A pre-proposal poll authored by Pedro put forward the notion of diversifying the Decentraland DAO Treasury, advocating for the sale of 20% of the total MANA position and replacing it with ETH.
The poll has an acceptance threshold of 500,000 voting power, ends on the 5th of March, and still needs to acquire an additional 376,000 voting to advance to the second stage of governance- a draft proposal. Currently, it has garnered 115 votes in favor totaling 123,914 voting power, and only 10 votes against, totaling 12,613 voting power.
An interesting dynamic observable is that no large wallets have interacted with this proposal; the most significant voter Canessa only holds 104,000 voting power.
Pedro gave his motivation for the proposal explaining that he believed it would help hedge against a decline in MANA’s price:
The DAO Treasury should, in my opinion, start diversifying its assets so that the community can protect against market risk related to the $MANA token.
A Look at the Treasury
The Treasury currently holds close to $21 million in assets, the vast bulk in the MANA token. This theme exists across DeFi; DAOs typically hold the bulk of their capital in the native token. But why? It signals faith to investors.
A DAO that does not hold its own token says to the community and the open market they have little faith in the future valuation of its token, and this can lead to a wider loss of confidence. At this stage, the token can enter a death spiral.
DAO member Dogman pointed this out in the comments:
Would this not devalue mana?
And DAO member Tudamoon echoed the same sentiment with a slightly more cynical tone:
They need to keep it in MANA. This is what ensures they are going to keep it valuable. If they don’t keep it valuable, then they lose because their paycheck relies on it.
The Inefficiency of Treasury Management in DeFi
Although the proposal has good intentions, it has not been sufficiently thought through, and the ramifications would be horrible for the Decentraland DAO and the value of MANA. An alternative strategy would be the monetization of the Treasury.
All of the assets held by the Decentraland DAO currently sit idle in the wallet, which is the case for most DAO treasuries. Instead of selling down MANA for ETH, parts of the Treasury could be deployed to generate yield within DeFi.
The DAO must keep sufficient assets on hand to pay grants and meet operating expenses. However, utilizing a portion of the Treasury in low-risk DeFi protocols could help close the DAO’s current deficit.