[Mission Request] Optimism Treasury Diversification Research

Governance Fund Missions 🏹
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Delegate Mission Request Summary

This mission request seeks a series of research pieces to address the question of treasury diversification within the Optimism Collective treasury, which currently holds 100% OP. We think there could be benefits in diversifying part of the treasury to pay expenses and earn yield on a portion of the treasury, likely with on-chain yield bearing assets/RWAs. We would suggest that whichever parties take on this research focus on the goals of 1) procuring stables for payment and 2) procuring yield-bearing assets that can help bring yield to the treasury, whose yield can ideally grow large enough to be used for payment of DAO expenses in the future.

Through Mission Request 1B, the Collective is incentivizing Optimism-based protocols to hold RWAs in their treasuries. This should start a larger conversation around how the Optimism treasury can and should most effectively begin to diversify part of its own treasury in a way that adds value to the OP token holder.

We want to see actionable plans with clear data backing the suggestions that can then be implemented in the DAO as viable.

S6 Intent

Intent 3A

Proposing Delegate/Citizen

Anthias Labs

Total grant amount

25,000 OP

Should this Mission be fulfilled by one or multiple applicants?

Multiple

How will this Mission Request help accomplish the above Intent?

This mission request is intended to set frameworks in place for how Optimism can most effectively diversify its treasury. This will likely have a focus on RWA providers, which will incentivize greater RWA adoption on Optimism leading to more RWA builders coming to OP Mainnet and the Superchain ecosystem as a whole.

What is required to execute this Mission Request?

  • A research piece or series of research pieces that demonstrate 1) a clear understanding of Optimism’s current treasury, revenue, expenses, and financial/product planning, 2) an analysis of treasury diversification strategies across DAOs, and 3) an analysis of how Optimism might adopt one or more of these strategies most effectively in combination with potentially newer strategies in order to optimize its treasury.
  • The research will need to demonstrate a clear goal for what the treasury is intended to accomplish and then outline the steps to achieving this goal with quantitative analysis of what tradeoffs and returns can be expected with each of these steps/strategies.
  • Finally, execution of this mission request will require demonstrating a deep understanding of the regulatory environment and legal implications + legal structure required to implement any of the suggested strategies.

How should governance participants measure impact upon completion of this Mission?

  • Milestones
    • First research team funded
    • First research piece reviewed
    • Next steps outlined for potential implementation within a legal framework
  • Metrics
    • Number of and quality of research reports
  • Impact
    • Growth of Optimism treasury (post-implementation of research)

Has anyone other than the proposer contributed to this Mission Request?

No

Which metric will the success of this Mission Request be evaluated against?

The North star metric against which this Mission Request should be evaluated is TVL as this Mission Request plans to grow the TVL of Optimism overall.

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As someone who has sat on committees around this subject at other protocols, we’re supportive of this general idea.

That being said, to maximize the impact of any research, there should be some decisions/assumptions made around:

  1. Specific goal(s) of the diversification (e.g. to procure stables for payments, generate yield, lower risk of volatile assets like OP and ETH going down in price). In our experience, if you want to shoot at more than one target here, you should clearly mark which one is the top priority.

  2. Have a clear idea of who bears responsibility to monitor/administer any assets and what their ongoing capacity is. This could be minimal, which is our recommendation to begin with, where only strategies that are “fire and forget” like simple deposits into DeFi protocols or bond/stock index funds are appropriate. It could also be quite hands-on, with very complex use of leverage and interlocking positions for maximum yield. There also needs to be someone responsible for understanding taxes, should the investments touch a jurisdiction where withholding happens by default.

  3. Current financial health. It’s unclear what the current position of governance is, since it’s not easy to guess at – much less audit – Optimism governance’s existing assets (mainly OP and ETH, held by the Foundation/Labs), liabilities (probably only grants that have been awarded but not yet disbursed), and cash flows (how much revenue is theoretically accruing to governance?)

We strongly recommend these be addressed prior to posting this Mission Request to avoid a generic report that can’t come to any conclusions because it doesn’t know the financial starting point or the financial goal.

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Hey @GFXlabs - here are some thoughts on your points here:

  1. Agree with the specific goal point. We would suggest that whichever parties take on this research focus on the goals of 1) procuring stables for payment and 2) procuring yield-bearing assets that can help bring yield to the treasury, whose yield can ideally grow large enough to be used for payment of DAO expenses in the future. We have updated the MR to reflect these goals.

  2. We think the legal implications of any treasury movements as well as the step-by-step of how they should be undertaken and which parties will need to be involved should be addressed by any researcher suggesting strategies to accomplish the two goals above. Seems more efficient this way than making this legal work a separate MR, but we are open to other opinions on that end. And we agree that simplicity is key with any strategy recommendations, but we did not specify that just in case an applicant could provide compelling reason for why and how a certain DeFi strategy could be implemented with a small part of the treasury.

  3. On 3, we agree that the financial audit will be required before any decisions around how to manage the treasury can be made. Treasury management is just one small piece of a much larger picture of financial planning and optimization for the DAO. To address this point, we will be drafting another MR for this point specifically and linking this current MR around treasury management to the next MR around the financial assessment of the OP Collective. If a DAO member can point us to a recent financial audit of Optimism that has already been completed, we can delete this new MR.

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@GFXlabs That new MR for the full Optimism financial audit can be found here–would welcome any feedback on this MR as well before it goes to the token house vote.

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This seems fine but i feel like there are several administrative steps to make any piece of this actionable, by which point the findings here might be irrelevant