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Decentraland mulls over treasury diversification plans

Following a grant to perform an analysis of Decentraland’s historical performance and treasury, Web3 consulting firm Alastor has proposed spearheading treasury diversification efforts for the decentralized autonomous organization (DAO) of Decentraland.

In June, the Sam Bronstein-led web3 firm received a grant of $20,000 to prepare detailed financial statements, including a near-term budget, and a long-term forecast, for the Decentraland DAO. The key takeaway from the analysis was that there was a need to diversify $12M MANA in the treasury into stables.

Although Alastor had earlier proposed being appointed to lead a strategy & finance squad, the proposal was rejected. However, the company is back again with its proposal, arguing that the price of Mana had fallen from $1.07 to less than $0.42 since it released its initial report on August 12.

To be clear, we did not predict this price drop - but our stance was simply that DCL had uncapped capital downside, putting the prospective runway of the DAO in jeopardy. What was at the time a >$200M treasury (including unvested MANA) is now worth just over $90M,” the company stated.

Alastor asserts that a $20 million diversification at the time the initial proposal was made would have saved the DAO approximately $12 million in value.

Decentraland is overexposed, unhedged, and undercapitalized. This was true in August, it’s still true today.

According to Alastor, the said $12 million worth of MANA it intends to diversify into stables represents a 12 to 24 months runway for the DAO at $500k - $1M per month of grant expenditure. The potential counterparties for the diversification efforts include venture capital, DCA using Uniswap v3, liquid token funds, and market makers. If approved, the team comprising Sam Bronstein and Jordan Stastny will start contacting counterparties in December “with the goal of having a fully fleshed out diversification plan.” The process is expected to be fully completed in Q1 2023.

As of press time, things were not looking very good for the proposal. 89% of the voting power was against the initiative, with many community members kicking against the $120,000 grant request by Alastor. One member wrote:

The 120k fees charged by the firm (aka the asked grant amount) for these transactions seem way too high, it could be lower than 1k. Even though it’s 1% of 12 million, the analysis was the main part of the job and was paid for 20k. I think the DAO needs diversification, in stablecoins included, but it could just be executed without fees through a governance proposal and perhaps be for more than 12 million.