Treasury Management for Web3 Platforms (For Techies)

Explore treasury management as the central cash system that supports operational and strategic goals through Web3 reserves, and learn how crypto assets are chosen for those reserves.

Web3 platforms generate cash flow from commissions, fund liquidity incentives, maintenance, and development, while reserves buffer shortfalls despite inflows and outflows in different crypto-assets.

Web3 platform reserves fund development by supporting outside contributors through grant programs funded by reserves, attracting high-caliber talent to grow the ecosystem, in contrast to Web2 development.

Explore how web3 treasury management uses reserves to generate non-operating income, through lending, staking, or investing, while balancing cash inflows and outflows to support platform stability.

Strategize liquidity to prevent cash-flow shortages on web3 platforms by balancing inflows and outflows and aligning timing. Valuate diverse assets, including native tokens, ether, and DAI, to ensure smooth operation.

Analyze how asset-liability management keeps reserves able to pay liabilities for web3 protocols despite denomination diversity, market depth differences, systemic risk, contagion, and conversion costs.

Diversify protocol reserves to maintain market value against claims, avoiding reliance on native tokens that become useless under stressed market conditions.

Learn how to implement a long-term budgeting and budget monitoring framework for Web3 treasuries, addressing forecasting challenges and competing DAO priorities on reserve assets.

Learn how budgets translate into reporting requirements for Web3 platforms, covering variance analysis, ALM metrics, capital adequacy, and risk management for DAO members and market regulators.

Apply traditional treasury tools in Web3 by using excess reserves to buy back and burn tokens. Encourage holders to keep tokens longer to reduce velocity and support the market price.

Plan fundraising needs and determine suitable securities to issue to raise capital, then plan the repayment of the funds raised.

Explore how Web3 treasuries conduct investing activities by funding new protocols, allocate resources, and influence the ecosystem, while understanding traditional treasury tools and the goals of divesting investments.

Classify cash flows into operating, investing, and financing activities, and explain how net income, non-cash expenses, and working capital shape CFO, CFI, and CFF.

Master budgeting basics for Web3 platforms, covering revenue budgeting, capital budgeting, and cash budgeting. Forecast sales and costs, and coordinate cash flows from operating, investing, and financing activities.

Learn how revenue budgeting translates strategic planning into quarterly and monthly goals, linking business objectives to targets, cost implications, and tracking with adjustments, e.g., banks boosting deposits and loan books.

Analyze variance analysis to compare planned and actual numbers, track price rate variance and budget variance, and assess revenue budget goals.

Capital budgeting allocates capital to assets that generate future revenues. It's a long-term, strategic process using cash flows, timing, opportunity cost, and after-tax considerations to avoid costly reversals.

Understand time value of money, present value, discounting, and WACC, including cost of funds, opportunity cost, CAPM-based cost of equity, and sunk-cost considerations in capital budgeting.

Analyze capital budgeting tools such as payback period, discounted payback, NPV, and IRR to evaluate project cash flows, time value, and profitability against the investment outlay.

Explore asset allocation across equity, fixed income, and cash to meet portfolio goals, balancing growth, predictability, and liquidity while recognizing growth's unpredictability.

Explore how asset allocation drives growth and why past returns do not guarantee future performance, considering macro factors such as low interest rates, policy support, and equity in fiat portfolios.

Build a future-ready portfolio by using past data, diversifying with counter-cyclical assets like equities and commodities, and adding fixed income such as bonds and time deposits for guaranteed returns.

Explore how portfolio liquidity shapes asset allocation, balancing growth, profitability, and liquidity by considering illiquid assets, money market instruments, and market timing for liquidation.

Explore how reserves generate non-operating income to diversify treasury sources for cyclical industries like oil and gas, including dividends, coupons, asset sales, foreign exchange gains, and rent.

Forecast short- and long-term fundraising needs to maintain cash reserves for operations and investments in web3 platforms, while minimizing cost of funds through healthy debt-to-equity and solvency.

Explore smart contracts as self-executing programs on blockchain networks that act as accounts holding crypto assets, power decentralized applications, encode token logic, and are self-sovereign and immutable.

Explore how decentralized autonomous organizations operate as internet-native, member-owned entities governed by smart contracts and on-chain voting, automating asset allocation through pre-approved rules.

Understand how crypto wallets secure private keys and enable sending and receiving assets on blockchain networks. Explore multisig wallets that require multiple signatures and configurable rules to authorize transfers.

Explore how market makers provide liquidity by holding assets and trading with buyers and sellers, and how automated market making (AMM) uses liquidity pools and algorithms in DeFi.

Explore staking as a source of passive returns in web3, including how validators earn rewards in proof-of-stake and how treasury managers allocate assets across native tokens, stablecoins, and applications.

MakerDAO governs the Maker protocol on Ethereum, issuing DAI as collateralized debt positions, with the treasury funded by stability and liquidation fees and MKR as the governance token.

Discover AAVE, a major decentralized lending platform across networks like ethereum and polygon, expanding into tokenized real-world assets via the RWA market and detailing treasury allocations.

Explore Uniswap, a leading decentralized exchange on Ethereum and layer two networks like Polygon, Optimism, and Arbitrum. Learn how its dao treasury is nearly fully funded by the uni token.

Explore how API3 DAO delivers traditional API services to smart contract platforms in a decentralized, trust-minimized way, with 75% of the treasury in API3 and 25% in USDC.

Explore Decentral Games DAO governance, separate from Decentraland, detailing treasury allocations to DG, stablecoins, and Quickswap and Uniswap V2 pools, and discuss current allocation problems.

Explore how decentralization, the core web3 promise, creates governance challenges in treasury management, with diverse stakeholder incentives, slow consensus, and potential collusion affecting budgets.

Explore how excessive dependence on the native token drives systemic risk and potential reserve failure under extreme market conditions, as selling pressure and minting can trigger hyperinflation and value loss.

Explore how asset allocation faces a lack of diversification in Web3 reserves and learn systematic diversification across crypto assets and cross-chain options to reduce portfolio volatility and reach goals.

This lecture explains how lack of income diversification ties the treasury to platform performance, with retained earnings from transaction charges forming the treasury and signaling systemic risk.

Explore how decentralized nature of web3 platforms, lack of a vision, and competing DAO incentives complicate treasury budgeting and forecasting amid volatile reserves, and consider improvements for web3 treasury management.

Apply a crypto asset diversification framework across major coins, stablecoins, utility tokens, NFTs, security tokens, and tokenized assets. Consider liquidity, volatility, yields, voting rights, and risks to build a portfolio.

Explore a risk-based income diversification framework for treasuries, classifying fund allocation options for generating non-operating income into risk-free options, low-risk options, medium-risk options, and high risk options, with each discussed.

Explore risk-free income options for Web3 treasuries, including staking network currencies like ETH, the DAI savings rate, and stablecoin liquidity pools on automated market makers.

Explore low-risk treasury diversification through money market lending, fixed-rate protocols, senior debt tranching, and on-chain money market funds like Pulse Aggregate Yield.

Explore a medium-risk option for non-operating income: yield aggregators. Deposit stablecoins into Yearn vaults to diversify dao treasuries' income.

Explore high-risk options like protocol M&A and partnerships to boost positioning and acqui-hire talent, and fund early stage investments with grants to support proofs of concepts and enable token swaps.

Improve forecasting and budgeting for web3 treasuries by balancing cash-flow buffers, emergency funds, and development work with multi-asset liquidity, stablecoins, and risk-aware reserve management.

Improve risk management for Web3 treasuries by diversifying assets and stablecoins, assessing counterparty risk from staking and yield farming, and auditing protocols to guard against hacks.

Appoint a centralized treasury management team to set up the platform's treasury structure, long-term goals, an asset allocation for reserves, and develop annual and quarterly budgets aligned with approved allocations.

Improve reporting and analysis in web3 treasury management by presenting holdings, liabilities, budget allocations, variance analysis, asset-liability metrics, capital adequacy, and risk exposures for stakeholders.

Explore essential tools for web3 treasury management, including Gnosis Safe multisig, Coinshift, Multis, Juice Box programmable treasury, Hedgey otc offers, Castle Finance risk-managed products, and Karpatkey non-custodial services for DAOs.

Explore the FTX and Alameda Research crisis, highlighting Bahamas-based crypto exchange valued over $32 billion, founded in 2019 by Sam Bankman-Fried and Gary Wang, with Alameda led by Caline Ellison.

Examine the FTX crisis, Alameda's FTT reliance, and the liquidity shock that led to bankruptcy, and explain how centralized exchanges act as custodians with custodial risks.

Explore options for safeguarding customer funds on web3 platforms, including self-custody, separation of exchanges and custodians, and proof-of-solvency using merkle sum trees and zk-snarks.

Explore proof of solvency for custodial crypto platforms by examining proof of reserve, proof of liability, and attestations, and discuss the caveats involved.

Explains solvency proofs by publishing balances and addressing privacy concerns. Introduces the merkle sum tree with balance and salted hash leaves and verifiable proofs of balance.

Centralized exchanges may incur liabilities beyond customer balances, such as loans, making insolvency possible, while solvency snapshots risk round-tripping manipulation; auditors could help, depending on credibility.

Separate custodianship from crypto exchanges to create non-custodial exchanges and safeguard customer funds through dedicated custodian banks. Highlight plasma and validiums for storage, noting validiums prevent operator theft.