[GP-6] Treasury Management Proposal
Summary
This proposal aims to initiate the process of Treasury diversification. Currently, no selling or token swaps are proposed.
Context/Background
At present, the DAO possesses a Treasury of approximately 53,700,067 SEAM, valued at more than $350 millions at the price of $6.5 per SEAM. The current composition of the Treasury ensures the sustainability of the protocol and the DAO’s ability to establish partnerships and conduct successful Grants and Rewards Programs. However, strategic thinking is necessary to maintain the protocol’s sustainability in the long term. The DAO must possess sufficient resources to mitigate potential risks, such as:
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Market conditions: The volatile nature of the crypto market is well-known. The prices of governance tokens for leading DeFi protocols, including Uniswap, AAVE, and Compound, dropped by more than 90% during the bearish cycle of 2021-2023. There is no guarantee that such a situation won’t recur in the future. In the event of a 90% decrease, the Treasury would be reduced to $35 million or even less.
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Risk of a hack: Despite numerous audits and tests, DeFi protocols remain vulnerable to potential drains. The DAO must be capable of exploring insurance for users, backstop solutions or other approaches.
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Contributor risks: There’s a possibility that the current core and community contributors, or some of them, developing and maintaining the protocol, could cease to contribute to Seamless. It’s important for the DAO to continue developing and incentivizing a large network of core and community contributors (developers and non-developers alike). In order to do so, the DAO needs sufficient resources, preferably in stablecoins, to engage new / additional contributors. For reference, the current average salary of an experienced developer ranges from $170,000 to $190,000 per year.
Proposal:
Given the aforementioned considerations, it is proposed that the DAO initiates the process of Treasury management. As the first step, it is suggested to establish a partnership with Aera Finance and allocate 5 million SEAM tokens to a specially created vault.
At this stage, the DAO approves only the allocation to an AERA vault. No selling or token swaps will be executed unless the mandate of the Aera Vault Management Council (outlined below) is also approved.
Transitional Period
For the purpose of the initial setup with Aera, the DAO agrees to nominate an Aera Vault Management Council (AVMC) composed of 3 well known contributors. The AVMC mandate being proposed would be for the " Aera Client (DAO) – Governance/Multisig" role as defined in the Aera docs. Should the proposal pass a 2 of 3 AVMC Multisig will be created.
The following limitations shall be applied to the AVMC:
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The council can make decisions regarding SEAM tokens equivalent to $2 million per month without DAO approval. Any exceeding amount must be approved by the DAO.
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The Council is required to present a monthly report on the vault’s management.
The ownership function is to migrate the back to the DAO once the Aera Vault and associated strategies are sufficiently setup and stable. A target window for migration to DAO ownership is 3 months from the vault launch date. This means that the AVMC Multisig will transfer ownership back to the DAO governor smart contract by this deadline unless a new proposal is written and discussed by the community to extend this period / adjust the approach.
FAQ
Q: What is Aera Finance?
A: Aera is a noncustodial, autonomous, continuously rebalancing treasury management protocol trusted by Compound, OpenZeppelin, and others.
Q: Is it safe to use Aera?
A: Aera was audited by Spearbit, audit found here. Additionally, Gauntlet Network works closely with Aera finance. .
Q: Why is it suggested to allocate 5 million SEAM?
A: At the current exchange rate, it amounts to around $25 million. Seamless’s current Total Value Locked (TVL) is $42 million, meaning that in the event of a hack, the DAO can have the option to compensate for more than 50% of potential losses. In the case of a bear market or needing to add more core / community contributors, this amount will enable the DAO to engage, at a minimum, 20 contributors for a period of 5+ years and continue partnerships and grants programs.