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Investments
As one of the Merit Circle DAO’s key verticals, investment has been the driving force behind our success so far. Operating as a hybrid of hedge and venture capital funds, we are creating a robust and resilient treasury that can withstand anything. This vertical consists of venture, token and NFT investments as well as staking operations.
The Merit Circle DAO is in a truly unique position with the ability to offer far more value to our portfolio projects than any other fund.
As one of the four verticals, Merit Circle Investments plays a crucial role in supporting and funding operations through the management of the DAO treasury. This management entails creating short- and long-term strategies to acquire and dispose of the DAO’s portfolio holdings. These include not only token and NFT investments but also staking operations.
Our investment strategies are governed by mandates set by the DAO, as well as executed through proposals put forth and voted on by its contributors. The aim of this vertical is to run the treasury as a fund, focusing on improving its long-term risk-adjusted returns by deploying every idle asset into quality investments. To summarize, the investment vertical:
- Finds appealing investment opportunities for the DAO
- Holds advisory positions in portfolio projects to ensure consistent performance
- Involved in staking to assure consistent rewards on idle cash positions
- Implements several mandates that allow for sustainable development of the DAO
- Allows the $MC holder to receive rewards from the DAO's performance through the staking portal
In its current formation, the Merit Circle DAO is focused on three pillars that together represent our ambitions to improve the DAO’s treasury:
Transparency – Via its monthly reports and public disclosure of wallet addresses, the treasury comes as close to being an open book as the necessity for competitive advantage permits
Operational efficiency – We budget for the DAO’s operations and ensure the financial continuation of all verticals. Budgeting for the DAO’s operations and ensuring the financial continuation of all verticals. This includes capital efficiency, which is the practice of seeking to have the most impact with the capital that we have available.
Treasury size – As an organization, we strive to increase the size of our treasury mainly through growth in both size and sustainability. Healthy organizations not only maintain their treasury, but also find ways to increase their treasury size and utilize that additional capital for further growth.
Transparency is of the utmost importance for us at the Merit Circle DAO. We cannot overstate how strongly we believe that operating transparently is vital to creating a healthy community. Therefore, when reporting about our treasury status and where we are now, we try to be as clear as possible. Accounting is not the most fun, but we want to lead by example here.
This is currently done through our monthly treasury reports where we share a clear breakdown of all the assets of the Merit Circle DAO. You can find a repository of all the available treasury reports below.
Staking positions as per January 2023
Through various proposals, we have deployed close to $30 million in stablecoins across various staking protocols. In the image above, you can see a breakdown of all the tokens we are currently staking that are generating significant returns for the DAO.
The aim here is to find low-risk yield-farming opportunities for our cash assets that are sitting idle, waiting to be put to use. However, acknowledging the risks attached to staking protocols, we are minimizing our exposure to staking positions.
Notable proposals:
Investing in the right projects means the possibility of generating significant returns. We’ve seen many of our investments perform incredibly well, forcing us to create a clear strategy on what to do with these proceeds. Therefore, a specific set of rules had to be put in place.
This proposal gives the DAO a venue to de-risk early-stage token and NFT investments at the time they become liquid. By mandate, the DAO would be able to do so quickly and flexibly, giving it more opportunities to benefit from short-term market conditions. It will also reduce the amount of governance overhead for something that is, in our opinion, a clear win for the DAO.
While this approach was officially embraced by the DAO, DAO contributors thought that creating a larger treasury in terms of USDC value wasn’t the most beneficial way of utilizing these proceeds. That’s why MIP-7, the ‘Sustainable Future Vision’, was brought to life. This is best summarized as follows:
This proposal has the purpose of creating a sustainable ground for the future of Merit Circle and the MC token. We propose to use the proceeds from realized gains on investments across various investments done by the DAO to be deployed in a structured manner. This consists of using one part to re-fill the treasury in USDC, one part buying back MC tokens for the treasury and the remaining part burning a part of the MC tokens bought back.
One way of tying everything together is our staking portal. Although more advanced than most staking modules, our current staking module is still relatively simple and straightforward. We aim to make it more complex and offer a wider range of options.
More about the staking portal can be found here.
Last modified 2d ago