Treasury Framework

Purpose

The BarnBridge DAO earns fees off of protocol activity. These fees are earned in the associated assets users deposit into applications like SMART Yield, meaning that we can expect the DAO to amass a variety of stablecoins and ERC-20s in the coming year. In order to maximize the impact of these fees, it is imperative that the community come to a consensus on a guiding framework for how to deploy treasury assets.

Context

Both community and core team members have expressed interest in deploying these assets in numerous ways: deploying them productively in other protocols, financing protocol growth, and reinvesting in BarnBridge products have all been floated as possible ideas. Without a clear consensus on a best path forward, this draft seeks to ensure that the DAO is on the same page as to what our priorities should be.

Considerations

As we discuss this topic, it’s important to note that there are both a) traditional treasury management best practices, and b) new crypto project considerations that will need to be taken into account.

  • Growth vs. Distribution: DAO resources can either be used to further development of the BarnBridge protocol or to return value to BOND token holders. When considering which route is more appropriate, we can look to traditional corporations and cooperatives for precedent. Startup and growth-oriented companies do not provide investors with dividends, choosing instead to reinvest either profits or raised capital; cooperatives only pay dividends to the extent that their members bought its goods or services (e.g. patronage dividends). My view is that DAOs represent a cross between high growth startups and cooperatives.

  • Exposure to BOND Upside: The DAO currently has say over some 35% of BOND token supply through its treasury and set aside budgets for liquidity mining. It goes without saying that the DAO should be the biggest bull on BOND. A DAO cannot however persist on its native asset alone, so I would warn that this should not necessarily be viewed as a binary.

  • Cross-Protocol Investment: BarnBridge is dependent on other DeFi projects for its relevance. The DAO’s ability to accumulate governance tokens for its major dependencies will grow increasingly relevant over time. We should fully expect that such governance power can drive our own growth and, in a more adversarial environment, impede that of competitors who would rely on the same dependencies.

  • Community Funding: The core team’s multisig is not intended to last indefinitely. In order for BarnBridge to reach a stage where it can be purely stewarded by the community, infrastructure needs to be put in place for compensating contributors and keeping BOND holders abreast of how revenues are spent.

  • Education: Congrats, you’re participating in an experiment in a regulatory gray area. It’s one thing when your friends and family don’t quite get what you’re up to in crypto; it’s another when regulators don’t. BarnBridge’s position on the frontier of DeFi behooves it to play a leading role in shaping the narratives and information flows that shape public opinion.

Proposal

With these considerations in mind, I’d like to lay out the following categories for prioritization by community discussion. If you think there’s a category that doesn’t fit neatly into any of the following buckets, please share it in this thread. They are ordered from most to least important, in my view.

  1. Security: Bug bounties, insurance investments, future audits
  2. Community Funding: Salaried teams, squad bounties, ad hoc contributions
  3. Cross-Protocol Investment: Providing liquidity, accumulating governance power
  4. Using Own Products: SMART Yield seniors, SMART Alpha and Exposure when they arrive
  5. Returning Value: BOND token buybacks, accumulating ETH

Next Steps

The DAO is currently sitting on $1.5M in fees. We are still early in BarnBridge’s development and so I think focusing on points 1 and 2 should be prioritized at this time. That said, the point of this thread is to aggregate the community’s thoughts over a week in order to inform subsequent proposals.

Please feel free to copy thoughts you shared on Discord in regards to this topic here.

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Maximizing the treasury allocation to the Bancor BOND/BNT pool was a point I put forth in the governance conversation on discord that reached general consensus.

The idea would be to seek additional BOND from the DAO to maximize the Bancor co-investment of 1 million BNT tokens, right now we are using less than a third of that allocation.

The immediate benefits would be deepening the liquidity of BOND tokens in an IL protected pool, and it increases our chances of successfully passing a second proposal for Liquidity Mining Rewards on Bancor.

With Liquidity mining rewards the BOND treasury stands to make a substantial yield on IL protected BOND tokens that would otherwise lay fallow in the treasury.

We get additional liquidity while being paid for it as opposed to what we have with Uniswap where Barnbridge is paying for liquidity by incentivizing the pool with BOND tokens.

Here are some examples of yields on Bancor for pools that would be comparable to the BOND/BNT pool in liquidity should be maximize the Bancor co-investment

This is a copy and paste of additional benefits I shared in discord:

Maximizing the Bancor relationship gives us an opportunity to win on a number of levels:

  1. Diversify the DAO and start a treasury management strategy that pays out in more ways than one: Yield, governance power, Positive PR etc

  2. Maximize the return on our BOND allocation to the pool + BNT should we take further exposure by buying BNT and supporting the BNT side of our own pool

  3. Set a new standard for cross DAO collaboration per this comment: https://twitter.com/NBAtrollsDOTcom/status/1402307339663941645?s=20

  4. Strengthen ties to Bancor and the LINK communities: Two formidable communities with engaged holders, many of who will have additional reason to look into Barnbridge

  5. Set us up for further support from vBNT holders on future Bancor governance votes

  6. Attract further attention from two strong communities (Bancor, Chainlink) and the rest of the ecosystem

  7. Sets a model we can learn from and build upon as we interact with and grow our relationship other DAOs

I would suggest anyone that wants a full appreciation of the discussion on this point and others, catch up on the conversation in #governance yesterday. I’ve linked to the start of the conversation here :point_down:. Its a 5 to 10 min read at the most.

> Comment based on a conversation thread in #:classical_building:governance that started here: https://discordapp.com/channels/748538797662273636/751179180053364830/851764228162322452

1 Like

Thanks @Ser_M for putting work in towards this idea.

@Akin couldn’t agree more with maximizing the co-investment opportunity with Bancor. The IL protection offered by Bancor will be valuable for many including the DAO. Plus the potential for LM rewards, should it be approved by the Bancor community, make the decision a win-win-win.

This discussion has an opportunity to expose the community to the longer-term planning for the project. I believe it’s one of the more valuable topics the community has yet to discuss formally and should provide a broad reference roadmap as the project progresses.

Personally I agree with the prioritization outlined by Max. @Ser_M could you provide details about the remaining duration and scope of the existing multisig. It’s current state will influence priorities and focus of this discussion.

  • 1 Security: Bug bounties, insurance investments, future audits
  • 2 Community Funding: Salaried teams, squad bounties, ad hoc contributions
  • 3 and 4 I would put in the same priority. We can use BOND for Cross-Protocol Investment like we do with Bancor and in the same time we can use other treasury assets to invest in our own products
  • 5 Returning Value: BOND token buybacks, accumulating ETH
  • 6 ???
  • 7 ???
  • 8 ???
  • x Reward governance participants with portion of the fees from the treasury :stuck_out_tongue:

So I agree with @Ser_M order of importance.

Cross DAO ecosystem funds are emerging.

This fits somewhat into item 3 on @Ser_M list of priorities under the Treasury framework, but perhaps not in a way we have discussed so far. Could be a model to look into @lordtylerward re: Atpar et al

It could also be an opportunity to leverage more members of the community in playing a role similar to how 0x structured theirs. Either way there could be lessons BarnBridge could take from this approach.

https://blog.0xproject.com/0x-governance-roadmap-0x-dao-ac9218135d3

Good overview and agree with the overall prioritisation for the treasury.

I’d like to see Point 3 expanded further. There seems to be an ever growing list of opportunities and it will become increasingly difficult to prioritise / trade-off. It may be an idea to develop a structured approach to cross-protocol investments.
I was thinking this could be a standard approach mapping opportunities against our strategic outcomes (liquidity pools, secondary markets for jtokens / seniors, smart contract insurance etc.).
I’m just not sure what our selection criteria would be!