Replace the mechanism to burn $MKR with a treasury

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.

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Check out how PERP did its token sale: https://medium.com/@perpetualprotocol/everything-you-need-to-know-about-the-first-liquidity-bootstrapping-pool-lbp-60a61b368c82

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

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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.

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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.

This.

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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.

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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:

https://medium.com/badgerdao/badgers-in-the-sett-a-dao-treasury-retrospective-volume-i-29ab5aa96048

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).

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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.

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Is there a difference between accounting and treasury CU?

I guess, by the name of it, treasury can take, or propose, decisions based on accounting reports.


What could be cool:

  • Maker uses DeFi to generate revenue (let’s say use yearn or curve to generate yield on DAI)
  • Maker uses revenue to pay salaries ,or/and buy and burn MKR ( while keeping the collateral MKR) or/and buy/invest in ETH

Big difference. You don’t want the people doing the books to also handle the money or make decisions about the money.

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Would be nice if the books were done by a piece of software

Accounting is viewed as a cost center…governance will always view it as such in a world of BURN BURN BURN

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Just to revive this thread.

Another idea that could be worth exploring:

  • Allocating a percentage of the treasury to DPI as an investment
  • Allocate a percentage of the treasury to MakerDAO competitors, to protect against competition
  • Set a percentage of the treasury to DAI farming

All this process could be automated via smart contracts and adding/chaning the investments could be done via governance proposals.

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I really like this discussion and all inputs.
IMO the burn model works out well for MKR at this point and since there is still quite a big governance treasury from the foundation it would be good to see how we can decentralize control over that first … then when that is in place we can start and talk about instead of a burn getting more funds in the treasury.

This is a deeper insight happy to see it evolved in a way towards a strategic reserves fund.
With also a buffer to ensure DAI etc
I Will continue the discussion here