INDEX 2.0 - The Community Treasury Autonomy Workshop Prior Reading
Title: The Community Treasury Autonomy Workshop Prior Reading
Status: Discussion
Author: Matthew Graham (@Matthew_Graham)
Created: 23/08/2012
Simple Summary
This forum post serves to provide context and kick-off discussion around the management of Index Coop’s account structure in the lead up to the Treasury Autonomy Workshop. During the Treasury Autonomy Workshop, the community will hopefully decide any future amendments in transitioning towards a more community-led management structure. After the workshop has been completed and broad consensus has been reached, the TWG and/or Autonomy Working Group will put forward an IIP for further consideration on the forum.
This discussion piece is intended to help provide context in the lead up to the Treasury Autonomy Workshop. Within this publication, we present all the non-developer/product wallets and discuss the broad organizational structure relating to the communities finances. Let’s build the “INDEX 2.0” together.
Abstract
Index Coop uses Gnosis Safe and multi-sigs to manage the community’s finances. The simplicity of this approach enables an easy transition towards autonomy. A phased transition of responsibility is expected within the community. In the later sections, we discuss a tentative draft timeline for phasing responsibility of managing the treasury from the existing structure to a more community-led structure. We also explore creating some kind of Leadership Council that manages the main Treasury wallet. If the Funding Council was migrated into a broader leadership role, the admin and reporting responsibilities would then be passed to working groups and the primary decision making responsibility of the Funding Council would reside with the Leadership Council.
The intent is to provide a starting place for future discussion and allow the community to define the most efficient operating model for Index Coop.
Motivation
Autonomy - Let’s create a DAO where trusted contributors from within the community manage the community’s funds.
Discussion
Account Structure
Currently Index Coop has a structure that looks something like the below:
Treasury
The Treasury wallet receives all of the INDEX tokens from the community Year 1, Year 2 and Year 3 vesting contracts, along with streaming fees from DPI, FLI, MVI, and BED. The Treasury funds large initiatives like the strategic raise, quarterly Funding Council expenses, and the KuCoin loan.
Index Coop is already transitioning the streaming fee revenue and the USDC balance away from the Treasury towards the Operations and Investment Accounts. In time, all streaming fees from products are likely to be routed to the Operations Account and then TWG will determine how best to manage them. USDC deployments for long-term investments will be funded from the Investment Account, and short-term money working capital management will be performed within the Operations Account.
Once these changes are fully implemented, the Treasury will consist solely of INDEX tokens received from the Year 1, Year 2 and Year 3 vesting contracts. For the purpose of future discussion, assume the Treasury is solely INDEX tokens.
Funding Council Wallet
The Funding Council wallet receives INDEX from Treasury and currently serves several purposes for the Index Coop:
- Funding Working Groups based upon costing data from the forum
- Distributing Contributor Rewards based upon WG lead inputs (HR/payroll-like function)
- Funds proposals that emerge outside of the WG submissions
The core value-add of the Funding Council is to review proposals, consolidate WG budgets into Quarterly Budgets, and perform on-chain transactions. Contributor rewards are distributed by EWG from the Funding Council wallet. The process of aggregating contributor reward inputs is currently being managed and consolidated by POC, which is then reviewed by the Funding Council.
Operations Account
The Operations Account is the DAO’s working capital account that exists to facilitate all short-to-medium-term expenses.
- Received FLI streaming fee revenue
- Stable coin reserve
- Short-to-medium term productive yield generating strategies
Currently, the TWG is building this trust within the community. Gradually in time, the TWG intends to grow the responsibilities of the Operations Account to include the transactions currently performed by the Funding Council. This then consolidates all short-to-medium term expenses into a single account, streamlining subsequent financial reporting.
- EWG shall distribute Contributor Rewards from the Operations Account
- Funding various Working Group wallets
- Funding proposals that emerge outside of the Working Group submission
The timeline for completing the above transition is not yet defined. However, 2 of 3 Funding Council multisig signers are signers on the Operations Account multisig. The Operations Account multisig was set up to enable a smooth transition towards running short-to-medium term expenses from a single wallet. The timeline for this transition is subject to how soon the TWG can demonstrate competency and build trust within the community.
Investment Account
The Investment Account holds Index Coop’s longer-term investments and offers the following functionality to the community:
- Deploy capital to generate a total return above a defined hurdle rate.
- Build a so-called DeFi Citadel and significantly enhance our community’s ability to survive any and all market conditions, eg: crypto winter, competitor attack, contract vulnerability, DAO hack, black swan event.
- Execute on strategic partnerships that enhance the Index Coop ecosystem.
Simplified Account Structure
The above structure has a number of account levels with intermediary accounts used unnecessarily. A more streamlined account vision is to consolidate the Operations Account and the Funding Council wallet. All short-to-medium funding needs can be performed from the Operations Account. This simplifies reporting for the TWG and relieves the Funding Council of the admin-like task of transferring funds. This has the effect of transferring all Quarterly budget, forecasting, and financial reporting to a single operational wallet.
Multisig Structure
Current Structure
The table below shows the controls in place on the three existing accounts and the Investment Account, which is yet to be created.
The below table details two multisig wallets that are signers on the Treasury Wallet.
The Treasury wallet is 2 of 3 approval multisig with one signer being a multisig. Treasury wallet transactions are queued via an EOA and then 2 of the 3 signers must approve the transactions. The EOA wallet’s login details are known to 3 people: Dylan, Greg, and Punia. Any one of the 3 mentioned people can log in to the EOA wallet and queue transactions then to be approved by the Treasury wallet signers.
The general process is as shown below:
- Dylan/Greg/Punia queue up the transaction via the EOA
- Dylan/Greg/Punia confirm the Gnosis transaction via the Nested Multisig
- We fill out a running doc and ping Felix to do the final signature & execution
Future Treasury Multisig Structure
As the community grows and develops, more and more responsibility will be passed to the community. Index Coop has started this process with the formation of the Operations Account which is now starting to actively manage community capital. This is critical for building in-house competency.
The most notable point looking at the current account is that a few changes have happened on the Treasury Account. The Metagovernance wallet has been added to the Treasury multisig. It makes sense to add Index Coop contributors to the Treasury wallet and then in time remove some of the Set Labs signers. A multisig handling upwards of $70M requires more security than other wallets holding lower values. A suggestion to kick start conversation is to transition towards a 5 of 7 wallet and the transition could look something like what is shown below:
Each time a new person is to be added to the Treasury multisig wallet, an IIP must be submitted and the community must vote to include this person on the multisig. How this individual is selected is something that can be discussed during the workshop. The intent here is to provide a starting place from which conversation can start. Wherever the conversation finishes is up to the community to decide and will be worked through within the workshop recommended by the autonomy group.
Future Funding Council & Operations Multisig Consolidation
As the TWG transitions the Operations Account towards managing all short-to-medium term expenses the Funding Council wallet becomes obsolete. The table below highlights the relative safety of the Operations Account to the Funding Council wallet.
The nature of the Operations wallet is such that if any specific skill set is needed, additional signers shall be added and removed as required. The TWG has no plans to implement anything beyond the basic 3 of 5 signer requirement.
Role and Responsibilities
The table below shows the current breakdown of roles and responsibilities across the following groups:
- EWG - Engineering Working Group
- POC - People Organisation and Community
- TWG - Treasury Working Group
- Funding Council
- Leadership Council
What is the Leadership Council column… Currently, some members of the Index Coop community meet with founder Set Labs periodically to discuss all things coop-related. From these discussions, things like Q3 Goals and Objectives are defined and priorities are shaped. This dialogue essentially is some kind of leadership group as it is only open to some of the longest-serving contributors who joined during pre-Nov 2020. For lack of a better name, this group is termed Leadership Council.
There are three tables below which are intended to serve as discussion points. We are not presenting a recommendation here, we are presenting ideas for discussion. The forum/workshop sessions are to flush out an ideal structure and fully define the roles and responsibilities of each stakeholder.
Option 1 - Funding Council and Leadership Council
Index Coop has some kind of formal Leadership Council and Funding Council. Each council is self-sufficient by way of owning processes, compiling data, performing on-chain transactions, and making recommendations to the community. This reflects how the Funding Council operates today and formally recognizes the Leadership Council.
The downside with the above approach is the Funding Council now finds itself with the burden of compiling forecasts and budgeting, yet the strongest financial resources reside within the TWG. This means someone from the Funding Council consolidates all the working group forum posts into a budget and then requests funding from the Treasury whilst the TWG generates all external financial reporting communications.
It makes sense to consolidate all the financial reporting to the TWG and remove this burden from the Funding Council. If all short-to-medium term expenses are run from the Operations Account, then the IIP requesting funding from the Treasury will be to deposit funds into the Operations Account.
The current structure results in overlap within working groups and causes duplication of work. In order to streamline this, does it make more sense for processes, such as collecting contributors’ rewards submissions and compiling budgets, that stretch across the community to be managed at an organisational level within POC, for example, with financial/technical analysis being performed by TWG. Let’s consider what cascading out financial reporting to TWG and process ownership to POC looks like in the next section. This would have the effect to make the Funding Council a review/advisory.
Option 2 - Leadership Council w/POC & TWG Sharing Process Ownership and Reporting Responsibilities.
Within this section, we will discuss potential structures for reporting and process ownership, noting however that the forum/workshop sessions will ultimately flush out an ideal structure. Let’s introduce the roles and responsibilities table below. In an effort to try to build scalability into the process and remove the administrative burden from the Leadership Council, we can take a look at what responsibilities/tasks can be passed off to POC and TWG.
- Funding Council wallet is made Obsolete
- All short term funding is performed via the Operations Account
- Decision-making responsibilities of the Funding Council and Leadership Council are combined (Who is the Leadership Council is a different topic)
- A process owner is implemented such that the volume of admin-like work is captured at the Working Group level enabling the Leadership Council to be more recommendation-making focused whilst retaining accountability to whatever the community then endorses on the governance forum.
- TWG performs all financial reporting/budgeting/forecasting and analysis in preparation for Leadership Council’s review
- Leadership Council makes recommendations to the community
- Governance Forum captures all dialogue
The core value add for each group below:
- POC - Defines and oversees cross-function processes
- TWG - Responsible for all financial Budget, Accounting and Forecasting reporting. Manages the Operational Account which holds all of Index Coop’s capital for funding operations. Manages the Investment Account for all of Index Coop longer time horizon investments
- The Leadership Council (or whatever variation we settle on) reviews and makes recommendations to the community based upon the information prepared by working groups from the governance forum, and manages the Treasury consisting largely of unproductive INDEX tokens
Option 3 - Leadership Council w/POC & TWG not sharing process ownership and reporting responsibilities
An alternative to the above which offers a more simple approach is that the “Process Owner” functionality shifts to TWG. This enables all financial reporting and processes to be managed by a single working group. The Coop will need to discuss how processes are managed, if they are to be more centrally managed by POC or if they are to be managed by the most capable Working Group over time. It seems logical that the Leadership Council’s time is freed up as much as possible to focus on recommendation-making and thinking about the Coop’s future which then becomes how best can working groups support the community’s leadership council.
Consolidate Funding Council into a Leadership Council
Firstly, let’s acknowledge there is no formal Leadership Council/Group and the means of creating said group is a hot topic.
If we look at how Index Coop operates now, in some ways an unofficial version of a Leadership Council exists today. Let me explain. Periodically, members from Index Coop have meetings with the Set Labs team to discuss Index Coop. These discussions contain brutal truth-like sessions and attendance is limited to a few of the original contributors to Index Coop. From these meetings, things like the Q3 Priorities forum post are published.
If we think of this group of individuals as an unofficial Leadership Council, or even if we simply say that Index Coop should have some version of a leadership council then we can essentially start to challenge what are the Funding Council’s responsibilities and what are the Leadership Councils responsibilities. It is fair to say that the group of people setting quarterly priorities are also the same group that endorses major spending commitments. The main value-add of the Funding Council is decision making and not performing on-chain transactions. The Funding Council on-chain transactions can easily be replaced by the Operations Account. The vision for the Operations Account was for this wallet to service all of Index Coop short- to medium-term funding needs, inclusive of contributor rewards and Working Group funding requests.
The value add of any Leadership Council is strategic-thinking and decision-making much like the Funding Council but with a broader array of considerations. There exists the ability to simplify the structure and combine the Funding Council with the Leadership Council. Because the Leadership Council is unofficial, this would mean changing the name and expanding the scope of the Funding Council into the Leadership Council. After all, if both councils formerly existed today, they would be composed of mostly the same people.
The community has a Treasury wallet that is not linked to any particular group. We can transition the ownership of the Treasury to Leadership Council over time. Long-term, post-transition, it makes sense for this Leadership Council to have control of the community Treasury multisig. This would have the effect of aligning the most important group of individuals with the most valuable wallet. With decision-making comes responsibility and with responsibility comes accountability.
What would need to happen:
- Phasing of on-chain funding management from the Funding Council to the Operations Account
- Migrate the Funding Council into some version of a Leadership Council
- Phase responsibility of managing the Treasury to the Leadership Council
The crux of it all boils down to short- to medium-term funding being executed by the TWG from the Operations Account and all the strategic/funding decision making performed by a single group (Leadership Council) which also manages the Treasury.
The process for how to elect or what the composition of the mentioned Leadership Council is not something to be discussed here. The concept of migrating the Funding Council into a Leadership Council is something to be discussed here.
Conclusion
This post aims to set out the foundation and the building blocks for constructive discussion around the ultimate management structure of the DAO. It aims to set roles and responsibilities for various working groups and provide initial suggestions of potential structures ahead of the Treasury Autonomy Workshop. The three suggestions are not set in stone and are open to modification. Please provide feedback and initial thoughts which will allow us to shape the direction of the autonomy workshop.
Disclaimer:
This is not the work of the autonomy group.
- this is must do reading for everyone. I learned a ton. This project is quickly growing so large and complex that these types of post are valuable.