Treasury Governance

On-chain voting is the process by which token holders directly propose and vote on treasury expenditures using smart contracts. Votes are weighted by token holdings (token-weighted) or delegated voting power. Key components include:

• Proposal Submission: A formal request to allocate funds, with a specified amount and recipient.
• Voting Period: A fixed timeframe for token holders to cast their votes.
• Execution: Automatic fund transfer upon successful vote, enforced by the smart contract. This creates a transparent and immutable record of all governance decisions.

Vesting schedules are time-based mechanisms that release treasury funds gradually to recipients, such as core developers or grant recipients, rather than in a lump sum. This aligns long-term incentives and mitigates risk. Token streaming (e.g., via Sablier or Superfluid) takes this further by providing a continuous, real-time flow of funds. These tools are critical for managing payroll, grants, and other recurring expenses directly from the treasury smart contract.

Delegated governance is a system where token holders can delegate their voting power to representatives or experts, known as delegates or guardians. This model, used by protocols like Compound and Uniswap, improves participation efficiency by allowing less active holders to trust knowledgeable community members to vote on their behalf. Delegates often publish voting platforms and rationales, creating a more informed and scalable decision-making layer for treasury proposals.

A core tenet of treasury governance is full transparency, achieved through on-chain analytics and regular reporting. This includes:

• Real-time Dashboards: Public interfaces showing treasury balances, inflows, and outflows.
• Proposal Archives: Immutable history of all past votes and executed transactions.
• Financial Reporting: Periodic summaries of budget allocation and runway. Tools like Dune Analytics and Nansen are commonly used to track these metrics, allowing any community member to audit treasury activity.

Treasury diversification involves managing the asset composition of a treasury to mitigate volatility and preserve purchasing power. Since many treasuries are heavily weighted in their native token, strategies include:

• Swapping a portion for stablecoins or blue-chip assets.
• Yield Farming to generate revenue from idle assets.
• Using decentralized exchanges (DEXs) or OTC desks for large swaps to minimize market impact. This is a critical risk management function for long-term project sustainability.

The core mechanism for executing treasury decisions, where token holders submit and vote on proposals directly via smart contracts. Votes are typically weighted by token holdings or delegated voting power.

• Common Standards: Snapshot (off-chain signaling), Compound Governor, OpenZeppelin Governor.
• Key Parameters: Quorum (minimum participation), voting delay, voting period, proposal threshold.
• Example: A proposal to allocate 100,000 USDC from the treasury to a grant program.

A secure custody solution requiring multiple authorized signatures (e.g., 3-of-5) to execute a treasury transaction. Often used as the final execution layer for approved proposals or for operational expenses.

• Purpose: Enhances security and prevents single points of failure.
• Common Tools: Gnosis Safe, Safe{Wallet}.
• Typical Signers: Elected council members, core contributors, or community delegates.

Structured initiatives to allocate treasury funds to external developers, researchers, and projects that contribute to the ecosystem's growth.

• Process: Often involves proposal submission, community discussion, and committee or community vote.
• Examples: Uniswap Grants Program, Arbitrum Grants, Optimism's Retroactive Public Goods Funding (RPGF).
• Goal: Incentivize development, marketing, research, and public goods that benefit the protocol.

The process of earmarking treasury funds for specific, recurring purposes (like developer salaries or marketing) and releasing them over time according to a vesting schedule.

• Purpose: Ensures long-term runway and aligns incentives for contributors.
• Mechanisms: Streaming payments via tools like Sablier or Superfluid, or scheduled multi-sig transactions.
• Transparency: Public vesting schedules are crucial for accountability.

The strategy of managing the treasury's asset composition to mitigate risk from volatility in the protocol's native token. This often involves converting a portion of holdings into stablecoins or other reserve assets.

• Rationale: Protects purchasing power and ensures sustainability.
• Execution: Typically requires a community vote due to its market impact.
• Famous Example: MakerDAO's multiple vaults holding various real-world and crypto assets.

The practice of providing regular, auditable reports on treasury balances, inflows, outflows, and investment performance. This is foundational for informed community governance.

• Tools: Blockchain explorers, dedicated treasury dashboards (e.g., Llama), and quarterly reports.
• Key Metrics: Runway (months of operational expenses), asset allocation, grant disbursements.
• Goal: Build trust and enable data-driven decision-making by token holders.

A cryptographic token that confers voting rights in a decentralized protocol's governance system. It is the primary instrument for participating in treasury decisions.

• Function: Grants proportional voting power on proposals (e.g., budget allocation, grants).
• Examples: UNI (Uniswap), MKR (MakerDAO), AAVE (Aave).
• Mechanism: Often uses token-weighted voting or delegation.

An organization represented by rules encoded as a computer program (smart contracts) that is controlled by its members, not a central authority. A DAO's treasury is its core financial asset, managed through its governance framework.

• Structure: Token-holder voting, proposal systems, and on-chain treasuries.
• Primary Function: To coordinate capital and resources for collective goals.

A structured initiative where a protocol's treasury allocates funds to external developers, researchers, or community projects to foster ecosystem growth. It is a primary expenditure mechanism in treasury governance.

• Process: Typically involves proposal submission, community review, and governance vote for funding.
• Examples: Uniswap Grants Program, Aave Grants DAO.

Sources of treasury inflows and strategic asset holdings. Protocol revenue (e.g., fees) replenishes the treasury, while Protocol-Owned Liquidity (POL) refers to liquidity pool assets owned and managed by the DAO itself.

• Revenue Examples: Trading fees, loan origination fees, slippage.
• POL Purpose: Reduces reliance on external liquidity providers, creates a sustainable financial asset.