$12MM Treasury Diversification

by 0x11cbb078596e5100f4cbb999c5c9b69ca2ff6477 (Bronstein)

Should the following Tier 5: up to $120,000 USD, 6 months vesting (1 month cliff) grant in the Community category be approved?

Abstract

Alastor proposes to lead a treasury diversification effort for Decentraland to diversify $12M of MANA into stables.

$12M represents a 12-24 month runway for the DAO at $500k - $1M per month of grant expenditure (DCL has averaged $640k per month over the last six months, with a high of $1.1M).

Grant size

120,000 USD

Beneficiary address

0x11cbB078596E5100F4cbB999c5C9b69cA2FF6477

Email address

sam@alastor.ooo

Description

This summer Alastor received a grant to do an analysis on DCL's historical performance and treasury on behalf of DCL. Our analysis had a number of takeaways but our primary recommendation was to diversify MANA in the treasury into stables.

Our analysis is located here: https://governance.decentraland.org/proposal/?id=a31bfa40-ed02-11ec-aa01-87bd234b340d

Subsequently, we proposed that Alastor be appointed to lead a strategy & finance squad, with our first priority being a treasury diversification effort. This proposal was rejected.

Since the release of our initial report on August 12th, the price of Mana has fallen from $1.07 to less than $0.42. To be clear, we did not predict this price drop - but our stance was simply that DCL had uncapped capital downside, putting the prospective runway of the DAO in jeopardy. What was at the time a >$200M treasury (including unvested MANA) is now worth just over $90M. A $20M diversification of vested MANA (our initial proposal outlined in our report) would have saved the DAO ~$12M in value, roughly 100x the compensation we asked for to lead this initiative.

We would like to ask DCL to once again consider our proposal. Today’s treasury (including unvested MANA) sits at ~$90M, with 99.8% of the value denominated in MANA. $18.5M of that MANA is vested, and we still believe that a large portion of that value should be diversified into stables, to prevent further value loss and to capitalize on the value DCL has created to date.

Decentraland is overexposed, unhedged, and undercapitalized. This was true in August, it’s still true today.

Potential counterparties for diversification include:

-Venture Capital

-Liquid Token Funds

-Market Makers

-DCA using Uniswap v3

Specification

We will contact venture capital firms and liquid token funds to assess if there is a single buyer for the $12MM in MANA. This transaction is likely to occur at a negotiated discount to current market price, with the tokens unlocking over a negotiated period of time

We will also contact market makers and explore alternative methods for diversification, such a DCA'ing on Uniswap v3

Ultimately our goal will be to secure the most favorable terms for the DAO amongst the potential options

Personnel

Sam Bronstein: https://twitter.com/Sam_Bronstein

Jordan Stastny: https://twitter.com/jstastny101

Alastor provides strategic and financial services to DAOs. Alastor has done grant work for Uniswap, Lido, Gitcoin, and others and also serves as a core contributor to Llama. Most recently, Alastor prepared a deep-dive research report for the Uniswap Foundation on their fee switch: https://gov.uniswap.org/t/alastor-fee-switch-report/18020

Prior to founding Alastor, Sam & Jordan were M&A advisors at Qatalyst, where they advised leading technology companies on M&A and strategy across more than $150Bn of M&A and capital markets transactions, including the sales of Slack, LinkedIn, Mailchimp, Glassdoor, and others

Roadmap and milestones

We would begin reach-out to counterparties in December with the goal of having a fully fleshed out diversification plan (potentially allocated across multiple counterparties and strategies, dependent upon demand). The goal would be to have the diversification fully complete by the end of Q1 of 2023.

Vote on this proposal on the Decentraland DAO