Executive Summary

This report details the outcomes of the Uniswap Treasury Working Group (UTWG)’s research into the mobilization of Uniswap DAO’s treasury. The following work was ratified by the DAO through a public proposal and has been undertaken gradually over the course of the last 5 months.

During this exploration, over 25 hours of interviews have been conducted, alongside surveys and discussions with representatives of key stakeholder groups involved in the Uniswap Ecosystem. Extensive research into traditional accounting and financial reporting, as well as other examples of DAO treasury management, have helped to form the foundations for comparative evaluation. Detailed data analyses have also been performed to analyze and forecast incomes and expenditures, simulate liquidity and allocation strategies, and better evaluate key considerations like utility functions and governance attacks.

In correspondence with our findings, we provide a series of suggestions to the Uniswap DAO as to how its treasury can be mobilized, should the decision to mobilize be taken. In short, we recommend:

Forming an oversight committee to gather and consolidate the various forms of reporting and key performance indicators (KPIs) from the various bodies and programs that operate as part of the DAO—and to prepare regular (e.g. annually, if not quarterly or monthly), aggregated reports of the DAO’s treasury activities.
Adopting an accounting framework that properly reflects and discounts the value of unissued UNI tokens held in the DAO’s treasury, as well as the inflows and outflows associated with the utilization of the DAO’s UNI tokens.
Focusing any mobilization efforts on two “north star” objectives, which best align the interests and goals of the DAO’s various stakeholders, while offering a realistic path to realizing them. The two objectives are:
- Growth: the DAO should allocate its treasury resources to propel the continual adoption of Uniswap and deliver value to relevant stakeholders in the process; and
- Sustainability: the DAO should be a self-sustaining entity, able to cover its future costs in perpetuity.
Adopting a formal asset allocation framework to aid in the evaluation of strategic and tactical allocations of treasury assets, to both facilitate the DAO’s objectives and generate non-operating income to sustain its operations.
Producing an investment policy statement to outline the agreed roles, principles, and guidelines that will be utilized in the management of the treasury and execution of its strategy.
Allocating assets to a Stability Fund, to provide the necessary stable assets to handle the DAO’s operational needs and manage its exposure to risk assets.
Allocating assets to strategic initiatives as part of native token management, such as protocol-owned liquidity and UNI-based incentives for the protocol, to both improve the experience for holders and users of the UNI token and facilitate the DAO’s own treasury management activities.
Appointing dedicated treasury managers to execute the investment policy statement and assume general responsibility for aiding the DAO in its pursuit of the stated north star objectives.
Designing and implementing an effective selection process for any treasury managers, with clear scoping, ample opportunity for competitive proposals, and a rigorous framework for selection based on clearly-identifiable expectations.
Devising the roles and permissions of treasury managers carefully to balance the DAO’s conflicting needs for decentralization and operational efficiency. Our research suggests that a fairly equal balance of these two factors is needed to maximize the utility of the arrangement for both the DAO and the treasury managers.
Evaluating and implementing a range of mitigation strategies to address the ever-present principal-agent problem, and minimize the extent to which the interests of the DAO and its treasury managers are able to deviate from one another.
Taking inspiration and insight from the broad range of historical examples of DAO treasury management arrangements, to avoid obvious pitfalls and make informed decisions about key design choices in any Uniswap treasury management arrangements.