This proposal will call for the implementation of a treasury management framework for Horizen DAO. If passed by the community, Horizen DAO mandates the Horizen Foundation to implement various automated, on-chain strategies to target the below asset mix for the Horizen DAO treasury.
Implementation of the treasury management strategy will not be immediate, but rather responsibly phased in over time.
Background
Horizen DAO has been allocated 3,000,000 ZEN with 750,000 ZEN (25%) unlocking at migration to Base and the remaining 2.25m ZEN unlocking linearly over 48 months.
Rationale
A sustainable treasury management framework will maximize Horizen DAO’s ability to fund ecosystem investments over the long-term while accruing value to ZEN. Deploying idle treasury funds will have the double-benefit of providing orderbook depth for ZEN on DEXs while earning fee revenue for the community.
Execution
With the migration to Base, Horizen DAO has the opportunity to drive utilization of ZEN across a vibrant deFi ecosystem and bolster utility for holders.
The proposed treasury management framework will emphasize support for Horizen across Base deFi and yield generation on Horizen DAO treasury.
All treasury operations will be automated on-chain via deposit of assets into single-sided vault strategies which deploy and manage concentrated liquidity positions for leading ZEN pairs across Base’s DeFi ecosystem. By leveraging automated liquidity provisioning strategies, Horizen DAO can generate fee revenue and provide depth to ZEN pairings while maintaining its target asset allocations.
Summary of Benefits
Yield on ecosystem assets - consistent yield earned from automated, on-chain liquidity provisioning
Bolstered ZEN liquidity - automated, on-chain strategy increases ZEN TVL across Base deFi ecosystem
Funding flexibility - diversification into stable and blue chips provides flexibility in funding community initiatives and alleviates sporadic sell-pressure on ZEN
Achieve industry alignment - Increases in ETH or BTC price result in ZEN buying pressure via rebalancing
Successful investments fuel ZEN - Tokens received from Horizen ecosystem investments feed into the ‘other’ category. Thus successful investments will result in rebalancing of those assets back into ZEN, blue chips & stables.
Cost
The Horizen Foundation will bear the cost of having the single-sided Ichi vaults configured and deployed ($40k). All vault strategies utilized for treasury management will also be publicly available to the Horizen community. With the passing of this zenIP, Horizen DAO authorizes Horizen Foundation to contract a third-party to configure and deploy the single-sided vault strategies.
Reporting
Treasury management data will be released each quarter detailing quarter-end positions and asset allocations, as well as yield activity such as fee revenue earned etc.
I’m a huge fan of this for a variety of reasons, including:
Diversifying the treasury and boosting ZEN when BTC and ETH go up
Seeding ZEN’s DeFi ecosystem on Base (and ultimately on our own L3, as applicable)
Generating sustainable revenue for the DAO long term
Automation is key here and we’ll have the best DeFi tools available by being part of the Base ecosystem, so we really ought to take advantage of that.
There’s one part not mentioned explicitly here that maybe should go into the actual ZenIP for vote: I think the excess sequencer fees collected should roll right into this process. Since they’ll be collected in ETH (gas for the L3), we’d ultimately have long term perpetual purchases of ZEN and other assets to fund long term sustainability.
Sequencer fees will likely be small at first, it’s important to create a mechanism linking the governance token of the platform, ZEN, with the platform’s success.
I fully support managing the Horizen DAO Treasury in this type of way. The way I understand it is it would provide liquidity for people to trade ZEN, and generates trading fees that provide an income stream to the DAO.
Is there any potential downside to this activity @tlogs ? Is there a way that the Horizen DAO may end up with less overall value than just holding ZEN?
Good question @blockops.. with the Treasury holding 100% ZEN, if ZEN outpaces bluechips (BTC & ETH).. then the DAO would obviously be better off holding 100% ZEN from a pure valuation standpoint.. but then how does the DAO realize those gains? Who makes the decisions on how much ZEN to sell and at what price point? In my opinion automating these actions is ultimately the best course of action. and there is the added benefit of producing revenue for the community and bolstering ZEN deFi TVL.
The other big point is that if ZEN underperforms USDC, BTC, or ETH, we lose out big time as an ecosystem. Diversification is always a good ex ante idea, even if there are scenarios where not diversifying would have had better ex post outcomes.
I fully agree with this proposal. It provides more stability to the treasury through smart diversification into BTC, ETH, and stables, while also helping the ecosystem by providing liquidity. I especially like the small risk bucket, which, in my opinion, should be allocated for protocols within our own ecosystem. It’s great that this can all be done while keeping the majority of our holdings in ZEN to capture all the upside.
Is it correct that the DAO splits its ZEN funds according to the ratios shown in the picture and then provides liquidity in the DeFi ecosystem (e.g., on Uniswap) with the ZEN/ETH (or USDC, BTC) pairs it holds? Am I understanding this correctly?
I obviously really like this idea. It’s similar to what I suggested in my campaign for special counsel. I would strongly suggest a much larger allocation to BTC, at least 20% of total allocation.
