Hey All,
With team proposals going live we wanted to provide a brief report on the AA spend from the last year and the treasury management. This should be helpful information for those who are voting on the current proposals in the Aragon DAO.
AA Transparency report - 2022
Executive Summary
The year 2022 was marked by turbulence for both the global economy and the web3 space. Unlike the previous year when many web3 projects seemed unchallenged, the overall cryptocurrency market experienced a decline of over 60% in market capitalization. Despite being impacted, Aragon’s treasury still ensures a runway of more than 10 years for the project, due to proper treasury management.
Decentralized Autonomous Organizations (DAOs) continued to gain momentum in 2022, with over 3,000 DAOs being built on Aragon’s smart contracts. This trend towards DAOs as a means of efficiently coordinating groups with shared goals shows no signs of slowing down.
The challenging environment of the previous year acted as a spark for innovation and change within Aragon. A new strategy was implemented, positioning Aragon as a governance hyperstructure and providing a clear direction for the future. In 2023, the project will launch new products and transition into a DAO. The successful implementation of this strategy will lead to increased alignment among the teams and token holders, this alignment has already resulted in a substantial acceleration of product development.
The year was marked by a wealth of learning from the AN DAO experiment, which provided insights into the functioning of a delegated voting DAO. This enables a successful transition kick-off of the Aragon DAO. This enabled the introduction of Aragon DAO’s Governance Framework.
The transition to a DAO was accompanied by a restructuring of the teams, including Product Development, Ecosystem Growth, ZK-Voting, ZK-Research, and Operations. The focus of these teams became hyper-focused, resulting in the initiation of several important initiatives. These included the DAO Experts Program, which connects DAO creators with the best resources in the industry, establishing Aragon as a thought leader in ZK-research through its blog, bringing on-chain voting to traditional organizations with Vocdoni, educating the public on secure, trustless, and censorship-resistant DAOs, and providing grants for public goods. Examples of these initiatives include sponsoring the Kyiv Tech Summit, funding the development of interoperable DAO standards with DAOStar One, and donating $100k to aid Ukraine.
In conclusion, we see ourselves in a “build market” phase, as our team continues to build. This will result in the launch of the Aragon DAO, later in Q1 2023, enforced by these rules. The Aragon DAO is committed to providing quarterly transparency reports to maintain open communication with the community. (find here more information regarding Aragon DAO)
We are also thrilled to announce the release of our new product, a lean, adaptive, and modular operating system, complete with a frontend, later in Q1 2023. This DAO governance stack offers the most flexible and secure tools for creating and managing decentralized organizations, enabling everyone to experiment with governance at the speed of software.
Financial Position
Financial Reporting
Financial reporting plays a crucial role in ensuring transparency for ANT Holders and accountability for the teams. By presenting information on Aragon’s financial performance and position, we aim to empower token holders and delegates with the knowledge they need to make informed decisions on future proposals. As Aragon is transitioning towards Aragon DAO, we are committed to provide quarterly transparency reports. The main objectives of these Aragon DAO quarterly reports are to shed light on the DAO’s budget (enhances financial transparency), and to track the progress and delivery of the team (enhances accountability).
Portfolio composition
The current investment portfolio consists mainly of ETH, stablecoins, and ANT. With decentralized coins accounting for 65% of the portfolio, Aragon remains committed to its decentralized investment philosophy. To ensure the project’s sustainability, a substantial portion of the portfolio is allocated to stablecoins, with 43.5% held in this asset class.
In 2022, concerns regarding censorship in the USDC stablecoin came to the forefront, following the Tornado Cash case. As a response, Aragon diversified its USDC holdings, with a portion invested in the censorship-resistant DAI stablecoin ($20 million) and another portion used to strengthen its ETH position ($10 million).
Emphasizing the importance of self-custody, Aragon DAO, being built on the Ethereum platform, is unable to hold Bitcoin directly, and wBTC poses centralization risks. Hence, in 2022, the decision was made to rebalance 75% of its Bitcoin position into ETH, with the aim of holding the remaining 25% in self-custody during 2023.
To summarize, Aragon’s treasury is focused on maintaining positions in non-custodial and censorship-resistant assets, in order to align with its decentralized ethos.
Treasury Risk
The Aragon Association places a high emphasis on ensuring the security of its treasury. To minimize risk, interactions with external smart contracts, such as yield farming, are kept to a minimum. Our treasury is viewed as strong, due in part to our substantial stable coin holdings, which currently stand at over $70 million. This substantial stable coin position helps to ensure that Aragon can weather periods of market volatility and continue to thrive.
Use of Funds (Budgeting)
The Aragon Association has displayed financial responsibility in its utilization of funds, evident in its consistent adherence to budgeting. In 2022, total spending amounted to $6.9 million (63%), significantly lower than the budgeted amount of $11 million (100%). To provide transparency on the budget, an overview of AA’s Financial Position, denominated in Dollars, is disclosed in this report.
In conclusion, the aim is to stay committed to financial discipline and responsible budget management in the new Aragon DAO. With a commitment to limit spending to no more than 10% of the total treasury in a given year, we aim to preserve a strong financial position while still investing in growth opportunities and being prepared for any potential challenges. For further inquiries, please reach out to transparency@aragon.org
