for the comments!

I agree that it would be nice to have an updated version of @0x-meta 's treasury overview as a lot has changed since then, including the launch of the Radicle Grants Program and the Ecosystem Growth Fund as well as adding more full-time contributors to the project. This the current treasury makeup according to the timelock: 0x8dA8f82d2BbDd896822de723F55D6EdF416130ba. How would approach creating an updated version of our treasury overview?

Thank you for sharing a brief version of your current MVP Treasury Mgt Framework model. I think the priority for us right now is to really nail down a defined “treasury mission,” or set of values and goals we hope to achieve with the treasury over the short and long-term. The next step in our view would be to focus more on figuring out a strategy aiming to fulfill the mission and set up a treasury management working group to help execute the strategy.

For transparency - The treasury mission definition is still being drafted and will require feedback and approval from our community before moving forward on any strategy. I have, however, started looking into different diversification options and started speaking with various asset management providers in the space including Enzyzme/Avantgardge, Karpatkey and Llama. It has been interesting to watch the ENS endowment discussion unfold publicly and has provided a lot of extra context and offered more perspectives these three providers. We will of course need to consider different strategies or the use of asset managers from the context of Radicle’s value and vision.