TL;DR

• Playing offense by chasing FOMO-driven upside investments is never prudent. Especially in today’s bear market, defensive diversification ensures survival. 
• Great treasury management proposals inspire a community to realize its vision, not promote a financial transaction. This post examines proposals from BitDAO, Uniswap, FWB, and others that achieve this.
• I include a summarized framework and treasury diversification proposal template to streamline governance initiatives. 

Framing

Treasury management should not be limited to one-off events like swaps or token sales. It is an end-to-end capital allocation strategy and operating performance framework to manage liquidity, optimize capital structure (debt and equity), profile risk, manage market and counterparty risk, and ultimately improve value capture of a DAO’s governed crypto project.

Bottoms-up investing communities are more than meme stocks, and active investment management must be transparent on-chain.

Standardization is not the enemy of decentralization - it sets clear expectations for market participants, reduces bias, accelerates deal terms, and ensures composability across transaction structures.

While crypto treasury diversification is necessary, proposals can lack a unified framework, which fail to educate DAO contributors on (1) why they should care and (2) financial benefits. Solving for these 2 pain points should invite more community participants into the conversation and improve DAO treasury management more broadly.

Proposal Framework

At Stanford’s DAO Symposium, Blockchain Capital Partner Kinjal Shah elegantly summarized treasury diversification proposals in ~100 characters: Make a case, list options considered, disclose who was involved, and participate in governance forums.

Here is an eight part checklist for treasury diversification proposals: 

1. Introduce and define your capital allocation strategy (how your finances align with your mission) in an inaugural post. Define strike zones for characteristics of ideal investments including:
   1. Founder background and credibility
   2. Product ecosystems and tech stacks
   3. Stage (private: Seed/A/B/etc, liquid: revenue size or product adoption footprint)
   4. Initial check size and follow-on capital opportunities 
   5. Timing and deployment schedule
   6. Co-investor relationship
   7. Or anything that may be beneficial to educate the community, anticipate questions, and garner support
2. Profile existing treasury allocation and P&L, and desired diversification targets (i.e., native governance tokenholdings, stables, NFTs, or themes to explore). If contributors only desire exposure to their own token, it would be best to know this early. 
3. Create an intake mechanism and standardized template using strike zone criteria for strategic partners and DAO members to submit diversification proposals. Pin this Google Form or Airtable to your Discord, governance forum and website to aggregate opportunities. 
4. Accelerate the standard tradfi investment committee process by creating a “soft proposal” process where anyone can submit a potential investment, but adhere to a standardized template of no more than two pages (1K words) covering:
   1. Why should the DAO consider this, and how does this fit within the DAO’s treasury goals?
   2. Team background and contributions to date (if applicable)
   3. Transaction summary: total investment size, financial and commercial terms 
   4. Projections: the process of developing a forecast for number of users, revenue, and value creation is inherently valuable since the author shares their assumptions on drivers and data. Accuracy will inevitably vary.
   5. Expected risk / reward: highlight traction and performance
   6. Token investment deployment and vesting schedules
5. Create a standard security checklist including wallet infrastructure and tooling, which continues to improve by the day.
6. Publish source post on governance forum, with commentary and links on Discord, Twitter and Telegram. Important: encourage open discussion in the governance thread and avoid private 1:1 conversations to reduce asymmetry of information to be inclusive of non-vocal DAO contributors.
7. Introduce a standardized voting process with time-boxed milestones for:
   1. Days to review proposal
   2. Days to vote
   3. Days to execute multi-sig
   4. Funding
8. Institute a monthly portfolio review framework and cadence, publishing an update on pipeline status, key milestones and outcomes achieved in period, plan for upcoming month, and asks from the community. See example from Aave.

Treasury Diversification Proposal Examples

BitDAO

BitDAO has the 3rd largest liquid DAO with $1.5B of assets and is growing a web3 ecosystem of tools and technologies across arts, education, media, finance, and gaming. 

BitDAO’s partners include Pantera, Dragonfly Capital, and Peter Thiel, but most notably the global crypto exchange Bybit which contributes 2.5 basis points of its ~$10B of average daily trading volume into BitDAO, with an average daily contribution of $2.5M. 

There have been $736M of contributions to-date, 50% in ETH (116K ETH) at a blended price of $3.2K, with the remaining 50% split in USDT and USDC.

Despite its relationship with Bybit, BitDAO is funding a broader financial ecosystem through its 1% token-swap with FTX (currently $100M of value), co-authored by Alameda Research.

BitDAO is supporting a series of autonomous entities (AEs) which function as subject matter expert subDAOs including GameDAO ($500M blockchain gaming initiative to fund and build community-owned gaming), EduDAO ($11M annual commitment to support university students from Harvard, Oxford, Michigan (Go Blue!) for research and blockchain innovation), and zkDAO ($200 commitment to promote Ethereum scalability and adoption). 

BitDAO will also fund arts and entertainment AEs, starting with the approval of BIP-8 through its investment in PleasrDAO. This proposal highlights PleasrDAO’s mission, contributors, artists, NFT inventory ($20.2M of asset purchase value) and financials (forward-looking six quarter P&L projection).

Finally, BitDAO is increasing tokenholder value through BIT-9’s proposal to buyback $700k / day of BitDAO’s native BIT token on secondary exchanges via Bybit’s $2M daily contribution. These tokens could potentially be burnt, reducing supply.  

BitDAO is seeking to evolve past the one-token-one-vote model with new governance frameworks to increase participation and drive more equitable outcomes. 

FWB

Friends with Benefits, a web3 creative community, passed a proposal to reallocate $1.5M of its $10M USDC balance into Aave Curve pools through Enzyme, a leading on-chain asset management application. 

This initiative accomplished two key goals: first, securing interest income of ~8% (an incremental $120K) to fund community initiatives like FWB Garage and prospecting headless creative partnerships like FWB’s upcoming takeover of Opensea’s homepage, and second, embedding treasury management infrastructure through Enzyme to simplify trustless custody, yield enhancement strategies, and automated performance reporting against crypto benchmarks like ETH. 

Uniswap

According to DeepDAO, 99.9% of Uniswap’s treasury consists of its native governance token. Airbayer submitted a thoughtful proposal for UNI to invest $1M-$5M in Index Coop’s BED index, a passive vehicle to diversify into crypto’s most popular assets:  

While it seems this initiative did not pass, I appreciated Marc from Index Coop participating in governance forums with direct, honest feedback, without shilling: 

Think of BED as your UNI proxy token that can be the first thing sold when needed. And feel free to sell when needed! It won’t hurt our feelings, or the price. BED is new and as such currently has limited liquidity, however, like DPI, it can be broken down to its base components which have deep liquidity and can be sold with minimal slippage.

Gnosis and Agave Token Swap

Agave is a lending protocol on the Gnosis chain which suffered a flash loan hack. As part of Agave’s plan to reimburse users, a DAO-to-DAO token swap was offered through Hedgey alongside a capital injection. 

https://twitter.com/hedgeyfinance/status/1522205008002965504

After the Terra fallout, I expect more post-mortem style posts chronicling what happened, how compensatory measures were evaluated, paths forward, and considerations for voting.

Ping me at @kishandao in case I can help.

About author:

@kishandao has 15 years of experience building billion dollar technology companies as a COO/CFO and was previously a growth equity investor at Goldman Sachs.

Thanks to Irina, Kyle, Evan, Kevin, Mirana, Enzyme, and Kaito for reviewing drafts of this post.