BIP 31: Revenue Management Part II

I’ve added information surrounding the first poll per comments from below, thanks for all feedback as we explore managing DAOs together!

Category: Revenue Management

Scope: Diversification Model Updates, USDC as stable, and Goal based Revenues

Status: Accepted

TL;DR: A less intrusive diversification model. Numbers you can play with. Some calls to action surrounding new revenue stream ideas. Diversification. Goal Directed Revenue.

Thank you to all commenters on the last BIP, @jonto, @po, @defifrog, @shakeshack, and @bitcoinpalmer for input, feedback, and critique.


In BIP 23: Badger Revenue Management Overview we covered:

  • “One-Time Diversification Event”; weighted voting resulted in a 19.5% Diversification
  • The ratio of ETH to DAI of diversification events; 49.7/50.3 ETH/STABLE
  • A one time addition to the Sushiswap Liquidity Position: 35%
  • A recurring diversification of monthly revenue; 5.6% of MRR


BIP23 Comments, Discussion, and Greater Inclusivity

In the process of discussing BIP23 a number of different comments and questions came up which we’ve attempted to address herein.

The first topic that came up was buybacks, we’re not in favor of buybacks in the near term as BADGER is a valueless governance token, it is of course at the discretion of the DAO but decisions around value flowing to token holders should not be taken lightly.

While tokens are being distributed buybacks will also have nearly no effect on liquidity. Even if we were to imagine near term revenue shares they wouldn’t be impressive enough to create any real value.

Instead of buybacks we’ll soon be putting up for comments a proposal that covers the topic of Protocol Controlled Value we first became familiar with thanks to upcoming stablecoin platform Fei Protocol.

Also discussed but not directly addressed in this BIP were: staking of ETH diversification, veCRV boosting, variable revenue forecasting, audit of expenses vs direct revenue and profitability, the use of gas tokens and other non correlates.

Breaking the BIP23 Diversification Down


If we look at the diversification voted on prior from the perspective of the market remaining flat over the next year our Revenue Account would look roughly as follows.

If you have a reasonable expectation that Bitcoin will grow over the next year what you’ll notice about this is that BTC would be likely to be more than the ~70% as shown above. In the case that you are bearish on BTC over the next year then you can look at it from the perspective of the stable positions, a 3.84% or $364,016 year end value floor.

Given the desire of the DAO to become a major contributor to the ecosystem we’re changing our recommendation from the last time slightly.

While it would be desirable to get things right the first time every time, being directionally right and moving methodically can also prove effective.

New Recommendations

We still recommend diversification, still recommend stabes, still recommend ETH.

What’s changing is allocation % and removing the one time diversification in lieu of a greater recurring diversification. Now with the model attached now anyone can understand the implications of proposed variations.

The new model would be as such:

  • one time diversifications go away
  • recurring diversification changes to 25%
  • ETH/STABLE ratio changes to 15/85.

Even with this aggressive diversification you can see the DAO portfolio would still likely be greater than 50% BTC.

The big change is that instead of having massive price exposure, we only have large price exposure. A decrease in exposure such that at the end of the year we’ll have been able to put away around $1.7MM, funds that can be used at the discretion of the DAO, funds that in the nearer term can be used for governance token farming and other productive pursuits.


Why!? Why would a growing organization need cash? Well to anyone asking that here is a rough breakdown of the DAO’s spend last grant period: Total ~$180K at time of proposal

  1. Dev 7850 47.69% ~ $86K
  2. Admin 750 4.56% ~ $8.25K
  3. Ops 5300 32.20% ~ $58K
  4. Mkting 2560 15.55% ~ $28K

While we currently benefit from the desire of contributors to earn governance rights, we should prepare for a day in which our treasury doesn’t go as far as we want it. Whether this is for outside contributors, partnerships, r&d, pr, or any other number of things is at the discretion of the DAO.

Stables, Act

The first topic of discussion is stablecoins. Namely how do we choose stables and create value with them. This will also be the topic of a further BIP but the first decisions surrounding stables will be made in this BIP.

In the immediate term it is recommended to allocate the stable portion of our revenue to USDC. The risk of systemic issues is lower with USDC than any other asset, and while there are regulatory risks the DAO will not be operating in any manner that poses massive near term threat.

Given the global macro situation it’s also desirable to explore further diversification of stable positions. Outside of stables the Swiss Franc comes to mind as a particularly strong fiat that still has connection to real value production through Switzerland Gold supply lines and exposure could be gained through synthetic positions.

Another option may be to diversify in part or in whole to another asset besides the United States Dollar. One of particular interest is the FRAX algorithmic fractional reserve system. FRAX<>USDC pool positions would be a good example of a yield earning position for the DAO and given FRAX current position with 86% collateral requirements is essentially a 93% collateralized USDC pool.

If it’s not FRAX it might be something else (like participating Curve pools, Fei Genesis group, or other). What the DAO needs to decide is whether this is a valid line of pursuit. Included in that discussion might be conversations surrounding CLAWS and DAO collaborations with UMA.

Diversification Avenues

It is proposed that when transacting with the revenue account the DAO route orders through DEX aggregators to reduce extracted value from DAO activities.

In the near term the diversification will happen at the discretion of DAO contributors, with the express intent to systemize as many parts of this process as possible, all of which is possible in future BIPs. At the beginning it’s a balance of transparency and efficiency.

Recurring Diversification

Given that the average diversification in the case of $1MM monthly revenue would average around $250K, we propose that the recurring diversification events happen no less than once a month but no more than to ensure a minimum transaction size of $67K.

A quick glance or some experience with bitcoin over the last few months tells you that Thursday to Monday tends to be the highest volume times. Selling into big liquidity isn’t absolutely necessary but will be more efficient.

The plan is to shift to more programmatic diversification as soon as possible. Shake Shack has mentioned the possibility of vaults that manage our diversification strategies, these would be restricted to the use of the DAO at first but could become a product in and of themselves in the future.

Goal Directed Revenue

While buybacks are not a desirable thing in the near term, we are intrigued by the aforementioned Protocol Controlled Value or PCV.

While most orgs are focused on the TVL of their platforms, many should be focused on the PCV, the amount of assets that the DAO actually owns.

The DAO owning real, cashflow producing assets will give BADGER holders the ability to decide on the incentives needed to take the deposits of the platform up an order of magnitude.

To start the PCV would be a percentage of Monthly Revenues that is split off from the main revenue wallet and would be directed based on an upcoming BIP. (please discuss below)

The key here is that the DAO itself would own these assets either for a given time period, or in perpetuity.

If this is desired the DAO could begin by splitting off a 21% of the MRR over the next roughly six months, this would provide the DAO with ~$800K to use for things like Ren Darknodes, BTC hashrate tokens and other cashflow producing assets.

It isn’t our intent in this BIP to hash out all details around PCV but what we can do is start the conversation. This particular topic will be a weighted vote with veto at 30% no, pushing the decision to a subsequent BIP.

(Please note that all models shown above included the BADGER SHARE PCV)

Recommended: One time event as outlined in BIP23, recurring diversification changes to 25%, Stable is USDC, ETH/STABLE ratio changes to 15/85, introduction of PCV


The intended framing of the first question is: Should we move from one time diversification to recurring diversification as outlined above?

Should we Cancel One Time Diversification?
  • Yes
  • No

0 voters

What should the new recurring diversification percentage be?
  • Stay the Same (5.6%)
  • 35%
  • 25%
  • 15%

0 voters

What should the new revenue diversification balance of ETH/Stable be?
  • Stay the Same
  • 10/90
  • 15/85
  • 20/80
  • 30/70

0 voters

Should the Stable position of Badger DAO be held in USDC?
  • Yes (USDC)
  • No

0 voters

Should we explore diversifying USDC further?
  • Yes
  • No

0 voters

Should the diversification event happen as outlined above?
  • Yes
  • No

0 voters

Should the DAO implement PCV?
  • No/need more info (20% will veto)
  • Yes 2.1%
  • Yes 7%
  • Yes 21%
  • Yes 30%

0 voters


Is this actually true? Do all of the devs and ops members want Badger only? Was this an internal poll and or conversation, or are you just assuming?

I’m curious to know the answer here as perhaps some would like a combination of Badger and stables. If stables are on the plate then we need to take that into consideration with a revenue plan and look at putting a portion of those assets to work.

Which brings me to another topic. Moving forward, I believe we should be holding tokens of other protocols that we intend to/are working with like Sushi, and UMA to come. This will not only be a sign of healthy collaboration, but also will give us access to voting and the potential to turn Badger into a supercharged gov token in the future.

If these various assets can be earning rev in their own right, all the better. I read through the article you linked re: PCV and I find that it fairly sums up a direction that I would like to see. We can think of it like starting our own index of DeFi.

I voted no on the PCV simply because I don’t know much about it. I skimmed the medium article but I will have to carve out some more time to go into it more. FEI hasn’t even launched yet from what I understand, does anyone know if it will even work? I think it’s fine to explore it further but we need more data.

PCV is more of a generalized concept basically outlining the capital/assets that a DAO or Protocol has within it can do more than just sit statically until governance decides to spend it. Instead, it can be used to either passively or actively be used to create more value for the interests of the DAO/Protocol. In this case, I presume that the coming BadgerDAO PCV proposals would be more about passively accumulating interest via other protocols. However, PCV can be used in ways that overall benefit the protocol but may not be economically beneficial to the total PCV. I usually refrain from self-promotion, but I just completed a large 3 thread series on Fei Protocol and its mechanics.

I’ll link the final thread here, and you can browse through the 3 of them as you wish.

The part of Fei’s PCV that I assume would be most similar to what I anticipate future BIP’s to look like can be seen in this short section I covered, but really isn’t all that in-depth and rather self-explanatory:

I really am a fan of including a PCV mindset in BadgerDAO, and I have faith that the community will invent a lot of interesting ways to utilize it to the benefit of the protocol!

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Thanks @mason for the depth of thought on this.

Gives me much confidence in Badger with contributions like this.

I do wonder though how many can really give an informed vote about such a technical BIP. I understand these things probably better than most, but to have an informed opinion without being very closely involved is difficult.

This is a challenge for these democratic methods of governance! I will go with what you think best!


I’ve been wanting to mention this for awhile, and please understand that this is not in a spirit of greed but in a spirit of competitiveness. I think the DAO has to share revenue directly with its token holders as promised in various media surrounding the project. If you own BADGER, you should get a payout of revenue the DAO generates. I look to YFI as an example: if they generate over 500k in a month, then they share revenue. I think we need to consider what do we need to bring in to remain sustainable (and finally pay our contributors in something other than a governance token!) and then after that, we need to continue to incentivize the value of holding and staking the governance token.


Great comments, I appreciate you taking the time to reply to this and share your thoughts.

There are currently proposals in the works that will relate to how contributors are compensated in a balance of Badger and dollars, keep an eye out for this and once it is out I hope we can discuss the implications of some of the numbers.

Totally agree we should have strategy surrounding these tokens, one of the upcoming BIPs I’ll be working on soon surrounds this type of thing. Please do add any further comments, would love to have discussion going in this thread.

Glad you found PCV interesting, I think there is a massive amount of opportunity there to create long term sustainability for Badger Dao.

Devin, appreciate your comments. Apologies for not laying out clearer, the intent of the vote here was mostly to guage interest. We won’t move forward with PCV till we’ve put out more info and had more discussion, this thread is one of the places for that so please feel free to add more thoughts. The way we were thinking of PCV wasn’t in relation to Fei, that’s simply how I learned about it and made me want to share it with the community.

Well thought out response, I’ll be reading your article and really appreciate the share. Any more info or thoughts you feel like adding here on the forum please do. Would love to have more conversation around PCV while this is up for consideration.

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Thank you for the response and always sharing cool ideas.

You’re right that this is technical. Will be focused on bringing things down to a more digestible level, hopefully this was easier to approach than the last one!

My goal with governance here is to get to a “choose your own adventure” type thing as quick as possible. It is tough however to find small enough forks in the road and turn pictures into outcomes. My pledge is to work on getting better at doing this!

Totally respect this line of thinking. Perhaps a high water mark on Revenue could help us in this capacity in the future.

I think this has to be really well thought out and clearly reasoned. In my mind it isn’t the highest priority but if the community thinks it’s the most important next step that can be taken for the fledgling DAO I won’t stand in the way

What does this mean exactly? Who is meant by DAO contributors?

After rereading this (and getting some sleep) I think I have a better grasp of what you are trying to propose here but I have some more questions. First off I don’t understand the way people are voting. The first poll asks if we should cancel the one time diversification and majority is no but the last poll asks if diversification should happen as outlined above (recurring) and it’s 100% yes. Was the question misunderstood?

I like the idea of a once a month recurring diversification and believe the 15/85 is is the best ratio. Even though I’m pretty much an eth maximalist I think we should have a large stable coin base that is constantly being grown to offset all the volatility we will see in our other assets. Another bear market will come at some point and we need to have stable assets that can weather that.

I’m totally on board with PCV after reading more about it. Absolutely lets put our money to work and not just sit on it. After emissions end we need ways to continue creating value and the treasury can help with that. I think it needs to be approached very carefully though with a lot of thought about the risks. You mentioned darknodes and hashrate tokens (the latter I had never heard of). Why not just stick our stables and eth in a yearn vault? Could we put the btc in curve? Would darknodes be better for some reason?

Voters seem in favor of using usdc what about using our own claws as well once they are fully released?

I really like your ideas here and look forward to seeing what the community decides on.

Yes the first poll has clearly been misunderstood.

If it were reframed positively as ‘should we move from one time diversification to recurring diversification as outlined above’ the result would be yes.

I just recommend try to keep things simple where you can @mason


Thank you @mason for the thorough proposal and the model you built. I tried to follow through as much as possible, but some concepts are not yet clear enough for me (I have yet to fully understand PCV but I am reading about it and going through again). I am getting there though.

I voted according to your recommendations (at least I think I did). I would suggest you to edit the BIP because the recommendations - and the questions - are quite confusing. Perhaps this is why people have voted quite differently.

Thank you for the thoughtful comments and I appreciate you going through it again.

The final question about the diversification event was meant to signal agreement with the process I laid out in the Diversification Avenues section above. Whichever way the DAO goes with the one time and recurring they’d be executed per that section. (with an aim at systemizing asap).

On the topic of PCV, excited to work on this more and explore the possibilities. Will be putting out further material on that soon

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Learning as I’m going, thankful to everyone here for the feedback!

Will be putting out more information around PCV soon. Thanks for your comments and patience as I get better at breaking things down more clearly :sweat_smile:


I voted no initially on the USDC diversification (for regulatory and universal acceptability reasons), but I am curious about the thoughts on the diversification of the stable coins, the Swiss Franc like mentioned is a good option, what ratio of diversification is being thought about?

Has the Great British Pound been considered as an addition? It has been performing well against the dollar over the last year like the Swiss Franc, but with more stability given the larger market cap.

It’s the oldest currency in continued use and is one of the primary reserves globally (more so than the Swiss Franc).

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Posted to snapshot Snapshot

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I don’t think effectively 50/50 forum votes are ready for Snapshot and more ought be discussed, but Badgers talk. Will see what Snapshot decides.

I agree with that. I voted here, in the forums, in line with the team’s recommendations. But I had to vote against in the snapshot (not that it would actually matter) because the snapshot reflects different numbers and I don’t think the team defended or debated enough their own recommendations.

@mason posted that he would be putting out more information around PCV soon. We were expecting it, but he didn’t have the chance, because suddenly this gets moved to snapshot

I understand that things need to be agile and that we should not get into endless discussions. But we also don’t need to rush things, honestly @DeFiFrog. We we really in a hurry and we couldn’t wait for the info on PCV? Is the team really satisfied with the outcome of this?