Growing More Stable: Using TCAP in DAO Treasuries

In the search for a diversified, reliable, and failsafe DAO treasury, governance participants often must take a multi-layered approach that incorporates different aspects:

Growth-Oriented side

  1. Native Token: In most cases, DAOs will allocate a significant proportion of their treasury holdings to their own Native Token. While it is good to hold an important part of the DAO's native token to show confidence in its value and use cases, it also poses a problem for the stability of the treasury. Depending on the scale of the project's development, volatility can increase, which may shake investor confidence. This leads to the treasury's value being based solely on the market value of the DAO's native token. Therefore, great swings in the total value of the treasury can compromise future development, and may even doom the project entirely.
  2. Proven Ecosystem Cryptos (ETH/BTC): DAOs should have full faith that the blockchain mainnet on which their project has been developed can facilitate all of the project's functions and add value to the entire ecosystem. As a result, the DAO will likely desire to invest in the mainnet's native crypto asset. For example, a crypto project and DAO built on the Ethereum network will likely want to hold ETH in its treasury. DAOs might also allocate a smaller portion of the treasury to BTC because of its status as "digital gold".

Stability-Oriented side

  1. Stablecoins: In the search for reliability, or stability, DAOs should allocate a portion of their assets to stablecoins like USDT, BUSD, or USDC. This balanced approach to allocating a greater proportion of the treasury to stablecoins is favored by DAOs during wild market volatility.
  2. Liquidity Pool Pair: For consistent returns, some DAOs choose to provide liquidity for their native token pairs on Decentralized Exchanges (DEX) in order to rake in incentives. This strategy can lead to unparalleled returns through liquid revenue streams for the treasury, especially in times of high trading volume.

Here's a graph of the typical allocation for a DAO's treasury.

dao treasury funds

  • 60% - 85% to Native Tokens
  • 5% - 15% to Ecosystem Cryptos
  • 5% - 15% to Stablecoins
  • 5% - 10% to Liquidity Pool Pair

Most treasuries will have a mix of Growth-oriented and Stability-oriented investments, with an emphasis on growth if they are deemed to be overexposed to native tokens.

DAO's will allocate anywhere between 60% and 90% of the treasury's holdings to their native token. Some will even allocate 100% of the treasury to their token.

This concentrated allocation is a high-risk strategy for a DAO treasury because it leaves the DAO vulnerable to the full negative effects of a downturn in price and extended bear markets.

Risk Factors

If we evaluate risk factors on a scale between 1 and 3 (1 being a non-volatile asset, like a stablecoin, and 3 being a highly-volatile asset), we can categorize and evaluate the reliability and security of a DAO treasury for future growth.

Native tokens have a risk factor of 3 because of their inherent volatility, especially if they are low/middle tier market cap tokens.

Ecosystem cryptos can be assessed with a risk factor of 2 because of their long-term viability and the trust of the crypto community, but they are equally risky during market cycles.

Stablecoins, by their nature, remain pegged to the value of a different asset and so have little risk and have a risk factor of 1. The different stablecoins offered by crypto companies can stumble into legal issues, but the risk is usually negligible. Another risk is the coin losing its stable peg, but this is a very rare occurrence in the case of the top stablecoins on the market.

Liquidity Pool Pairs tend to present the greatest risk with a risk factor of 3. However, the rewards that they pay out allow the DAO treasury to accumulate wealth over a long period. Another condition that adds risk to this strategy is impermanent loss, which is where the balance of tokens a liquidity provider initially provides can shift based on fluctuations in the market.

TCAP: The Answer for Growth and Stability

Inherent risk factors in DAO treasury investments makes TCAP an ideal token for a treasury to hold. TCAP is a coin based on the value of the total cryptocurrency market capitalization.

It acts as a token index replicating the movements of the whole crypto market with a divisor of 10,000,000,000 meaning that when the whole capitalization of the market is valued at $2 trillion, TCAP is $200.

tcap price september 21

Some aggregated data on TCAP's performance (as of October 8th):

YTD performance: +203%

QTD performance (October 8): +11%

With a current Crypto Market Capitalization of more than $2 trillion, TCAP gives DAOs the opportunity to capture the growth of the entire crypto ecosystem without compromising on decentralization, security, and governance flexibility.

DAOs can now allocate a part of their treasury to the S&P 500 of cryptocurrencies. The crypto sector is known for its volatile cycles and otherwise unimaginable returns but it is seeing adoption by institutions, companies, and retail investors proving that it's here to stay.

With TCAP's ability to replicate the total capitalization of the cryptocurrency market, DAOs can capture exponential future growth while offsetting the inherent risk of investing in a single class of cryptocurrencies. TCAP comes with a risk factor of 2 - the worldwide adoption of crypto as an asset class makes for a proven and trusted exotic market - but with greater historical performance than ETH or BTC.

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