3rd in a series of topics. This topic impacts 3 components. The treasury, authors of SIPs, as well as the community’s perception of what is considered worth it to spend on at any given time.
The DAO’s treasury is denominated in SAND only. Crypto prices, including SAND, can be volatile. If this recent bear market has taught us anything, it’s that prices can move up/down 15-20% in a matter of a day(s).
Currently, and correct me if I’m wrong at any point @Cyril/@Geraldine, passed proposals can be denominated in SAND or Fiat. The issue comes when proposals which are denominated in FIAT gets disbursements at a time of volatility.
E.g
An SIP goes into voting, requesting 80k USD in funding on Mar 17th 2024 (SAND price:80 cents). That’s a stipulated disbursement of 100k SAND.
By the time the same proposal gets passed and implemented (est. 1 month), SAND price on the 13th of April is at 40 cents. That means a stipulated disbursement of 200k SAND.
A 1 month difference has essentially doubled the cost of a single project in SAND terms. Now imagine that happening concurrently for multiple passed SIPs which are funded in FIAT.
Possible solutions
Having a part of the treasury denominated in FIAT at all times. A recommended proportion lies somewhere between 10-20%.
Converting 6% of every component of the treasury to FIAT every quarter(2% every month). This amount will be allocated for disbursement first.
Immediately converting SAND to FIAT once SIPs denominated in FIAT passes. This isn’t recommended, but up for consideration, because we won’t know if all SIPs will hit their milestones.
Side note: take note that unlike other DAOs, our treasury will get funding from TSB on a yearly(please fact check) basis as well. With the next round likely in end 2025 since the current budget is due to expire then.
Yeah I tried to unravel this at about 1:10:15 in episode 35, I covered the new budget guidelines and requirements but I need help trying to figure out a possible solution. I also put all my notes in this thread here. Here’s what I came up with
“We guarantee 70% of the requested budget in USD at the time the proposal is published for discussion in “SIP Draft”
Recommendation: change “SIP Draft” to “SIP Active” instead of Draft to account for SIP changes
See below, 7d range from CoinGecko can exceed financial commitment, much less 160+ day window
Ahh yes I’ve just read through your replies on both threads. It’s great to know that price volatility has been taken into consideration by the Admin team.
There’s no perfect answer for this. The only way I believe we can fully avoid this is if the DAO sells SAND at say, the beginning of a quarter, and then inform its community of what said quarter’s budget is.
I have the impression that if a SIPs funding is requested in FIAT the best is to convert directly the SANDs in FIAT. That does not mean that you transfer directly the entire amount of the FIAT to the SIPs author and you can still make payment based on milestones.
The only issue with this would be if SIPs does not go to the end and you do not use entirely the FIAT. But here again you would have the option to either used it for another SIPs, or to buy back SANDs.
I see one potential negative point is that for a big SIPs requiring a lot of SAND I am not sure it will be easy to sell those SAND in a fast way based on current liquidity of the market.
Yeah, I agree Kurchato. I’ve gone through something like this very similar when I had a GMF 2023 project, when SAND went up in value and my payments to developer were cut big time. If I didn’t have a contract clause that helped to equalize the USD value to the SAND trade rate at the time, then I wouldn’t been paid a lot less for something way outside my control.
