This thread is in meant for educational purposes to DAO members as the DAO becomes more active in managing the DAO Fund. Financial decisions made by the DAO can mean the difference between success and failure of the DAO. If properly managed, Balanced could become fully sustainable from its DAO Fund initiatives alone.
There are two objective truths that I’d like to highlight in this post
1.) BALN in the DAO Fund is infinite. At any time, the DAO could vote to mint more BALN to the DAO Fund.
2.) BALN in the DAO Fund provides no intrinsic value to circulating BALN. For all financial analysis, it should be considered $0 value. Other assets (sICX, bnUSD, etc.) do provide intrinsic value. It provides tangible backing for circulating BALN.
note - please see this definition of intrinsic value if you’re not familiar with the term
With that said, let’s walk through an example. For simplicity, the DAO Fund will hold 100 bnUSD in this example:
DAO Holdings pre-purchase
- BALN = $0 (remember, we have infinite amount but has no intrinsic value in the fund)
- bnUSD = $100
- BTC = $0
- Intrinsic Value of circulating supply = $100
Scenario 1: Buy $100 of BTC with 100 of bnUSD
DAO Holdings post-purchase
- BALN = $0
- bnUSD = $0
- BTC = $100
- Intrinsic Value of circulating supply = $100 (fluctuating with BTC price)
Scenario 2: Use $100 of BALN to acquire $100 of BTC
DAO Holdings post-purchase
- BALN = $0
- bnUSD = $100
- BTC = $100
- Intrinsic Value of circulating supply = $200 (fluctuating with BTC price)
As you can see from this illustrative example, total intrinsic value can be increased by utilizing BALN in the DAO Fund to acquire assets with intrinsic value. Of course, there is no such thing as free money. This causes dilution, so should not be overused.