Tangle Community Treasury “Year in Review” — Part 1: Fiscal Analysis

TLDR

Despite the Shimmer $SMR token considerably losing market value since the Treasury was formed, the Tangle Community Treasury limited liquidating $SMR to avoid any sell pressure on the market. Also, when the treasury did liquidate, it did so at an average of less than 1% of daily trade volume, meaning if there was any selling pressure, it did not come from the treasury. The Treasury is not in the business of ‘making money’ or ‘playing the markets’; instead, its strategy is to support the ecosystem, even if its value may decrease due to market activities. Additionally, given the limited size of the treasury, the committee has maintained meager industry standards regarding salary compensation compared to other industry DAOs. The sole purpose of this was to ensure more funding goes to community projects.

INTRODUCTION

The last 18 months have been exciting for the Shimmer and IOTA communities. In the year 2023, we saw not only the launch of the Shimmer EVM network and corresponding ecosystem projects but also the IOTA Foundation’s token inflation plans. This will provide funding to the IOTA Foundation for the next five years and, hopefully, the ecosystem. We also saw the launch of the Tangle Community Treasury, an entity that fairly supports and represents all community members and ecosystem projects.

This annual overview, divided into parts, will highlight the treasury’s operations from April 1st, 2023, to the present. We will highlight the successes and struggles it has faced, upholding the community directive to support the positive increase of the Shimmer & IOTA ecosystem. As we enter February, the community will see elections and governance proposals submitted as a Phase I vote to approve the treasuries and representatives for another year.

We will also look at the road ahead. By focusing on the positive outcomes, we are growing those endeavors and trying new processes, so we avoid repeating negative past actions. More importantly, let’s iterate and innovate, and most importantly, let’s not scrap three years of community investment to start over with something new entirely.

Whether it’s a DAO, a startup, or a global corporation, it doesn't matter. Any organization must be agile in such a way that it can be innovative and adapt to the fast-changing web3 market. This report will summarize the positives, negatives, and the path ahead, which advances the DAO into a more web3 decentralized governance structure and an entity that can better help the community and ecosystem.

PART 1: FISCAL MANAGEMENT

On April 1st, the price of Shimmer ($SMR) was 0.066 cents, giving the Tangle Community Treasury an initial valuation of $1,795,484 when it was first formed. Since April, we have seen a steady decline in the token price and liquidity. The Treasury has practiced extensive fiscal management during these turbulent times, focusing on supporting ecosystem infrastructure and project builders while ensuring not to put downward price pressure on the markets.

Despite the negative market sentiment, the Treasury was able to operate and support its objectives. In total, $5,761,620 was requested for grant funding, while only $888,287 (15%) was approved. Only $457,412 worth of Shimmer was paid out of that approved funding. Meanwhile, the remaining SMR payouts are either waiting for milestones to be completed or simply waiting for better market conditions.

The table compares the decrease of the Treasury (SMR Holdings) vs the decline in treasury (USD valuation). It’s easy to see the decline in USD valuation is much more than the decline in SMR holdings. The committee has been very agile in compensating and conducting proper fiscal risk management to ensure grants can be paid by the end of the term. We have also carefully, slowly, and regularly liquidated $SMR to average out and not gamble on the market. Still, the table above and the graph below show that not to add sell pressure to a declining SMR token.

The above graph shows the valuation over time compared to the token holdings of the Treasury. What is important to note is that as the red line, the value of the Treasury decreases three times as fast as the token disbursement. What does that mean?

The community Treasury is not focused on profits! On the contrary, it is focused on preserving and protecting the community. If the Treasury was an investment firm, there is no doubt that the firm would have sold a much more significant portion of the SMR holdings. However, this would have put a lot of sell pressure on the markets. Given that the Treasury’s focus is to support the ecosystem, when the token price decreases, it slows its liquidation of assets to limit market pressure. The data clearly shows this and solidifies that the Treasury prioritizes the community first over profits. This is the bedrock of ethical capitalism and something we hope to see from all entities in our space. Through ethical capitalism, we can work as a community of projects and all prosper together!

There have been some rumors and instigations that the Tangle Community Treasury is overpaid for their services. As the Tangle community treasury always focuses on market data when conducting any analysis, we want to show a quick snapshot of the current industry in regard to salaries for an FTE (Full Time Employee).

The program lead is full-time, and the lead position's annual salary is way below the industry standard. The bar chart below compares AAVE grants and TCT DAO job positions. We can see that the program lead and reviewer salaries for the TCT are much more cost-efficient than other DAOs.

Though how about liquidating funds? The Tangle Community Treasury is responsible for not affecting the current market price with its holdings. Some rumors have also been flowing around that the Treasury has ‘Dumped’ on the market. Education and factual data can be best when confronting criticism and rumors.

There are vital factors to consider:

• The Treasury does not, nor has it, ever liquidated in which daily trades account for more than 8% of daily volume, while the average daily trade amount is 1% to 2%.

Data Facst, out of 40 trades the treasury has completed over the past year,

• Thirty-six of the forty trades were less than 3% of the daily volume
• Four trades were between 3% to 8% of daily volume
• When the market was volatile, we did not conduct any trades.

*Note: Now that we have a DEFI system, we barely conduct any trades at all (on a DEX or a CEX).

The graph above shows the Treasury’s daily trade amount in dollars compared to the daily trade volume for the SMR token. The blue bars show the Treasury’s daily trade amount in dollars, while the line points are the daily volume in dollars for the SMR token. You can see that in the middle of October, we stopped trading (i.e., no blue bars) due to the volatility in the market. More so, it can be seen that the Treasury’s trade amount is minuscule compared to the market volume. There is clearly sell pressure given the down trend of the $SMR price, but that is not coming from the treasury.

Another visual example shows a side-by-side bar chart of the Treasury’s total daily trade values next to the daily market volume for that day. The orange bars are the daily market volume, while the blue bars are the total valuation of trades the Treasury has completed. You may have to zoom in to see the blue bars.

Further, to give context, the most daily trade value in a single day was September 25th, 2023, of $7,530 worth of Shimmer (which was broken into three trades), accounting that day for 0.351% of the total $328,639 in daily trade volume. To repeat, the most significant amount we ever sold in a day accounted for one-third of a percent of all the trading volume that day.

This complex data shows that the Treasury committee takes the impact of liquidation exceptionally seriously and understands that if not done correctly, it can affect the market. Our main goal is, and always will be, to put the community before the Treasury’s profits.

Today is a new day. The Treasury can support our ecosystem liquidity pools as our DEFI space gets legs and TVL increases. This not only supports liquidity but also allows liquidation through impermanent loss. This will be shown in more detail in a later article release. The point is that the Treasury is not an investment firm; the community always comes first!

Part 1: Fiscal Analysis
Part 2: Governance Update
Part 3: Success Metrics
Part 4: New Year with an Active Treasury (Coming out soon).

Keep an eye out for Part 2: Governance Update, where the article will summarize the previous year’s governance updates.

Treasury Donation Wallet: 0xDac6c2470fc3058BBf7E3093B03794996558f164
Website: www.TangleTreasury.org