💸Treasury Management

There are four functions that we need to be aware of in the management of the DAO treasury:

Spending

Our goal is to attract new contributors and reward core contributors in the growth of Layer2DAO. In order to do this, we will be looking to establish grant programs to empower a wider network of contributors.

We will be looking to establish committees as part of our DAO to be part of the decision making for future treasury spending.

Diversification

Diversification is an important area to focus on at the moment given that the entirety of our treasury is held in our native tokens. If our price falls by 40%, our balance sheet would also shrink by 40%.

So how do we achieve diversification? There are many avenues we can take when developing our asset allocation inside the treasury. We could begin by swapping a small portion into stablecoins. The difficulty with this is that it requires selling our native protocol tokens. This may cause an issue with the price impact long term, but the ability to invest those stablecoins could outweigh the negatives. We want to be upfront about the diversification and preempt any negative perception.

We also intend to diversify the treasury without selling native tokens where possible. To do this we need to establish relationships with other treasuries as well as token swaps with projects already on an L2 or looking to launch on an L2. Part of our grants and spending will include token swaps with current and new projects on L2 protocols.

Borrowing

Long term, debt instruments may make up a portion of our treasury. The cheapest form of debt is to access loans secured by a loan protocol, but until $L2DAO reaches a much higher level of liquidity this will not be feasible. There are other options to explore, and we hope our community will explore these options together.

Reporting

Production of financial statements & disclosures (income statement, balance sheet, key revenue drivers, operating expenses, and salaries) is key to maintaining transparency. If users need to spend several hours digging through Etherscan, Discord forums, and voting tools to get a summary of the treasury’s activities, there isn’t full transparency. We will look to establish a committee to maintain a quarterly reporting of Layer2DAO's activities.