BAO Treasury Plan and Treasury update (06/18/2022)
Introduction
On March 5th, 2022, the unanimous passing of BIP-9 officially marked the creation of the Treasury Galaxy. In the BIP, the Treasury Galaxy was given 120 days to define a proper risk management strategy and to update the DAO with their plan. Since then, the Treasury Galaxy has been hard at work creating a plan to ensure BAO can meet its operating expenses through a prolonged bear market while still providing positive risk-adjusted returns to grow the DAO’s treasury.
Approved Protocols
The Treasury Galaxy plans to use the following list of protocols in their ongoing management of treasury funds:
- Convex
- Curve
- Yearn
- Lido
- Rocketpool
- BAO Synthetic Markets and BAO Baskets
Strategies
The treasury is currently staking the majority of stablecoin reserves (1M) in the RAI+3CRV pool at Convex Finance earning both CRV and CVX tokens. As our stable reserves grow, we will also continue to accumulate more CRV and CVX. CVX tokens will be locked in 16 week periods on Convex Finance earning platform fees as well as bribes for gauge weighting votes on Curve. CRV tokens will either be swapped to ETH or stables or will be swapped to CVX and locked in the Convex strategy previously mentioned.
State of the Treasury
Current monthly operating expenses are around $52,150. This comes from a combination of salaries ($33,150/month) and galaxy budgets (maximum of $19,000/month). Galaxy budgets will likely be less than this on a month-to-month basis as not all galaxies will fully spend their allocated budgets and therefore will not need additional resources from the treasury. We expect the monthly salary expense to increase as the DAO continues to onboard guardians over the next year.
Long Term Goals
3-year runway
In order to reduce the risk of insolvency in a bear market, we are aiming to build up a 3-year runway in stablecoins and bluechip tokens. This will include a combination of liquid stables and stable reserves held in liquidity pools. Regarding all of the recent scrutiny around stablecoins, it is important to note that the BAO Treasury will never be involved with or hold undercollateralized stables. This is an important line to draw to reduce the risk of depeg events.
We currently have a runaway of around 36 to 40 months, not accounting possible new protocol revenue coming from BAO Markets or any franchise revenues. We do not include any BAO in our treasury valuation as we aren’t considering selling the BAO token held by the treasury and truly consider this as illiquid.
Risk Management
The treasury galaxy will seek to actively manage treasury funds using strategies through the use of the protocols listed in the Approved Protocols section.
Quarterly Updates
The treasury galaxy plans to provide quarterly updates on the state of the treasury to the DAO. This will include a cash flow statement, balance sheet, income statement, and an update on treasury risks.
Consolidation of Funds
Currently, treasury funds are centralized in the Treasury Multisig, but certain low liquidity or illiquid liquidity pool tokens are still scattered across multiple chains. The Treasury Galaxy will seek to consolidate all treasury funds if possible to the Treasury Multisig (BaoTreasury.ETH). The team also plans to keep the list of approved protocols small to ensure ease of management and tracking.
Decentralization
The role of the treasury galaxy is to ensure that the DAO maintains a sufficient cash flow and proper risk allocation to ensure the long-term health of BAO Finance.
The galaxy will be tasked with the following responsibilities:
- Consolidating and centralizing liquidity from all revenue sources and franchises.
- Create and maintain proper risk management strategies to manage excess treasury funds.
- Maintain sufficient levels of short-term liquidity to cover the operating expenses of the DAO.
- Facilitate the payment of grants, salaries, bounties, and operating expenses.
- Create projections to forecast cash flows and treasury balances.
- Provide the DAO with pay scales for the onboarding of new guardians that are in line with similar pay scales across the broad Defi ecosystem.
- Publish quarterly/annual summary reports
The BAO treasury is currently set up as a 5-of-8 multisig with the following signers :
- Baowolf
- Baoman
- Chickn
- Vital
- Fresh Pizza
- Fabiaz84
- Vex
- 0xC0le
State of the treasury (As of 06/18/2022)
Our liquid assets for the treasury are worth around 1.655M$. You can find the detailed composition of our treasury here :
