Buy, invest, vest

HI Yakitori - sure. Applicable financial market laws cannot be chosen but they just apply. As the Aragon Association and the Aragon DAO (Aragon Ecosystem Association) are incorporated in Switzerland, I’m mainly referring to Swiss financial market laws i.e. the Swiss Financial Services Act article 3 (b) FinSA Fedlex and the Financial Market Infrastructure Act article 2 (b) FinMIA . If you are interested I’m happy to provide you with background on the practice of the Swiss regulator on how it applies the term securities to digital assets.

At the end the aim must be to protect the treasury of Aragon Association against any risks that it can be used in the best possible interest for the Aragon mission.

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Thanks for sharing your thoughts, @luis! I’ve been following the recent discussions and, as a long-term ANT holder myself, I wanted to chime in with my opinion.

I believe that we should pursue both short and long-term strategies simultaneously or, alternatively, focus on aligning the long-term plan first and then address short-term goals. This way, the value generated from long-term initiatives may eliminate the need for a buyback. I’m confident that every ANT holder would agree on the importance of long-term sustainability.

From what I understand, @Yakitori, the DAO currently holds 300k, which it can allocate as it sees fit. However, the remaining assets have yet to be transferred to the DAO. Correct me anyone if this is incorrect.

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Just to be clear:

there is no legal obligation of the Aragon Association to transfer any funds to the current Aragon DAO nor to anyone else - both are separate independent legal entities. The only obligation the Aragon Association has is to follow its purpose in the of association. On the other hand, the Aragon Association can and does also not control the Aragon DAO. You see the Aragon DAO is a real autonomous decentralized organization governed by wANT holders.

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Ok so to be clear, say a vote passed in the AragonDAO that breached the laws you reference the Aragon Association would not be able to implement it regardless?

Thanks @luis for your thoughts. I think it’s healthy to have such discussions before too many proposals congest the pipeline. I have had to do with risk management most of my career and hence developed a passion for this typically less popular topic. Let me thus share my 5ct.

The Buy

I cannot comment on whether buying ANT is an effective approach to prevent a 51% attack. To manipulate price floor of ANT and steer supply for treasury management reasons I would rather deem a risky bet. Buying significant size transparently does not necessarily set a floor, but attracts more speculation which can go both ways (since the purchases are finite, an attacker could speculate that once the program is done, the project holds a bulk position and may short against it… the lower the price goes un-supported, the more holders exit and at one point the treasury will be forced to liquidate too). Not sure if this will shine a good light on Aragon either.

For the DAO to maintain a certain balance of ANT, particularly for incentives and liquidity purposes, is certainly a reasonable thing to do. Given the legal and tax aspects of the AA, it may make sense to manage the treasury (with limitations of course) in the DAO. Question is, how would the individual decisions be made and who would have that responsibility?

The Invest

If ANT or other crypto investments shall be made, the market risk should definitely be managed. Aragon already has significant intrinsic exposure to the crypto industry (price, counterparty, regulatory, tech, adoption risks, etc). Further, correlation with ETH, BTC, etc is very high and typically even intensifies in downturns. Sure, we all believe in the potential of crypto but “we” should not put all eggs in the same basket. There are different effective ways to mitigate market risks (or combinations of the below):

  • Risk Diversification with low correlation assets. Allocating assets to different strategies, managers and assets effectively reduces overall portfolio volatility.
  • Use systematic and non-emotional trend models to determine feasible buy and sell levels and thus reduce drawdown.
  • Use derivatives (options, futures) to hedge price risk temporarily or implement accumulation and liquidation strategies.
  • Apply Portfolio Risk strategies such as CPPI/TIPS, to implement a portfolio floor.

What Aragon DAO requires, before making such investment decisions, is a well thought-through risk model and a long term investment strategy which finances opex, incentives allocations and fosters long term growth. Maybe this is already available, then never mind. I think it is an important piece which can, if set up properly and transparently for stakeholders, add tremendously to an effective governance. The alternative to risk management is risky management.

  • Protect against losses
  • Improve decision making
  • Enhance stakeholder confidence
  • Promote compliance
  • Encourage innovation

I know it adds to complexity but some kind of Risk Guild/Commission may be an idea. Its responsibilities would be to:

  • Identify risks
  • Analyse (likelihood + impact in numbers/values)
  • Prioritise risks based on business objectives => complement strategy, guide Hi-level asset allocation and make annual proposals
  • Treat/respond to risk conditions
  • Monitor results + adjust

This would provide reasonably adjustable guidelines for sustainable treasury management and effective risk management in addition to a mitigating effect of a 51% attack. And how about having an economic/treasury guardian to also check if proposals are in line with the long term portfolio strategy?

A well-diversified treasury in the current total size should easily allow for an annual yield that covers all opex and incentive requirements for Aragon. With the above as basis it can be well positioned to address various risks, including risks outside the crypto industry (e.g. inflation which is very relevant for wages, but also geographical, regulation, etc.) and ensure cash flows for the long term.

Treasury should not be “locked away” but put to work in a diversified portfolio. A part should be invested with low risk but off-chain imho. This is to diversify away some industry exposure. E.g. US Treasuries pay 5% p.a. with much less volatility than ETH and less counterparty risk (sure we can argue about this, but if the US goes bust we have other problems). They are further more aligned with real risks like inflation. Holding USD cash or USDC is no option in my view. Actual 10yr inflation risk of 30m USD cash assuming 2% average inflation rate is approx. 20% (current rate is 4.98%). ETH staking yields ~5% now but will be affected by activity and $ yield is extremely dependent on price development. Please also keep the additional issuer and custodian counterparty risk of USDC et al. in mind. Regulation is also a constant blackbox here.

Treasury could for instance run a TIPS model which effectively gives it a floor value, and could include:

  • Crypto (all Hi-Risk unless price risk mitigated)
    • ANT => with price risk mitigation
    • ETH (staked) => with price risk mitigation
    • BTC => with price risk mitigation
    • DEFI yield portfolio => with proxy price hedge
  • Strategic Investments (which are Hi-Risk)
    • Private Equity => with proxy price risk mitigation
    • Token Swaps => with price risk mitigation
  • Traditional (Lo-Risk portfolio, can be individually implemented token based)
    • Low risk equity/bond portfolio
    • Alternative strategies with zero correlation
  • Mitigation tools besides effective diversification could be:
    • Asymmetric exposure strategies: I know a friendly Quant Shop that runs very effective models on real cash since >4 years. The model could be implemented fully automated using Aragon tech.
    • Derivatives use: This is in fact my expertise, we advise other foundations in that field. If there is interest, I am happy to shine more light on the topic. Such strategies may also be packaged into token-based structures.

The Vest

The above imho takes away the need for a vesting scheme. Available resources may be discussed in the Hi-level asset allocation proposals of the Risk Guild, which naturally consider the risk tolerance, strategic requirements and risk buckets. Hence, to address your north star metrics the treasury strategy can simply define a bucket with size that allows for larger contributions if strategically required.

Any fix contributions to proposals naturally reduce the available resources over time. A crypto winter accelerates that process. I thus highly suggest Aragon implements a treasury yield strategy that allows the project to live and grow from the effective annual $-yield (as long as salaries and expenditures are not paid in crypto).

Hope this helps in any way. Happy to discuss and assist with concrete proposals. It goes without saying that this is just personal thoughts and experience shared and NOT financial advice.

Not exactly. The Aragon DAO can vote on whatever they want. If they decide to distribute the USD 300k transferred, then the Aragon DAO (remember is a Swiss association) would be in breach of Swiss association laws and the association may be re-qualified as general partnership with unlimited liability and pro rata taxation of the funds based on wANT holding.

The votes in the Aragon DAO are not binding for the Aragon Association i.e. they are independent and separately governed entities. My point here is that the Aragon Association should not commit to a buy-back, as this may result in a re-qualification of the ANT tokens.


Thank you for clarifying. One more question who are the members of the Association governing the DAO?

Its the wANT holders and delegates (received delegated wANT). You seed that in the articles of association that you have to accept in the DAO App when you wrap ANT.

It’s not a distribution, it’s a swap. The ANT tokens can then be used to pay contributors and improve the general state of the protocol, as Luis outlined.

As you explained, AragonDAO and Aragon Association are different entities. You could frame this as a treasury diversification.

can you dig in more about the specifics behind why the buyback is is problematic? Is it the methodology? market buying in a dex.

Sure. The main challenge is that the commitment of a buy back of own tokens results in a requalification of a token as a security in many jurisdiction (for sure in Switzerland). The regulator applies the approach “substance over form”. Arguing that Aragon Association buys back ANT to pay contributors i.e. it is only a swap will not hold up. They will ask: why can you not just pay in ETH, fiat or other currencies that are in the treasury?

@Yakitori : again it is not up to the Aragon DAO to decide what the Aragon Association shall do with its treasury.

Then what specifically about previous buybacks funded by the treasury makes it different?

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Hey there,

First off: I find it a bit weird this accounts first forum interaction is only on this thread and created 2-3 days ago as you speak as a member from the team or AA. Would enjoy your main forum account here than an alt.

Second: AA or Aragon has completed a multitude of buybacks in its history. Tokens that have conducted buybacks have A. not been delisted for doing so - if so would love proof. B. DEX can not ban tokens from its front end… its a dex.

Third: Upon research into your claims more - Where is the transparency report for 2022 for AA, and where is the DAO transparency report for 2022? What is there being hid there…

Fourth: The DAO has voted to move FULL treasury LAST YEAR. And only just moved 300k last week or so? Going by that vote it seems the DAO is responsible for the treasury. Please refer to the image: FINANCE and OPS contributor claiming against your claims:


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Only a few months ago the association conducted buybacks. So using the same “substance over form”, what makes this different?

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As said above, the DAO should already be in full custody of its treasury by now. Unless the Association intends to steal the funds for its usage, it should at least act as a transparent custodian for the DAO[1]

Regardless, given that we’re anons here, I’d be interested to have a neutral perspective from a swiss lawyer(s) regarding this if the DAO thinks it’s an issue. There have been many controversial actions lately from the Association and the team, and I think an outside counsel could help the participants move forward.

The proposal is, I think, an excellent one for the DAO as a hole:

  • Rewarding contributors with ANT tokens aligns the incentives toward a growth mindset and adds skin in the game, which is an essential primitive of crypto activities. It’s also standard in every successful DAO.
  • The swap won’t decrease the value of the treasury, and will grant the DAO with precious tokens that will be used to grow its activities by allowing it to benefit from the value it adds to the ecosystem.
  • Treasury management should be done in the interest of the protocol, meaning spending when it’s necessary. It’s not about behaving like Smaug in Erebor. Such swap should have been done long ago to sustain ANT, increase the assets/ANT ratio, and protect the DAO against centralization of its supply. It is however not too late, and action should be taken as soon as possible.

[1]: As a sidenote, it’s a bit painful that Aragon advertises treasury management tools to other DAOs but refuses to use it for itself.

Thank you, @luis, for the proposal. I am looking forward to the discussion.

As for my comments, I only have the information as one of the guilds; I am not part of the AA anymore.

ANT Holders signalled the transfer. Signalling does not give control, regardless of how much you want it to.

Think @F.C.Savigny has made the point pretty clearly.

Aragon’s treasury is mostly on Aragon Client @Yakitori managed by the Aragon Association as explained a separate entity - would appreciate it if all new accounts would do some research.

Nothing is hidden. Teams were voted on in the DAO, so the budgets are transparent now. That was the focus. The new Ops guild is working through doing the monthly reports for the DAO and Guilds, first ones being this month. Almost everything is on-chain in known wallets - not sure how anything can be hidden.

I think @Yakitori point around looking at what is actually possible in Switzerland is important. As all ANT holders who vote in the new AragonDAO are members and liable.

I agree with distributing ANT tokens to align incentives as well.

Perfect, and given that some funds have already been transferred, and as you said earlier, the Association has acted that “The treasury is in principle governed by ANT holders”. Then what is preventing the association to performing a treasury transfer, that has been delayed for a year now?

“Ensuring smart contracts are safe”, for something as simple as asset management, can’t be the reason. Aragon has the execution capacity and the runway to hire the best auditors around. An outside eye would see that the Association is only executing its duty when it suits its needs, not the DAO’s.

Regarding treasury management, I can recommend which is doing an excellent job at managing DAO’s assets.

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using the “substance over form” argument, it does not matter if you are not part of AA, the end effect was the treasury which is under the association was used to buy back ant tokens.

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You will have to get that from the AA.

I agree an active manager in the future would be good. For now, I would say ETH staking is enough, agile small steps.

It was always in phases, and that was made clear.

Anyway, I am here to engage productively in Luis’s proposal, which I think is an excellent discussion step.

Sure we can work together to make it work. Even if we start with the long-term first, incentivising wANT holders seems like a good idea to me.


I agree, staking eth is enough, not sure why the need to hold uni tokens and others. I fear the idea of putting things in a enzyme fund, and complex active management to be a net drain on the treasury - it is very hard to actively manage a treasury on chain of this size, just look at any onchain hedge funds performance, be it enzyme or dhedge. Plus then have to pay active managers. Adding to smart contract risks. Best to keep the assets few and simple, and find robust yield. Stick to ETH, Stables - stables can be in uniswap pools or curve pools, eth can be staked. This is very simple, low overhead for management and safest. Anything you buy onchain is correlated to eth anyway.