In the setting of the volatile market of digital currencies, it is time for many DAOs (Decentralized Autonomous Organizations) to collect funds by organizing token sales with the aim of improving their finances and devaluation of their tokens. This alteration in strategy is because many cryptocurrency projects want to reduce the level of risk that one asset can have, exhibited by Uniswap’s governance token, UNI, experiencing a decline of 20% because of regulatory scrutiny from the United States Securities and Exchange Commission.
Doo Wan Nam, the co-founder of StableLab and one of the authors of Uniswap’s Treasury Working Group Proposal, warns against the sole use of one kind of asset. This is why crypto assets are highly volatile and possible risks to the treasury. To tackle this problem, on April 5th, Uniswap DAO assembled a group of professionals whose mission is to research different treasury strategies. During 8 weeks of analysis, the group will consider other alternatives for diversifying the treasury of $6.4 million that before was held entirely on UNI tokens.
The issue of keeping the native token out of focus is not specific to Uniswap alone. Avantgarde’s research on behalf of Arbitrum DAO established that the top 25 DAOs recorded that more than 90% of their treasury funds were in their own tokens. Diversification has revealed itself to be one of the factors most important for these organizations’ stability, allowing them to withstand the instability of cryptocurrency prices and loss.
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One of the leading examples of this is CoW DAO, the decentralised exchange platform referred to as CoW Swap, which is precisely being managed. In recent times, the team has changed its treasury holdings by buying 88% of COW in its native token and 12% of stable coins like USDC and DAI, as well as staked and unstacked ETH. While safety is the primary objective, they can earn from assets like liquidated ether tokens, which yield around 3% to 4%.
Likewise, Nam urges the DAO to consider holding a piece of the treasury in traditional currencies or stablecoins with yields to shield it from the crypto market volatility. On the other hand, spreading resources too widely may lead to the same problems when there is a mismatch, and the native token of the organisation can lose its value. Devansh Mehta, one of the team members of Arbitrum DAO, argued that oversubscription might result in conflicts with the primary objective of the DAO, which is to promote their ARB token.
Despite the difficulties they go through, DAOs keep sailing their way through the tides. For example, Arbitrum DAO has just voted to reallocate 35 million ARB to stable and profitable assets after a thorough vote, which took place around 4 months from the initial proposal to the final approval. This suggests that much thought is given to the parity of the development of an ecosystem, not to mention the financial aspects in the face of a DAO.
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As the world of Web3 continues to change, Uniswap and Arbitram are innovating on the best strategies for managing decentralised treasuries. Sustainable development and risk management are the core of these organisations, and they have learned to keep pace in this ever-changing enterprise world.
