Why Most NFT Project Treasuries Are Mismanaged

Treasuries are parked in illiquid, volatile NFTs, creating a paper fortune that can't fund operations. This forces reliance on unsustainable token emissions or rug-like token sales.

• >80% of treasury value is often locked in the project's own illiquid NFTs.
• Creates a negative feedback loop: selling treasury assets for runway crushes floor price and community confidence.
• Real-world example: Projects like Bored Ape Yacht Club and Moonbirds faced backlash for monetizing IP or selling assets to fund operations, exposing the core flaw.

Multi-sigs and DAO votes for every micro-payment create paralyzing overhead. Paying contributors, covering AWS bills, or funding grants becomes a month-long governance nightmare.

• ~14-30 day decision lag for simple expenses via typical DAO voting.
• High gas costs and administrative burden for trivial transactions.
• Solutions like Sablier (streaming payments) and Utopia Labs (corporate cards for DAOs) exist but are underutilized, showing a failure to adopt basic treasury ops tools.

Idle ETH and stablecoins earn 0% while inflation erodes purchasing power. This is a failure of basic fiduciary duty, leaving millions in annual yield on the table.

• $10B+ in NFT project treasuries sits largely unproductive.
• Simple strategies using Aave, Compound, or MakerDAO sDAI can generate 3-5% risk-adjusted yield with high liquidity.
• More advanced projects like Flooring Protocol and NFTFi enable yield generation against the NFT collateral itself, turning dead assets into productive capital.

Projects treat their native NFT floor price as a balance sheet asset, ignoring the liquidity sink of a mass sell-off. A treasury of 10,000 NFTs valued at a 2 ETH floor cannot liquidate for 20,000 ETH; the market collapses instantly. This creates a phantom treasury that funds nothing.

• Key Insight: Realizable value is a fraction of paper value.
• Solution: Use on-chain liquidity metrics (e.g., Blur's depth chart, NFTX vaults) for realistic valuation and diversify into stable, productive assets.

Using illiquid NFTs as collateral for leveraged borrowing creates reflexive risk. As floor prices drop, loans go underwater, triggering liquidations that further crush the floor—a death spiral. This turns the project's own treasury into the catalyst for its collapse.

• Key Insight: Collateralized Debt Positions (CDPs) on volatile assets are systemic risk.
• Solution: Implement conservative LTV ratios (<30%), use oracle resilience mechanisms, and avoid reflexive treasury activities.

Treasuries deploy capital into high-APY, inflationary farm tokens to generate 'revenue', ignoring tokenomics decay and impermanent loss. This swaps durable ETH for depreciating farm tokens, eroding the treasury's real value. It's subsidizing short-term hype with long-term solvency.

• Key Insight: Real yield > inflationary emissions.
• Solution: Allocate to base-layer staking (e.g., Lido, Rocket Pool), ETH/USDC LP with controlled risk, or DAO treasury bonds.

Treasuries locked in 5/9 multisigs with anonymous signers create decision-making ossification. Proposals stall, funds remain inert, and the community loses faith. The treasury becomes a museum piece, not an operational tool for growth or survival.

• Key Insight: Security without agility is failure.
• Solution: Implement streaming payments (e.g., Sablier, Superfluid), DAO-focused modules (e.g., Safe{Wallet} Zodiac), and clear, executable treasury mandates.

Treasuries blindly fund an ambitious, multi-year technical roadmap, leaving zero strategic reserve for market-making, partnerships, or survival during bear markets. When development outpaces adoption, the treasury is depleted with nothing to show for it.

• Key Insight: Runway is more important than features.
• Solution: Adopt a buckets model: Operational Runway (50%), Ecosystem Growth (30%), R&D (20%). Mandate a 2-year fiat-denominated runway at all times.

Funding operations via continuous, uncapped token emissions to a treasury wallet (see: ApeCoin DAO) dilutes all holders and destroys token velocity. The treasury's selling pressure creates a permanent negative price spiral, making the funding mechanism self-defeating.

• Key Insight: Printing money to pay yourself devalues the money.
• Solution: Fund via protocol revenue, bonding mechanisms (e.g., Olympus Pro), or a one-time, sufficient endowment. Treat the native token as a last-resort asset.

Projects hold their own tokens or volatile altcoins, creating a fragile balance sheet. A market downturn destroys runway and community trust.

• Self-referential risk: Native token price collapse directly kills operational budget.
• Lack of diversification: Over 80% of treasury value is often in a single, correlated asset.
• Forced selling: Downturns trigger panic sells at the bottom to pay contributors.

Convert a minimum of 2-4 years of operational expenses into stablecoins or low-volatility assets. This de-risks the core mission.

• Predictable runway: Teams can build through bear markets without financial stress.
• Strategic optionality: Preserves capital to acquire assets or talent during downturns.
• Credible signaling: Demonstrates mature, long-term thinking to the community and VCs.

Treasuries are tracked in spreadsheets, not on-chain. This leads to mismanagement, fraud, and a total lack of real-time accountability.

• Manual errors: Spreadsheet mistakes cause misallocation of millions.
• No real-time audit: Community cannot verify holdings or flows, breeding distrust.
• Multi-sig governance bottlenecks: Every spend requires manual signer coordination, slowing operations.

Use dedicated protocols like Llama, Syndicate, or Sablier for transparent, automated fund management.

• Full transparency: Holdings and transaction history are publicly verifiable on-chain.
• Streaming vesting: Use Sablier to stream salaries and grants, aligning incentives.
• Programmable spending policies: Automate approvals for recurring expenses, removing multi-sig friction.

Stablecoins and ETH sit idle in multi-sigs, generating 0% yield while inflation erodes purchasing power. This is a massive opportunity cost.

• Erosion by inflation: A 5% inflation rate halves real treasury value in ~14 years.
• Missed compounding: Failing to earn even risk-free yield is a direct governance failure.
• Reliance on risky bets: Forces projects to seek higher returns via speculation.

Deploy a portion of stablecoin reserves into verified, low-risk yield strategies via MakerDAO (DSR), Aave, or Compound. Treat it like a corporate treasury.

• Risk-tiered buckets: Core runway in 100% safe instruments, excess in carefully vetted DeFi.
• Inflation hedge: Earn yield to preserve purchasing power for the long term.
• Protocol alignment: Earn yield while providing liquidity to foundational DeFi pillars.