Restructuring of Investment Committee into a Treasury Committee
Authors and contributors
This proposal has been revoked by the authors.
This proposal seeks to restructure the Investment Committee of Merit Circle DAO (MC DAO) into a Treasury Committee. If approved, the Treasury Committee will be appointed by MC tokenholders and will, initially, consist of five members (expansion of the four person Investment Committee). The Treasury Committee shall be independent from the main multisig signatories and the proposers believe that the suggested Treasury Committee members have a better mix of domain-specific expertise compared to the existing Investment Committee. An independent committee of active members should also ensure higher engagement and improved risk assessment capabilities. The Committee members will be responsible for performing the functions as set out further in this proposal. Methods of appointment, evaluation, renewal and removal are outlined in further sections, as well as the motivation and rationale for this proposal.
Specification of the proposal
Merit Circle DAO has been relatively successful in maintaining a healthy and well-managed treasury during a very turbulent 2022. This has created a scope for future growth of both the DAO Treasury and Merit Circle DAO ecosystem once markets stabilise or return to growth. In order to better plan, execute, manage and evaluate the value of assets held, it is proposed that oversight of the Treasury will be assigned to a newly established Treasury Committee. This Committee will consist of five members (that can comprise either of individuals or organisations), who will replace the Investment Committee established by MIP-2. If approved by the Merit Circle DAO, the Treasury Committee shall operate under a set of prescribed functions and responsibilities as outlined further in this proposal. The Committee will always work towards maximising Treasury value in accordance with MC DAO vision, values and principles as provided for in the Constitution.
Should this proposal be accepted, the functions presented below will be performed by the Treasury Committee on a voluntary basis. Members of the Committee will receive no monetary or non-monetary compensation, whether formal or informal, for the performance of tasks in their capacity as Treasury Committee members. They shall always act within the approved mandate, with integrity and to the best of their ability. It is important to note that they shall bear no legal liability to the MC tokenholders, DAO contributors or any other organization they work with in their capacity as Treasury Committee members. To cater for any risks that the Committee members take on in the interest of MC DAO, each Committee member should, in the same manner as the main multisig team, be indemnified by MC DAO from all liabilities and costs that arise as a result of the Committee member’s actions for the committee, in the capacity as a Committee member, except for liabilities and costs arising out of or in connection with a Committee member’s fraud, gross negligence, willful misconduct or actions that fall outside of mandate. Such indemnity shall however be capped in the exact same manner as the main multisig team’s indemnity is capped (see MIP-23).
Treasury Committee members will be appointed, evaluated and removed as per the procedures outlined further in this proposal.
Functions of the Treasury Committee
Below is a proposed list of functions that would fall under the Treasury Committee’s mandate. The mandate can be changed through normal governance channels. Where the below mandate and explicit future governance proposals overlap, the most recent tokenholder approved proposal shall always take precedence. A new approved proposal would effectively alter the Treasury Committee’s mandate, without being targeted on the mandate itself. The mandate is an extension and improvement of the Investment committee mandate established in MIP-2 (as further amended through e.g. MIP-6 and MIP-7), and will continue under the Treasury Committee. Wherever operations require the Main Multisig wallet or other operational multisig wallets it requires coordination and cooperation with those teams.
- Disbanding of the current Investment Committee and transferring its existing mandate to the Treasury Committee.
- Formulation of a long term investment program, strategy and objectives for Merit Circle DAO (DAO), including development of policies and procedures to achieve the objectives.
- Oversight of the investment strategy in accordance with relevant DAO governance proposals.
- Screening, evaluating and selecting investment projects and partnerships relating to MC DAO.
- Development of a clear and consistent valuation policy for Treasury assets
- Development of a risk management framework and adherence to it in the interest of the DAO, in accordance with relevant DAO governance proposals.
- Development of metrics for performance measurement, benchmarking and evaluation of Treasury performance in relation to the broader macroeconomic, crypto and GameFi conditions and the integration of these in the treasury dashboard.
- Establish conflicts of interest framework that adhere to established best practices. Treasury Committee members must make full and fair disclosure of all matters that could reasonably be expected to impair their independence and objectivity or interfere with respective duties to the DAO. These disclosures shall be made on the public forum.
- Regular provision of market feedback, treasury holdings and performance to the broader Merit Circle DAO community through community updates.
- Enable transactions concerning the transfer of unvested MC tokens, provided that such transactions do not result in the relevant MC tokens being put into circulation or utilization earlier than the would prior to the transaction, and are executed without cost to MC DAO.
- Manage balances through financial accounts (such as exchange accounts) to the extent applicable for transactions within the mandate. The balance on any single off-chain venue can never be more than 5% of the treasury value (as it may be from time to time) and the total balances off-chain should never exceed more than 10% of the treasury value (as it may be from time to time).
- Regular reviews of multisig transactions of other multisig teams, to see if there are any irregularities or errors. Report irregularities or erroneous transactions. In this way the committee also acts as a check to the functioning of the multisig team.
Appointment of members to the Treasury Committee
Members of the Treasury committee will be appointed by MC DAO through this proposal. Candidates will initially be proposed by the current investment committee (please see proposed members with bios below). It should be noted that any DAO participant can nominate themselves or another participant to form part of the Treasury Committee. They will be required to state how they will add value in this capacity and outlining their skills and aptitudes, experience, relevant academic and/or professional qualifications and motivation for joining the Treasury Committee.
Performance review, reporting and removal of the Treasury Committee
The work of the Treasury Committee would be reviewed by the DAO stakeholders on a continuous basis. The work of the Treasury Committee shall be reviewed and analysed at least annually. This would involve an annual publication containing as a minimum, the following:
- Treasury performance and projections
- Work performed by the Committee, including successes, challenges and other information relevant to the Merit Circle community.
- Individual statements from Committee members detailing their contribution to the overall functioning of the Treasury Committee
- Analysis and review of MC tokenomics and staking
A new governance forum category will be set up in the Merit Circle governance forum, providing a forum for discussions, recommendations, complements, criticisms, complaints and ideas related to the work of the Treasury Committee.
The Treasury Committee will be, primarily, executing tasks set out by this mandate and act as a soundboard / knowledge sharing organ around investment decisions. In most instances the Treasury Committee member with relevant expertise or that has been delegated a specific task within the Treasury Committee will make a decision on a required action within mandate. The committee member can receive input or feedback from the other members. Tasks can be divided between committee members, completed in cooperation with other committee members or transferred to other committee members.
There may arise situations where choices benefit from a vote or active input from all members. Based on their best judgement, any committee member can request such a vote at any time. This can be useful in the case of new situations, situations where it is not clear whose domain an action within mandate falls in or situations that could have large potential consequences for the DAO. In this case, a vote is held among committee members. A majority is needed for a decision to pass. A majority is more than 50% and in the case of a 5 member committee, that would mean 3 out of 5 votes. The used channel for these votes and for day to day communication is a private Telegram group with the committee members, or an otherwise agreed on private channel among members. This is because it could form a competitive disadvantage to have these discussions and votes on a public forum or in a public channel.
The committee members further have the ability to refuse tasks they are not comfortable with. Either because it is out of their area of expertise or any other reason. If none of the other committee members are comfortable with taking over the task, the committee is then requested to bring these tasks to the DAO, as they will either need consent from the DAO on a certain decision to get more comfortable or the DAO needs to select a new appointee for the specific task.
Based on the annual review and evaluation of the Committee’s work, reappointment or removal of Committee members could occur. This would be done via a qualified majority vote of 4/5 Committee members. An alternative way to remove Treasury Committee members or disband the Committee would be through a DAO community proposal. The DAO itself can also replace or alter the committee at any time, through the normal governance process.
The Investment Committee has sourced its network and propose 5 committee members that they think are all independently qualified. These members have shown interest in the Merit Circle DAO, have proven to be competent in their domain, and all offer a unique set of complementary skills to each other. Together they would be forming a board with extensive cumulative knowledge and different viewpoints.
- Orange Pill Ltd
Orange Pill Ltd is one of the software development companies for Merit Circle DAO. It is currently performing the bulk of product development tasks and expected to stay one of the main development companies in the long-term. They are developing a lot of the DAO’s products and running a number of the day-to-day operations for and on behalf of the DAO. Their expertise lies in web3 gaming, web3 gaming infrastructure and DAO governance operations.
CitizenX is an investment firm focused exclusively on ventures, token projects and protocols being built for Web3 services, DeFi and NFTs. CitizenX is also a seed investor and venture partner of Merit Circle DAO.
- Fyde Treasury Protocol
Fyde is a trustless treasury management protocol that helps crypto firms and DAOs with asset diversification, liquidity optimization, yield generation, and governance maintenance in a single cohesive solution. Fyde’s team consists of former portfolio managers from JP Morgan’s Chief Investment Office, Deutsche Bank, JP Morgan Equities, PhDs / scientists from Stanford, Cambridge, and NASA, and technical expertise from Synthetix and Ocean Protocol. Beyond the protocol, their expertise lies in macroeconomic analysis, asset allocation, and treasury risk management.
- PEAR Protocol
Pear Protocol is the first and only on-chain narrative trading platform, which allows DeFi users to go simultaneously long one asset and short another in order to extract pseudo-market neutral returns. They are a team of 10 DeFi native experts each with individual experience of either asset management or building DeFi apps. The Co-Founder is Huf, who is the proposed member. He is also currently the Head of Investments at ReFi Pro, which is an on-chain asset-management protocol that utilises a risk-managed yield farming strategy with a proven track record of over 18 months. Huf brings with him 10+ years of investment banking experience, mostly as an Equity Derivatives trader for Deutsche Bank in London. At the end of his career he specialised in providing systematic investment solutions to some of the largest asset managers and pension schemes in the UK. Since 2019, he has been full time in DeFi and deeply understands the on-chain investment horizon, having provided thought leadership through his Medium articles, tweet threads and podcast series. He brings stewardship in terms of best risk management practices and real-time insights on opportunities in the evolving DeFi space.
- Fair Play Collective DAO
The Fair Play Collective DAO is solving fundamental problems in the “Play-to-Earn” model, by gathering industry leaders and promoting productive discussions. The organization has game building expertise and unique insights into the world of web3 game design. The organization aims to promote four pillars of good web3 gaming - fun, transparency, community and economics.
Anyone is free to object to the above 5 committee members or propose alternative members. Or step forward themselves as an alternative member.
The MC DAO Treasury is a key part of the investment vertical of the DAO and drives the growth of other verticals through fund allocation and investments in digital assets, gaming projects and platforms. The motivation behind this proposal is mostly already covered by the above specifications. A treasury committee of active members is meant to ensure higher engagement and improved risk assessment capabilities relating to MC DAO’s treasury - an improved and increasingly transparent committee compared to the current Investment Committee.
Why is this necessary given that the Treasury has been maintained well, even during a very tough 2022?
Given the changed landscape of crypto and GameFi post-2022, Merit Circle has to be forward looking in order to foresee and address the coming challenges with respect to maintenance and growth of its Treasury. This requires a more systematic approach not only to capital allocation but also to valuation, risk management, benchmarking and performance measurement. All of these components seek to reduce the risk of malinvestment of treasury assets and assist the DAO with picking the projects with the most development potential, viability, growth and expected return.
Having a dedicated team with a clear set of functions also helps with transparency and overview by the community, which is well aligned with the goals of the DAO to be open with its members and the public at large from inception. This proposal aims to improve on the transparency of our monthly Treasury reports by providing a more detailed view into how decisions will be made and monitored. Some of these functions are already performed by the Investment Committee, with broad mandates and some additional details being agreed upon via MIP-2, MIP-6 and MIP-7. The functions described here are thus complementary to what was accepted under those proposals and are not intended to conflict with the spirit of the aforementioned proposals.
While a significant amount of trust is required for the performance of the Treasury Committee functions, the effects of mismanagement, negligence or fraud are visible on-chain and can be tracked through the on-chain activity of the relevant Treasury wallets, details of which are published in our monthly Treasury reports. Further internal scrutiny by the most active DAO members would also add comfort over the integrity and capability of the Committee.
How will the Committee prevent or address conflicts of interest?
Crypto is still a rather small industry and GameFi and crypto gaming are even smaller. It is thus inevitable that conflicts of interest situations can arise when Treasury Committee members will be working on investment decisions. Such situations would involve discussions of capital allocation to projects that are related to, either directly or indirectly, individual Committee members. These relations would involve financial, investment, family, agency or other relations that would have the appearance of close proximity. In situations where there is a perceived or a factual conflict of interest, Committee members would disclose such conflict and abstain from voting on the investment decision.
Merit Circle DAO Treasury Committee members will perform their duties on a voluntary basis and will receive no monetary or non-monetary remuneration for their contribution to running the DAO. No budget allocation is necessary for the implementation of this proposal.
- Yes - approve the restructuring of the Investment Committee into a Treasury Committee with the functions and processes as outlined in this proposal
- No - keep the current structure with the Investment Committee and continue to further research and discuss innovative and effective methods of treasury management for MC DAO
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