DAO Funds Diversification

Proposal is to diversify the funds held in the DAO treasury into BTC as well.

The crypto equivalent to ‘foreign exchange reserves’. Balanced could hold 65% of the reserves in BTC. The reason to hold BTC in the reserves is to ensure the treasury remains stable through market cycles when alt coins can pull back 80-90% from the top. BTC holds value better.

About foreign exchange reserves:
The average country holds US Dollars in foreign exchange reserves, at 65% of total reserves. They also hold gold and other foreign currencies.
This excerpt from investopedia sums it up:
‘Foreign exchange reserves can include bank notes deposits, bonds, treasury bills, and other government securities. These assets serve many purposes but are most significantly held to ensure that a central government agency has backup funds if their national currency rapidly devalues or becomes all together insolvent.’

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I broadly agree with the sentiment, however I feel a more explicit investment mandate is needed.

I wouldn’t want proposals to devolve into what bags the DAO fund should pump next.

Even the relatively beneign opinion on holding BTC can be argued against for someone that prefers say ETH.

For mandates, at a minimum I think we should consider % maximums held in non ICON assets, and minimum mcap on those of assets (for non ICON assets).

The other issue is custody, as I understand it, BTC will be of the harder assets for BTP to apply to, leaving some wrapped version, maybe from ETH, as the proxy.

Nations and endowment funds all have managers managing them, to ensure they track whatever benchmark they have set, at some level, this is asset management. We will soon see people have different risk appetities, and voting on things like this will be very divisive.

Personally unless Balanced is launching an asset management product, investing in BTC does not make sense. I think its very fair to say Balanced in the first place lives and dies on ICX, so its treasury is best held in ICX. If ICX dies, the DAO treasury holding BTC is ‘better than not’ but not material in that scenario. Anything else is taking a relative bet/speculation on the performance of those assets.

Without a benchmark, and detailed investment mandates, and ultimately fund managers, the process would be extremely divisive.

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Would rather we hold assets as they are (or condense into ICX or BALN) - would selling them off for BTC not create downwards price pressure for those assets? Especially low market-cap like BALN?

Agree with Arch above on a mandate on the max % of the DAO held in coins outside of the ICX ecosystem, 5%? 10%?

I disagree. I’d much rather see the DAO holding majority in ICX, BALN & bnUSD. Maybe with the majority in bnUSD.

By selling the % of the DAO funds into BTC, while this isn’t a bad idea. We really need to
give customers of Balanced confidence/trust in the platform, the DAO needs to support its own tokens.

Once a wrapped version of BTC is live on Balanced, there will be some BTC in the DAO.

Even if the price of BALN & ICX were to drop during a potential ‘bear market’ the price is only temporary. Which long term, the short term price is not an issue.

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I agree with BigBen here. Holding a mix of BALN, bnUSD and ICX broadcasts the following:

  • $BALN: BalancedDAO has a lot of confidence in its own potential. We back ourselves.

  • $bnUSD: BalancedDAO wealth is less prone to crypto market volatility. We are stable.

  • $ICX: BalancedDAO believes in the broader value proposition of the motherchain. We are ICON.

Regards, David

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I should clarify the intent of this proposal is for the Emergency Reserve Fund; which only has use for the SHTF worst case scenario.

Holding ICX and BALN in the Emergency Fund is likely not going to be able to complete the function in a worst case.

A different proposal for a different matter is the DAO Fund which the community votes to use funds to improve, build, develop, or incentivize using Balanced.

Sorry for confusing the two.

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Diversification is key to preserving principal. We could almost create a index fund out of it. I do think ICX, BALN, bnUSD should have the heaviest weight, but I love the idea of adding other coins especially with Icons interoperability focus. Not suggesting these exact numbers, but just as a ballpark example. We could even vote on adjusting allocations at certain times depending on where we are in the market cycle.

60% ICX, BALN, bnUSD
15% BTC
10% ETH
2.5% DOT
2.5% BNB
2.5% Omm
2.5% LUNA (if they are added with BTP)
2.5% other

Thinking about it more, I think being an investment fund or having an investment thesis is beyond the mandate of ‘making Balanced better’. The DAO fund should be used to make the Balanced itself generate more value/profits, or returned to owners.

Also while there are many companies with investment arms, they are exactly that, owned subsidiaries which gives a measure of both seperation and accountability instead of merging ‘managing investments’ into the core product/business.

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