HIP-3 Treasury Allocation

Background:

The HairDAO Multisig asset allocation is currently as follows:

USDC: $302,073.16 ETH: 6.49446 (worth ~$9,235.12 as of 3/10/23)

The recent insolvency of Silicon Valley Bank has made it abundantly clear that HairDAO should diversify its treasury out of USDC. For context, the company Circle holds US Dollars in traditional bank accounts that are represented on-chain by the USDC token. Unfortunately, Circle’s disclosure materials have revealed that it has exposure to Silicon Valley Bank. While we do not know the extent of Circle’s exposure to SVB, HairDAO could reduce risk while maximizing the upside potential of its treasury by exchanging its USDC asset for DAI and ETH.

The Proposal:

We propose that HairDAO exchanges its USDC holdings for DAI and ETH. The proposed treasury allocation would be as follows:

DAI: ~ $151,036.58 ETH: ~ $160,271.70 worth of ETH

Reasoning:

The reason we are advocating to reallocate our treasury so quickly is that should Circle announce any kind of insolvency, HairDAO’s USDC assets would be irreversibly impaired almost immediately. As such, it is important that we act proactively to limit our exposure to insolvencies in the US banking system.

DAI is a stablecoin from MakerDAO, pegged to the value of the US Dollar. While DAI is ~42% backed by USDC, it’s our best option for on-chain fiat money exposure. Its two competitors are significantly worse: USDC is inherently more risky, and USDT (our only other option) is more opaque than USDC. DAI has maintained its peg to the US dollar through significant market downturns and, as such, will be a safer store of stable value than USDC.

ETH has been a deflationary asset (one of the most important features of a store of value) since the Merge 176 days ago and is used to secure Ethereum (the network that HairDAO operates on). ETH is the only asset we can hold that we believe in long-term and is out of the control of any singular government or country. Should the US banking system fail–HairDAO will be just fine. Should the US banking system succeed, ETH will still continue to grow, and HairDAO will be just fine.

TL;DR - Holding our non-IP assets in DAI and ETH adds minimal downside risk with high upside potential to our Treasury. This emergency HIP brings HairDAO closer to becoming a true Network State and increases the probability that we solve hair loss.