Hello everyone, sharing here for transparency, clarifications to a few questions we received about our approach to treasury management for the Scroll DAO:
- How do you guys plan to manage sell pressure if diversifying the majority out of SCR? Will using CEXs create an extra burden for the DAO?
We use different strategies to make sure the market impact is as low as possible. Usually, we combine automated execution with discretionary execution.
The former lets us continuously diversify in small portions - we have tools to run accurate simulations through which we determine the sweet spot between moving on with the diversification and minimising market impact. An important factor here is liquidity - we’ve run simulations specifically for SCR, and we believe the optimal route currently includes CEXs (specifically Binance) within the diversification strategy, as DEXs don’t have sufficient liquidity.
We have experience operating on CEXs as we already use this approach for other projects in our network. Based on our previous work, effectively operating on CEXs requires a legal entity that can register and securely operate on the CEX on behalf of the DAO. This enables the treasury manager to access the latest features, directly use the UI and benefit from the full range of capabilities the platform offers. Additionally, this leaves a clear and compliant record of the operations performed by effectively offloading the legal and compliance risk to this specific entity.
Once again, we have experience in incorporating Cayman Islands Foundation Companies for this purpose. An example of this is the dYdX Treasury SubDAO we incorporated for the dYdX Community, which has been successfully operating for almost 1 year. The legal structure and its operations would be handled by kpk, with no cost and no additional burden for Scroll DAO.
As for the latter, we use it to take advantage of market conditions and discretionary diversify more or less based on that. For example, we used the discretionary method for ENS and achieved a $2.36M surplus for them: https://x.com/alicecorsini_/status/1952738713777086917
- Are you able to operate on MYSO even if you’re not an official partner?
Yes. MYSO is a permissionless protocol. Anyone can use it and take advantage of its entire functionality.
- The DAO lacks a defined strategy for resource allocation and investment. How will kpk help with that?
While specific goal setting will be done in collaboration with the Scroll Foundation and the Scroll community as part of the drafting of the Investment Policy Statement, we’ve already suggested in our proposal some key steps that we’ve identified from a first analysis of the Scroll treasury and ecosystem. Specifically:
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Diversify the treasury for long-term sustainability. Initially, we’d focus on stablecoins to cover DAO expenses and build runway. Over time, depending on Scroll’s cashflow and goals, we’re ready to expand diversification into ETH and WBTC.
We plan to do this via CEX diversification (see previous question for additional details) and Covered Calls to generate recurring stablecoin yield by selling call options on SCR, providing upside without upfront asset sales (unless exercised). -
Liquidity Growth: In parallel, we’d bootstrap SCR-based liquidity pools on Scroll-native DEXs, ensuring SCR liquidity expands alongside treasury diversification.
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DeFi strategies: As we accumulate diversified assets, we can start allocating treasury funds into DeFi strategies that offer risk-adjusted returns.
That said, we strongly believe that setting clear goals that reflect the project’s and community’s vision is essential for a successful outcome. The Investment Policy Statement will help with exactly that —it will provide a guiding framework for accountability and evaluation, among other benefits.
We are committed to always managing the treasury in alignment with Scroll DAO’s values and risk profile, periodically aligning with stakeholders. We will work jointly with Scroll’s oversight structures and be attentive to the community’s feedback as well, since treasury management is an adaptable process. Our alignment with Scroll’s ecosystem will be continuous, and our operation will be completely transparent, not only in terms of reporting but also in terms of decision-making criteria.
Our ultimate goal is to become Scroll’s long-term strategic partner and help its ecosystem grow, just like we’ve done with some of the largest DAOs in the ecosystem since our inception.
4. Could you provide details on kpk planned insurance for Scroll treasury management? Specifically, I’m interested in the anticipated yield kpk expects to generate from this plan, and over what period this return is projected
Given that a significant share of SCR liquidity is currently held off-chain on CEXs, and considering the limited DeFi venues available for the SCR token, we’re basing our yield forecasts on:
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CEX availability: the list of CEXs we are allowed to operate on (Binance, HTX, Gate, and other exchanges).
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CEX liquidity depth: the actual availability of SCR to execute meaningful size without major slippage.
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MYSO covered-call simulations: indicative quotes and projected returns to sell SCR covered call options.
These three factors — CEX availability, liquidity conditions, and MYSO’s forecasted quotes — underpin the performance assumptions for our strategy, and of course, they fluctuate over time and are susceptible to make our forecasts inaccurate.
That being said, we forecast we can diversify 60% of the available treasury in under two years, moving that liquidity on-chain, and earning premiums on the covered calls on MYSO for 8% - 10% APY.