[BIP-XXX] DAO Treasury Assets Migration

Governance General Proposal
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Summary

Separate governance and assets on the DAO multisig; send assets to kpk managed multisig. With the exception of the DAO’s working capital; it will remain where it currently is. At the same time, the kpk managed multisig’s owners will be replaced by the Balancer Foundation directors (3/4). Overall this increases security, speed of execution and capital efficiency.

Separation of Coin and State

Serious optimisation of processes on the DAO multisig has always been very tough, given the slow (secure!) signing cadence and high risk of compromising governance or losing assets. An example of this would be rebalancing some of its smaller asset positions into different assets (e.g. stablecoins or passive altcoins), or installing automation modules (e.g. the unexecuted BIP-715).

In an attempt to make the DAO multisig more manageable, it is proposed that we separate its governance authority from the assets it is holding. The most logical way to do so is to keep governance where it is (0x10A19e7eE7d7F8a52822f6817de8ea18204F2e4f), and to sweep all its assets to the @kpk managed multisig (0x0EFcCBb9E2C09Ea29551879bd9Da32362b32fc89). A big part of the DAO’s assets are there already; sending the remaining Ethereum assets over would make it easier for @kpk to manage and rebalance Balancer’s whole treasury. Some positions, such as the uncirculating $BAL or some positions already mandated by a previous BIP, will be left untouched by @kpk. These positions will thus be exempt from their management fee. @kpk will share a detailed overview of all to be migrated positions.

# Make Foundation Owner of kpk Managed Multisig

The kpk managed multisig can act faster because it has a module installed that is given permissions for certain pre-approved actions. However, giving these permissions and/or performing any non pre-approved actions still require the full signer set to enact. This creates the risk that moving all treasury assets to the kpk managed multisig doesnt solve the problem of slow signing.

It is therefore proposed that the signer set on the kpk managed multisig is replaced completely with the signer set of the Balancer Foundation multisig. These signers, the directors of the Balancer Foundation, are subject to votes from regular DAO governance. According to article 5.3 of Balancer’s Foundation Articles of Association: “The Token Holders have the power, by Governance Resolution, to appoint or remove Directors.” And with a threshold of 3 out of 4, it will make the multisig significantly faster in performing permission approvals and any ad hoc actions.

Working Capital

To provide a clear distinction between working capital and surplus assets, and to prevent the kpk managed portfolio from turning into an operational wallet, the working capital required by the DAO to pay service providers will (for now) remain in the DAO multisig. It will be replenished by (1) fees being collected from the protocol and, if necessary, (2) from results and/or principal capital currently in the kpk managed portfolio multisig. Further investigation is required to be able to move the working capital and its in and outflows to a separate, leaner multisig.

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Thanks for putting this proposal together and publishing it for public discussion, @gosuto. A few things I’d like to outline here for the community to fully understand the implications of this proposal:

  1. This vote could increase risk to the managed assets. While this risk is somewhat mitigated by the fact that 3,/4 signers are KYC’d professionals — arguably even better than a 6/10 multisig of anonymous signers — it’s important that voters make an informed decision.

  2. @kpk doesn’t have a formal contract with the Balancer Foundation. Their mandate for treasury management is based solely on on-chain governance (BIP snapshots). I’d really appreciate if we could move forward with a formal SLA and investment policy (or similar agreement) to clearly outline responsibilities and accountability prior to payload execution. Most likely, the Directors won’t be reviewing the merits of the permissions — they/we will effectively be blind-signing — so it’s crucial we’re careful here. We’re essentially giving KPK full control, so might as well add a couple of KPK signers as well (4/6).

  3. Will the Maxis still be providing technical review of the payloads under this new setup? If so, that also needs to be fully disclosed, ideally formalized in the SLA with the Foundation.

  4. The community should also investigate if a a secondary wrapper for the Treasury is needed, to avoid triggering any VASP (Virtual Asset Service Provider) implications under Cayman or BVI law. Managing our own funds isn’t an issue, but doing so on behalf of others could be. Ideally, it would be clear that the funds are now being managed under this new entity, and avoid confusion.

  5. Lastly, considering the DAO Treasury has low funds, and most assets are already inside the KPK-managed multisig — plus the need to fund operations in the short term — this “KPK Treasury” will likely need to be used to pay service providers and the stablecoin positions/strategies will need some adjustments very soon.

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due to points raised by @0xdanko (namely that using foundation signers might have vasp implications), the signer change has been removed from the current proposal. once there is more legal clarity there, a signer change can always be proposed separately.

also, a new section has been added in regards to working capital; funds needed within a timeline of three months or less in order to pay service providers. these funds will not migrate over for now, so that payments can still occur from the dao multisig itself.

lastly, @kpk has committed to provide an investment policy in a separate bip to formalise their mandate with the balancer dao.

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Thank you @gosuto. Fwiw, we are exploring options for a more robust framework for the DAO’s incorporated entities, that would fit these (and other) needs.