Authors: @Xeonus @0xDanko @karpatkey
Introduction
Operating expenses in the third quarter of 2024 exceeded income streams by $526,967, resulting in a net negative operating P&L. Despite a 19% reduction in expenses compared to the previous quarter (dropping from -$1,285,845 to -$1,040,483), the Fjord income stream, which was the DAO’s primary revenue source in Q2, has been discontinued. Additionally, core pool fees saw a 29% decline, falling from $575,652 to $410,386.
Following a successful token swap proposed on a Snapshot vote in January 2022, the BalancerDAO now holds 9,500 GNO (+$1.5mln), which increased the karpatkey-managed Treasury up to $10mln from $7.5mln in April. The Treasury, which now holds 44% of the DAO-owned assets, has generated $91,961 in DeFi results, 18% lower than Q2, as average yields across DeFi dropped 20% from 5.75% APY to 4.6%. With the GNO now deployed on Stakewise V3 as per [BIP-696], and updates on the Treasury’s permissions (PUR#5 and PUR#6) we expect treasury’s yield and DeFi results to increase.
Q3 Results
DAO Performance
Q3 2024 is under-performing on an operational level, income streams have reduced since Fjord agreement has been discontinued, and even though expenses have reduced by 35% relative to last quarter, operating income has only been able to cover 51% of expenses, resulting in a net negative operating P&L of -$526,967.
Income from Protocol Fees
Total protocol fees, from swap and yield-fees across all our deployments & chains, netted $2,345,060, of which 16.02% is directed to the DAO as income stream, and the rest is distributed to voting incentives (50%) and veBAL holders (32.5%).
Given the presented stats, we can infer the following annualized returns and compare them to Q2:
| Total | DAO | veBAL Fee Share | veBAL Voting Incentives | vlAURA Voting Incentives | |
| Annualized (Q2) | $13,149,040 | $2,302,560 | $4,280,000 | $2,326,480 | $4,240,000 |
| Annualized (Q3) | $9,380,240 | $1,641,542 | $3,048,578 | $1,759,200 | $2,930,920 |
Income totals: $410,386.
Income from Treasury Management
The Treasury’s assets under management (AUM) grew by $361k in Q3, rising from $8.24 million to $8.6 million.
With 84% of the funds allocated to different DeFi positions, the Treasury generated $92k in DeFi results, yielding a 4.6% APY for the DAO’s Treasury.
With a diversified portfolio consisting of 24% ETH neutral strategies, 32.4% stablecoins, 27.6% stAAVE, 1% in WBTC and the newly acquired 15% in GNO, the mark-to-market (M2M) profit and loss (P&L) for Q3 showed a positive $269k.
Both M2M and DeFi returns combined contributed to the total AUM increase during this quarter.
Income totals: $63,198 (net of management fees).
Income from Beets Fee Split
As per the Beethoven X / Balancer partnership proposed on BIP-326, which structures a 50/50 split on 35% of fees generated on Beethoven X, this quarter a net amount of 11,170 USDC was transferred to Balancer’s Multisig on Optimism.
Income totals: $11,169.58
Net income Q3: $513,516
Expenses
Relative to last quarter on-chain operating expenses dropped from $1,285,845 to $761,814 (-41%) showing reduction in cost of SP expenditure. The net asset value sent to SPs include:
- Maxis (people and infrastructure cost): $468,396 (-1.67% relative to Q2).
- Beethoven: $176,989 (-40.1% relative to Q2).
- B.D. Unit: $86,551 (-38.2% relative to Q2).
- Karpatkey: $35,481 (-33.4% relative to Q2).
- Hypernative: $15,000 (paid in advance beginning of each year)
Whilst OpCo / Foundation’s expenditures netted $278,669 (-14% relative to Q2’s $322,317). Here is the breakdown of where these funds where directed to:
- People costs: $191,281 (-14% relative to Q2).
- Software: $46,415 (+8.65% relative to Q2).
- Non-people costs: $40,973 (+13.7% relative to Q2).
Net expenses Q3: $1,040,483
Current DAO-Owned Assets
YTD Analysis
From January 2024, until the end of September Balancer’s protocol activity reflected a net negative P&L of -$349,708. This is partially due to declining market conditions, volume, and the discontinued Fjord income stream.
| Fjord LBPs | +$1,439,362 |
| Protocol fees | +$1,598,764 |
| Beets fee split | +$46,425 |
| DeFi Results | +$322,061 |
| Total Operating Income | +$3,406,611 |
However, as we’ve seen in the previous expenses summary for this quarter, S.P.s have indeed reduced their overall spend, and thus this net negative P&L is 6.8% lower than last quarter’s -$375,588.17.
| Maxis | -$900,615.60 * |
| Beethoven | -$708,666.36 |
| OpCo (Admin & Ops + Product) | -$766.000,01** |
| DNS hack reimbursements | -$253,016.41 *** |
| Wonderland | -$276,845.12 * |
| B.D. Unit | -$247,206.02 * |
| Foundation | -$186,309.76 ** |
| Grants | -$207,044.42 * |
| Karpatkey fees | -$96,641.14 * |
| HyperNative | -$59,996.50 |
| ONsite | -$53,977.35 |
| Total Operating Expense | -$3,756,318.69 |
*’ Includes USDC and BAL transfers from DAO Treasury, pricing tokens on daily av. on the day of the transaction. Further includes ETH for operations purposes as outlined in [BIP-514], [BIP-556], also see gas station statistics for a detailed breakdown.
**’ Figures taken from The Balancer OpCo bookkeeping, including off-chain records.
***’ Includes USDC and BAL transfers from DAO Treasury, pricing tokens on daily av. on the day of the transaction. Source: [BIP-535], [BIP-544].
Note: Maxis expenses take into account savings rolled over to future quarters as per [BIP-694].
Outlook
Estimating Annual Spendings across SPs
We took the amounts requested from the most recent funding round (Q4 2024 - Q1 2025) and, to better estimate the annual cost, extrapolated them to a full year, both in USDC and BAL.
| Service Provider | Annualized Cost (USDC) | Annualized Cost (BAL) |
| Maxis | $849,000 | 123,750 |
| Karpatkey | $128,855 | 11,618 |
| BD Unit | $144,000 | 24,001 |
| Hypernative | $60,000 | |
| Grants | $60,000 | 134,108 |
| Beethoven-X Mkt | $360,000 | |
| Beethoven-X Tech | $348,000 | |
| OpCo (Admin & Ops) | $522,168 | 12,000 |
| OpCo Product | $666,652 | 23,553 |
| Balancer Foundation | $272,733 | 4,800 |
| IRL events (yearly) | $170,000 | |
| TOTAL | $3,581,408 | 333,830 |
In total, we anticipate a burn rate of roughly $3.5mln USDC annualized, $366,555 less than last quarter, mainly due to the more conservative funding requests sent in September.
Whilst 334k BAL tokens are subject to being burned over the next 360 days, 4.5% more than the envisioned spend from last quarter due to increased funding through BAL / veBAL and [BIP-648], which includes BAL payments to karpatkey for financial services.
Runway Estimations (stablecoins)
As of the writing of this report, the DAO currently holds following stablecoin reserves:
| Stables karpatkey | $3,278,459 |
| Stables OpCo [1] | $1,318,810 |
| Stables DAO | $536,606 |
| Total | $5,133,875 |
Given our burn rate of $3,94mln with the current SP configuration, and an expected annual income of $1,78mln, from swap, yield fees, DeFi results on the Treasury, the DAO would be able to fund operations for another 2.2 years.
[1] these figures comprehend the stablecoins in the Foundation/OpCo multisig plus business accounts (payment solutions, exchanges, etc) as of September 30th.
Closing Remarks
In conclusion, the third quarter of 2024 presented several challenges for BalancerDAO, driven by a shifting market environment and reduced income streams. The DAO’s proactive measures have helped contain costs and maintain a stable runway.
The Treasury’s diversification efforts and strategic asset deployment are anticipated to drive higher yields moving forward, positioning the DAO for potential recovery. Looking ahead, maintaining financial prudence and continually refining funding and income strategies will be essential to weather ongoing market fluctuations and sustain operational health.
We anticipate that the tentative launch of Balancer V3 by Q4 2024, along with improving market conditions, will enhance the DAO’s operational P&L.
References
Foundation/Opco bookkeeping