Inverse DAO Treasury Stablecoin Flow Review - 10/24
This Financial Status Report is designed to provide the Inverse DAO community with transparent, comprehensive insights into the DAO’s financial performance and stability. This report spans April to October 2024, following on from the previous March report, and delivers a detailed analysis of our stablecoin treasury performance (excluding INV expenditures). For an extended historical view, please refer to the accompanying Google Sheets: 10/24 Snapshot - Treasury Review SHAREABLE
Executive Summary and Revenue Highlights
The period from April to October 2024 has been remarkably positive for Inverse DAO, marked by substantial growth in the treasury’s stablecoin holdings, which increased from $1.25 million to $1.73 million. This expansion reflects the success of the recently implemented runway protection strategy that has optimized free cash flow management since May 2024. Additionally, a significant portion of DOLA bad debt—totaling $1.76 million—was repaid, with contributions coming from both the treasury’s free cash flow and the virtual xy=k DBR auction mechanism.
Notably, inflows consistently surpassed outflows, except during August and September when inflows temporarily fell below outflows. Even then, the stablecoin runway remained comfortably above the minimum 12-month target, affirming the resilience of the treasury under the new protection strategy.
Revenue Sources
Approximately $1.2 million, or 76.1% of total treasury inflows, was generated by Treasury Working Group (TWG) operations. The majority (86.3%) of this revenue originated from activities on Base (Aerodrome), with an additional 7.7% from Optimism (Velodrome) and the remainder from Ethereum-based protocols (Curve, Balancer, Uniswap). Activity on Aerodrome continues to perform well, although lending capacity constraints due to new collateral options on FiRM are expected to impact future profits. It should be noted that liquidity operations on both Base and Aerodrome are (and have been for a considerable time) both fully self-sustaining (requiring no outside capital), whilst achieving these profits.
The Treasury also earned $374,000 (23.8% of inflows) through TWAP sales of INV, predominantly conducted during the first half of the period. The Policy Committee paused this program in June, reacting to a downturn in the ETH DeFi market that impacted INV.
DOLA Bad Debt
The DAO made considerable progress in reducing DOLA bad debt, repaying $1.36 million (77.2%) through the virtual xy=k DBR auction and the remaining amount via stablecoin inflows. This debt reduction illustrates the protocol’s ability to generate revenue while strengthening financial stability. With continuous debt reduction, the DAO’s resilience is expected to improve further, potentially allowing for an accelerated repayment schedule and an early target for eliminating DOLA bad debt before the May 2027 forecast.
Working Group Operational Expenditure
Working Group expenditures (OpEx) have remained consistent through Season 2, maintaining similar levels to Season 1. This stability in operational costs has helped reinforce the DAO’s financial foundation, allowing for greater focus on strategic FCF generation.
Treasury Holdings
The DAO experienced a decrease in liquidity holdings for INV and DBR in USD terms in part due to price reductions in ETH, but also rates on FiRM dropping significantly. In response to very high FiRM lending capacity, the TWG resumed liquidity-deepening initiatives in October to improve depth for INV and DBR against DOLA through single-sided DBR additions in the TriDBR pool.
Additionally, following a significant decline in CRV asset prices due to a liquidation event in June, the TWG elected to retain a portion of CRV rewards from Convex Feds and lock them into sdCRV. This strategic move increased the DAO’s holdings by 129% (542k to 1.24m sdCRV), enabling more effective CRV and CVX emissions directed towards liquidity pools on Curve (e.g., TriDBR, TricryptoINV, and DOLA pools).
The DAO’s veNFT portfolio continues to be a massive value driver for the DAO, attracting significant DOLA demand. On top of this, the TWG actively manages these positions in order to maximize value back to the DAO - for some time now the DAO has been able to operate at net 0 INV inflation, which is possible due to the cashflows provided by the various veNFTs held within TWG multisig wallets.
Looking Ahead
Entering Season 3, the DAO is in a strong financial position with stable revenue and expenditures, alongside a product-market fit for the FiRM protocol. Moving forward, prudent fiscal management will be essential, particularly with the projected audit and security expenses linked to upcoming projects outlined in the Product Working Group’s Season 3 proposal.