Observations of the DAO Treasury Management Landscape

The Evolution of Crypto Treasury Management

Treasury management has been an exciting area of development within the crypto community, spurring discussion around models that can best serve the needs of projects through on-chain products.  But most of the focus has been on the composition of treasuries and skips over the current challenges of their operations.  Treasury managers face a multitude of operational frustrations, including managing multisigs, sending funds, and conducting transactions.  And this is all before the task of executing based on the timing, size, and price of actual transactions.

For a project or DAO to successfully navigate treasury management, they’d need to find an asset management skillset either internally, or through a community like Discord, which makes declarations of their abilities on a mostly anonymous basis.  This is quite challenging for most projects.  While the upside is a groundswell of participation and openness to talent and experience, the downside is often slow and hesitant execution with suboptimal outcomes.

This evolved into projects selecting delegated teams for treasury management.  While there are efficiency gains in delegating to a small group of people, or even one individual, risks can arise from putting the lifeline of a project in the hands of a few. 

A Risky Endeavour

From the perspective of treasury managers, they’re working with high stakes, and often without the proper tools for risk management.  For example, how can they monitor markets around the clock?  As seen with the 7 Siblings liquidation alarm, manual systems have vulnerabilities, even with the best intentions and people.  

Furthermore, how can managers systematically execute tasks such as buying ETH for gas fees, instead of bearing the responsibility of manual trading?  It would be helpful for teams to determine usage needs and pre-set DCA (or BTFD) parameters.  But pulling the trigger on that would require obtaining multisig confirmations that send funds into an execution wallet, which can involve chasing down people across time zones, waking them up, or hoping their planes land on time.  Then comes the execution of transactions themselves.  Are managers equipped to read order book depth and navigate slippage?  If order size creates slippage beyond the parameters that the DAO had set, what should the manager do? 

The Need for Better Treasury Management Solutions

From our conversations with treasury managers, we found that there’s a keen awareness of the need for capital protection.  It’s a stark contrast to the current DeFi farming mentality.  But managers are often overwhelmed by the abundance of options, even ones that are pitched as “treasury management solutions.”  It’s often unclear how these individual products fit into the overall roadmap and operating needs of a project.  How can they develop frameworks for allocations to protect from various risk vectors?  How can they better understand the relevant risk vectors?  

Additionally, there is a lack of automation.  Managers who are using DeFi products have to remain vigilant about yield rewards, compounding, impermanent loss, and market movements.  Managers have told us that it’s unrealistic to expect them to be professional farmers or traders, or ideally, hedge fund managers whose full-time job is to create risk-adjusted returns.  These are challenges that often fall onto people or teams that are not experienced in asset management and trading, which can be harrowing and lead to paralysis by analysis.  

Ultimately, treasuries would benefit from a holistic approach that matches capital needs to their roadmap.  Effective tooling should provide automation that can systematically offer alerts and parameters for execution.  Strategies ought to be simple to understand in terms of both yield and risk, so managers can lay out their overall exposure.  And the execution of the above should be a smooth process that automates secure transactions while protecting both the project and the manager.

What We’re Building and How you can Help

We’ve spoken to many teams and have heard your frustrations.  We’re working towards building products that will allow you to offload capital management functions, so that you can focus on building your product.

Feel free to reach out.  We want your feedback, even if you just want to vent 😊

You can reach us on via Twitter, Discord, or email. We’re always happy to chat!

If you want to learn about Exponent, visit our website or read our docs