Replace the mechanism to burn $MKR with a treasury

I don’t think the Dao is well enough developed for a general strategic reserve fund, and it is highly susceptible to abuse. Let’s keep burning MKR as the system was designed and then we can vote to issue new MKR to fund individual projects that MKR holders agree are worthy.

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Fine, admittedly I think you are right on this.

At the same time, I think there are improvements that can be made on the current setup that do not try to ‘time the market’. Perhaps we can have a productive discussion about those (see my example below).

For example: I think buy/burning the MKR as soon as the surplus buffer is full, is not necessarily the best strategy.
We had a peak of burning in february (before Black Thursday) and then 0 burning for many months (up to now, November), when the price of MKR was very low.

Simple Proposal: I suggest we could buy/burn MKR not as soon as the surplus is full, but following some kind of “moving average” of sorts, so to smoothen peaks and dips.

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I am certainly not against optimizing earnings distribution in the mid/long term, but I just can’t see this topic (buyback) being really important at this point, i.e. so early, in the DAO creation process.

The important part is to have a Treasury - especially to start covering expenses, while strategic part is imo, not so important, in the short term.


@jernejml, one can have MKR-burning and at the same time MKR-minting for covering expenses, etc.

I guess this might seem convoluted, but as others have suggested above, it keeps the system simple and working as it was designed for (i.e., MKR burning).

I like this idea of “smoothing out” the Maker burn. Maybe accumulating funds and burning x% of the total funds each y length time period. This essentially would mimic the investing strategy of Dollar Cost Averaging, which I believe outperforms lump sum investing (or at least is lower risk), especially with highly volatile assets.

I also like the idea of the maker protocol holding reserves rather than burning Maker with 100% of income. That said, I am completely against holding ETH as it is much too volatile. I think LP tokens are the best option to be held as strategic reserves. Neither volatile cryptocurrencies like ETH nor stablecoins like USDC are a good fit due to their asset class specific risks.


I think we need to sort terms.

Company treasuries usually have - cash - or cash like assets (say bonds that retain value but also earn return) they can have volatile components (often anticorrelated assets that grow when their business sinks or related to supply needs - oil futures for airlines, etc.). When I first brought this idea of a Treasury or a secondary surplus to Maker I wanted to use it as a direct DAI liquidity control (inject by buying assets, withdrawal by selling them). Which meant one had to buy other assets to let the DAI in the surplus go out into the markets rather than draining DAI liquidity and having surplus DAI just sitting around doing nothing.

We have MANY more choices today with what we can do with DAI to both retain it, generate return, while still allowing it to be out in markets (balancer pools, various liquidity stakes) that we can even use with MKR to boot to earn farming returns. Literally there are vastly more ways to manage a treasury now than even 6 months ago. Since one key function of a Treasury is to retain value particularly in bad market situations I urded we should add stablecoins and we can also use those as liquidity pairs to earn extra return for the Treasury via farming.

We don’t have to completely STOP the MKR burn as this is something clearly important to MKR holders. BUT I have urged and will continue to urge governance to stop buying the MKR price up using this burn model and simply set a price floor with some liquidity via limit MKR/DAI or MKR/USDC orders or even using liquidity pairs that are automatically going to buy MKR when price drops and sell it when price rises.

As @befitsandpiper suggests:

we can simply buy market periodically with some randomness and simply dollar cost average the MKR purchase price. Frankly I think we get a bigger bang for our DAI by putting our surplus into farming returns. We achieve multiple goals, a growing return from surplus, diluting farming returns into our own treasury, and still releasing DAI into markets to provide liquidity. If we do this against MKR itself we also indirectly support price via pair liquidity (I don’t think people really appreciate how price support can work in these liquidity pairs btw)

Lets try to separate the concept of a Maker working Treasury which would be used for:

  1. Operational expenses, ETH for smart contract deployment, oracles, insurance, legal costs, licensing fees, etc.

from a Secondary surplus that could be used to add or remove DAI liquidity by buying/selling assets and growing return component from these to the value of Maker.

I think it is a secondary surplus that should have the farming assets as well as MKR purchased to match against DAI to provide liquidity. I can’t stress the following enough. Maker really needs to get past this idea of always burning MKR vs. using MKR that could have been burned against DAI in hand to provide farming MKR liquidity in many pairs (DAI, USDC, TUSD, maybe even ETH) in a secondary surplus fund from a treasury that for the most part only contains DAI, and stablecoins to fund operational expenses (that are in ETH, DAI, USDC and possibly MKR via sourceCRED).

Last thing I want to point out. Company value is not just the following:

  1. Market value of the outstanding stock.

It is the other following values.

  1. Cash flows
  2. Net profit from cash flows to company bottom line (and hence to shareholders)
  3. Total disposable (non-encumbered as well as encumbered) assets.
  4. Future contracts to cash flows and hence profit.
  5. Growth rate (or contraction) of the above.
  6. Speculative value based on the growth in the entire space the company is a part of. (size of markets and growth of them).
  7. Dividend return. (i.e. payout to stockholders either by buyback or by direct dividend as a rate of return)
  8. Intellectual Property (i.e. enforcable patents)
  9. Expense rate vs. cash on hand.

We seem to focus exclusively on (1) and peripherally on (2), (3) and (8) and ignore (4), (5), (6) and (10). We ignore (7) we don’t have much control over it, and (9) because Maker is opensource and forkable.


This might be a good investment strategy, but I disagree on a fundamental level.

In an ideal world, MakerDAO would earn some money (DAI, from SF) and distribute them (proportionally) to MKR holders.

This is not practically doable, because thousands of transactions would waste money in fees. This is one of the many reasons behind the MKR-burning system. It is efficient.

This said, I think we should not impose any investment strategy on any MKR holder (even little holders). Even if this imposition was democratic (i.e., voted) I would probably consider it an abuse.

We should just distribute the revenues (after having subtracted the amount needed to run operations and expand) and then simply distribute (which, as it is implemented now, means burning MKR) the revenues.

ADDENDUM: one of the selling point of DeFi is that I can invest in MKR/BAT/WBTC/whatever by buying 1000MKR or 0.01MKR. It does not make any difference.

There is no need to ‘group up’. I could just as well invest on the farming pool myself, if I wanted, I don’t see why MakerDAO should do that for me.


You are basically discussing the conglomerate discount. It’s a very complex subject.

Farming with MKR money to generate a yield doesn’t make sense as MKR holders can do the same more efficiently.

But adding liquidity to something that helps the DAI ecosystem create good value as there is a synergy with our main business.

Also having cash aside to endure bad times is smart. It would be not smart to let it be idle if we can make a secure yield on it.


Check out how PERP did its token sale:

We can do the the same but in the opposite direction. MKR bought would be burn instantly.


This sounds very interesting because it seems this approach (prices going constantly down until a buy happens) creates a game-theoretical incentive to do dollar-cost averaging.


Strongly in favor of accumulating strategic reserves.

If we keep a treasury it should be denominated in MKR and DAI, and invested in high-yield returns. A small ETH fund could be justified for contract deployments, but this should be much smaller in scope.

  • Compounding MKR would increase our long-term burn rate.
  • Compounding DAI would provide a fund to pay audits and engineers, and an insurance fund to prevent MKR issuance.
  • Compounding ETH could be used for contract deployments. It should be kept in an ETH-CHI AMM to fully mitigate gas price risk, as described here.

For MKR pools we invest in we have to be careful about protocols like COMP using them for “voting blocks”; we could mitigate this risk by burning from those pools or avoiding them.

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I am strongly in disfavor of any large reserve or fund, strategic or otherwise. Various buffers are fine, especially if they are small and have a very specific and limiting purpose.

  • Any reserve outside of buffers increases the scope of the already stretched Maker governance. We need proposals for how to make Maker governance smaller, not larger. Governance is currently lacking resources in Risk, Oracles and Smart Contracts. Domain teams such as HR, Marketing and R&D are not even proposed yet. And now you want to add Fund Management on top of this?

  • Any funding of initiatives can be accomplished by siphoning from the revenue stream generated by the Stability Fees into buffers for expenses. No need for any fund of any kind. It will slow MKR burn but that is acceptable.

  • Reserves or funds can easily lull the community into a false sense of comfort and complacency. Protect MKR against issuance? We do this by diligent risk management, not reserves.



Agreed on all your points. Scope creep is a powerful thing. The one advantage of having a large reserve fund is of course being ready to spend should a large opportunity/crisis come up. But on net, I think it is much better to maintain a cash buffer for planned expenses only.


At this moment there is no clear vision of how MakerDAO should evolve. I agree with you that reduced governance is better, but as there is no long-term goal in this sense, I believe that making small improvements is the best way forward.
As I wrote in my initial post, this discussion was not about how to spend Maker’s funds, but simply about whether or not to create the treasury. Many participants in this thread gave some interesting insights on how to administer the funds, but in my opinion, these discussions should be postponed until after the treasury is established.
how to proceed in my opinion:

  1. Create a MIP that has as its purpose the approval or denial of a treasury. The MIP should be limited to this. There should be no other changes to the protocol, for which separate MIPs should be made. For example, there should be no terms specifying how the funds are to be spent. Again, how the funds are administered should be a decision taken after the treasury is established. Absurdly enough, you may also think that after the treasury has been set up it is decided to continue to burn the MKRs burn mkr like we always have

  2. Launching a political discussion on how to administer the funds

@rafinskipg shared this:

Does it seem that having a Treasury Team (Core Unit?) might be beneficial?

It would also help with questions such as:

  • should we burn MKR?
  • should we wait for MKR to go up?
  • should we mint?
  • should we land this plane on runway 3 based on the current meteorological conditions?
  • should we remove this person’s appendix?

Some questions are better left to a specialized group that considers all the variables instead of making everything democratic. (Granted, we can vote on the direction, or general guidelines).


I definitely think someone should look into the most economically sound strategies for using the MKR tokens. LP, staking rewards, voting rewards, advertising, scaling, etc. If a Treasury CU is needed for such a purpose then so be it.

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At the moment, I would almost settle for knowing how much DAI has been spent burning MKR over a given time period. We don’t even collect basic info like that. Hard to make any real decisions in an informed manner.

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Yeah it does seem like there is a lot of movement such that some things are falling through the cracks.

A dedicated Accounting CU. We need it. Crazy we’ve made it this far without one.


Is there a difference between accounting and treasury CU?