Introduction: The Polkadot Treasury, a central pillar of the Polkadot ecosystem, has experienced a substantial reduction in its holdings, declining from 1,084 billion USD in November 2021 to the current 332 million USD. Recognizing the importance of a robust and diversified treasury, this proposal outlines a strategic plan to diversify the portfolio and implement an automated asset management system.
Objective: The primary goal of this proposal is to safeguard the Polkadot Treasury against market volatility, enhance its resilience, and ensure a stable source of funding for various ecosystem initiatives. By diversifying assets and implementing an automated asset management system, we aim to optimize the treasury’s performance.
Diversification Strategy Proposal:
Integrate stablecoins such as USDT and other reliable assets like iBTC into the treasury portfolio.
Establish a diversified asset allocation strategy, designating specific percentages for each asset class to create a well-balanced and resilient portfolio.
Automated Asset Swapping in Hydra:
Utilize the Hydra protocol to automate the swapping of incoming DOT from inflation into the predetermined mix of assets in the treasury.
Ensure a seamless and efficient process that maintains the desired asset allocation percentages.
Treasury.Spend Call Mechanism:
Modify the treasury.spend call mechanism to enable disbursements in stablecoins, specifically USDT.
Alleviate concerns related to price fluctuations by ensuring that award recipients receive stablecoin payments, promoting predictability and stability.
Continuous Allocation Maintenance:
Implement a mechanism to monitor and automatically adjust the asset allocation within the treasury.
When the stablecoin allocation drops below the predefined threshold, trigger automatic asset swaps to restore the default stablecoin allocation.
Engage with the Polkadot community to gather feedback and insights on the proposed diversification and asset management strategy.
Address community concerns and refine the proposal based on constructive input.
Present the finalized plan as a governance proposal for approval by Polkadot stakeholders.
Clearly communicate the benefits of diversification and automated asset management for the overall health and sustainability of the Polkadot ecosystem.
Conclusion: Diversifying the Polkadot Treasury and implementing an automated asset management system are essential steps to fortify the heart of the Polkadot network. By strategically managing asset allocations, incorporating stablecoins, and utilizing automated processes, we aim to create a resilient treasury that can withstand market fluctuations. This proposal underscores the commitment to the long-term success and stability of the Polkadot ecosystem, recognizing the treasury as a cornerstone of its resiliency.
Would you have a suggestion of % or amount allocated to this diversification?
Talking for myself, I’d rather receive DOT to reward a contribution that is not a job. For jobs, definitely makes sense to have a part stable coin.
Ultimately this raises the question: which part of treasury community wants to be funding jobs, and which part to reward contributions.
This isn’t really a proposal for a strategy, it’s just a proposal that we have a strategy. The vast majority of it is already implemented and possible. The Treasury can already support and spend assets like USDT and iBTC.
Long term, I think it makes more sense to divert inflation into sub-treasuries and let each sub-treasury manager decide on their best strategy. Different groups will have different needs w/r/t allocation and can also act much faster than the public referendum tracks.
This is not a strategy, you are just saying we should make a strategy.
This is just an implementation detail. The Treasury can use many avenues to fulfill its strategy.
Already done / possible. I don’t know what you mean by “ensure that recipients receive stablecoin payments”. If someone wants a stablecoin payment, they should make the proposal in that. The system ensures that the passed proposal is executed properly.
Do you mean rebalance the asset allocation? Adjusting asset allocation sounds like it should need to go to referendum. Either way, it will never meet everyone’s needs and will always be slow, hence why IMO it is better to divert more into sub-treasuries that are easier to manage, and the diverse preferences of the different groups provides automatic diversification.
Hi @joepetrowski, thanks for your input
Yes, I mean the treasury rebalances itself with a predefined asset allocation. The sub-treasury idea is interesting. However, from a user perspective, it would be easier to think about one treasury and not multiple treasuries. But this can be done as a UX implementation, even with sub-treasuries.
Ensuring low volatility in treasury holdings is critical for the ecosystem’s long-term viability, and it should be a top priority. One community concern is the potential for awardees to receive more funds than proposed if the underlying asset’s value increases during the referendum voting period. Currently, it’s at the awardee’s discretion to return excess funds to the treasury.
In my view, directing all treasury disbursements in stablecoins is essential. This prevents proposal spikes during bull markets, where the potential for increased asset valuation could result in awardees receiving more than initially proposed. While not inherently negative, it does introduce a potential incentive for malicious behavior. This adjustment could foster a more stable and predictable treasury spending mechanism.
No user has to think about managing multiple Treasuries, unless they are members of the groups designated to manage them. And then they should be qualified to do it. Pragmatically speaking managing sub-treasuries is much easier than the main one.
Yeah people have been saying this for years. As I said, everything is implemented. Go ahead and make a referendum to convert some DOT to a stablecoin so that people can make stablecoin Treasury proposals.