Proposal:

Structure the Beethoven X DAO Treasury to enable value maintenance and accrual. The following BIP is composed of 2 intermingled sections: Tenets and Risk.

Motivation:

The Beethoven X DAO Treasury should strive to fulfill a purpose in all actions taken from its usage.

Tenets are goals or intent that the treasury should fulfill and are ordered in priority. This means that Tenet 1 has a higher priority than Tenet 2 and so on. Tenet 1 and Tenet 2 also have a “prereq” attribute, meaning these Tenets must be fulfilled before any funds can be allocated to the following Tenet. Tenets become the baseline that sustains an active treasury. Any BIP that is targeting the use of treasury assets will be assessed against the Tenets and needs to fulfill at least one of them.

The Risk Framework is then the required guardrail to sustain a safe treasury. The risk framework defines levels from 0 to 3 (Minimal, Low, Medium, and High), with each risk level having a maximum allocation to ensure the treasury risks are diversified. If a maximum allocation of a higher risk level is not fully utilized, the remainder can be used in a lower risk level.

Together with the framework the following definitions will be used:

• “Total Treasury”, which refers to all assets controlled by the DAO treasury
• “Active Treasury”, is a subgroup of Total Treasury that excludes assets with specific limits set to their usage, such as BEETS held in the wallet or assets received by treasury swaps and/or grant programs. Maximum allocations for various risk levels will be set based on the values of Active Treasury.

In general, the music directors will assess the treasury assets every 6 months and process any necessary rebalancing steps to make sure the treasury allocation conforms with this BIP. Such actions could entail moving funds to lower risk levels or higher priority tenets.

Risk Framework:

The Beethoven X DAO will be implementing a Risk Framework divided by levels:

Risk Level 0: Minimal

Maximum Allocation: None. Minimal Risk includes the least amount of risk that the treasury can maintain and still function. Minimal smart contract risk. Minimal surface of attack.

Example: Assets to be held in the different Beethoven X DAO multisigs. Assets earmarked as part of a grant.

Risk Level 1: Low

Maximum Allocation: 50% of Active Treasury Low Risk represents an entry level risk for simple or yield-bearing assets that still allows to compose them onto DeFi to accumulate yield.

Example: Assets may be composed on non boosted Pools (Stable or Weighted) on the Balancer Ecosystem. Assets may be lent.

Risk Level 2: Medium

Maximum Allocation: 30% of Active Treasury Medium Risk represents the allowances to increase treasury yield by interacting with the Balancer Ecosystem through the composition of smart contracts.

Example: Assets to be composed on Pools (Stable or Weighted) with a seasoned or proven Boost.

Risk Level 3: High

Maximum Allocation: 20% of Active Treasury High Risk represents top strategies meant to maximize return on treasury assets.

Example: Assets may be composed on Pools (Stable or Weighted) with experimental Boost (Concentrated Liquidity, Multistrat smart contracts, New partners). Any borrowing/leveraging activity falls within this risk level.

Tenet 1: Bug Bounty Safeguard and Liquidity Management

Objective Beethoven X DAO pledges to maintain a sufficient level of liquidity to allow payment of a critical bug disclosed via our bug bounty program as per BIP-26. Adequate funding will be earmarked and accounted for from the Treasury to ensure the correct identification and actions related to this Tenet.

Specification Prereq tenet with a specified cap of $200k USD in native stables in our multisig wallet (Risk 0)

Tenet 2: Core Contributor Funding and Retention

Objective Beethoven X DAO commits to maintaining Core Contributor funding at a level of 12 months or above, taking into account the rationale of BIP-40 and BIP-56. Adequate funding will be allocated from the Treasury in stable assets to the Core Contributors' wallet to ensure the continuity of development efforts and retain key contributors who drive the project's success.

Specification Prereq tenet with a specified as 12 times the monthly cost of contributor and infrastructure payments, currently totalling to $450k USD is calculated as the yearly amount based on the values currently set for Contributor payments under BIP-55 ($35k per month) and Infrastructure payments under BIP-56 ($2.5k per month): 12x($35k+$2.5k)=$450k.

At least half of the cap ($225k) must be held in native stables in our multisig wallet (Risk 0). Any remainder can be held in stable assets under Risk 1 (e.g. stable pools). Any funds that are not needed for Tenet 1 can be utilized for this Tenet.

Tenet 3: Provide Protocol Owned Assets on Beethoven X deployments to grow treasury and/or increase protocol revenue through fees

Objective Beethoven X DAO will strive to actively use protocol owned assets as a tool to maintain, sustain or increase its total revenue.

Specification Assets on both Fantom and Optimism deployments can be used following the Tenet prioritization and Risk Framework BPT can be staked on external projects (e.g. AURA) to maximize return.

Tenet 4: Empower the Optimism Deployment through increasing veBAL & vlAURA Ecosystem Share

Objective Beethoven X DAO will strategically increase its share on the Balancer ecosystem (veBAL & vlAURA) to further empower the Optimism deployment, aligning with the objectives of BIP-44. By holding these assets, the DAO gains voting power to direct emissions and incentivize pools on the Optimism chain, which is expected to increase total value locked (TVL) and revenue for the protocol.

Specification Assets can be used to hold DAO owned vlAURA orDAO owned veBAL.

Tenet 5: Deposit Treasury assets in external protocols to increase treasury revenue

Objective Beethoven X DAO will judiciously allocate treasury assets to external protocols that serve the purpose of increasing treasury value.

Specification DAO assets can be deposited in external projects as non-BPTs.

Impacts/Risk Assessment:

Active treasury management will increase the risk for the Beethoven X treasury, there is no way around this issue. The tenets and risk framework will serve as a guiding point so it can be understood what is the correct r/r (revenue/risk) of a given strategy.

Tenet and Risk framework adherence will be actioned every six months with the Composers and Music Directors having the provision to act on an emergency situation to unwind any position deemed at risk.

Specification/Execution Plan:

If approved the Composers and Music Directors will: For Tenet 1 and 2, accounting already has the assets correctly identified. For Tenet 3, 4 and 5, individual strategies are already in place and if approved as a BIP, any future treasury allocation will need to be structured to follow the tenets.