Authors
ChopChop
Glossary
Runway
Burnrate
Summary
This proposal is intended to rebalance the current DAO treasury into securing a 2-year runway parked in stablecoins, to counter any potential downside risks the overall cryptomarkets could be subject to - as well as decide on some guiding principles to overall treasury management within NFTX moving forward. If this proposal passes, the action plan under specifications will be executed.
Rationale
During the NFTX genesis event, the community raise, stake in the DAO has been distributed to all early participants in return for specified NFTs (such as Avastars, Axies, and CryptoPunks) alongside three tranches of ETH. All contributions have been collected into what is called the NFTX DAO Treasury - a balance of assets owned and utilized by the DAO to grow the NFTX ecosystem.
Since the genesis event, we’ve grown the protocol and ecosystem together to hold over 45mm in NFT inventory, as well as generating approximately 1mm USD in protocol-native yield each month without diluting token holders through liquidity mining programs. We’ve also grown the core team extensively, moving from a 1 to 9 person Core team in the last year. This growth comes at a cost which is dubbed burn rate: all expenses made to develop, sustain and grow NFTX.
Having discussed this topic a couple of times during monthly governance calls, the core team feels it is now the appropriate time to rebalance a part of the DAO treasury. To understand the context around current costs, balance sheet distribution, and future outlooks, please refer to the presentation from our last governance call. This proposal is inspired by the mental models posted from Hasu, as well as personal experiences within organizations that failed to properly de-risk their balance sheet for down only market cycles.
Effect
Opportunity
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By rebalancing the DAO treasury to contain a sizable amount of stablecoins (USDC), we will cover a minimum of two years of runway. This allows the current core team structure to remain operational without having to sell crypto assets during a bear market (under perceived value).
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Setting precedents for how to deal with certain assets during bull/bear cycles in advance rather than in the moment limits emotional biases we may have. For instance, setting a precedent where the DAO is allowed to distribute minor parts of its own governance tokens in return of ETH when the community feels it is fairly valued increases token distribution as well as treasury health, without it potentially be considered dumping (in the moment).
Risk
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Selling assets for USDC will always come with hindsight bias. If i.e. ETH moves up from where it is at the time of sale, it will be considered as the DAO selling the local bottom. A good real-world example of this was the DAO selling off Zombie CryptoPunks in 2021. While being sold at fair value (based on historical sales and the currently listed floor prices), in hindsight we would’ve outperformed by holding.
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2-3 years of runway may be considered too little to outlive a true extended bear market without forcefully liquidating any additional assets along the way.
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Staking our own LP positions to start receiving protocol fees may limit organic liquidity growth. Doing this in a sensible way (specified below) is advised.
Specifications
The current runway of the Core team is broken down below.
Passing this proposal will raise 2 to 3 years of runway in USDC, by:
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Removing 2mm of NFTX/ETH liquidity, to sell the ETH for USDC.
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Unwinding ETH/GLYPH, lend out 500 ETH to bootstrap FloorDAO, and sell to USDC once returned.
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Unwinding Axie-Origin/NFTX, to sell Axie Origins for USDC.
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Unwinding Kitty-Gen-0-F/NFTX, to sell Cryptokitties for USDC.
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Selling Axie Mystic 1 & 2’s for USDC (including already sold assets on Ronin).
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Selling remaining earned xSushi for USDC.
Next to securing the runway, we want to set two precedents for our DAO treasury management efforts.
- The DAO will never distribute governance tokens at high discounts (undervalued) during crab/bear cycles unless it is the DAOs’ last resort to survive. However, the DAO should distribute batches of governance tokens at fair/high value during bull cycles. Either will always have to pass the governance process for transparency purposes.
- To limit direct staking impact on certain vaults where we are a majority market maker, the DAO will start to stake LP/IP position at a 10% per 2w ratio. This means that it will take 20 weeks until the DAO has fully scaled into its position, leaving enough room for other participants to adjust.
Funding request - Yes - Implementation Requires Funding
In order to execute the DAO Treasury rebalance proposal, all assets listed under specifications will be used as funds to secure the runway target.
Communication
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Discord: NFTX
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Governance Call rundown: NFTX Monthly Governance Call #25 - February 2nd, 2022 - YouTube
Proposed points of discussion.
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General thoughts on proposal / treasury management thesis
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Implications of distribution NFTX during bull cycles
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Length of runway: too long/short?
Quorum (For forum)
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Minimum Quorum: At least 5 votes
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Passing Threshold: More than 50% must vote in agreement for the XIP to Pass. For changes to the NFTX contract, more than 70% must vote in agreement for the XIP to pass.
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Yes, move forward with the current proposal
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No, amend
0 voters
