TIP-103: Restructuring of Threshold DAO committees and roles

[please see Forum post for the screenshots of the financials]

DAO Elected Representative Sponsors: @JohnPackel @Eastban @Luna5 @Vict0r @MrsNuBooty

Key provisions TIP-100 called for sunsetting existing committees and restructuring DAO roles to reflect Threshold Labs taking over tBTC development & growth per TIP-098 This TIP is the recommendation of the DAO restructuring workgroup based on evaluation of responsibilities remaining with the DAO The treasury, security and oversight committee called for in TIP-100, combining the responsibilities of the Treasury Committee and Council, will be the “Threshold Committee” The Threshold Committee will consist of 6 part-time paid seats and 3 volunteer seats, retaining the 5-of-9 threshold for multisig security 5 part-time contributor roles remain (hours reduced from current): treasury operations, tech support, communications/engagement/education, project management, incentives/reporting Total cost for Committee and part-time roles will be $602k annually, a reduction of ~$1.1 million from current payroll Streamlining operations and reducing cost substantially will minimize the treasury selling T tokens, allowing the DAO to be a net purchaser of T by implementing “buyback and make” Treasury assets plus 30% of projected revenue can cover ~23 months of our obligations paid in stablecoins, with $10.6M in T remaining to cover ~$1.6M annual protocol & incentives cost A detailed plan with timing is outlined, reflecting the need to transition multisig signers and committee work streams; election for Threshold Committee seats will start March 29th Process for creating this recommendation The DAO restructure workgroup (East, John, Luna, Ashley, Victor, Ethan, Sap & MacLane) used these principles to inform our work:

tBTC development and growth will move to Threshold Labs, a new DAO structure will streamline remaining core work, and we will discontinue what’s no longer essential Avoid compromising protocol, treasury and operational security by assessing risks each retained function needs to mitigate Every function needs accountability: no autonomous or “orphaned” roles Ground the recommendation in financials: actual cost and revenue Given the mandate (from token holders approving TIP-100) to sunset guild committees, combine Treasury and Council functions into a single committee and dramatically reduce cost, we put all work streams managed by each committee and contractor role on a board, separated them into 3 groups (move to tLabs, retain in DAO, discontinue) and determined the minimum number of committee seats, contractor roles and hours per week we believe are required to mitigate risks to the protocol, tBTC and the DAO (token holders).

Threshold 2.0 structure & financials In addition to the >$8.5 million annual savings from TIP-92 eliminating tBTC rewards and continuing TACo’s for 6 months, TIP-100 prescribing a further $360,000 reduction by discontinuing thUSD incentives, as well as $252,000 in protocol savings – this proposal will reduce the annual cost of committee and contractor roles by ~$1.1 million, to $602,400.

Threshold Committee: 6 paid committee roles (7 hours/week) plus 3 volunteer signers (trusted members of the community), all elected (see schedule detail below).

Dev & growth to tLabs: the 2 full-time developer roles (Evandro and Leonardo) and growth lead (Ethan) will transition to tLabs. Expected timing is April 1, but these roles will remain on DAO payroll until tLabs is able to hire them.

Redefined DAO roles: These roles, with reduced hours/week, will cover the key needs not moving to tLabs: POL & treasury operations (East, 15 hours/week), Tech support & Discord management (Victor, 20 hours/week), DAO communications/engagement/education (Ashley, 20 hours/week), Project management (Luna, 20 hours/week), Incentives and reporting (Wuji, 8.5 hours/week).

While the DAO has used $85/hour as its standard for most roles since the Marketing Guild adopted it 3 years ago, this recommendation and financial plan includes a rate of $100/hour to reflect both the contributors’ reduced hours and the fact that they receive no benefits and pay full self-employment taxes.

As tLabs finalizes its planned team structure, there may be additional opportunities for former DAO contributors and committee members to apply.

Simplifying treasury operations: In order to streamline operations, reduce cost and increase security through fewer treasury transactions, we will make the following updates:

Treasury multisig will hold only assets for 6 months of operations; any surplus, plus T returned from betastakers’ stakes, will be transferred to the Governor Bravo contract All reserve assets – stables, tBTC and ETH – will be managed by vaults from partners like Aera, Arrakis or Flowdesk, facilitating yield and diversification (detailed proposal to follow) Active T pairs on DEXs will be analyzed to be determined if liquidity needs to be adjusted Other assets (all governance tokens like CRV, CVX, AURA, AERO, VELO) will be swapped into tBTC, ETH or T (timing depending on market conditions)

Bridge fees can turn the DAO into a net buyer of T If we annualize the current level of bridge fees we can project revenue of ~32 tBTC in 2025, not counting future growth based on accelerated development and growth via tLabs, as well as previous TIPs (particularly TIP-96).

We can use tBTC revenue to implement “buyback & make” as originally proposed in TIP-54. If we use 70% of redemption revenue to buy T and add it to the T/tBTC pool, it would mean that:

Threshold Network becomes a net buyer of T tokens (i.e., quarterly T purchase amounts will exceed T used to pay protocol & incentives expenses by $214k) The remaining 30% of tBTC revenue could be kept in the treasury or converted to stables Each quarter, tBTC from bridge fees can be claimed and the buyback executed.

Expense planning Based on the new DAO structure above, plus an estimated ~$2.5 million in tLabs costs for development and growth in year 1 (they will share actual cost in the coming weeks), if we convert all reserve assets (tBTC and ETH balances above) plus governance tokens to stables as they are needed – this will cover ~23 months of our obligations that are paid with stables (i.e., DAO Committee and roles plus tLabs).

Note that total runway for Threshold is longer, as the treasury has $10.6M in T and T pairs, and annual obligations paid in T (protocol and incentives) are $1.58 million/year. We do have other costs (oracles, market making services, legal, etc.) but these account for only ~2-3% of total.

Of course, we could decide on a different ratio for tBTC redemption fee revenue going to buyback and make; e.g., if we put 100% of revenue into buybacks (eliminating the 30% to treasury) we could still cover ~19 months of our expenses paid in stablecoins.

The DAO should also decide at some point to turn off the mint fee holiday we’ve had since December 2023, increasing our projected revenue.

Operational transition and timeline While TIP-100 approved sunsetting all committees as they have been configured, and combining the Treasury Committee and Council, it will take a few weeks to complete this, including transitioning the multisigs and committees making any final payments already committed.

This document outlines a full plan and schedule, with key milestones being:

One week for comment on this TIP, plus one week Snapshot (March 7 - 21) End of current committee and role responsibilities and payroll: March 21 Transition – current Treasury Committee members** take on Treasury + Council responsibilities and execute all multisig updates: March 22 - April 6 Nominations (one week), vote (one week) for new Threshold Committee: March 22 - April 4 New one-year term for Threshold Committee begins: April 5 ** The rationale for recommending the current Treasury Committee members take on the Council responsibilities during the transition period rather than vice versa is that the Council has not been involved with treasury management and the multiple daily transactions required, whereas Treasury has provided guidance to Council on decisions such as POL and asset transfers, Threshold Foundation transactions, etc.

Links to documents with further detail:

Threshold Committee expectations & requirements

Risks each DAO role is designed to mitigate

Full timeline for Threshold 2.0 transition

Transition of DAO Multisigs and Asset Ownership