TWG - Request for Funding (1st July to 1st October)

Situation

The Treasury Working Group (TWG) would like to present Index Coop the opportunity to continue the TWG until the 1st October. In doing so, the TWG requests a budget for the three month period starting 1st July.

What is the core problem(s) you want to solve?

Index Coop needs a group of individuals to present recommendations to the community across the following key areas:

  • How financial capital should be managed
  • Forecast forward operating expenses
  • Provide external facing financial reporting

Over time it is becoming evident the community needs a way of determining the most efficient way to allocate capital to ensure the correct initiatives are funded to maximise the growth of Index Coop and/or its products. Now, the Funding Council (FC) determines what initiatives are to receive funding and the TWG has the ability to create a process/means of determining how to assess proposals as they present themselves via the governance forum. The TWG has also identified the need to review INDEX’s tokenomics and determine if more can be done to enhance our capital flows to benefit INDEX holders.

Why is this worth addressing today?

DeFi is a highly competitive landscape which iterates and adapts quickly. The Index Community has established itself as a leader within DeFi, for this reality to be maintained the Index Coop needs to enable the community to make informed forward looking financial decisions. How we financially structure the DAO and how we manage external communications, will directly shape the future of the DAO’s success. Poor financial decisions lead to dire outcomes.

To date the TWG has published numerous documents spanning financial reporting, forward expenditure guidance and analysis, improving INDEX liquidity and creating an account structure the Index Community can grow into over time. In April, we set out to improve transparency and introduced the potential to review INDEX’s tokenomics. Reflecting on the last three months, we have made solid inroads on financial transparency and we have started laying down solid foundations for how the community will manage financial capital. More importantly, looking forward, we know there is still so much more to achieve.

How will you address it?

The TWG shall continue to review the DAO’s finances, generate financial reports and present the DAO with recommendations for how best to manage the community’s financial capital. The TWG will also seek to support and put forward ideas that improve the overall tokenomics of INDEX. Over the next three months, we seek to become more consistent with our outward communications and start to implement the recommendations made over the past three months in order to develop the working capital of the DAO, allowing us to be more agile to respond in fast changing market conditions

With a sizable treasury, large growth expectations and an incredibly active community we collectively need to improve our financial forecasting, catering for a vast number of funding requests but only selecting those that help us achieve our KPIs/North Star objectives. TWG will work with the Funding Council to streamline the process of assessing proposals in an effort to direct capital to areas best aligned with our growth ambitions.

What impact will this project have?

  • Developing a financial forecast will facilitate more informed decision making around how best to allocate capital
  • Continuing to produce Monthly, Quarterly and Yearly financial reports with the goal of continuous improvements
  • Develop in collaboration with the Funding Council a way to assess funding requests to ensure our limited capital is deployed for maximum impact towards achieving KPIs and North Star targets
  • Present the community with recommendations for how to deploy our passive financial capital to generate a return
  • Commence a review of INDEX tokenomics with intention of enhancing the business model for all parties

Working Group Lead/Coordinator

  • Matthew Graham

Request for Funding

Proposed Budget:

  • Core Contributor - Matthew Graham - 440 INDEX/month
  • Core Contributor - Elliott
  • Core Contributor - Accelerated Capital
  • Core Contributor - PrairieFi
  • Bounties - $10,000
  • Multisig transactions practice - $5,000

Over the next three months, TWG expects there to be a range of tasks not currently known or planned for which the above contributors will not be able to absorb. Existing core contributors will endeavour to absorb additional workload within reasonable means. The intent is to drive efficiency, but recognise individuals have capacity thresholds that will likely mean additional man hours are needed. It is worth noting, the rewards detailed above are specific to the TWG activities. If other members provide services to other parts of the DAO, then these rewards are derived from other budgets.

Bounty activities are to be funded on a task by task basis and for this we request a bounty budget of $10,000. Priority shall be given to individuals who present the most promise of progressing towards becoming a core contributor of the team. Currently, the TWG has two roles with Community, Organization and People Working Group (COP) to source. These two roles are essentially a Quantitative Finance and a Management Consultant like resource and are expected to be in the range of five to ten hours per week. We expect the October to December proposal shall detail one, possible two additions to the team. At this point in time, we do not envisage any additional man power beyond what is already mentioned above.

TWG requests $5,000 to be deposited into the Operations Account for the TWG to practice transactions via multisig, developing/documenting a guide for how to perform transactions with different protocols like Aave. Purchase some ETH and interact with various smart contracts.

Summary

All contributor rewards are to be distributed by the Funding Committee through the merkle contract distribution mechanism. The budget totalling $99,000 is to be managed by the TWG. The TWG shall advise the FC what rewards each contributor is to receive for services/deliverables provided at month’s end. The FC shall then review/approve and then distribute those rewards. All rewards are priced in USD and are to be paid in INDEX based on the INDEX to USD conversion price for the applicable reporting period as determined by the FC. Upon 1st July, if the TWG is approved IIP-46 is to put to snapshot, the accounts created and funded.

Organization - How will it work?

What will you be doing?

Business as usual activity (primary responsible person/s)

  • Monthly Community Call - AMA format (Matt)
  • Monthly Financial Report - One pager (Matt)
  • Monthly Financial Report - Long form (Elliott)
  • Quarterly Financial Report - Long form (Elliott & PrairieFi)
  • Quarterly Financial Forecasting - Internal modeling (Elliott & PrairieFi)
  • Year End Financial Report - Full set of accounts (Elliott & PrairieFi)
  • Future - Operations Account Monthly Report (PrairieFi & Accelerated Capital)
  • Future - Investment Account Monthly Report (PrairieFi & Accelerated Capital)
  • Future - Quarter Financial Update/Presentation (Matt)

Specific work scopes

  • Composition of Operations Account - Forum post - (PrairieFi)
  • Execution of the Operations Account - Forum post - (PrairieFi)
  • Sub-asset class investment analysis and range recommendations - Forum Post (Accelerated Capital)
  • Stable coin investment analysis - Forum post (Accelerated Capital & PrairieFi)
  • Develop a depositing into Aave / Compound playbook - Internal Document - (TWG)
  • Sharing lessons learned from depositing trial Aave / Compound - Forum Post - (TWG)
  • Rerouting Product income streams away from Treasury Account - IIP (Matt)
  • FLI product retention recommendation - IIP (Accelerated Capital & PrairieFi)
  • Initial stable coin investment - IIP (Accelerated Capital & PrairieFi)
  • Second stable coin investment - IIP (Accelerated Capital & PrairieFi)
  • Third stable coin investment - IIP (Accelerated Capital & PrairieFi)
  • Productive ETH investment analysis - Forum post (Accelerated Capital)
  • Creation of an ongoing investment performance report - Ongoing Forum Post (Accelerated Capital)
  • Analysis and review of major treasury investments - Ongoing Forum Posts (Accelerated Capital)
  • Maintenance of the budget (Elliott & Matt)
  • Creation and maintenance of the Balance sheet (Elliott & PrairieFi)
  • Budget vs Actuals monthly review (Elliott)

Potential work scopes being discussed

  • Methodology for FC to use for assessing how capital is allocated by Index Coop
  • Quantitative modelling of returns for potential portfolios within the Investment Account
  • Explore the potential use of derivatives to capture upside in INDEX price whilst minimising downside capture
    • This may be achievable through proxy correlated assets which have better on chain liquidity
  • Review & present recommendations for Index Coop’s tokenomic model. Potential for a better value accrual mechanism for INDEX/Select Product holders/LPs
    • Longer term project with significant developer lift, therefore likely to roll over into October-December period
  • Contributor Token Ownership Plan - Potential to revisit this topic and also consider non INDEX nominated rewards
    • Increases developer workload and therefore low priority
  • Review and publications on regular competitor analysis

Within the TWG we allocate owners of specific deliverables who are responsible for ensuring the quality of a suitable standard and the deliverable is published in line with expectations. All deliverables produced by the TWG are peer reviewed within the working group and discussed during weekly team meetings. The level of review is detailed, a single team meeting may spend sometimes hours talking through the specific intricate details of a given topic. TWG weekly meetings are less updates and more deep dive analytical meetings that facilitate the deliverables being drafted.

How will you interface with the community?

  • Governance Forum Posts
  • Weekly Presentation during Org Work Session Meeting
  • Monthly Community call (AMA style)
  • Quarter Financial Update/Presentation
  • Index Coop account publications
  • #Treasury channel in Discord

Key Performance Indicators?

Whilst most KPIs focus on product success, the TWG is opting to commit to the following self governing objectives:

  • A portion of funds received from strategic raises to be deployed productively
  • Three monthly reports short and long form
  • Three Community Calls (AMA style)
  • One Quarterly Report
  • One Yearly Report (this will be published during the next iteration of TWG funding)
  • Fund the Operations Account (near term)
  • Frameworks and governing documentation for Operations and Investment Account published

These KPIs/Objectives are different to the North Stars and are specific to the TWG. Contributor rewards are linked to output and impact, not time or experience, and certainly are not a wage for attendance. So therefore the goal is to continually find ways to achieve more with less - Higher output for the same cost base. Our initial thought is shaping up something like the below.

  • 20% reduction in man hours for recurring monthly tasks, measured quarterly
    • Potential to be measured indirectly through output expansion

A per capita efficiency drive target is yet to be derived. However there is a strong appetite for capital efficiency and the TWG seeks to lead by example. TWG does not intend to scale headcount or man hours to drive expansion unless absolutely necessary which flows into the vision statement below.

Self Motivating Targets (Future KPIs)

The vision for TWG is to be a net value add function by year’s end. Returns generated by the Operations & Investment account exceed the operating costs of the TWG on a monthly basis. The stretched target is to cover the operating costs of a second working group, most likely a working group without the ability to directly impact revenue. This can be thought of as Return on Investment by the community investing capital in the TWG.

Vote:

  • For extending the TWG from 1st July to 1st October
  • Against extending the TWG from 1st July to 1st October

0 voters

7 Likes

Gnosis has a Rinkeby testnet function, Mr Madila and I have had a quick play around with it, there is a Compound App on the testnet too. Worth doing it this way instead first? I think most of the functions you’ll use work just the same on testnet and seems unnecessary to put real funds at risk while learning the ropes and building out best practices.

2 Likes

HI @DarkForestCapital,

We do plan on utilising testnets where we can. However, we have been informed there are subtle differences between the different testnets and ethereum itself. We will use this capital responsibly, the size of the transaction is not significant, we just wanted to ensure there was enough and it will reside in the Operations Account.

2 Likes

Solid post and proposal @Matthew_Graham and TWG.

I’m FOR.

I look forward to seeing the scale and efficiency piece play out. Given this is the whole point of DeFi I really appreciate this and this looks like a pretty solid SEAL-team to bring it, where I wouldn’t see too much need to scale the head count itself.

I think you folk executing the efficiency example as you describe will be a powerful example for the DAO - and for DeFi.

1 Like

@Matthew_Graham This last part you have at the end is critical.

This proposal would cost the Coop $336k on an annualized basis (minus the one-offs like bounties), but is justified by making Treasury Working Group a revenue-generating function in its own right.

Definitely in favor of building out a long-standing Treasury institution for the Coop. Great work taking the lead and pushing this forward!

3 Likes

@gregdocter @dylan @DarkForestCapital

Can TWG please request IIP-46 be moved to snapshot this week ?

Strongly support moving this forward - @Matthew_Graham has an incredible vision for IC treasury operations and has built a high level of trust throughout his time at the Coop.

Excited to see what he does next!

6 Likes

Everything looks good to go here Matt so I’m just wrapping up on each working group before the Funding Council puts out grant request #4.

Just to confirm you’re still happy with the numbers below:

With the bits in bold my own additions. If that’s all good then we expect to provision 1320 Index + $15,000 worth at the time of request, all of which will be held by the FC wallet to fund monthly distributions.

A large bulk of the budget is missed within the above numbers - when totalling the summary, the total cost for the TWG for the next 3 months would be c$48k which would leave the WG majorly underfunded.

The total stated here was before core contributors stipends were removed and therefore not reflected in your figures above. I have sent @Matthew_Graham an updated budget for review before updating the proposal.

1 Like

Thank you @ElliottWatts

@DarkForestCapital - please see below summary of the forecast for TWG for the next three months.

1 Like

Ok the FC will pull 1320 INDEX + $73k worth of INDEX at the time of the transaction which will be kept in the FC wallet for monthly reward distributions. On top of that we will also pull $5k in INDEX at the time of tx which will be sent to the TWG m/s for practice.

2 Likes

This would be a massive impact.

A rough question on my mind as of late (h/t to the treasury reports put out by this group) is: How much should the Coop be spending each month/quarter/year?

@Matthew_Graham big question, though i am very curious, how do you think we reach that number and then adhere to it? I am not really looking for an answer at this moment, just getting the questions out there.

:raised_hands:

Mere note, I was re-reading Treasury Management Goals and, “Preserve - Protect our future” caught my eye in relation to this.