Proposal: 12-month Budget for Treasury Guild

Over the past several months we’ve worked in the open to develop a 12-month budget for the Treasury Guild. This budget can be seen at the link listed below.

This budget is a spend approval - not a spend mandate.

Here is a walkthrough guide for reading it:

  • When you open the budget you will find three tabs:
  1. “Budget” - a line-by-line and month-to-month breakdown of expenses.
  2. “Assumptions” - contains all variable inputs to the budget. This should serve as a focal point for any discussion.
  3. “Assets” - the treasury’s assets updated on May 20th, 2022.
  • The budget is broken into three high-level categories, respectively:
  1. Liquidity Incentives - which primarily comprise a budget for incentivizing liquidity providers for T LPs, tBTC LPs, and thUSD LPs. Historically, we have used Votium and bribe.crv for this. Going forward we plan to use Paladin’s Warden application, which have started testing this week.
  2. Compensation - comprises the stipends for all existing committee members, the Threshold council, and our Director of Research. Additionally we have a budget for the development and audit of thUSD as informed by @ben and @EvandroSaturnino . And lastly, we have budgeted for a Project Manager role, which is currently vacant.
  3. Other - this categories includes a conservative budget for (a) the tbtc coverage pool rewards, (b) conferences and hackathons, (c) treasury diversification, and (d) the repayment of the DAO’s T-ETH loan.

Let’s breakdown 3(c) and 3(d) a little deeper since this is the least obvious:

3(c) → We plan to diversify the treasury into ~$5m of tBTC and ~$5m of Convex. This is the equivalent of ~2400 ETH worth of each. The purpose of the tBTC purchases is to help build liquidity for our flagship product. The purpose of the Convex purchases is to help direct liquidity towards all of our product offerings.
Rather than indicating a schedule, we place this entire expense in the final month of the schedule. However, we intend to do this opportunistically, whenever it is in our best interests. This is a deliberate decision to avoid being front run.

3(d) → The DAO’s T-ETH loan should be paid back so that we can start to accrue the fees and rewards and so that we can avoid any significant IL accruing. For that reason, we have included a monthly payback schedule. More information about the loan can be found in this post:
Proposal: ETH loan to Threshold DAO


Note that:

  • This does not include revenues as it is purely a spending approval.

  • Not every line item is an expense! The majority of the spending in this proposal is to diversify the treasury, which should serve to preserve or increase the value of the treasury over time.

  • With our current protocol-owned-liquidity (that we plan to increase), we will capture a significant share of the liquidity incentives ourselves.

  • This is marked in USD, however the expenses and the treasury’s assets are primarily in T. If there are significant changes (which we define as +/- 50%) to the market value of T the Treasury Guild should consider revising the budget and seeking re-approval.

I propose the following schedule:

  • Forum Discussion Started - 2022-05-22
  • Forum Discussion Concluded - 2022-05-29
  • Snapshot Vote Started - 2022-05-29
  • Snapshot Vote Concluded - 2022-06-01
8 Likes

Looks good to me - but should we really have all of that allocated to the Treasury Guild multisig at one time? Perhaps better if we use the spending function for particular line items, like treasury diversification.

@davidnunez is this possible?

Do you mean using approvals rather than transferring the tokens to the Treasury guild committee? Yeah, that’s possible

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In the TG budget proposed here is it including other council budget proposal numbers? Or do these guild line items only reflect council member compensation? @Nous @JohnPackel I’m curious how this budget integrates with the MG guild budget you all are working on.

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Thanks for all the effort and details put into this, this is great!

Want to take another closer look but had some initial first questions:

  • Are the tBTC v2 coverage pool incentives supposed to come from the treasury, or does this come from inflation similar to staking rewards? My thinking is it does, at least for bootstrapping, but wanted to confirm

  • I don’t see the ETH Loan repayment reflected in row 65, is this covered somewhere else?

  • The spend approval would be requested in T, correct?

  • On Liquidity incentives, do we need to add a note that this is an initial number for tBTC.

    I imagine this number could be higher at launch, depending on / needed to get volume bootstrapped. At current prices and volumes of 2k & 20k tBTC we’d have 60M - 600M$ worth of tBTC locked in. On one hand it could be that more incentives are needed to get things going at launch, on the other hand, having significant incentives for these kind of volumes or higher isn’t sustainable in the long run.

    I don’t know if have already modeled how much fees we expect to get back to the DAO, what the fees at launch will be etc.

From my understanding the Treasury Guild will be responsible for all Threshold committee and council payments if this proposal is approved.

One guild handling these payments will help to ensure that payments are distributed in a timely manner and that rates are calculated in a consistent way.

I think the Treasury Guild intends to use Utopia to automate these payments. @Eastban did I miss anything?

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→ Inflation will go to the stakers. We will need to fund the incentives from the treasury and the treasury guild is in the best position to make these judgements (see the work with Paladin / Warden).

→ If Line 65 were extended an additional month, it would equal 500, reflecting the 2400 ETH paid out in Cell N68. Per the note in the OP at 3(c), we initially had this as a monthly figure that we decided to sum in the final cell for other reasons.

→ The budget is in USD and is being requested in USD. However, if the price of T fluctuates extremely in the downwards direction, we will adjust the budget accordingly and ask for new approval. I don’t think that would be necessary if the price fluctuates upwards.

→ It’s a thought that I’m open to… however, I think that we should opt for forum posts at the time to perform course corrections if necessary. It will be delayed, but our governance process will coincide nicely with the incentive schedule.

→ Income/revenue has not been included in this and we don’t have those estimates at this point. Will need more data for that.

Thanks for your questions @Naxsun - let me know if there are any more or if anything remains unclear.

→ This is correct. @Liz_S we’ve worked with the other guild in budgeting to ensure there was no overlap.

:+1: thanks for the clarification @jakelynch & @MrsNuBooty !

2 Likes

Not a comment on this rev of the budget, just curious for down the road… do you ever see us having a separate “risk” working group, ala Maker, to review and review economic security parameters?

1 Like

As for the actual budget, can we get “comment” turned on for all public views @jakelynch? Have a couple clarifying questions that are tough to surface in the forum.

Thanks for the clarifications!

→ Inflation will go to the stakers. We will need to fund the incentives from the treasury and the treasury guild is in the best position to make these judgements (see the work with Paladin / Warden).

My question is more that I don’t see a line item for coverage pool incentives. Are these assumed to be included in here or will this be a separate proposal?

The amount needed for this depends a lot of the volume of tBTC. I imagine it could also be higher % wise at launch and reducing over time with system maturity.

→ The budget is in USD and is being requested in USD. However, if the price of T fluctuates extremely in the downwards direction, we will adjust the budget accordingly and ask for new approval. I don’t think that would be necessary if the price fluctuates upwards.

But the approval can only be given in an amount of T, right? So from a flow of funds perspective: When this proposal passes, there is a move or approval of x amount of T from either the council or the GB contract to the TG multi-sig?

And in case of significant price changes there could be need for an additional approval / readjustment of plans. Is that correct?

Ooops - should work now.

Regarding the coverage pool and other economic assumptions? Or regarding counterparties and their economic assumptions? The former I would support, the latter I think is trickier.

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Ahhh - so the relevant lines here are:
Budget!B58:P58
Assumptions!B51:B55

Which is a factor of (a) the target TVL for the coverage pool and (b) the target APR (on a monthly basis).

(a) is estimated to start at $6m and increase by $1m every month after launch. This is an assumption and we tried to take a conservative approach here.

(b) is approximated to be the minimum rate received staking.

Yeah - I’ve thought about this, and I think it makes sense to take 1/4 of the budget on a quarterly basis, rather than take the entire budget. This allows for us to make course corrections based off a longer term budget. Curious to hear what you think of this? @Eastban @CouchPusher @billiboiadams - any thoughts?

To leave proper time for commenting and considering the comments that I provided today - I will push the start of the snapshot vote back to 2022-05-31.

The new schedule will be:

  • Forum Discussion Started - 2022-05-22
  • Forum Discussion Concluded - 2022-05-31
  • Snapshot Vote Started - 2022-05-31
  • Snapshot Vote Concluded - 2022-06-02
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This vote has been posted to snapshot:
https://snapshot.org/#/threshold.eth/proposal/0x46887543146a9a274bad9446dabc2fcc19fbc505cdc968edd47ee5876f1fbb03

2 Likes

Ah clear, I think I missed these when they were collapsed. Thanks for clarifying.