Some general reactions on the idea to sell a portion of the treasury for stables:
- I understand the argument that a diversification could make sense given Lido’s significant revenue stream (~9.5K stETH run rate) combined with previous treasury diversification into ETH (~21K ETH).
- I agree that Lido would benefit from establishing a treasury management function. For a protocol of Lido’s size, we think it makes sense to protect the project against the downside by selling a portion of the treasury into stablecoins.
- As a general matter, we think that projects should manage treasuries conservatively. Typically, that means selling tokens for stablecoins to fund 2-4 years of runway and avoiding active management strategies like investing in other tokens or using the treasury for yield-farming purposes.
- At the very least, a thorough analysis of the DAO’s treasury and finances should be published before moving forward with any significant treasury operations.
As far as tactical steps go, we’d suggest running a process that looks something like this:
- Model historical and projected revenues to calculate how much money the DAO is generating per month.
- Calculate the current monthly burn rate across all of the DAO’s expense categories, project go-forward burn rates, and decide on the optimal token to fund each category (e.g., contributor salaries, USDC).
- Identify expenses that are currently paid outside of the DAO that will be pulled into the DAO’s budget in the near future and include them in the go-forward projections.
- Based on above findings, calculate the minimum monthly budgets across each expense category.
- Sell a portion of ETH from the treasury to cover USD expenses over the next 2-4 years.
- Establish a financial reporting and treasury management working group. This group will develop processes to manage the treasury (read: we don’t recommend doing anything fancy with it like yield farming or risky lending) and provide transparency to the community through ongoing reporting.
Reverie has helped with treasury sales for projects like Uniswap and dYdX in the past. If this is something Lido needs help with, we’d be glad to assist. Work like this benefits from expertise, so we’d collaborate with Sam and Jordan, who are former bankers with deep FP&A experience.