Proposal: RLY Ecosystem DAO Treasury Management

RLY Ecosystem DAO
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Purpose:

The RLY Ecosystem DAO is run by token holders for the purpose of growing a community driven ecosystem for Rally. The DAO receives 20 million $RLY and $2M USDC on an annual basis, to be deployed by a group of 7 reviewers. This is an annual treasury that now needs to be managed for the benefit of the DAO.

This proposal is meant to describe the challenges that have come and go through a potential solution to these concerns.

Problem:

There are two primary problems with RLY Ecosystem DAO’s existing treasury management.

First is that the $RLY token is the primary cryptoasset used to deploy grants. As this is not a stablecoin, the value of $RLY fluctuates according to market conditions. Reviewers have seen that grant proposals tend to ask for grants in USD, which raises the question of exactly how much $RLY can be deployed for a grant ask given that the price of $RLY may change from the initial proposal to executing the grant.

Second is that the size of the treasury is concentrated in the native token of $RLY. This weakens the Treasury against market volatility and can reduce the reviewers’ ability to deploy the grant funds effectively over the course of each year.

Solution:

The reviewers can authorize a Treasury Manager to oversee the Treasury, which includes the selection, appointment, and removal of the Manager, as well as deciding on the full scope of the Manager’s responsibilities.

Treasury Manager Responsibilities:

  1. Oversee the operational management of RLY Ecosystem DAO Treasury funds.
  2. Develop proposals for changes in how the Treasury is allocated that best suits the reviewers’ goals.
  3. Perform due diligence on asset recommendations, how assets should be allocated and conservative DeFi protocols that can create additional yield.
  4. Regularly report to the DAO and overall community on how Treasury funds are performing and being allocated by reviewers.

Metrics:

  • Focusing on preservation of capital → average 30 day Treasury performance with minimum 75% of the Treasury in stablecoins.
  • Time horizon and liquidity - there should be no liquidity lock up longer than 90 days but investment outlook can be longer term (1-3 years).
  • Reporting Uptime - 100%. A key focus of reporting will be risk management, which will encompass an array of factors, including macroeconomic events, on-chain analytics and technical charting.

Initial List of Approved Assets:

  • USDC, USDT, UST and DAI
  • BTC
  • ETH

How the Treasury can interact with DeFi protocols will follow in another proposal.

Timeline:

  • 1 month to create the processes, provide the necessary documentation and propose the initial Treasury changes,
  • 3 months afterwards and then every 4 months, the Treasury Manager is evaluated on communication, asset diligence and reporting to the reviewers.

Suggested Compensation:

For every quarter, the Treasury Manager is rewarded a flat 24,000 $RLY with no performance based compensation. This can be changed by the reviewers in the future.

Potential Candidate:

Mike Huang

  • Current reviewer for RLY DAO
  • Currently holds NY CPA and Series 63 licenses
  • Manages a family fund that is crypto-centric
  • VC and angel syndicate experience
    LinkedIn
    Twitter

Notes:

From the reviewers’ call on 2/10, it was decided that grants would be valued within 7 days after the proposal has been approved at the average of $RLY price during that time.

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It’s been a while, but I recall the main/old RLY Treasury had a manager. Would it make sense to expand their responsibilities to cover this treasury as well?

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To comment on @Soul_of_Jacobeh’s suggestion

I’m the RLY DAO lead and treasury manager. I am in vote of this proposal to expand the treasury team for bandwidth support as the scope is vast ranging from volatility management and financial controller for grant distribution. I have previous working experience with Mike and he would be a good addition.

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Thanks for sharing the proposal, @mikexhuang . For the 75% minimum of the treasury in stablecoins, can you describe in more detail? Specifically, I would be concerned if 75% of the full treasury of RLY was liquidated for stablecoins given the overall effect on that would likely have on price due to the size of the treasury. Are you proposing the 75% threshold for some subset of the treasury (like enough to meet expected grants or capital needs for 1-2 months)?

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Hey @GaryCoover , that is a great point. The execution of transitioning the Treasury would be done over a period of time over several trades so as to not spike the volume and cause the price to fall. $RLY is currently at a $550M market cap with $3.5M in daily trading volume. 75% of our Treasury is currently worth $3.3M. Converting that in one go would be catastrophic.

The 75% threshold was my initial thought at the beginning of every year (which I recognize we are almost done with Q1). Each following quarter, we can look ahead at both capital needs and what we can expect to deploy towards grants. I would expect this to be cyclical but on average 20-30% per remaining quarter. I’m also not opposed to having 50% in stablecoins as the standard.

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Thanks for the additional depth @mikexhuang. As you shared, there will ultimately be a need to convert RLY to USDC or fiat in many/most cases for grants (although IMO grants that require some amount of lockup or holding should be considered for each case as well). I’m supportive of a gradual approach to diversifying that both balances near term needs and the health of the market for RLY.

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Feedback from 2/25 Reviewer Meeting:

  • We are using a Gnosis Safe with a DAO Minion
  • Helps to have a team of 2-3 Treasury Managers who are empowered for Treasury decisions up to a certain threshold and anything above that will need reviewer or community decisions

Vote has passed from this meeting.

  • Next steps are to set up the operations of daily/weekly Treasury work.
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