DappCon23: Developing standards for DAO treasury management - Cassidy Daly

Transcript

hi everyone um I'm Cassidy uh from Center fuge as mentioned uh we actually started off working in Berlin at full node the nosis co-working space uh so it's nice to give this talk here in Berlin um although we're actually based all around the world now um Center fuge is R asset financing on chain and today I want to talk about Dow treasury management which I think has always been a really important topic but it's newly relevant and today I'm going to go into exactly why that is um so first off what is Dow treasury management it's really um I think based on the fact that most of our Dows have native tokens uh and they mint

those native tokens uh often times to actually fund development of what the purpose of the Dow is uh so Dow treasury is usually made up of those native tokens and often times they do a token sale and actually get other types of assets so Dow treasuries are made up of of their native token uh probably making up a big chunk of it still these days uh but also stable coins eth Bitcoin even times um and so the Dow treasury management itself is really all of the activities that are involved in custody of those assets the strategy of how to manage those assets and then the actual trading or management of the funds themselves that are held by the Dow and I think what's unique about Dow

treasury management as compared to traditional corporations is that there's a little bit of a different mandate when it comes to a dow so just like other uh corporations that have a treasury you're obviously managing your liquidity and you're managing your risk so that means that you're really planning for the current needs of the Dow what your short-term spending is going to be in the next year or so but you're interested in also having Capital preservation strategies to make sure that the Dow can really fund itself into the long term and fulfill its Mission uh because most of our Dows do have long-term missions right um but I think what's unique really about Dows in particular compared to traditional corporations is that they really do have a core mission that tends to be Crypton native uh in nature and

really the management of the treasury should be aligned with what the Dow itself is trying to accomplish um and often times that means supporting its own ecosystem um so in the example of let's say um ethereum the ethereum foundation would probably want to put a lot of its eth into supporting projects within its ecosystem right um so I think when it comes to the management of a doubt treasury we do see a little bit of a different approach and that's why I think um approaching this as a as a manager for a dow treasury is a really unique problem that a traditional manager for a corporation's treasury wouldn't necessarily fully understand the needs of the Dow and be able to employ a strategy that meets both of

these things um so when a dow is actually deciding its goals um deciding how to deploy a strategy I think there's really three buckets that we can look at when we're looking at portfolio allocation um so that's again this liquidity portion of what are the short-term needs of the Dow um how much money are they going to have to spend on developing the protocol this year right how can they pay uh out the grants that they've uh given to teams different development teams auditing teams whatever have you for the Dow you need to understand what that looks like in the short term and be able to have uh liquidity strategy to actually meet that um but then on the other hand you probably will also want to have preservation and appreci appreciation

strategies uh to be able to actually have the Dow treasury either grow or not be depleted too much to be able to fulfill its long-term Visions um so I think these three buckets are really what we're looking at in terms of how managers today for a dow are looking at deploying their capital and often times or at least up until this point that's really been only Crypton native strategy IES that they've looked at and so right now when we're looking at Dow treasury management it tends to be pretty simple and it's usually just holding a stable coin as part of having that liquidity um and actually deploying a pretty leveraged sometimes risky crypto native strategies and I think what we're

looking at it's inter Fusion what I'd like to dive into a little bit more today is being able to take a step back from only looking at the crypto native side um and I think the reason for that is really because of what's happened in the market right so we had this amazing bull market where we saw defi tvl shut up and that is where these crypto native strategies were really useful um and I think made these Dow treasuries grow quite a bit and I think it was actually really great time for a lot of these teams to start deploying a lot of these um or really synthesizing the governance process around how we decide what a dow is going to do with its Treasury and so I think this bull market was extremely meaningful and really building that infrastructure giving teams a reason to

work on the legal infrastructure the um active managers to come into the space because there was a real opportunity to provide value here to these Dows and also developing the governance process to go along with both of those things um but unfortunately now in the bare Market I think it's really an important time to start zooming out of just these crypto native strategies and the reason is that defi yields are just lower than trafi yields right now um so I think this is the reason why we've actually seen quite a explosion in interest for us treasuries I think um this is something that's uh more interesting than a lot of defi yields right now um but I do think there's much more Beyond just relying on

something like us treasuries to D diversify Dow treasury into as well um but this is just an example of what we're seeing happen in the market today um so I just wanted to yeah bring up this point of well if all these Dows understand this uh it's a Well understood problem why don't I see a lot of activity happening in Dow treasury management right now where they're actually starting to diversify out of crypto and I do think a huge reason for that is the fact that we just did not have the tools yet why now we actually have a stack available for these Dows to do what they need to do to actually actively manage that treasury what does the stack look like I mean it's teams

like safe that actually have real custody solutions that I would say are finally getting into a place that's institutional grade I mean a place where a institution that has legal mandate to have proper management of his funds can actually start using safe to custody those assets we have governance I think nosis actually is doing a lot of really interesting work here that I'll dive into in a a few minutes of actually developing a sort of standard we could call it maybe of how to actually have governance around how to deploy your treasury um we've got stable coins like makers die A's just launched a go um we've got managers like karaki that are going to be talking on the panel right

after me um reporting like Stakehouse financial and then Center fuge we're really focused on real world assets and another thing that we've really tried developing together with maker is also this legal aspect um so I think three really key elements within this stack that I'd like to touch on uh a little bit deeper are the portfolio allocation that we that we focus on with cuge the legal infrastructure that a lot of teams are really focused on developing and this Dow governance aspect so for this portfolio allocation piece we've launched cuge Prime we've really built this specifically for defi native organizations and one of the things that really outlines this is this

work that we've done uh on a d legal wrapper I think what's really important to point out here is that creating something uh some sort of legal structure for a DA should never be a legal structure that encompasses the entire Dow it's really a specific entity for One Piece One purpose that's specific within the Dow and the important thing there is that you don't want to have the liability of whatever this legal entity is doing carry over to any other Dow participants and also vice versa you don't want anything else that the Dow is doing to then allow uh any regulator Target This legal entity just for something that someone else in the Dow is doing so it's really important

here to have a legal structure that's really narrow in its purpose and specifically focused on you know in this case allocating a portfolio of the Dow's assets and so that's something that I think is still in development probably working together with Regulators to improve and improve but I think we've got something here that uh well maker is happy to use at least for now um and I think uh and more and more Dows are going to start to employ this to basically enable their onchain treasuries to be able to invest in assets offchain and even invest actually in other onchain assets uh in a more legally compliant way so that legal infrastructure I think is really key but

the other aspect of centrifuge Prime is really our bread and butter which is this uh able ability to really uh diversify the portfolio of a dow into different types of re World assets so again looking at those other buckets that we uh looked at earlier liquidity preservation acceleration being able to have a portfolio allocation strategy that invests in all types of different real world assets um another thing that we've brought into our ecosystem uh is what we call the credit group and these are a group of credit and finance experts that really will help to inform uh Dow treasury managers and work with them on hopefully creating a strategy that really works for this Dow and being

able to understand how these assets fit into that strategy um so when we think about portfolio allocation a lot of that should really happen within the Dow and in that governance process and that's that process that I think we're still seeing develop but the Dow should allocate to the different buckets of these re assets so for example maybe they would decide to have uh a specific allocation of the Dow maybe let's say uh 10% of the Dow's assets they want to uh deploy to different types of Ru assets of that bucket maybe they want to put 70% into us treasuries and 30% into other types of credit and so the Dow will have a vote to actually decide on that

allocation um this allocation can then be worked on together with the treasury manager of the Dow together with the Cent fuge credit group as an example to really decide exactly what kind of strategy to employ but it really then comes down to Dow governance to actually approve what what those strategies are in a vote and then using centrifuge Prime be able to automatically allocate that portfolio the way the Dow has actually governed onchain so I think what we're trying to do here is take what we see in trafi but really bring that onchain I mean truly on chain where you have the Dow really governing down to the te exactly how you're deploying these assets and be able to have this automated in a way that is ideally

trustless to the extent that you know as a token holder that your decisions are actually being employed without you needing to double check on them it's all happening trustless on chain I think the governance aspect here is a really interesting one that we're still developing and I wanted to highlight a couple examples of of how that's going so one of those is um a Stakehouse Financial this uh reporting um proposal that they made to ens and I think ens is has actually done a lot of really interesting work in um creating a governance process to really facilitate how how they're managing their treasury um so that was a really good example that I think uh if you want to take a look something really interesting to get into um and another team obviously here

at dcon uh nosis is really I think leading the way in terms of having a robust governance process around how they govern their um their Dow Treasury and so this is a proposal here from karaki one of those active managers um that's working with the nois da to create together with the da together with the token holders a straty that works for those token holders that is aligned both to the mission of nosis but also able to employ strategies that would preserve their capital in the long term preserve their liquidity for the short term so I think this is actually for me one of the key examples of creating a standard hopefully for other Dows to follow in step of what nosis is

doing learn from them and understand that this is all something that can actually happen on chain I think one thing that's really interesting about katki and the way they work with nosis is that they use uh another nosis team called zodiac to actually um onchain have a a clear uh mandate that the da is actually able to set um and it's completely enforced on chain where karpat is not able to actually employ strategies that have not been decided by the Dao through this governance process so I think this whole um uh you know progress that we're seeing with all three of these things this legal infrastructure that we're developing the portfolio allocation that you can now do with cuge and this dowo governance that teams like nosis are really leading the

way in I think these are really key areas that we're seeing of development where you know we are in a new time where this has always been an issue for Dows this is always something that DS have wanted to do something about newly in the bare Market really looking at you know assets that are outside of the crypto native place but really because we have the tools both of those things are I think really key reasons why right now we're seeing a lot of growth in this area we're seeing a lot of dows actually really start to go into this direction of deciding how to allocate portions of their treasury to rural assets um and I think yeah for me that's really exciting obviously working at cuge uh but I do think one of the key

things here is that we make sure we're continuing to do this on chain we're not just replicating what traditional Finance is doing we're not just replicating the way that corporations today manage their treasuries we're actually building new tools and new infrastructure to be able to do this in a transparent and in a trustless way so that Dows can meet their needs to be responsible stewards of capital for the da but do it in a way that's actually happening as trustless as it can be on chain uh with these new pieces of infrastructure so that's all I've got for today uh but I do have a few minutes for questions thank you Cassidy we have a few minutes

uh for questions over here uh we have a microphone so just give us one second um hi there I think you mentioned at the start of your talk that a lot of the treasuries have their it's stored in their native token so I wanted to know if you could go a little into depth on how you convert the native token to something else which is more liquid and then you finally take it onto real world without without like having a price impact on the token in some way yeah I think I that's a great question I think a lot of teams are always thinking about that there's a few different ways that a dow could go about this depending on how much liquidity there is for their n

native token so you know there's one bucket of dows that might have a you know a high volume of trading for their token they could actually probably use like an OTC desk in this case to work with um you you know another team that would be able to very slowly uh trade that token for a stable coin for example so but that's really only limited to very large Dows that have highly liquid tokens and large token volumes on the market in the case of most Dows um I'd say they probably fall into a different type of bucket which is really that they end up doing things like Private Sales to key investors um or doing a public sale where the native token is then

locked over 2 years for example so you see both of these different examples now and these are an existing teams obviously a new team generally ends up starting off with some sort of a private sale or public sale as well but I think the key there like to your question of not moving the the token price too much I think is having either really high token volume so that the price isn't moving very much or locked tokens uh when you are selling them have another question for Cassidy if not we'll wrap it up there thank you so much Cassidy for your time and uh next up we have a panel

discussion we'll take a short break and we'll switch out the stage and then uh kick it off to round out this uh this section of talks for today thank you so much Cassidy thank youone