• Authors: Brennan Mulligan (General Manager @ RareDAO Foundation), John Crain (RareDAO Council Member, SuperRare Labs CEO)
• Status: Proposed
• Implementer: RareDAO Foundation
• Sponsor: @Emma (RareDAO Council Member)
• Created: December 9, 2024

Summary

This proposal requests a multi-year endowment of 85M $RARE to be managed by RareDAO Foundation in order to simplify operations, improve treasury strategy, and strengthen financial stability. By transferring routine payment responsibilities to the Foundation and working with professional asset managers, it aims to reduce administrative overhead for the council, optimize resource allocation, and better support long-term strategic initiatives.

Background & Motivation:

The RareDAO Foundation was originally established to serve as a legal entity for the DAO, providing regulatory compliance and liability protection for both token holders and contributors. Over the past year, we have successfully increased operational independence by transferring responsibilities from SuperRare Labs (SRL) to the Foundation. Additionally, we have launched multiple experiments for deeper community engagement with $RARE, including the $RARE tipping program on Farcaster and more recently $RARE rewards, while continuing to ship iterative improvements to superrare.com and staying on the cutting edge of regulatory compliance.

That said, there are still a number of operational inefficiencies in the current structure. The community elected DAO council continues to be responsible for some unnecessary operational tasks, such as service provider payments. This makes such payments very cumbersome, and other more complex tasks such as treasury management more difficult to coordinate around. As an iterative improvement on the model established last year with the Foundation’s first annual budget request, we propose establishing an endowment which will allow more efficient execution of routine operations, overseen by RareDAO Foundation, and more nuanced approaches to critical tasks such as treasury management, we will be better equipped to bring value to the community as a whole.

Objectives of This Proposal:

1. Transfer Payment Responsibilities: Shift the responsibility of paying SuperRare Labs and related service provider expenses from the DAO governance council to the RareDAO Foundation, simplifying the current process and achieving better alignment with the community approved service agreement.
2. Establish a Multi-Year Endowment: Request an allocation from the community treasury to fund a multi-year endowment for the RareDAO Foundation, which will cover operational costs for itself and any service providers (including SuperRare Labs) as well as opening new opportunities for growth initiatives, and community engagement, treasury management, and diversification.
3. Ensure Marketplace Revenue Continuity: All revenue generated from marketplace activity will continue to flow into the community treasury, maintaining a clear separation between operational resources and revenue inflows.

Specification:

To achieve the above objectives, we are requesting an allocation of 85M $RARE from the community treasury, amounting to roughly 30% of reserves.

These assets will be consolidated in a managed endowment under the RareDAO Foundation’s control, held in a new gnosis safe created by the Foundation. This endowment will allow the Foundation to optimize cash flow management, diversify holdings, and extend its runway. RareDAO Foundation has already undergone an extensive search process for qualified treasury managers, and will be partnering with Avantgarde for initial setup and execution of a diversification strategy which minimizes price impact while still being able to respond to the market and prioritize trading during periods of high volume and market depth. While Avantgarde has been selected as the initial service provider, the Foundation will retain the ability to add, change or remove providers based on performance or any other factors after an initial commitment period.

About Avantgarde:

Avantgarde is crypto native asset management that specializes in running non-custodial on-chain asset management strategies, leveraging DeFi protocols and tools to build solutions for clients.

Avantgarde has been active in DeFi since 2016, notably as co-founders of the on-chain asset management protocol Enzyme, and brings decades of experience from reputable TradFi firms to help DAOs and Foundations optimise treasury management strategies, improve financial sustainability, and support long-term growth. Past and current clients include Uniswap, Arbitrum, Safe, Gitcoin, Nexus Mutual, amongst others.

Benefits:

1. Operational Flexibility & Financial Stability:

• The endowment approach provides the Foundation with the flexibility to strategically time the sale of $RARE and other assets during periods of high market liquidity, reducing price impact. This contrasts with an annual budget model that may force asset sales during periods of low liquidity or unfavorable market conditions.
• By consolidating operational funding into a multi-year endowment, the Foundation can focus on strategic initiatives rather than yearly budget renewals.

2. Optimized Treasury Management:

• With a secured endowment, the Foundation will be able to actively manage its treasury, leveraging strategies to diversify into ETH and stablecoins while minimizing market impact. This will result in a more sustainable treasury strategy than is available under the current framework.

3. Simplification of Financial Processes:

• Transferring payment responsibilities to the Foundation will streamline operations, reducing administrative overhead and aligning contractual obligations with the responsible entity.

Drawbacks:

1. Reduced liquidity available to other SIPs: Any allocation of a significant portion of the community treasury reduces the amount of $RARE available for other community proposals. However, this is offset by the long-term benefits of strategic asset management and reduced future funding requests.
2. Balancing flexibility with oversight: While the shift to a multi-year endowment offers greater flexibility, it requires trust in the Foundation’s ability to manage these assets responsibly. To address this, we commit to periodic updates and transparency based on community interest.

Proposal Execution:

Upon passage of this proposal, the DAO council shall transfer 85,000,000 $RARE tokens from the community treasury to a new multi-sig created by the Foundation. These funds shall be used for operational expenses, as well as growth and marketing initiatives, or any other activity which is in the best interest of the community.