A New Mental Model for Defi Treasuries

It is risky for protocols to only have their own governance tokens in their treasury. If Uniswap has only UNI in its treasury and the token price falls by 40%, its balance sheet would also shrink by 40%. This is dangerous because it occurs at a time when the protocol needs to ramp up spending, whether it is LP subsidies, token buybacks, or core dev... See more

Currently, even some of the largest protocols are unable to generate enough revenue to cover operational expenses (audits, salaries/payments to contributors, marketing, etc.). Yearn, for instance, operates at a loss even after accounting for non-operating income from yield farming. As such, retaining protocol revenue alone is likely to be insuffici... See more

Risk management To fund future operations, DAOs must manage their currency exposure. Some DeFi and NFT DAOs have treasuries worth hundreds of millions or billions. In addition to funding development and audits, these assets provide insurance if underlying protocols fail and are used for user acquisition and growth. To achieve these goals, DAOs mana... See more

Most protocol DAOs currently only hold their native protocol token on their balance sheets. Given the volatile nature of cryptocurrencies, this could mean that DAOs are forced to sell their native tokens during extended bear markets (and therefore at inopportune prices) to finance ongoing operations. Consequently, DAOs should first ensure that they... See more