Smart Treasury

A Smart Treasury uses its assets to provide deep, permanent liquidity for its native token, reducing reliance on third-party liquidity providers (LPs). This is often achieved by bonding assets or using protocol revenue to seed liquidity pools (e.g., Uniswap v3).

• Key Benefit: Mitigates sell pressure and volatility by creating a stable trading environment.
• Example: OlympusDAO pioneered this model, using its treasury to own over 99% of the liquidity for its OHM token in its own pools.

The treasury automatically collects fees or revenue (e.g., from protocol usage) and executes pre-programmed financial strategies.

• Common Actions: Swapping accrued revenue (often in stablecoins or ETH) for the native token on the open market, effectively performing a buyback.
• Outcome: The purchased tokens can be distributed to stakers, burned to reduce supply, or retained as a treasury asset, directly linking protocol success to token value.

Instead of holding idle assets, a Smart Treasury acts as a decentralized asset manager, deploying capital across DeFi to generate yield.

• Strategies: Depositing stablecoin reserves into lending protocols like Aave or Compound, providing liquidity to curated pools, or using yield aggregators.
• Purpose: The generated yield becomes a sustainable revenue stream to fund protocol development, grants, or further treasury growth without diluting token supply.

Some protocols design their native token to be a backed stable asset, where the Smart Treasury's diversified collateral portfolio (e.g., DAI, ETH, LP tokens) provides intrinsic value.

• Mechanism: Each token is minted against and redeemable for a basket of assets in the treasury, creating a floor price.
• Goal: To create a censorship-resistant, decentralized reserve asset not pegged to any single fiat currency, with the treasury's expanding asset base supporting its value.

A Smart Treasury can automate the allocation of funds for grants, bug bounties, and contributor rewards based on transparent, on-chain governance.

• Process: Governance token holders vote on proposals, and upon approval, the treasury executes the payment directly to the recipient's address.
• Advantage: Removes centralized intermediaries, ensures transparent audit trails, and allows for streaming payments (e.g., via Sablier) that vest over time to align incentives.

Advanced Smart Treasuries employ on-chain risk management to protect their asset base. This involves continuous monitoring and automated rebalancing.

• Actions: Automatically moving funds away from undercollateralized lending positions, adjusting liquidity pool ranges in response to volatility, or diversifying across asset classes.
• Tools: Use of oracles for price feeds and keeper networks to trigger safety mechanisms, ensuring the treasury's solvency during market stress.

Smart Treasuries deploy idle capital into DeFi protocols to generate yield without manual intervention. Common strategies include:

• Liquidity Provision: Supplying assets to AMMs like Uniswap or Curve.
• Lending: Depositing stablecoins into protocols like Aave or Compound.
• Staking: Earning staking rewards from Proof-of-Stake networks or liquid staking tokens (LSTs). This transforms static treasury reserves into productive assets.

These treasuries automate the execution of DAO governance decisions. When a vote passes, the smart contract can autonomously:

• Execute token buybacks or burns.
• Fund grants or investments from a multisig-controlled community treasury.
• Adjust protocol parameters or fees. This reduces execution lag and removes reliance on a central party to enact votes.

Smart contracts can be programmed to maintain price stability for a project's native token. For example, they can automatically:

• Use a portion of protocol revenue to buy back tokens when the price falls below a target.
• Sell accumulated tokens into a stablecoin reserve if the price rises too high.
• Implement bonding curves or other algorithmic mechanisms to manage supply and demand directly from the treasury.

Advanced Smart Treasuries employ risk frameworks to manage exposure. This involves:

• Portfolio Rebalancing: Automatically adjusting allocations across different asset classes (e.g., stablecoins, ETH, LSTs, LP positions).
• Slippage & Fee Optimization: Using MEV protection and aggregators for efficient trades.
• Circuit Breakers: Pausing operations if market volatility or smart contract risks exceed predefined thresholds.

Smart Treasuries are often the destination for a protocol's fee switch or revenue. Instead of burning tokens, fees (e.g., from DEX trades or lending) are streamed directly into the treasury contract. The treasury then:

• Accrues value for token holders.
• Funds further yield-generating activities.
• Provides a transparent, on-chain record of all revenue and its use, enhancing protocol sustainability.

The broader discipline of overseeing an organization's financial assets, liabilities, and cash flows. A Smart Treasury automates traditional treasury functions on-chain. Core management activities include:

• Asset diversification across stablecoins, native tokens, and LP positions.
• Liquidity management for operational expenses and grants.
• Risk mitigation through non-custodial DeFi yield strategies or hedging.
• Financial reporting via transparent, on-chain analytics.

A cryptographic token that confers voting rights in a DAO or protocol. The native governance token is often the primary asset held in a project's Smart Treasury. The treasury uses these tokens to:

• Fund ecosystem grants and development.
• Execute buy-and-burn or staking reward programs.
• Provide protocol-owned liquidity (POL) in decentralized exchanges.
• Serve as collateral for on-chain lending to generate yield.