Authored by: Tristan
Balancer OpCo Limited (or the “Balancer OpCo”) is a wholly-owned operating subsidiary of the Balancer Foundation. It is an integral element of the Balancer Foundation corporate structure supporting the Balancer DAO. It serves two primary functions (1) Administrative and Operational; and (2) Product Development. This proposal deals with the Administrative and Operational (Admin & Ops) element of the OpCo. It has been discussed in detail in this draft BIP for year 2 funding and the comments there related to Admin & Ops should be considered as a part of this proposal.
The Product Development element of OpCo is dealt with in a separate proposal here.
Serving as the operating entity with which third-party Service Providers to the Balancer DAO will contract, submit invoices to, and from which they will be paid whether that be in fiat or in tokens. This role is integral to the decentralised operations of the Balancer ecosystem, and in practice supports the healthy long term functioning of the DAO and the Balancer Protocol, and helps the DAO achieve its goals.
The Balancer OpCo will operate under the direction of the Balancer Foundation, which will oversee / have responsibility for governance, corporate administration and operations. This includes hosting and managing software subscriptions and login credentials for the OpCo team and certain ecosystem-wide platforms and social media accounts. An addition for year two is in-house Governance, Legal and Compliance (GRC) that the Ecosystem Council proposes be retained by OpCo as a new addition to the OpCo budget. As a reminder, the Foundation operates under the governance of the DAO.
A little more on GRC: given their experience with the Balancer Ecosystem, we are proposing Warburton continue this role. Hours are reduced under this proposed budget. In terms of scope, Warburton will provide GRC advice to support the Balancer Ecosystem Council which includes major service providers (SPs). Warburton will provide reporting to the Ecosystem Council as requested and protect confidentiality so Balancer has the ability to defend itself from unnecessary disclosure in litigation or government inquiries.
GRC services will be focused on protecting the resiliency, and facilitating the growth, of the ecosystem through the Council members (and major SPs). GRC efforts will protect Balancer by focusing on further decentralization strategy and implementation, US regulatory risks and Balancer objectives to understand and proactively protect against potential threats from legal/regulatory changes. GRC will also include keeping the Ecosystem Council current on matters of regulatory changes and sentiment, monitoring the GRC program including review of marketing/comms, conflicts of interest, VASP, sanctions and exemptions/exclusions from other evolving global requirements, assessment and negotiation of material contracts for disclosed council members and SPs and management of regulatory inquiries, investigations and/or litigation and strategy for Ecosystem Council with external counsel as needed. GRC will be handled “in-house” to extent practical to minimize external counsel costs and time. Please note that this is an internal facing role that will report to the Ecosystem Council including OpCo, not directly to the DAO. The scope of hours may be expanded to cover needs as pre-approved by OpCo. Warburton would operate on a 30-day notice period.
One year - July 2023 (Q3 FY23) through June 2024 (Q2 FY24) divided into four quarters.
The summary below reflects the proposed budget for these four quarters, to be sent in quarterly payments from the DAO. Each quarter an update will be provided via Community Hall calls and via Discourse. If budget changes are requested they will go to a snapshot vote. If no changes are requested, this proposal will serve as the governing decision. Any unspent amounts at the end of the period will either be returned to the Balancer Treasury, or offset against the next period’s funding proposal or other SPs.
The table below shows the applicable expense categories by quarter, followed by descriptions of their make-up.
The OpCo holds funds due to the reduction in spend achieved by OpCo and Orb vs their original budgets in year 1. Estimated savings at the OpCo in year one have been partially allocated to fund the Foundation for Q3 FY23. The final savings figure will be known in Q3. We propose that USDC funding needs for OpCo be drawn from these funds, which are estimated to cover the twelve months of the OpCo budget based on current information.
Q3 FY23 - USDC 76,379 - cover with funds held at OpCo
Q4 FY23 - USDC 55,979 - cover with funds held at OpCo
Q1 FY24 - USDC 61,991 - cover with funds held at OpCo
Q2 FY24 - USDC 55,989 - cover with funds held at OpCo
Admin & Ops has no BAL requirements.
The projected spend associated with this proposal (and that of the Product Development Team for a possible 9-month proposal) can both be covered by projected savings at OpCo and Orb, since we now have more recent data on those projections. Thus OpCo does not require any funding from the DAO Treasury to fund this proposal.
For objective comparison, the Treasury currently holds ~4.5M in USDC. OpCo holds ~1.4M in unallocated USDC (resulting from the savings mentioned), together ~5.9M in USDC. Funding this proposal for the year would cost around 4% of combined current unallocated OpCo funds and current Treasury USDC (not including the impact of projected revenue during the period).
The main items in this section are legal and compliance costs (more below), monthly bookkeeping service (we continue to perform the “CFO” element in house for the foreseeable future in order to keep costs down). We have included a $20,000 estimate in Q3 for Directors and Officers insurance - actual costs could be materially different. Software subscriptions included here are for operations (G-suite, QBO) and ecosystem-wide services such as Dune Analytics, Discourse, Slack, Notion and Asana. Q3 2023 includes a one-off amount of $10,000 in case a deposit is required for a new bank account.
The largest increase relates to in-house Governance, Legal and Compliance (GRC) that the Ecosystem Council proposes be retained by OpCo as a new addition to the OpCo budget, effective 1 August, 2023. As mentioned, we are proposing Warburton continue this role. Hours are reduced under this budget compared with year one, to a fixed monthly fee of $10,500, or $115,500 for 11 months. If this needs to be revisited it will be dealt with in a future proposal.
The total amount sought for Non-people costs, Operations and Administration is USDC 250,338. Broken down by category:
Administrative costs: USDC 11,800 - Registered Office/Agent, Registrar of Companies Fees, Annual Compliance Services, Bank fees, Gas fees, hardware wallet if needed.
Directors’ and Officers’ insurance: USDC 20,000 (estimate)
Establishment of new banks account(s): USDC 10,000 (estimate)
Internal GRC - total for the year (11 months in this case) USDC 115,500. This represents the minimum internal GRC support required for the items mentioned in the proposal - that is - the day-to-day of the operations. To keep the budget lean, we have removed the proposed buffer budget that was in the previous draft.
The fixed part of the proposed GRC amount represents 20 hours per month (roughly 5 hours per week) at USCC 525 per hour. This is the USDC 10.5k per month. For baseline, Warburton is currently contracted to Balancer at 20 hours per week (not through OpCo) and is fully occupied. This budget is a 75% reduction in time, and therefore yet to be seen how it works. We have edited this proposal to remove the buffer, and will raise a specific proposal should the need arise on a specific matter.
There is a cost benefit of having someone experienced that can cover multiple issues, jurisdictions, entities and topics - for illustration one person’s hourly rates vs having multiple specialists and having two or more lawyers on a call, all charging per hour. With this proposed arrangement, GRC would support the Foundation, OpCo, B Labs, Beets, Maxis and other members of Ecosystem Council as well as major SPs. This resource would not just be dedicated to providing services to one entity.
The estimate for external GRC is USDC 24,000 for the year.
Bookkeeping / Accounting services estimated at USDC 24,000 for the year (USDC 2,000 per month). This also is a very low budget given industry comparables, but we are hopeful of achieving this.
Software services for the Ecosystem and OpCo administration USDC 45,038
Not necessary as this proposal can be covered by funds currently held at the Balancer OpCo.
Not applicable given this is internal / for the OpCo itself.