Implementing a Community Owned and Operated Treasury

Hi Sundae Community,

My name is Logan and I am a core team member of Clarity. I have been an entrepreneur building on Cardano for the last three years and we have had the pleasure to work along side the Sundae Labs team.

Clarity enables the creation of DAOs that operate on the Cardano blockchain. Through a user friendly interface, protocols can create an onchain treasury with smart contract enforced rules to govern the treasury. To interact with the treasury, communities are able to create onchain proposals which automatically execute if the DAO’s execution threshold is reached.

These automatically executing proposals can include treasury withdrawals, protocol parameter updates, governance parameter updates, staking treasury assets, and more! We are even integrating with Sundaeswap to enable DAO treasury swaps!

Building off the recent governance action which discusses Sundae v3 Administration, and based on what’s described in the whitepaper, we notice that the actual treasury mechanism isn’t specified. We think there’s a great opportunity for synergy here, and wanted to start a conversation about how you all feel about using Clarity for the official Sundae treasury, owned and operated directly and on-chain by Sundae token holders!

Clarity makes it an easy process for protocols, like Sundae, to operate a treasury and govern itself through an Agora based DAO. Agora is an open source and audited governance and treasury management framework built for Cardano projects.

I know personally that the Sundae Labs teams wants to keep decentralizing the protocol and operate an onchain treasury, but ultimately it is up to the community to decide.

I would recommend we discuss

  1. What kind of risk appetite the community has for a smart contract controlled treasury out of the gate. 5% of the treasury to be operated by an Agora DAO? 10%? 100%?

  2. What are the alternatives/other treasury management options?

  3. What types of decisions will be left to the DAO to make?

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Hi Logan!

Thanks for starting this discussion!

We’ve always wanted to have a protocol owned treasury, but it’s a huge responsibility to trust those to a smart contract, hence why we’ve held off.

To my understanding, the Agora contracts (which you’ve built on top of) are probably among the most battle tested in the space, and it would really save Sundae Labs time and resources to be able to rely on something that has real world battle testing.

Some questions that I have, and I’m sure others would be curious to know:

  • Has the specific version of Agora you use been audited? If so, by who? Is there a public audit report?
  • Do you know or have an estimate for what the total USD value currently locked by the agora scripts you use?
  • Do you have a timeline for main net readiness?
  • How would such a treasury fit into the larger incentive / reward narrative that you have planned at Clarity?
  • If the Sundae DAO wanted to contract someone else to build a dedicated frontend for interacting with these contracts in the long run, independent of the Clarity platform, do you foresee anything that would prevent that?
  • For that matter, do you offer white-label frontends for specific DAOs?

Thanks again for your time!

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I personally find the idea of DAO operated treasury with automatically executing proposals very fascinating. It’s the real spirit of decentralization…not something like “snapshot” or similar voting tools that give a “DAO impression” but are actually off-chain and eventually it’s still up to the people in the background if they accept the vote or not… If you have voting and automatic execution, then “code is law” just as the DAO was initially dreamt up…
As a Clarity community member I also must say, that Clarity is probably one of the simplest ways to implement such ambitious project!
(Actually still a pity this one didn’t get Catalyst funded…).

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I’m all for collaboration, and thing this solution proposed by Logan could save sundae a lot of time and resources, and at the same time create a new usecase and client for Clarity. Clarity also seems to be doing some great work which is extremely positive as well. Would like to see some of the questions asked by Pi answered as well.

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I suggest going ahead and creating the DAO. You can get a few polls in to see where the community stands on these issues. It’s a great way to organize and plan even before implementation. DAOs need to be the default way that projects use for governance and decision making if we are serious about decentralization.

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To be clear, we already have an existing DAO, with governance procedures that have been voted on, ratified and used for many votes in a fully verifiable way. So yes, decentralized governance is already well under way.

The proposal here is about augmenting / leveling up that system for full on-chain management of the treasury.

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Hey Pi,

These are some good questions. Here is how we are thinking about them.

Has the specific version of Agora you use been audited? If so, by whom? Is there a public audit report?

  • Yes the core infrastructure has been audited. It has been audited by Vaccuum Labs, here is the audit report: https://github.com/Liqwid-Labs/agora/blob/staging/Agora audit report-v1.0.pdf

  • Core agora has been audited, but the automatically executing effects have not been. We are in the process of starting the audit on these effects. Maybe we can chat with Sundae about this audit, especially regarding the proposal effects the Clarity and Sundae DAO want to leverage out of the gate.

Do you know or have an estimate for what the total USD value currently locked by the agora scripts you use?

  • Liqwid has been leveraging Agora for on-chain community sentiment voting for a year, but they have not yet moved to Agora for treasury management.

  • There are currently no projects leveraging Agora for treasury management since this ability is new to the Cardano ecosystem.

  • You have different starting points when launching the Sundae DAO:

    • Similar to Liqwid, start with no-effect proposals to get everyone used to voting using an Agora framework. In this phase, core team/community members operate the treasury through a multisig. This would work similarly to Sundae’s existing governance platform where decisions are not executed automatically, but votes would be recorded directly on-chain.

    • Another option is to start with a portion, say 10-50%, of V3 revenue flowing directly into the DAO treasury to be governed by the Sundae DAO. This way the DAO treasury is managing a small portion of the revenue generated, and the DAO can get a feel for money flowing in and out of the community treasury.

    • Another option would be to have all of V3 revenue flow directly into the DAO treasury to be governed by the Sundae DAO. This is the highest commitment to decentralization right off the bat, but may not be where the community wants to jump to for step one.

No matter where the community ultimately decides to start, the level of decentralization can scale up over time by putting a higher percentage of Sundae V3 protocol revenue into the Agora treasury. Once all V3 revenue flows to the DAO, the DAO can eventually also manage protocol parameters and the existing Sundae Treasury.

Do you have a timeline for main net readiness?

  • By the end of March.

How would such a treasury fit into the larger incentive / reward narrative that you have planned at Clarity?

  • Sundae will be able to leverage community Bounties & Challenges to add another layer of incentives to the protocol. Community members can be rewarded with Gems for engaging with the protocol, participating in governance, or doing anything else the community should be incentivized to do.

  • These Gems can optionally be integrated with Sundae’s snapshot governance tooling to give a more robust temperature check layer that considers both community contributions and $SUNDAE holdings. This helps give non-whale holders a way to ‘earn’ more influence in the Sundae community.

  • Gems can also be customized to fit Sundae’s branding (ex: maybe they’re called Scoops!)

If the Sundae DAO wanted to contract someone else to build a dedicated frontend for interacting with these contracts in the long run, independent of the Clarity platform, do you foresee anything that would prevent that?

  • No not at all. We will have an SDK that developers can interact with.

For that matter, do you offer white-label frontends for specific DAOs?

  • Yes, we can provide white-label frontends.

Happy to discuss any of these points. We are excited to collaborate with the Sundae community to build a robust on chain treasury management system.

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Treasury management is at the heart of community governance, implementing automatic execution of proposals will enable easy and simple management of community treasury.

Having interacted with Clarity platform, I must say that they have good infrastructure and a user-friendly interface which makes it super fast and easy to implement a community owned and operated treasury.

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Id suggest going right off the bat for the second option Logan mentioned. The technology seems safe enought to try with smaller amounts and its the best way to get community members familiarized with the mechanism.

Maybe that “sub-treasury” could be specifically destined for a particular theme so that we dont get “white canvas” paralisis. Frequent small actions since the inception would be ideal.

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I think this is a very interesting Idea, Maybe you could start with a small pilot, with less funds, and then if everything is going well, expand it to manage the entire treasury?

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Exciting proposal! Starting with a pilot for on-chain treasury management, perhaps with a ‘sub-treasury,’ would ensure a gradual transition, minimize risk and would familiarize the community with the mechanism. Sundae’s existing DAO foundation would align perfectly with this enhancement for full decentralization. Furthermore, collaborating with Clarity could optimize resources and amplify decentralization. Let’s embrace DAO-operated treasuries for true decentralization and efficient decision-making :partying_face:

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