Treasury Questionnaire

[LemonadeAlpha]

I have been pondering the goals of the treasury and have come to draft two main principles. I wanted to share these principles with the broader community for feedback, and also to pose a number of questions for which I’m hoping the community can give some direction on how we’re thinking about our holdings and how to use them.

Treasury Principles

1. Maintain Strong Purchasing Power:

• Accrue profits (streaming fee for now - expenses)
• Retain Index reserves (to fund future growth)
• Fiscal Responsibility (Diversification, Frugality)
• Optimize for INDEX valuation (in the form of fundamentals growth)

2. Use Purchasing Power to Incentivize Scaleable Growth:

• Pay foundational expenses: Coop member rewards, salaries, other overhead
• Provide generous rewards for asymmetric return profiles
• Pour fuel on promising growth programs

Questions:

How are we thinking about full-time, contributors now, how to keep incentivized. What overhead do we have outside of rewards/salaries? Technical? SaaS?

[Answer in comments]

Where do we want payment for contributions to pull from (why?)

Contribution Source

• INDEX Reserves
• DPI Balance
• Stablecoin/hedge

Do we want to diversify in order to hedge INDEX volatility? If we do, why? And, if so, how much?

INDEX Holdings

• No Hedge
• Diversify 10%
• Diversify 30%
• Diversify 50%
• Diversify >50%

Do we want to maintain balance of DPI from streaming fee (why?)

DPI Streaming Fee as % of treasury

• None // Not Necessary
• 0-10%
• 11-20%
• 21-50%
• Greater than 50%

How do we view the INDEX in our Treasury?

INDEX Reserves Philosophy

• Save at all costs
• moderate savings, moderate spending
• Spare no expense for growth, and use sooner than later

Do we want to target retaining a certain amount of INDEX circulating supply? (Why?)

• No Target
• 1-10%
• 11-20%
• 21-50%
• Greater than 50%

[gdocter]

@Lemonade this is great just voted and excited for discussion. At the proper time, I’d find it helpful to dig into the “why” & “why not” behind each of these.

[puniaviision]

We can expect overhead outside of salaries and rewards to be insignificant. Currently the biggest expense by far is liquidity mining programs. Maybe partnerships or advertising will become significant line items.

Not sure what was meant by this: " Do we want to maintain balance of DPI from streaming fee (why?)" - is this how much we keep from the streaming fees we get?

[LemonadeAlpha]

Noticing a couple people having confusion over what is meant by: “Do we want to maintain balance of DPI from streaming fee (why?)”

The question is seeking to understand whether and to what extent the Coop is interested in targeting and maintaining a certain % of our treasury portfolio in DPI (which would come from streaming fee) as that was mentioned by a few people when I suggested streaming fee should be returned to INDEX holders.

[verto0912]

Alright, let’s dig in.

I think payments for contributions should come from INDEX reserves. This sort of goes together with what I believe is the need to diversify the Treasury holdings.

Diversification of the Treasury is not necessarily to reduce volatility, it’s to preserve the purchasing power. It also gives us an opportunity for buybacks, if we feel there’s a need to buy back some INDEX for the Treasury. Also think we need to diversify to provide 2-sided liquidity for INDEX via ETH-INDEX liquidity provisioning.

I think it makes sense to maintain some DPI from streaming fees. I think we can take weighted average of top 3 choices.

I lean on the side of aggressively spending INDEX. Two reasons. One is to achieve a meaningful level of decentralisation. Second is the first mover advantage. DeFi is a big space and can accommodate several index providers. Other sectors have limited liquidity, meaning that they are unlikely to sustain several products. My preference would be to semi-aggressively roll out other sector products.

Why do we need to retain any INDEX in the Treasury long-term? Short-term, yes, we need to incentivise contributors, etc. But in the long-term, if we have done a good job, we should have enough revenue from streaming fees. I personally voted for no target, but if there’s a reason for it, anywhere between 0% and 20% would be fine.

Thanks @LemonadeAlpha for putting this together.

[mrvls_brkfst]

Where do we want payment for contributions to pull from (why?)
Use INDEX for growth. Later DPI fee streaming could be split to a reserve, contributors, and INDEX holders.

Do we want to diversify in order to hedge INDEX volatility? If we do, why? And, if so, how much?
I can see the point of this but hedging might remove motivation a little and taking on other volatile assests is almost could be seen as a lack of confidence. Though, could it be split 50/50 INDEX/ETH and pooled, maybe in 3 or 4 pools? I selected 50% only on that thought, I wouldn’t want to need stand by that selection come hell or high water.

Do we want to maintain balance of DPI from streaming fee (why?)
Possibly a little for rainy days.

How do we view the INDEX in our Treasury?
I’m attracted to Spare no expense but am wired for a little more caution.

Do we want to target retaining a certain amount of INDEX circulating supply? (Why?)
A small amount. As before, for rainy days, unforseen events. Likely me being over cautious but if there is a strong reason not to hold any, I’m keen to learn.

As others have said, interested in hearing the discussions!