Background: 1Hive has accumulated a significant amount of assets in a Treasury multisig as a result of various community initiatives. This multisig has been used to hold the assets and manage them as a portfolio in order to gain exposure to other assets based on community feedback. Note that, managing non-honey assets is something that the core 1Hive protocol does not yet have a mechanism for and using a multisig is not a viable long-term solution for various reasons, however addressing that issue is out of the scope of this proposal.
Proposal: We should treat the treasury like an endowment fund for the 1Hive common pool, consistently converting a small (<4%) fixed percentage of total asset value on an annual basis into Honey and sending it to the common pool. Currently most of community’s income is accumulated in a treasury multisig
After implementation, our income can go in either the treasury or common pool, and still be a closed loop.
Rationale: 1Hive’s “dynamic honey supply policy” was modeled and adopted with the expectation that issuance would be used to help bootstrap the Honey economy, with the expectation that contribution would aim to be “productive” and result in net-inflows to the common pool overtime. While initiatives like Honeyswap’s fee routing directly resulted in common pool inflows, other initiatives have resulted in the accumulation of assets in the Treasury multisig, and in these cases we do not currently have a mechanism to close the value loop. This proposal aims to address that fundamental issue.
Implementation details: If this proposal gets support, we will need to work out the implementation plan in more depth. But at a high level, I imagine we would need to specify a policy/process that could be executed manually by the treasury multisig. We would determine the value of the treasury (excluding Honey), the rate we want to convert, then use tools to sell assets for honey over time (eg cow.fi), and deposit them into the common pool.
1Hive’s treasury assets are far more productive to us outside of Honey and its LPs. “Closing the Loop” here really means retiring 1Hive money from usefulness and sending it to Honey holders instead to recuperate losses on their investments over the last 3 years.
We’ve seen this already with the using Honeyswap fees to buy HNY and send to the Common Pool, which also hasn’t been effective. If we’d collected Honeyswap fees as another token in a dedicated Honeyswap treasury, we might actually have dedicated contributors today working on it.
Honey has intrinsic value as a governance token - people who care about the community want to get and hold HNY because it gives them say in decisions and represents their ownership in 1Hive. I think we should continue to focus on improving Honey’s effectiveness as a governance token, and separately use treasury assets to invest in things that are more likely to bring new contributors and new money to 1Hive.
I’ll expand on my thought that Honeyswap’s decision to buy HNY with fees and send them to the Common Pool was not a good idea…
It helped send Honey to the moon in spring 2021 which then became an unsustainable price it never maintained. It’s not like Honeyswap doesn’t still get healthy volume: $100M in the last year, which would be $100-200k in fees (protocol fee is .1-.2% I think?).
If Honeyswap collected that as xDAI, yes the price of Honey would be even lower, but Honeyswap would have an active team still working on it today and I doubt any of today’s active contributors wouldn’t still be around since they’ve proven by now Honey price isn’t what keeps them.
If the goal was to make inflows > outflows for Honey, then 1Hive is a company and should probably restructure to a private org better suited for profitability.
If the goal was create a narrative that Honey was a good token to speculate on, a) that didn’t work, and b) as a contributor I don’t understand why we’d want that anyway. It’s stressful to have your governance weight subject to a speculative market.
Honey as a liquid governance token that functions purely as voting weight, distributed proportionally to the value created by people, with a separate endowment treasury of growing assets that are managed by Honey, to me is a the cleanest / best structure for 1Hive.
My sense is that buying Honey with treasury funds or fees and adding to the Common Pool is effectively shoveling money from a wheelbarrow into a deep dark pit.
The treasury assets are only useful if they are allocated to productive things, and the way that we allocate resources in 1Hive is by distributing Honey from the common pool using conviction voting. While it is definitely useful to have a separate treasury, since we want to have exposure to other assets for diversification and yield opportunities, eventually we need to start putting some of this yield back into the common pool so we can continue to allocate it to contributors.
This does benefit honey holders in that it would reduce dilution and systemic sell pressure from common pool outflows, it also benefits those earning Honey who might need to sell some in order to pay their bills.
Actually that fee mechanism has worked. Honeyswap as a project may not have grown as big as it could have been, and we certainly made mistakes in terms of strategy and execution. But the fee split contributes to the value of Honey, even today.
The price of Honey has been relatively stable over the past year, which suggests that buy and sell pressure has been balanced, the only real source of stable buy pressure comes from the Honeyswap fees, without it price would have just kept falling until there was little value in Honey due to persistent sell pressure created by outflows.
While current contributors have shown that they are interested in contributing even though price has declined dramatically from all time highs, they are still getting Honey from the common pool and selling some portion of that, so its hard to know what would have happened without those inflows helping to stabilize the price where it currently has.
As far as if Honeyswap would have worked better if fees were kept by a dedicated team, it certainly possible, but hardly a definite.
For me the goal of 1Hive has always been to make a successful decentralized autonomous organization, something akin to Bitcoin or Ethereum. The core idea of conviction voting is to reward a broad range of contributions to the protocol, instead of only rewarding mining or validation.
Making inflows > outflows and/or demand > supply seems like a reasonable measure of success in this context.
Having a shared goal for the community to grow, and that existing community members be rewarded in the event that happens through appreciation of Honey doesn’t mean that we ought to restructure into a centralized company.
By nature of being a liquid asset, Honey is inherently speculative. That can have both negative and positive consequences, and I think we have experienced both over the history of 1Hive.
I think there is a case to be made for non-speculative, non-liquid frameworks for distributing governance rights, but that’s just not how 1Hive works right now.
If there is value in distributing Honey added to the common pool via issuance, I would think that there would also be value in distributing Honey that has been recaptured from the market.
If you are saying contributing to the Common Pool is a deep dark pit, then are you not essentially saying that common pool outflows are not worthwhile?
There may be some intrinsic value in governance, but I think 1Hive would benefit tremendously if participation in governance is more broadly attractive to more people. Working towards a healthy and growing economy for Honey is good for all contributors. It allows people to participate in governance without inherently expecting the value they put in to devalue over time, and it allows contributors who earn Honey for their time, to choose to sell it or hold on to it, with less worry that there individual choices will harm the community.
I’m making the case that using the treasury this way not only makes Honey a better governance token, it’s the simplest and most intuitive way for us to start safely allocating the treasury funds to productive contributions using conviction voting.
