[DISCUSSION] BitDAO Treasury Management - Responsibility Diversify & Engage Ecosystem

Title: BitDAO Treasury Management - Responsibility Diversify & Engage Ecosystem

Authors: SIZE [@tk]

Date: November 15th, 2022

Summary: SIZE has built a fully decentralized, peer to peer on-chain sealed bid auction protocol catered towards DAOs launching responsible and ecosystem friendly auctions of their native assets from their treasuries. Protocols and their treasuries can use SIZE to conduct an auction for a batch of their own vested native assets. Traditionally, when the ecosystem (either users, traders, funds or investors) are interested in purchasing native assets from a protocol, they are required to submit a governance proposal similar to this one - a long process that historically gets front-run by the market itself, resulting in a significantly worse execution price for the interested party.

SIZE allows these protocols to conduct public, on-chain, fully transparent and private auctions for batches of their own vested tokens. Bid prices and amounts are fully encrypted on chain, so participants in the auction are unaware of what the other buyers are bidding at. This reduces the possibility of a sophisticated bidder, say an investor or fund, leaking their information/alpha and getting front-run in the auction.

The initial proposal would be for a single, one-time auction using SIZE, however, if successful and with positive community feedback and support, we would encourage a regular, once a quarter (if not more) treasury diversification event in which BitDAO sells a small batch of vested BIT tokens in a sealed bid public auction to its ecosystem. Vesting the tokens natively with SIZE eliminates any near immediate market impact, and ensures that purchasers are additionally aligned with the long-term goals of BitDAO.

Benefits: BitDAO will benefit from this proposal by nature of not only slowly and reasonably diversifying it’s treasury, but allowing its ecosystem, users, investors and interested funds to accumulate a position in BIT token at a slight discount, in exchange for some 6 or 12 month, on-chain enforced, vested BIT.

Treasury: As we can see below, currently about 56.12% of BitDAOs holdings is in its own native asset, BIT, with only 23.76% of its holdings being in USDC/USDT. Based on these ratios, we believe there is more than enough appetite, bandwith and holdings for BitDAO to sell some of its BIT tokens to the public in a responsible manner.

Proposal: While the protocol can handle auctions of any size, considering the state of the market SIZE would recommend a couple of different options, however, is open to community feedback and seeing what the ecosystem feels is the best route forward. A small (or a couple small) auctions to begin with would probably be the most reasonable path forward. SIZEs recommendation would be either Option A or Option B to maximize for complete filling of the auctions in smaller batches.

Option A: BitDAO sells ($2.5M) BIT tokens, in $500k auctions, one a day, for five days, vested for 6 months or 1 year.

Option B: BitDAO sells ($5.0M) BIT tokens, in $1.0M auctions, one a day, for five days, vested for 6 months or 1 year.

Option C: BitDAO sells either ($1.0M), ($2.5M) or ($5.0M) BIT tokens, in a single auction, vested for 6 months or 1 year.

Next Steps: If approved, the next steps would be for SIZE to connect with the BitDAO treasury management and give them a demo/walkthrough of the protocol. Then, after BitDAO picks the days they would like to conduct the auctions, they would simply create an auction on SIZE and deposit the BIT tokens to the auction contract. Upon completion, the USDC collateral would be withdrawn from the auction contract by BitDAO and complete.

SIZE is well funded and has a full time team of engineers. While not formally launched yet, SIZE plans to publicly launch very soon, in which the full platform will be in the public for review. SIZE is beginning to prepare for some initial auctions, the auction protocol is prepared, audited (both by individuals and by CodeArena), and the time to get the auction off the ground after approval would be little to none. The SIZE protocol charges no fee, and is asking for no budget for this proposal. If the initial auctions go well and has ecosystem support, SIZE would recommend conducting these on a more frequent basis.

Please let me know if you have any questions, and SIZE looks forward to the possibility of working with the BitDAO community.

Cheers!

tk

2 Likes

Hi @tk, thanks for kicking off this discussion! Diversification for a DAO with BitDAO’s size is clearly not an easy topic, given the market impact on any larger transaction. SIZE certainly looks like an interesting solution for facilitating OTC trades.

Two questions I would like to understand:
(1) Who would be the buying counterparty of the BIT tokens? What are the dynamics behind this?
(2) Have any OTC trades already been successfully executed through the SIZE platform?
(3) What would be the economic model behind this, as I imagine you would like to be compensated for the service?

Excited to learn more!! :pray:t3:

2 Likes

Have a question on diversification in BitDAO. I’ve always seen BitDAO being in a position of having pretty substantial diversification + inflow of stables and ETH. We’ve looked at BitDAO treasury as kind a gold standard for having the cash reserves to avoid overly diversifying, especially in a bear market.

As a background, I’m at Hedgey. We’ve had DAOs diversify through a few of our products (most recently had a $6m diversification this month) and really explore DAO treasury health.

I’d be more curious on the opportunity for BitDAO to participate in the other side of diversification events to grow its presence in governance of other DAOs in the space - either through USDC or even D2D swaps (which we have also done through our protocols). Would be curious to learn more on your thoughts Bernard + happy to share some of the insights we have on it all if it’s helpful.