With the paradigm shift in the DeFi world from 1.0 to 2.0, a critical difference between the two generations is the move from liquidity mining mechanisms (or more commonly known as yield farming) to a protocol owning its liquidity. This ownership of liquidity means that a DeFi 2.0 protocol emphasizes the creation and maintenance of a treasury that holds a basket of assets, giving an intrinsic value to the protocol and its token.
Let’s look at the KeplerDAO treasury and how it will become a solid foundation that will enable not just operations, but key business models we build.
The Growth of the KeplerDAO Treasury
Like the growth of a traditional company relies on its increase in cash flow, Kepler’s treasury growth is directly linked to its success as a DeFi protocol. Being a community-focused venture investing DAO, the explosive growth of the Kepler treasury will eventually be driven by the success of the ventures that Kepler invests in. However, such growth takes time to come to fruition and requires a solid foundation to be built upon. Thus, the fundamental accumulation mechanism for Kepler’s treasury is through the process of bonding.
For Kepler, bonding is a near-term profit approach that allows for the accumulation of reserve assets and liquidity that has been entrusted to the Kepler treasury. The sales of bonds enable bonders to provide their LP (liquidity provider) tokens or their crypto assets (USDC, DAI, ETH, etc.) in exchange for discounted KEEPER tokens (Kepler’s native currency) which will then be vested for gradual release to the bonding party. Investors can invest in Kepler with a discount and gain significant rewards over time, while the Kepler treasury can own its liquidity and reap substantial profit from its LP tokens. This win-win situation ensures a handsome profit for investors and raises the protocol’s reserve value, as well as that of KEEPER.
The Composition of KeplerDAO Treasury
Unlike other OHM forks, Kepler does not aim to become a reserve currency but to become a mighty crypto investment vehicle that is community-funded and community-driven. Inspired by OlympusDAO, KEEPER is always backed by a minimally valued treasury consisting of stable coins and LP tokens from KEEPER-stable coin pairs. These low-risk assets are vital to ensure stability for the KEEPER token and to provide confidence for our community and investors. Apart from these assets, a unique feature of the KeplerDAO treasury is its holdings of protocol tokens from its investments.
A feature that makes Kepler unique is the combination of blockchain-related assets with a varying risk profile that made up the Kepler treasury. The treasury assets are summarized in the table below according to their risk profile.
Kepler Treasury Assets Type
- Low Risk: Stable coins such as USDC/USDT/DAI
- Low-Medium Risk: LP tokens from pools such as USDC-KEEPER
- Medium-High Risk: Other crypto assets such as Eth, wBTC
- High Risk: Tokens from investment in portfolio web3.0 projects
Stable coins are a good hedge against volatility and provide a solid base to ensure the stability of the treasury value. However, such assets do not gain significant value over time, limiting the future growth potential of the treasury.
The protocol directly owns LP Tokens, as discussed earlier through the mechanism of bonding. Direct ownership of liquidity means all fees generated from the liquidity pool are channeled back to the treasury as profit, which is a significant source of value growth.
Bonding of assets such as Ethereum (ETH) is done for strategic purposes to add crypto-native and highly decentralized assets. Such assets can be more volatile but with higher potential upside in the coming years with the dawn of Web 3.0 and the continued growth of the crypto market.
The final and most exciting class of assets in the Kepler treasury is the Kepler-invested protocol assets, which is a unique part of Kepler. Through the management of a community-elected FMT (Fund Management Team), a portion of the treasury funds are allocated for investment into promising early-stage crypto projects. Such projects can attain massive growth, driving the value of the investment up significantly and resulting in an enormous increase in the value of the Kepler treasury, which owns the investment portfolio.
Valuing assets in the KeplerDAO Treasury
Assets that carry value are typically defined by their market value, the price an asset would fetch when offered in an open marketplace. Determining the value of some assets can be a huge challenge that requires advanced analytics and detailed research to establish an accurate number. The success of a protocol like Kepler is often defined by its treasury’s value. Consequently, an accurate valuation of all the assets in the treasury is vital to establish the protocol’s strength.
For Crypto related assets, stable coins are the easiest to define in terms of value as they are typically fiat-backed (major ones are pegged to the USD to give a value of USD 1) and thus retain a consistent value. Both Crypto tokens like ETH and LP tokens can also be easily defined by their token price, derived from established exchanges (with significant trading volume). The value of these assets in the treasury is just a simple mathematical calculation of the token value multiplied by the amount owned:
Asset value = $token x amount owned
On the other hand, the asset pool consisting of protocol VC-investment assets in the Kepler treasury is challenging to define. This is because most of these investment protocols are in an early stage of development with no clear way to determine their intrinsic value. The team faces this ongoing challenge with limited solutions through established means. Creative ways would have to be invented, and one such idea currently being explored is through collaboration with the most prominent blockchain oracle, Chainlink. Discussion with Chainlink has been initiated to provide Kepler with a customized oracle solution based on their off-chain computation capabilities and access to real-world data. This would not be the only solution. As Kepler grows and improves its operation, an innovative approach or new technology would be developed to enable accurate valuation of the true worth of its VC investment.
Kepler’s treasury has been designed to achieve immediate and consistent gain through bonding, while the non-bonding revenue would provide longer-term sustainability. This solid foundation can be built upon through its VC investment assets which would drive the exponential profit that will eventually reward all investors and the Kepler community handsomely.
Check out this YouTube video for a quick summary of the points mentioned above.
HODL and prosper!
KEEPer for life.
