Please refer to the full proposal text on the SafeDAO forum. Some parts may have been removed to fit within the character limit on Snapshot.

Title:

[SEP #24] karpatkey - SAFE DAO Treasury Management Core Unit

Authors:

@karpatkey

Created:

2024-03-25

Abstract

With the SafeDAO having achieved all milestones laid out in SEP #3 and approaching its token transferability, we propose for karpatkey to become the treasury manager to SafeDAO and, as part of the mandate, delegate treasury management of the joint SafeDAO <> GnosisDAO treasury to karpatkey.

Proposal types

State which proposal type this proposal belongs to.

• [] SEP: Constitutional Proposals
• [] SEP: Governance Proposals
• [x] Other SEP

Proposal details

Purpose and Background

Having accomplished the objectives outlined in SEP #3, including the creation of a constitution, a governance framework, a system for resource distribution, and the definition of token utility, SafeDAO has completed all the necessary steps for its token transferability.

With the foundational elements of SafeDAO in place, the focus naturally shifts to the efficient and strategic management of the DAO's assets. karpatkey with its expertise in managing DAO treasuries is well-positioned to undertake this role, supporting SafeDAO in treasury management, risk management, governance, and driving research and investment suggestions to grow the SafeDAO ecosystem.

Alongside the token transferability, the unlocking of the joint treasury between GnosisDAO and SafeDAO will take place. We propose delegating the joint treasury management to karpatkey as part of the mandate. Any future treasury management of SafeDAO treasury assets will go through a further vote.

Effects and Impact Analysis

We propose for karpatkey to become a service provider to SafeDAO, contributing to the following:

• Treasury management
• Protocol integrations for $SAFE
• Risk management
• Research

karpatkey will build a dedicated treasury team that will contribute to SafeDAO. This will also work on establishing a path and framework for the future treasury management of SafeDAO and management of the joint treasury alongside ongoing research, governance, and risk management support.

karpatkey’s expertise in risk management is crucial for active treasury management. Risk management plays a crucial role in strategy. Our risk team evaluates the security, reliability, and performance history of each protocol we use. We also continuously monitor the protocols we have funds deployed with for any emerging threats or vulnerabilities. Moreover, karpatkey has built risk management infrastructure on top of Safe / Zodiac, including our Execution App (AxA) and Guardians. The AxA allows treasury managers to instantly withdraw from positions when risk is detected, while Guardians are autonomous risk monitors that withdraw positions when certain activities such as exploits or depegs are detected.

Today, karpatkey is an active governance participant in leading DAOs, such as GnosisDAO, Aave, Arbitrum, Lido, and Uniswap. Our experience in governance allows us to contribute and be a proactive governance member in SafeDAO.

karpatkey will also advise on investments aimed at strategically allocating SafeDAO's resources to foster innovation, support community projects, and invest in opportunities that align with SafeDAO's mission and objectives.

Alternative Solutions

The joint treasury is currently a 2-of-2 Safe with SafeDAO and GnosisDAO as signers. Without a delegated treasury manager acting upon the treasury would require finding agreement among both DAOs to undertake any actions on the treasury, likely with governance proposals required to take any actions. This would have the consequence of significant governance overhead and make it impractical to actively deploy the treasury.

The SafeDAO may choose to explore alternative service providers and processes for entrusting the management of the collective treasury. The SafeDAO may also choose not to have a managed treasury and leave assets idle.

Implementation

[x] Own implementation possible [] Own implementation but with funding (how much % to implementation) [ ] Request for technical support through Safe matter experts

According to GIP-29, 5% of the SAFE tokens are allocated to a shared treasury by SafeDAO and GnosisDAO intended to fund rewards beneficial to both the Safe and Gnosis communities.

We propose that SafeDAO entrust the management of this collective treasury to karpatkey, which is already managing GnosisDAO's treasury as per GIP-58. This positions karpatkey optimally to manage the joint treasury efficiently and align the interests of both communities.

The joint treasury will be used to create liquid Safe markets with up to 2.5M $SAFE used for incentivising $SAFE DEX liquidity on the Gnosis Chain.

Additionally, the joint treasury will be used to provide liquidity for Safe on Ethereum and Gnosis Chain as well as support the Safe price. Upon potential diversification of the treasury in the future, karpatkey shall also use these assets for staking (ETH / GNO), LPing or other means to gather yield on the assets. Given the initial 100% treasury composition of native tokens (SAFE), karpatkey will provide a more detailed strategy as these become feasible.

The joint treasury will be included on our reports page, allowing the community to monitor positions and actions taken with the treasury holdings.

To implement active treasury management and make the delegation effective the current signers, Safe Foundation and Gnosis DAO, will amend the existing joint treasury safe to a 3/6 MS with 2 karpatkey signers, 4 signers to be appointed by the current signers, and a Module Safe controlled by SafeDAO and GnosisDAO which itself will always have full control over the joint treasury.

A corresponding Safe will also be deployed on Gnosis to expand the joint treasury's presence to the chain.

Fees

2% annual fee on assets under management, paid in monthly instalments in either ETH, stablecoins or Safe token at the discretion of karpatkey and what is feasible based on the treasury composition.

Fees are calculated as jointTreasury * 0.02 / 12 at 23:59 UTC on the last day of each month and will be paid from the joint treasury.

Duration & Termination

This agreement has an indeterminate time duration since it is approved by way of the SafeDAO governance mechanism unless any renegotiation and/or termination of this agreement occurs, always through the governance mechanisms of SafeDAO.

The SafeDAO may terminate karpatkey DAO’s engagement under this agreement for any reason by way of Governance Mechanism.

karpatkey DAO may terminate this agreement upon four weeks’ notice posted as a new discussion thread in the SafeDAO forum.

Regular fees will be collected until the day of termination independently of which party made the decision.

Either SafeDAO or karpatkey DAO may at any time terminate this engagement with immediate effect, without previous notification, in any of the following circumstances:

a. If the other party incurs a material breach of any of their obligations under this proposal

b. If the other party commits any act of fraud or dishonesty, or acts in a manner which brings or is likely to bring the other party into disrepute or materially affect its interests

c. If the other party becomes unable to pay its debts, admits its inability to pay its debts, enters into administration, becomes insolvent, or enters into a similar arrangement

d. A competent regulator considers the services rendered under this agreement in breach of the law.

karpatkey DAO will be entitled to terminate this agreement, without previous notification, if the joint treasury fails to make payments for more than 3 consecutive months.

Custody of Funds

karpatkey DAO is not a custodian of funds. The funds will be in possession of the joint treasury at all times.

Likewise, karpatkey DAO is not responsible for loss of funds caused by the existence, identification and/or exploitation of vulnerabilities through hacks, mining attacks (including double-spend attacks, majority mining power attacks and “selfish-mining” attacks), sophisticated cyber-attacks, distributed denials of service or other security breaches, attacks or deficiencies with smart contracts or protocols which are not owned by SafeDAO or karpatkey DAO.

karpatkey DAO assumes the risks associated with contractors.

Both parties have to take their own security measures for the addresses used to make the DeFi transactions to avoid a loss of access.

Entire Agreement

a. This Agreement constitutes the entire and exclusive agreement between the Parties regarding its subject matter and supersedes and replaces any previous or contemporaneous written or oral contract, promises, assurances, warranty, representation or understanding regarding its subject matter, whether written, coded or oral.

b. Each Party acknowledges that in entering into this Agreement they do not rely on, and shall have no remedy in respect of, any statement, representation, assurance or warranty (whether made innocently or negligently) that is not set out in this Agreement.

The plans outlined in this proposal are subject to discussion by the SafeDAO and may need to be (re)structured to take into account legal, regulatory, or technical developments as well as governance considerations. This document should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in any transactions.

About karpatkey

karpatkey is a DeFi-native organisation specialising in professional DAO finance through industry-leading research and tooling since 2020. We’ve been working with GnosisDAO, Balancer, ENS, CoW Protocol, Lido and AAVE on financial planning, operations, and strategy, diversifying their treasuries into sustainable portfolios of DeFi investments designed to support DAOs in executing their missions. Our tech stack is built on top of Safe, using Zodiac modules to allow for non-custodial, trust-minimised treasury execution. Check out our values to understand more about our guiding and decision-making principles.

As DAO treasury developers, we contributed to some of the most reputable DeFi protocols in our industry. We supported the deployment of sDAI that boosted chain TVL and consolidated a stablecoin hub with integrations like Angle and Spark. Our extensive experience provided us with advanced practical knowledge of DeFi primitives like stable swap and concentrated liquidity AMMs, liquidity, and voting incentives, veTokenomics, leverage and lending platforms, and integrations with top protocols.

Open Questions

None at the time of posting.

Copyright

Copyright and related rights waived via CC0.