The Weekly Yax #15: Treasury Diversification
The Weekly Yax is the easiest way to keep up with the yAxis Project.
Every Sunday, we highlight major news and developments, alongside key takeaways from the week’s episode of Ya Herd?
Major News & Developments
- July 29th introduced yAxis’s intention to integrate Chainlink Keepers.
- July 30th marked the 15th episode of Ya Herd? and its new podcast format.
- July 31st revealed the winners of the Canonical Vault NFT Contest.
Ya Herd? Week #15 Key Takeaways
This week’s episode was motivated by community suggestions on the Era 2 Emissions Forum Discussion to diversify the yAxis treasury. Building upon this sentiment, yAxis decided to educate the community on the concept of treasury diversification and synthesize community input into key considerations in developing a potential treasury diversification strategy.
What is treasury diversification?
Treasury diversification is the concept of holding many different types of assets in a project’s treasury, not just its own token, to remain well-capitalized regardless of market conditions. A typical asset mix involves some “blue-chip” tokens, Bitcoin & Ethereum, and stablecoins.
Unless they engage in a series of presales or have significant VC backing, most projects end up holding much of their own token in their treasury. While this may seem like the project is well-aligned with its token price, a large treasury allocation toward its own token presents a two-fold issue:
- If the project wants to fund anything, it must sell its own token, and it must sell indiscriminately (regardless of market conditions), creating the dreaded “forced seller” scenario. Not only is this dynamic counterintuitive, but the project selling its own token to fund operations also decreases the value of its remaining treasury.
- When you need the treasury most, it’s there the least. If the project falls on hard times and needs funding to catalyze an inflection point, chances are the token price, and thus the value of the treasury, is severely depressed, limiting the project’s ability to rebound.
Avoiding these situations and moving toward a diverse treasury was the big motivator behind the recent (controversial) Sushi raise. You can read the discussion here.
What benefits does treasury diversification enable?
By maintaining a diverse treasury, projects can retain upside exposure to the crypto market, but also have “rainy day fund,” which helps mitigate risk and ensure resiliency. In addition, a treasury made up of blue chips and stables creates optionality for a project to earn yield with its assets, generating cash flow to cover expenses.
Additionally, a diverse treasury ensures that a project retains funding to continue to execute its plans, regardless of market rotations and volatility. The “forced seller” of your own token into depressed market conditions scenario is also prevented. The project can use the stables and other assets to fund operations while its token is “cheap” and choose to trim some when its token price appreciates at its own discretion.
Moreover, by holding blue chip assets in its treasury, a project can develop governance positions in the protocols it uses. This “meta governance” position creates optionality around voting to benefit a project’s own users, revenue, and partnership interests. Most DeFi projects appreciate when their users hold their liquidity mining rewards and participate in their governance, making them more willing to partner and develop positive-sum engagements.
Potential Treasury Diversification Strategy for yAxis
As explained at the outset, several community members in the Era 2 Forum Discussion voiced the need to diversify the yAxis treasury and adjust the buyback strategy in the short term while the project is still in its high emission phase. Shoutout to these community members for their thoughtful, market-relevant suggestions.
Based on community input from the Forum and the benefits described above, we’ve synthesized some key takeaways:
- yAxis could park the revenue it generates during Era 2 from v3 Canonical Vaults into our treasury in the form of a variety of assets, including stables and blue chips, to diversify the treasury and secure “all-weather” project funding.
- yAxis could utilize the governance tokens generated from yield farming revenue, particularly with our plans to farm Convex Finance, to accumulate cvxCRV, which is a highly cash flow productive asset, and 3CRV, a stablecoin that mitigates volatility.
- Building a treasury asset base that’s not in the form of our own token eliminates the “forced seller” scenario for yAxis, such as in the current market conditions where we feel “cheap,” better aligning incentives between project operational needs and YAXIS holders.
- Generating cash flows from that treasury asset base with productive assets like cvxCRV positions yAxis to fund the Partner Programme and other project expenses with cash flow alone, continuing to grow that asset base we earn cash flow against without needing to tap into it in the short term.
- Bolstering the treasury allows yAxis to attract more developer talent and strategists, leading to better strategies and more institutional-grade features — resulting in a better product that attracts more capital as the Project hits its lower emission phase in later Eras. By then, we’ll have secured the Project’s funding future and buybacks can return with greater impact given low emissions. Further, yAxis can also engage in marketing and other operational activities without the fear of having to sell YAXIS to fund them.
Community Question: Development Update
Many community members asked this week about plans to add development resources and yield strategists as well as guidance on v3 launch timing.
The audit process for the v3 Canonical Vaults has officially begun. yAxis is excited to deploy v3 and catalyze an inflection point for yAxis’s technological innovation and growth trajectory. Furthermore, the yAxis team has been in contact with a developer who has contributed to yAxis in the past and is interested in writing strategies for v3. The team has also been in contact with another developer interested in writing v3 strategies. With added bandwidth to support better strategies, the canonical vaults are well-positioned for success in attracting TVL, generating revenue, and elevating yAxis’s name within the DeFi landscape.
The full recording of this week’s episode can be found on YouTube and now in podcast format.
yAxis Project Stats of the Week
- MetaVault TVL $6.6 million.
- YAXIS staking 94% APY (66% APR) and LP 138% APY (90% APR).
- Nearly 450 YAXIS bought back with MetaVault revenue this week for distribution in The Great Harvest.
Community Content Spotlight
This week’s community content spotlight goes to BigPapi, wtime, and samjackgilmore, the winners of the Final Champions Table Design Contest — the Canonical Vault NFT Contest. The yAxis community spoke, and these designs (shown below) resonated with them the strongest.
Use this link to check out the animated YAXIS winner from samjackgilmore.
You can view the voting results here. Congratulations to the winners! Thank you to all yAxis Herd members who participated through both design submissions and voting. yAxis looks forward to using these amazing designs to further spread awareness of the upcoming v3 Canonical Vault launch.
Join Us: Bounties & Jobs
Coordinated by the yAxis Champions Programme, the yAxis Bounty Board lists requests for proposals (RFPs), where community members can respond to specific Project needs and receive compensation upon task completion. See the current opportunities below and check the Bounty Board frequently as more opportunities will be added over time, such as the recently added Convex Development Bounty.
If none of the current opportunities appeal to you, but you would still like to contribute, reach out to waali@yaxis.io. You have the opportunity to shape the next era of yAxis.
That concludes the fifteenth edition of The Weekly Yax. Thank you for reading and looking forward to many more!
Onward and upward, Yax Herd!
