Hi all, I’m from Avantgarde Finance. We’ve been following the conversation here and wanted to chime in here to advocate for the middle path.
TLDR:
- More transparency on budget & breakdown of expenditures would be useful to have as a community. We’re happy to help prepare reporting for that if there is demand for this.
- Selling a portion of the initially-suggested ETH now seems sensible to cover short term needs but this should be limited given low prices and the existence of better options.
- Exploring convertible notes and credit facilities through protocols like Solv and Porter is a worthwhile endeavour. Whilst borrowing facilities come at a cost, they provide optionality.
Transparency & Reporting
We agree that a clear view on what the DAO has spent and what it projects to spend in the future is vitally important in deciding on a treasury management strategy and the tactics necessary for its success. We’re under the impression that this work is ongoing, but pending the outcome there we would be supportive of a Reverie engagement to hone in on the specific vertical budgets and projections. Given all the information, we would hope to settle on a strategy to diversify a predetermined portion of the protocol’s revenue from stETH to USDC at a regular cadence. Going forward, we think it’s helpful to have more transparency on accounts and reporting on how funds are spent. We would be happy to help gather this information if there was demand for such a task.
ETH Inventory
Absent the appetite to cut costs, we believe that selling a portion of the ETH sitting in the treasury to cover immediate expenses, is a suitable stopgap measure. That said, we subscribe to an endowment model for DAO treasuries where an organisation’s assets are used to generate a return which is in turn used to help fund operations. We believe that there are benefits to exploring ways to use the treasury’s ETH and LDO to generate yield or potentially collateralise debt offerings.
Karpatkey are well-positioned to advise on what is possible in the current DeFi landscape, and we are supportive of them expanding their WIP proposal to include this type of opportunity. We’d like to see it being done on Enzyme in order to ensure transparency, 24/7 real time on-chain reporting and trustless management of assets. We’re happy to help with this.
Tapping the Credit Market (whilst we still can)
We disagree with the categorisation of convertible notes (or similar credit facilities) as the most expensive option for funding. If structured well, we believe they provide valuable optionality that would be given up by just hitting the sell button. Depending on the structure, they prevent forced selling of tokens at depressed prices (because the DAO can just draw on the credit line to fund expenses). When token prices rebound the DAO can opt to sell and cover the debt, or pay it down with protocol revenues, or some combination of both. An ideal design would take into account the protocol’s cash flow dynamics and capacity for repayment and push the sale of protocol assets or native tokens well into the future.