Gitcoin’s tough treasury diversification in winter

TLDR Gitcoin decided to use $15 million worth of GTC to diversify its treasury (which can be understood as financing), but it took half a year to make progress, and finally decided to directly execute OTC for $3 million and exchange it for stablecoins (sorry, we just dropped points) , the rest will be exchanged by future strategic investors, and the unreplaceable part will eventually return to the treasury.

The OTC operation is connected with professional service providers. Since the GTC market has good liquidity, the impact of the 3 million selling pressure on the market is not bad. The assessment is that the total slippage does not exceed 10bps.

The plan needs to wait for the community to vote. The more certain part is only 3 million US dollars from the secondary market, and the remaining 12 million needs to actively seek strategic contributors.

The discussion and plan design of Gitcoin’s treasury diversification started half a year ago, but the progress was slow and dragged into the bear market.

Why do we need to diversify our treasury? Let’s look at the picture below. This is the financial report from September last year. 99.8% of the funds in the treasury are GTC’s governance token.

Source Sep 21 Financial Report by Llama

Looking at the latest treasury report released 5 days ago, 9 months later, we managed to get down to 99.7%, yay.

Source May 22 Financial Report by Llama

This is equivalent to a company that only has stock and no cash. Although the DAO and the company are not directly analogous, the liquidity of the token in the Crypto world is really good, so people often use it as half of the cash, but there are still huge problems with this gameplay.

Propose an idea On January 14 this year, the Gitcoin treasury diversification strategy was officially proposed.

Diversifying treasury funds will bring the following benefits:

  • De-risk your treasury and reduce its volatility
  • Workflow and contributors can choose stablecoins to get paid
  • Can maintain a strong position and continue to operate in the event of a market downturn
  • There is no need to arrange resources to sell GTC every quarter, saving operating costs
  • GTC is held by long-term partners, and token distribution is healthier

open dry

At the beginning of February, the working group defined the strategic partnership framework , and put forward some requirements for strategic partners (just giving money is not enough, it is necessary to coordinate values, to be able to walk together for a long time, etc.) and selected some potential contacts , and then defined where to communicate and how to communicate. It does not rule out that it also includes unified language, what can be said and what cannot be said. Then started talking.

The weekly updates for three consecutive months were basically the same, and the most important thing was to “ continue to contact DAOs, VCs and other potential candidates ”, interspersed with processes, legal frameworks, smart contracts and other work.

From the work report at the end of February, we can see that we have begun to explore different ways of diversification . Exploring different pricing methods appeared in the work report starting in March .

Needless to say, the chat is definitely not smooth, so come and come, we can discuss the form and price.

It was so difficult . In early May, one of the people in charge of treasury diversification posted a post revealing the difficulty of the financing. ” I’ve personally spoken to more than 20 potential investors in the past five weeks ,” he said . I have to admit, the market is bearish, and probably more bearish. Investment in Web3 is slowing, and investors feel they should get a better price if they wait eight months. In the past, the progress of our working groups was not good enough and the output was poor, which also had a negative impact on the work.

Our current situation is: **No opportunity has been secured and probably won’t be found in the current situation. **Maybe it would be a good idea to start a community round? Liquidity is also important, and something has to be done to increase it. We are not just for money, but also want more people to better participate in governance. (still stubborn)

(I may not be accurate, the original words are as follows. We have not secured the right “lead” and may not find the right lead given the sentiment described above.)

frugal food

Two weeks later, the founder of Gitcoin posted a post asking the community if there was something wrong with our incentive system. A vigorous wage reduction campaign was launched.

Three days ago, I finally waited for the last update, which is also the final plan (but it has not been voted by the community, there are variables). This is the scene at the beginning. No matter, sell it for 3 million knives first, otherwise it will be hard to live. The rest will be slowly found.

at last

In fact, there is enough money in the Gitcoin treasury. There are nearly 10 million GTCs, and there are still more than 20 million at the current price, and many more are being unlocked one after another. But treasury diversification remains urgent. It is important to hold the stablecoin bullet as the market may further decline.

But you are afraid of the downside, and investors are also afraid. It is difficult to do this in a bear market, and it is really necessary to work as early as possible.

In the past six months, many DAOs have actually diversified their treasuries, large or small. However, Gitcion is really different from some DAOs with little liquidity. Because people can’t buy it in the market, they can’t form an effective price. At this time, it has become an advantage. (Brother, do you want to make a layout? If you want to make a layout, you have to come and change it with me. Right now, if you don’t change it, someone will change it. There is no such store in this village.)

GTC is different. Whoever wants to make a layout can buy at will in the market, and the liquidity is sufficient. Then why should I change it with you, not necessarily to the most suitable price, but also to lock it in.

GTC maintained a monthly payout of around $1 million in the months leading up to the pay cut. Considering that there are only 30 million yuan in circulation in the market, the monthly contributors give 1 million, and everyone wants to eat, all of which are selling pressure, which is also quite scary. More importantly, the output is very poor. (In the previous post, I saw a discussion that the expenditure was two million dollars, but I saw that the financial statement was actually about one million dollars. Friends who have better financial details can add it)

This shows that there is still huge room for improvement in DAO’s financial management, salary management, and output tracking. For details, please refer to Shawn’s article “What Happened to GitcoinDAO”

Now looking at only using governance tokens for contributor incentives, it is almost the worst solution.

But it is not appropriate to not give governance tokens at all. After all, it is necessary to allow contributors to participate in governance. At present, everyone believes that a combination of stablecoins and governance coins is a better approach. And if you can choose your own proportions, even better. (ArrowDAO: Are you talking about me)

In the future, with the development of the deSoci concept, governance tokens will likely become non-circulating versions in a considerable number of projects, and gradually withdraw from the market, allowing governance to return to its origins.

All the information cited above comes from public disclosure reports of Gitcoin or service provider Llama and discussions on governance forums.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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