[BIP-XX] Karpatkey Balancer Treasury CU Proposal

Karpatkey Balancer Treasury CU Proposal


This is a proposal to provide limited delegation of the Balancer treasury to Karpatkey DAO in a non-custodial, trust-minimised way.

Karpatkey is a DeFi native DAO that has been constantly evolving to maximise capital efficiency, manage risk, increase security and optimise yield by combining industry-leading research with best-in-class tooling to prevent collateral liquidation.

Our operation would be completely transparent at all times, and any member of Balancer DAO would be able to monitor it on-chain and through the weekly reports posted on the Balancer Forum.
Also, Karpatkey would suggest the creation of a Treasury Core Unit (CU) within Balancer DAO. If Balancer DAO approves this initiative, we would hire full time contributors to work exclusively with Balancer under our guidance and training. The scope of the CU would be determined after the assessment meetings where Karpatkey would find out Balancer’s needs.
Karpatkey has been supporting Balancer since 2020, by being a top liquidity provider of ETH and stablecoins, and participating in governance, successfuly proposing a GNO-BAL treasury swap.

As a token of our long term commitment and financial alignment with Balancer, the performance fee (detailed below) would be charged in BAL and vested for 1 year. We intend to hodl the collected BAL, and we would transparently report on our BAL holdings.


In order to focus on its core business, Balancer DAO must secure enough runway to keep developing its market-leading products, regardless of economic junctures.
An idle fund has a significant opportunity cost (e.g.: circa USD 120,000 a month for a $20M treasury at current market values). Therefore, delegating limited access of the treasury to a specialised DAO such as Karpatkey would optimise its growth through carefully curated and tailored strategies within a risk-controlled framework.

The chart below shows our past performance managing the treasury of our main user, GnosisDAO, when the main goal was to obtain a sustainable growth of funds with a low exposure to risk, before the focus was shifted to maximising the growth of the Gnosis Chain. As the chart illustrates, the yield obtained by Karpatkey’s strategies was greater than the yield of all the other DAOs in the ecosystem put together.

Source: Autonolas independent research (link to original report here)

About Karpatkey


Karpatkey DAO specialises in professional treasury development, and has had a remarkable performance with Zodiac, Gnosis Ltd. and Gnosis DAO’s treasury portfolios, sustainably increasing their size, profitability and diversification week after week since its inception in September 2020. Ever since, Karpatkey DAO has been evolving to cater for the specific needs of DAOs we work with.

The appointment of Karpatkey DAO as Gnosis’ treasury consultant has resulted in a consistent revenue stream for Gnosis, increasing its treasury size by circa $1.5 M a week (YTD tracked since May 2021 includes but is not limited to: 71K GNO, 350K BAL & 20K FLX | AUM ~$550M) while reducing risk through diversification. At the top of the bull market, our AUM raised to circa $1B.

Here are the links to our Twitter account and our website.

Karpatkey’s Organisation Structure

Karpatkey DAO is organised in different functional teams, as shown in the following org chart.

Karpatkey Functional Chart

Sample Reports


Past Performance

The following chart displays our 2022 YTD performance.

Here’s an example of positions distribution:

Core Proposal

Trust-Minimised Fund Allocation Strategy

The process of fund allocation starts by Karpatkey DAO proposing a list of allowed protocols on Balancer DAO Snapshot, which must be approved by the majority of token holders. Once this happens, the target addresses and transactions’ call data associated with such protocols will be allowlisted in a smart contract, so that funds are always under Balancer DAO’s custody. As a result, Balancer DAO will have the power to withdraw or transfer funds without Karpatkey’s intervention.

If Balancer DAO has a specific need which wasn’t included in the approved strategy, such as incentives/rewards, payments, etc., Karpatkey would post another ad-hoc strategy including the additional services for Balancer DAO to approve.
An alternative would be to operate with trusted signers from Balancer, using the Safe multisignature wallet. Karpatkey would not hold enough signatures to be able to execute transactions on its own. Therefore, approval from Balancer signers would always be necessary.

We would put together a periodically reviewed emergency withdrawal protocol to be able to quickly derisk/liquidate/swap all positions in the event of a market crash, hack or any fortuitous event that requires to stop loss.

Karpatkey DAO’s professional treasury development consists of carrying out tailored strategies that vary twice a week, adjusting to the constantly changing DeFi market.


Karpatkey DAO would be a delegate of Balancer, using all non-veBAL token holdings of the Balancer treasury and 100k veBAL tokens, to participate in cross-DAO governance in the best interest of Balancer.

Daily Strategy Reevaluation

Each step of the strategies would be designed and monitored daily by our research team, keeping in mind different risks and opportunities. For example:

Risks Liquidation events Depeg Poor diversification
Risk Management tasks deployed by Karpatkey - Live KPI dashboard (liquidation prices, CRs, collateral prices evolution, etc.)
- Definition of minimum CRs to be maintained
- Definition of variables and values for exit loan strategy
- Periodic review of minimum CRs, exit strategy thresholds and alerts parameters
- Execution of CRs corrections with sufficient frequency
- Early alerts system on main loans’ KPIs
- Up-to-date emergency protocol
- Execution team available for taking prompt action
- Maintenance of available sufficient collateral volumes (in farming but removable positions) to increase CR if needed
- Maintenance of available sufficient borrowed tokens volumes (in farming but removable positions).
- Live dashboard with stablecoins prices, volumes and their main liquidity pools evolution data at a 5% slippage or less
- Definition of variables and values for the exit strategy of each stablecoin
- Early alerts system
- Up-to-date emergency protocol
- Execution team available for taking prompt action.
- Up-to-date technical assessment of all ETH staking opportunities
- Identification of optimum volume to be deposited in each battle tested protocol (for both ETH and stablecoins)
Weekly review of optimum volumes: portfolio’s diversification optimisation
Alpha research on robust opportunities
Identification of new strategies
Live dashboard with operated protocol’s KPIs to identify further diversification opportunities
Assessment of taking profit opportunities. Exit strategy definition for long positions.
Opportunities Short positions with borrowed tokens that either lost peg or suffered a price drop and repay loans at a much lower value. Repay loans at a much lower value. Exposure to collateral’s price increase
Staking yield.

Impermanent/Divergence Loss

To minimise the risk of Impermanent or Divergence Loss, we carry out the following tasks:

  • Identification of profitable and low IL pools (assessment of assets’ correlation evolution)
  • Definition of thresholds for exit strategies
  • Accurate IL tracking*, also considering different variations of deposited volumes over time.

*The way in which we calculate IL differs across protocols and specific cases within protocols, but it’s primordially based on the formula detailed below, which calculates the IL per LP token for any AMM with constant swap fees. Our Financial Engineering team is currently preparing a paper on the equations that we use for IL calculation in different cases, encompassing single isolated financial positions and more complex positions including composability.

Impermanent loss evolution tracking example:

Treasury Core Unit

After reviewing Balancer DAO’s structure, we came to the conclusion that creating a Treasury Core Unit (CU) would increase the efficiency of the overall management of the tokens held in the treasury. If Balancer DAO agrees, this CU would be composed by full time contributors that would be sourced and recruited with Karpatkey DAO’s support.
The CU members would be trained and assisted by Karpatkey DAO, observing strict security standards. They could be on Karpatkey DAO’s payroll and would be in charge of the following tasks (among others):

  • Balancer Value Proposition: Improve the value proposition of Balancer and the Balancer DAO treasury
  • Availability: Increase Balancer availability on other networks and markets
  • Liquidity: Increasing Balancer liquidity so more traders and investors can acquire it with a lower price impact
  • Balancer Health Monitoring: Propose buybacks if we consider Balancer is undervalued
  • Fund Proposals: Any proposal involving funding will be comprehensively analysed by the CU to plan how token transfers should take place in a timeline, and ensure that liquidity requirements are met and executed properly
  • Fund OPEX: All of Balancer DAO’s operating expenses will be analysed and projected to meet liquidity requirements and make timely transfers if needed
  • Drafting and Maintenance of an Emergency Token Withdrawal Protocol: In case of a sudden black swan market event, the team will execute a carefully structured protocol to de-risk all positions and avoid losing funds. This protocol will be periodically updated to ensure it’s ready to be executed at all times
  • Capital Optimisation: CDPs will be continuously monitored and managed to prevent liquidation (more details in the Risk Management section below)
  • Reporting: Dashboard creation and maintenance to monitor the yield of investments, rewards distribution and overall treasury growth trend, health and diversification
  • Bridge Monitoring: analysis of funds allocation to allow the Balancer token to be transferred across networks without friction.

Yield Strategy

The yield strategy would vary weekly to keep it within target. It would resort to different combinations of staking derivatives solutions, AMM, same asset leveraged in money markets, carry trade, arbitrages, etc. Given the risk that it entails, we don’t do trading.

The following protocols would be considered to obtain an adequately diversified yield strategy with low risk and reduced ETH price exposure. This is just a sample list, the final one would follow Balancer DAO’s preferences and risk profile:

Aave, Agave, Ankr, Aura, Balancer, Bancor, Compound, Convex, Curve, Element, Honeyswap, Idle, Lido, Liquity, Maker, Nexus Mutual, QiDAO, Reflexer, Rocket pool, Stakewise, Sushiswap, Swapr, Symmetric, Synthetix, Uniswap, Unit.


Karpatkey DAO will post a weekly treasury development report on the Balancer forum, and support in identifying data elements upon request from the Balancer community. Also, Karpatkey DAO would review data reported and assist in performing analytics and quality reviews to confirm the accuracy of the information.

The following metrics would be included:

  • Portfolio Summary: shows the current holdings in USD and ETH equivalent, considering the allocation by blockchain, as well as the allocation of the most relevant assets
  • Revenues: shows the performance of the portfolio strategy, displaying the current APR, annual revenues, capital utilisation and past performance
  • Positions: shows the complete strategy implemented for the considered time period, explaining the type of investments, protocols, underlying assets, expected APR and expected revenues
  • Loans Management: shows the loan strategy to quickly assess the health status of the active loans, considering the borrowed assets and funds, the lent assets and funds, the collateral ratio and the minimum (liquidation) collateral ratio
  • Portfolio details: shows the complete composition of the portfolio by type of asset
  • Improvement Proposals: shows the list of executed proposals, as well as a summary of the weight of each proposal
  • Incentives program: shows the incentives strategy, displaying the amount of assets used on each protocol.


Karpatkey DAO will charge the following fees, which have been adjusted to make this proposal self-financing, without burdening Balancer DAO’s growth:

Management fee

A yearly management fee (in monthly instalments) of 0.5% of the AUM would be charged to finance fixed costs like hiring full time contributors to Balancer DAO.

Performance fee

We’d charge a monthly performance fee of 20% of the yield obtained during the last month in BAL tokens, and every payment will have a vesting period of 1 year. We intend to hold it long term, as a token of our commitment to Balancer.


Balancer may terminate Karpatkey DAO’s engagement under this agreement for any reason by way of Governance Mechanism. Kapatkey DAO may terminate this agreement upon four week’s notice posted as a new discussion thread in the Balancer forum. In case the termination is requested by Balancer without at least a 4 week notice, Karpatkey DAO will be granted an exit fee equal to the fees collected during the last 2 months, which will be paid in ETH. Regular fees will be collected until the day of termination.

Custody of Funds

Karpatkey DAO is not a custodian of funds. The funds will be in possession of authorised signers of Balancer at all times. Karpatkey DAO will sign transactions using two addresses, which won’t suffice to execute transactions.

Karpatkey DAO is not responsible for the loss of funds caused by the existence, identification and/or exploitation of vulnerabilities through hacks, mining attacks (including double-spend attacks, majority mining power attacks and “selfish-mining” attacks), sophisticated cyber-attacks, distributed denials of service or other security breaches, attacks or deficiencies with smart contracts or protocols which are not owned by Balancer or Karpatkey DAO.

The plans outlined in this proposal are subject to discussion by Balancer and may need to be (re)structured to take account of legal, regulatory, or technical developments as well as governance considerations. This document should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in any transactions.


Upon approval of this proposal, Karpatkey DAO would post a yield strategy in Balancer’s Snapshot, holding a broad list of protocol options without granular specification of parameters nor exact moment when transactions would be executed. We would then operate within those boundaries, without having to go through a DAO-wide vote on every trade, while ensuring that only transactions approved by Balancer DAO could be carried out by Karpatkey DAO.
Alternatively, at least one trusted signer should be appointed by Balancer to approve each transaction. This could be a member of the Treasury Core Unit.

Risk Assessment

Risk Management

Every decision made and action taken weighs in risk exposure. Most large treasury holders have one thing in common: risk aversion. At Karpatkey DAO, we go above and beyond standard risk assessment protocols, and we have developed a multilevel approach to curate yield strategies, assess protocols and carry out transactions safely.

Risk Factors


We have built a Crypto Asset Pricing Model which takes into account the tradeoff between systematic risk and expected yield.
Before suggesting the addition of a position to the portfolio, we make sure that its beta is never higher than the market average in the segment that we define for each client after the initial risk profile assessment.

A more detailed explanation on how we tackle this aspect of risk has been provided in the ‘Daily Strategy Reevaluation’ section above.


All the actions taken during the execution process would follow a strict security protocol audited by Cipherblade, an unbiased professional third party blockchain forensics and cybersecurity consulting organisation.

Transaction-related risks would be minimised by the use of the Safe multisignature wallet, featuring industry leading safety features, together with geographically dispersed multi-brand hardware wallets, utilised abiding by a multistep failsafe procedure including multi-participant human validation.

Each transaction would have an additional layer of security through the use of Redefine technology. This technology provides fully automated risk mitigation as it performs different layers of analysis before the signing of each transaction and it shows proactive alerts.

After the Financial Research team has drafted the strategy, the Operations Team executes each transaction. Before signing, transaction viability validation takes place. This collegial process precedes the execution of each transaction, following the logic below:

Also, the operations team has a frequently updated emergency withdrawal protocol which allows them to withdraw all assets into the Safe multisignature wallet to prevent capital loss.

The strategy execution includes redundant controls to double check that transactions follow the strategy verbatim, and that trusted signers are always in control of their hardware wallets.

IT Security

The computers with which we operate are connected to the Internet via ethernet cables or with a wireless connection compliant with a WPA2 or higher security certification. They must be behind a firewall (pre approved and maintained by our IT team) and must use a VPN from a curated list.

All the dApps with which we interact are extensively battle-tested and have been audited by at least 2 reputable third parties. All applications and extensions installed in the computers with which we operate must be pre-approved by our IT team. Industry leading antivirus and antimalware software must be running at all times, to minimise risks related to ransomware, key-logging, trojan installation and eavesdropping, among others.

We only use Mac OS and certain Linux distributions to operate, always updated to the latest versions, immediately after they’re published. Computers are locked with high entropy passphrases and have biometric access as well. All the storage devices we use have military-grade encryption.

Protocol Security

To be allowlisted, protocols must be professionally audited and approved by reputable third parties, and must have been extensively battle tested. The bug bounty needs to offer at least a USD 250k reward.

We also factor in potential exposure to vulnerabilities in bridges, token standards used and how decentralised the networks we utilise are.

When analysing liquidity pools to determine if they’re fit for the yield strategy, we assess the concentration of token distribution so as to prevent negative price impact of large holders.

If there’s a worthwhile position in a different network, we analyse the bridge security to determine if it meets the security standards to transfer the tokens. A liquidity assessment also takes place to ensure that the tokens can be transferred back to mainnet if necessary. As with every transaction suggestion, Balancer DAO could reject it (e.g.: if the DAO’s preference would be to operate exclusively on Mainnet).

Regardless of how safe the bridge might be, we will favour the utilisation of tokens (mainly stablecoins) which are native to the network in which they’re allocated, since that would eliminate bridge-related risks.


Thanks for this proposal. I appreciate the level of detail put into it and I think its pretty clear Gnosis has benefitted from having Karpatkey on board.

For a long time there has been discussion about ways for us to earn yield on our treasury assets. My conclusion has always been that we do not have the ability to do much when you consider 26m of our 33m Treasury is in native bal token. When we look at liquid capital and ignore bal, we have the following:

  • 2.1m USDC
  • 16.9k AAVE ($1.25m
  • 2.8m TRIBE ($567k)
  • 152 wsteth ($197k)
  • plus some other minor assets

USDC gets paid out quarterly to Service Providers so we should always have some liquid to pay off our obligations. My question is, what sort of activities do you envision we would be able to do with our liquid capital and whether its even worth your time managing such a small amount? Do you have other plans to liquidate any BAL into other stable assets? Can you give us specific examples of some of the strategies you might do given our current liquid holdings?

I wouldn’t be surprised if there was opposition to touching the USDC at all since it is so integral to the funding the ecosystem operations of Balancer that many might not find the yield to be worth it considering the existential risk it would have to the Balancer ecosystem should it be lost due to a hacking event, which no one can predict.

The treasury does not hold any veBAL so this would not be possible without a separate proposal for us to do so.

In summary, I’m unsure we even have enough liquid assets to make it worth it, nor do I personally believe (but am willing to be convinced otherwise) there are yield strategies that are worth the risk given the small amount of capital we have to work with and how important these liquid funds are to the continuation of Balancer ecosystem operations. I would also prefer there be some sort of veto mechanism for treasury operations + votes made using our delegated governance power.

Additionally, we have seen other parties that have sought delegation of Balancer DAO governance power, and I think a discussion should be had whether it makes sense to delegate ALL of our governance power in other protocols to a single entity, rather than multiple specialized ones.

I really appreciate the time and effort put into this proposal and I hope no one takes my mild skepticism as anything other than someone wanting to fully understand what the DAO is getting into.


Thanks for the very detailed write-up. I agree with what @Mike_B has posted above and have some additional comments and questions.

Out of curiosity what are you using for your risk-free rate? I find this is probably one of the more difficult things to define in the crypto space. You aren’t putting your trust into government issued bonds like you are in tradfi, there are very unique risks in this space that exists in almost every investment scenario (mainly contract risk).

Additionally how do you define your expected market return for your potential investments? As you are acutely aware things change fast in this space, just curious what your methodology is here.

I know @Mike_B has this question above so I won’t ask it again, but if the answer to his question is yes I think executing on that has been one of the DAOs biggest concerns in the past when it comes to diversifying our BAL in the past few months. Obviously in retrospect we probably should have rotated a portion of the BAL into stables. However, once the treasury BAL is gone there is no guarantee we get it back without paying a premium (DAO got it for free).

There are no guarantees, the price could continue to drop and selling would end up being a wonderful decision, but I think a good number of us think we’d be parting with BAL at the worst time. Curious what answer you will have around this subject (if the answer is yes to the above).


Hi, MikeB. Thanks for having taken the time to go through our proposal and provide us with your feedback! We’ll edit it to include some information from the reply below and make it a bit more comprehensive.

When designing the treasury strategy, we’d take into consideration your liquidity needs and make sure there are always enough liquid funds to face Balancer’s obligations. This applies to both scheduled and unexpected payments.
We would only suggest swapping BAL for stable assets if our technical analysis concludes that it’s above the expected market price.
Regarding the strategy examples, here are a few ones we would consider:

  • Coordinate with DAOs to further increase the partnerships from the previous token swaps and add liquidity BAL/token, and increase price correlation
  • List BAL on QiDao, mint MAI and carry trade or spend it on Balancer’s development
  • Propose an institutional vault BAL/ETH BPT to be listed as a collateral on MKR
  • More token swaps with strategic protocols
  • Create a BAL price model, do buybacks if the token is undervalued or create UNIV3 selling positions if the token is overvalued
  • Work for integrations with more DeFi apps to increase BAL utility.

If Balancer DAO members oppose investing the USDC and would rather hold it idle in the treasury, we’ll do so. We understand that the stablecoins necessary to secure runway need to be kept as safely as possible. We carefully evaluate the size each position should have in order to make an eventual loss bearable for the treasury. Nonetheless, we make every effort to allocate funds only to the safest, most battle tested options in the DeFi ecosystem.

Yes, we’ll post another proposal for that.

The current liquid assets Balancer holds are below the minimum threshold to make it economically viable for us in the short term. However, we want to create an alliance of DAO treasuries which we think would be beneficial for all its members.
We’re currently working with Gnosisdao, Zodiac, private funds, and negotiating with several protocols and DAOs. We believe Balancer DAO has a very high potential and we are committed to assist its growth by reducing the workload that treasury-related tasks imply and making sure that there’s always sufficient runway for Balancer to thrive and focus all its resources on working towards becoming the number one source of liquidity for DeFi.
Our strategies will aim to minimise risk while optimising yield, and Balancer DAO will always be in custody of its own funds, holding veto power at all times.

We’re always open to discussing the pros and cons of all approaches. We are confident that DAO members will be very happy with the outcome of our interventions in Balancer DAO’s favour, in an agile way, and within the guidelines of a general strategy that we would propose.


Really appreciate the response.

There is really only a single strategy on here that earns yield and we could actually do right now is the Qi DAO strat, and that would require constant monitoring of the position to make sure we don’t get liquidated, which is the reason we have been hesitant to borrow/mint stables using BAL as collateral.
The closest thing we have tried to do in the past was the Fei Turbo Proposal, which had much better controls in place to avoid liquidation but unfortunately things happened prior to deployment into turbo :slight_smile:
Also, Qidao rewards are based off of how much you mint against your collateral which makes it a difficult choice since we have to straddle the line of capital efficiency and minimize liquidation risk. I would much prefer on chain risk minimization strategies when it comes to liquidations.

The other strategies I’m not a fan of either so to be honest I personally remain unconvinced that any of these strategies are worth it as most have been extensively discussed before. For example, we’ve done #1 with PrimeDAO in a d2d/bal pool and it just resulted in us eating IL since we were LP’ing into an unincentivized pool. I don’t see value in eating IL on our treasury tokens just to have some sort of price correlation between them.

I’m very skeptical of the talk about “coordinating with other daos” and am worried that simply means more token swaps, something many of us have been critical of in the past.
[Proposal] Freeze Treasury Swaps for 3 Months I suggest reading up on historical discussions around other token swaps. In my experience, treasury swaps are the laziest form of bizdev, and while there are scenarios where the make sense, they often serve as a mediocre means of “aligning incentives” between two decentralized protocols.

Can you more concisely outline what is included in this proposal and what isn’t? What exact actions should the DAO take should this proposal go through?

It’s important to point out that in the middle of this proposal is a request for over $1.3m worth of veBAL, which is about 5% of the liquid BAL in the treasury and 1% of all emissions. What are your specific intentions with this veBAL?

I remain unconvinced that this is worth committing to under the current conditions. Only one of the strategies involved actual yield and the ones regarding minting/borrowing stables against BAL has been thoroughly discussed and was decided against for various reasons. I personally don’t think we need to be paying management fees to do strategies we are reasonably capable on executing on ourselves.
I am perfectly fine paying these fees for strategies that clearly require the expertise of a team like Karpatkey to execute on, but I have yet to be convinced there are any.

I would encourage Karpatkey to independently propose treasury operations and require collection of management + yield fees with no other commitments involved. I think even just a couple of well executed proposals would do a lot to give confidence to veBAL holders to make further commitments. Even right now it’s unclear what exactly what we would be committing to.


Hi @zekraken. Thanks for getting back to us! Please find my replies inline below.

In the continuum that ranges from holding funds in a multisignature wallet to farming in new unaudited protocols, there’s no risk-free rate in our industry. The closest we can get to risk free is ETH staking rewards.

Our expected return is calculated shortly before executing transactions, and it varies constantly, together with the market. If a position’s expected return goes out of range, our Financial Engineering team will report it and the strategy will be updated to allocate funds to a more suitable position.

Please refer to my answer to Mike_B above (let me know if that doesn’t answer the question). Regarding getting the BAL back, we will suggest economically viable ways to do so. Positions can be closed after the yield goal has been met, and the BAL can be recovered. Also, we’ll suggest buy backs when the market juncture is favourable to do so.


Thanks for writing this in-depth and very thorough proposal.

@Mike_B has already done an excellent job in giving context to why we think this proposal is not something we take lightly. We have been thinking about many strategies, have experienced certain set-backs and are in general rather critical about third-party treasury management.

I want to keep it short and only want to add the following points to the conversation:

  • The DAO wants to protect its BAL at all cost - although it is the highest potential asset to “manage”.
  • I am critical and generally against protocol swaps given our history
  • Only a small fraction of the treasury could be managed but as Mike said, it is currently not worth it.
  • Our highest priority is to increase our stable footprint while protecting our BAL. We should achieve this with other methods, namely a sound product strategy generating fees (and stables) organically.

Given these points I am currently rather skeptical how Karpatkey can bring value to the table and most importantly make it worth wile for both parties involved. But please, let us know what strategies you could come up with beyond the obvious ones that @Mike_B nicely analyzed are not really feasible options.

Edit: I would also be interested in your self-assessment in regards to any potential conflict of interest given the treasuries you manage.


Hi @karpatkey,

Firstly, great to see the Karpatkey on the forum and thank you for sharing such a thought out proposal.

I am writing my personal view here. Looking at the assets held by the community, Balancer Analytics, I think @Mike_B, @zekraken and @Xeonus comments around if actively managing the treasury is something the DOA should pursue are on point. I am a fan of @0xMaki’s proposal to deposit BAL into Aave, it made passively held funds productive and is a nice way to indirectly acquire BAL on market.

If we look at the composition of the assets in the Treasury, downside protection for the core BAL holding would be worth exploring. Otherwise, the most obvious near term transaction would be to unwind the TRIBE holding for obvious reasons.

The AAVE holding can be either used as collateral on various lending markets, staked to get around 9% APR in the Aave Safety Module, deployed into a cover call strategy to earn yield (risks loosing principle deposit) or an alternative would be to create a new AAVE pool on Balancer v2 ready to integrate into the Safety Module (SM). Some options don’t have voting rights, BPT, collateral or Ribbon’s vault. If I was to manage the Treasury, I’d be looking to integrate the Balancer v2 BPT into the SM. I would try and do it such that the BPT can be deposited into the SM to earn AAVE rewards, plus either the Balancer Gauge or Aura Gauge rewards. If these options existed, I would favour depositing the BPT to earn the Aura gauges rewards + AAVE rewards. Creating such an integration would create revenue for both Balancer and Aura.

If Balancer was open to debt, converting some Aave to stkAAVE and minting GHO against deposited collateral would be an interesting strategy. GHO is subsidised, those who hold stkAAVE receive discounted GHO debt and Aave DOA determines the borrowing rates. The GHO unit price upon repaying debt is fixed to $1 which is a nice quality. Pursuing GHO may be more a growth initiative if the objective is to ensure the home of GHO is on Balancer.

More broadly, my personal opinion is Balancer is able to manage its funds via the existing governance framework. If responsibility was to be delegated, I think it should be at the executional level and each strategy should go through governance. I would encourage @karpatkey to become a delegate and present strategies on the forum for the community to discuss. Perhaps retro funding via grants for any approved strategies is a nice easy way for both teams to work together. Given the size and composition of the Treasury, I don’t see the need to go beyond this arrangement in the near future. Growing Balancer is the number one priority at the moment and finding ways to use the DAOs assets to do this most successfully resonates with me.

That said if Balancer wants to have a Treasury Team, then I am sure @Llama would be interested. With the Software Engineering capabilities and strong Growth focus Llama brings, it would be an interesting alternative. The ability to design built and ship upgrades to other dApps that benefits Balancer is something Llama is already working on and is very much in tune with trying to grow the revenue and adoption of both Balancer and Aura.


Agree here. With the managable amount within the treasury, I rather see a team follow the standard pathway of presenting proposals to the DAO for treasury management. Albeit not as efficient as employing a team, it does not make much financial sense for the DAO to employ an external team in these current conditions.

Karpatkey, Llama and others can now assist with treasury management through governance. Until we see a change in the situation, I would avoid handing this responsibility to an external team.


Hello! I’m elbagococina from Karpatkey. I think this is a good opportunity to support Balancer and I thought it would be a good idea to bring some context to the community. GnosisDAO is one of the largest liquidity providers since 2020 and one of the largest investors, through Karpatkey’s support.
Our commitment to Balancer is clear and strong. We’ve created a BAL/GNO token swap proposal a long time ago, with significant benefits for Balancer. E.g.: Their treasury has received 644,468 COW tokens from the airdrop event (representing $55K pending to claim). There are a several reasons why Karpatkey wants to be part of the Balancer ecosystem. In reference to this, we want to be AAVE delegates and treasury core unit advisors.


Hi there! This is Sisyphos from Karpatkey as well.
I appreciate all the thinking put into these discussions, as it is such an important topic. Thanks for sharing all that feedback and honest concerns.

Though I hope I am not being redundant, I do want to point out that the service Karpatkey it is offering is not only about the yield, but also about risk management.

For instance, Karpatkey would be monitoring size and utilization of BAL market in Aave before making large deposits to ensure the position could be exited safely. Similarly, CDPs are closely monitored for positions being managed to ensure there are no liquidations (as pointed out by the OP). Which I think also ties nicely to @Mike_B 's comment:

Risk management takes time and also proper tooling which we develop. That could be one of the reasons some of those strategies are perfectly available for Balancer’s team but don’t always get prioritized (rightfully so maybe as Balancer’s team is building and innovating on a great product).

The other aspect I think may be worth highlighting from the original post is the allowlisting of protocols and strategies thru governance. This process would grant those instances to discuss more broadly the different strategies and tailor them to the Balancer DAO’s requirements (e.g. share of the USDC available, risk aversion, etc…). In combination with the noncustodial approach, it will provide the DAO with the right level of control when it is preferred to opt in. As rightfully pointed out by @zekraken, this is very dynamic environment and why the service needs to be an active management.