Summary
With the approval of [SEP22], [SEP24] and GIP-29, the SAFE token became transferable, and karpatkey was appointed as the asset manager of the SafeDAO <> GnosisDAO Joint Treasury. In this post, we share progress on our work and provide visibility into the topics our team focuses on next.
As per [SEP24] and GIP-29, the Joint Treasury (“JT”) is a strategic fund to support healthy markets for the SAFE token, grow the Safe{DAO} ecosystem and bring back value to both the Safe and Gnosis ecosystems.
What have we achieved so far:
- Successfully managed the Token Transferability Event by diversifying a portion of the Joint Treasury before launch, ensuring our ability to provide two-sided on-chain liquidity;
- Created liquid on-chain markets for the efficient trading of the SAFE token across Uniswap, CoW and Balancer on Ethereum and Gnosis Chain.
- Successfully maintained efficient on-chain markets for the SAFE token, lowering fees for users by providing 85% of all token liquidity.
- Reduced operational risk by implementing karpatkey’s proven, non-custodial treasury management infrastructure for the JT.
- Generated ~$280,000 in fees for the Joint Treasury from yield and LP positions, covering >100% at (30-Jul) prices of the fees drawn by karpatkey;
- Set up a team exclusively dedicated to the JT with the aim of offering all of karpatkey’s services in the long term: Advisory, M&A, Business Development and Growth, Governance, Investment and Risk Management.
Going forward, karpatkey will continue to fulfil its duties with respect to on-chain liquidity provision for the SAFE token and treasury management. It is important to recognise that the latter is constrained by the difficulties of diversifying the Joint Treasury composition under current market conditions.
In addition to these continued efforts, we will be dedicating resources to supporting the adoption of Safe infrastructure on the Gnosis Chain through incentive initiatives and contributing to research efforts focused on SAFE token utility and Safe infrastructure monetisation, which have been identified as high-value contributions our team could make.
H1 results
Since the beginning of our mandate, we leveraged the Joint Treasury to support the Safe ecosystem through the early stages of its DAO. In parallel, we collected perspectives from various stakeholders (Safe team, product teams building on safe, SAFE investors) that direct the identified next steps.
Treasury Management
Key treasury metrics include the following as of 30-Jul (source: karpatkey monthly reports):
- Over 90% of the Joint Treasury’s holdings are currently in SAFE tokens;
- Of the non-SAFE assets, ~17% are currently deployed in LP positions;
- The remaining assets (~7% of the treasury as of 30-Jul) are leveraged for yield generation returning 4.39 ETH and 27.6k DAI.
Risk Management
karpatkey implemented its On-Chain Non-Custodial Asset Management Infrastructure adapted to the JT requirements, integrating practices that have allowed karpatkey to safely operate with 1B+ non-custodial AUM.
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Crafted a meticulous risk map tailored for the Joint Treasury, pinpointing specific risk parameters and outlining both preventive and mitigative measures;
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Set up Hypernative alerts for each of the protocols with funds deployed from the JT:
- Various protocol, smart contract, and financial risk factors are monitored, including oracle pricing, contract ownership transfers, pool liquidity checks, withdrawal queues, collateral ratios/health factors;
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karpatkey conducts both weekly internal risk reviews and weekly external reviews with the Hypernative team.
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We internally built an Agile Execution App (AxA), enabling asset managers of the Joint Treasury to swiftly execute pre-designed strategies for emergency purposes (allowlisted swaps and exits), reducing dependency on protocols’ UI and minimising human error/time-consumption whilst ensuring security.
SAFE Liquidity Management
TTE liquidity management
Prior to SAFE’s Token Transferability Event, we raised $5.6 million via OTC deals, with a one-year vesting of the SAFE tokens. This was an essential step in leveraging the Joint Treasury to bootstrap the initial liquidity needed to support on-chain liquidity on the day of the TTE. It is important to mention that these actions had no price impact.
Over 50% of the trading activity on the day of the TTE was on-chain, with the JT being responsible for over 90% of the total liquidity provided on the SAFE/ETH Uni V3 1% pool - This was the main pool that had trading activity that day.
This activity marked an early success for the karpatkey team and the Safe Ecosystem.
Continued SAFE liquidity management
As per our monthly reports, the following key metrics were observed:
- Since June 3rd, 100% of the on-chain volume has been routed through one of the three pools owned in its majority by the JT, which now makes up over 85% of all the liquidity (excluding the CoW AMM position):
- ~80% on the Uni V3 1%;
- ~99% on the Uni V2;
- ~99% on the Balancer in Gnosis Chain;
- Through the LP positions, the JT has bought a total of ~620,000 SAFE valued at ~$630k USD at the current market price;
- The JT has also earned ETH, GNO & SAFE from trading fees in the pools valued at ~240k USD at current market prices.
Safe/Gnosis BD & Protocol Integrations
Below are the key highlights of our analysis of the Safe ecosystem:
- We mapped the Gnosis<>Safe ecosystem to identify strategic incentive campaigns that benefit both ecosystems and are working on a Dune Dashboard to identify activity in Gnosis Chain related to SAFE token and Safe Accounts;
- We explored possible strategic partnerships, investments and DAO2DAO token swaps for Safe.
SAFE Token Utility
We have initiated conversations with key stakeholders and working groups across various team building on the Safe infrastructure with respect to the SAFE token utility and general product monetization for Safe. This is a strategic initiative with a substantial impact on both Safe DAO and Gnosis DAO, with powerful long-term potential. In addition, this would enhance our ability to effectively manage the Joint Treasury and pursue yield opportunities.
Reporting
In line with karpatkey’s industry best practices, we provide transparency and comprehensive reporting on our treasury management activity through our dashboards and reports. We make ourselves accountable for the results achieved and continuously engage with the relevant stakeholders.
We appreciate the trust you have placed in us with this critical responsibility. We look forward to maintaining our commitment and efforts in the upcoming semester and beyond, ensuring the lasting success of the Safe DAO & Gnosis DAO.
Next Steps
After successfully supporting the TTE our team has explored multiple paths to leveraging the Joint Treasury. Combining karpatkey’s vast experience across ecosystems with feedback from stakeholder consultations and taking into consideration the constraints of the current market dynamics, we have defined the following priority initiatives towards which we will be allocating our resources:
- Evaluate and deploy incentives targeted at increasing the adoption of Safe on Gnosis Chain
- Finalise mapping the ecosystem to deliver data-backed incentive programs aimed at increasing Safe Account adoption & activity (i.e. mirror the Safe {Pass} initiative on Gnosis Chain)
- Support “amplifier” protocols and products that have the Safe infrastructure deeply integrated into their value proposition (i.e. GnosisPay)
- Identify new “amplifier” use cases for Safe on Gnosis Chain
- Research modes for value capture in the Safe Ecosystem and value accrual into the SAFE token
- Identify and work with key stakeholders to develop potential paths for monetisation of the Safe infrastructure and value accrual for the SAFE token
- Contribute to ongoing related initiatives in the Safe ecosystem such as the Token Utility Sprint
- Continue supporting a healthy on-chain market for the SAFE token, including:
- Monitoring SAFE on-chain activity and trading-related metrics
- Executing actions to maintain market liquidity by providing ample “in-range” liquidity across AMMs
- Evaluate and create additional liquidity pools across Ethereum and Gnosis Chain
- Continue implementing treasury diversification through OTC deals, DeFi, and Derivatives strategies, seeking yield as a byproduct.