How to Structure a Protocol's Treasury

The first priority for many large protocol treasuries is to diversify a portion of assets into stablecoins. The stablecoin allocation should at least cover a few years of operating expenses for the treasury.

Treasury allocations should ensure that critical expenses can be funded even if the protocol token has a significant drawdown.

A protocol treasury should help grow the network. If managed well, the treasury can serve as a strategic asset that improves the protocol’s market position. If a treasury becomes significant enough, it can fund important public goods, including things in the physical world.

Currently, even some of the largest protocols are unable to generate enough revenue to cover operational expenses (audits, salaries/payments to contributors, marketing, etc.). Yearn, for instance, operates at a loss even after accounting for non-operating income from yield farming. As such, retaining protocol revenue alone is likely to be insuffici... See more