Treasury Management
Note: Data in this section last updated July 3rd, 2022
What are Treasury Management Tools?
Unlike traditional corporations – which hold their assets in banks – DAOs store and manage their own funds on a blockchain and access them through a crypto wallet that is known as a “treasury”. In essence, is the DAO’s “bank”.
Treasuries are built through initial token sales, follow-on investments, donations and profits generated by the organization. Many DAOs today have massive treasuries.
The Treasuries of the Top 5 DAOs Hold Nearly $5 Billion
Treasuries are managed democratically by the members of the community and used to fund operational costs, pay salaries, make investments, etc…
As one can imagine, this is a daunting task, as DAOs face the same challenges as any Fortune 500 company: how to preserve capital, ensure that cash inflows are greater than outflows and minimize risk. In particular, a DAO must decide:
Cash Flow Management: How much do we pay in salaries? How do we fund operational costs?
Fundraising: Should we raise more capital? Do we issue tokens to raise capital or borrow?
Capital Allocation: Should we perform token buybacks? Should we make investments or acquisitions?
Risk Management: Should we diversify into stablecoins? What assets should we hold?
Financial Controls: How do we ensure that no one person can steal the funds?
Reporting: How do we report what’s happening in the treasury?
Fortunately, there are several tools available to help members store and manage their funds.
How do Treasury Management Tools Work?
One of the most popular – albeit relatively basic – tools for treasury management is Gnosis Safe, a multi-signature crypto wallet (“multi-sig”) developed by the company Gnosis in 2016.
Crypto wallets are software programs that allow users to access their cryptocurrencies and initiate transactions. Unlike physical wallets or bank vaults which hold actual cash, crypto wallets don’t technically store cryptocurrencies. Instead, funds are stored on the blockchain and accessed via private keys (which are held in the wallet).
The main benefit to using a crypto wallet is that it gives DAOs full custody over their funds. Unlike a bank account, no external party can restrict access, block transactions or siphon funds. In addition, owners aren’t subject to “banking hours”, meaning they can access their capital 24 hours a day, 7 days a week (and from anywhere in the world).
As the name suggests, multi-sigs are a special type of wallet that requires two or more private keys to authorize a transaction. While Gnosis offers a variety of options for structuring these wallets, a common setup has 3 owners needing 2 keys to initiate a transaction.
A Gnosis Safe Requires 2 or More Users to Authorize a Transaction
Using a multi-sig wallet provides a host of benefits to a DAO:
Trust: As most multi-sigs require a majority of owners to approve a transaction, it reduces the risk that one party will steal the funds
Security: Multi-sigs reduce the risk of cyberattacks by requiring hackers to breach multiple devices
Redundancy: If one owner loses their key, the remaining two can still recover the wallet
In addition to serving as a multi-sig wallet, Gnosis Safe provides users a variety of additional features, such as an enhanced user interface, transaction tracking and the ability to access dApps directly from the wallet.
Gnosis Safe is one of the most popular treasury management solutions – as of December 2021, a total of $86 billion in funds were held in their products. Several, high profile companies including Consensys, ENS, Balancer, Aave and Sushiswap trust Gnosis Safe.
What are Popular Treasury Management Tools?
In addition to Gnosis, some of the most popular Treasury Management tools include Parcel, Superfluid, Sablier and Llama. Juicebox also offers a treasury management solution.
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