Financial Analysis of the TEC

⚛ Community
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All amounts and balances are set as of December 8th, 2023.

As part of the first phase of the Fiduciary Stewardship of the TEC Common Pool initiative, as stated in the latest Coordination Team proposal, the Coordination Team, in conjunction with TECAN, presents this high-level analysis of TEC resources. We provide a general overview of the state of the Common Pool, Reserve Pool, multisigs, and liquidity providers, along with a brief recap of the current governance systems to manage Commons’ funds. Lastly, we conduct an analysis in which we attempt to identify key internal strengths and weaknesses, as well as external challenges and opportunities related to the Commons, with a particular focus on resource management and financial responsibility.

Common Pool / Reserve Pool

A high-level examination of the current state of Common Pool (CP) and Reserve Pool (RP) funds, focusing on their amounts, allocation, and utilization.

Common Pool

The TEC’s Common Pool, funded through an Augmented Bonding Curve, supports TEC projects, operational needs, and aligns stakeholder incentives. When buying TEC tokens via the ABC, an Entry Tribute goes to the Common Pool. Selling TEC tokens leads to an Exit Tribute, also benefiting the Common Pool. This dual tribute system ensures continuous funding for the TEC.

Common Pool balance: 308,478.40 WXDAI

Total amount of tributes that have been collected:

The percentages have remained constant since July this year, with entry tributes at 2% and exit tributes at 12%. However, at launch, the entry tributes started at 22%, while the exit tributes were initially set at 2%, and these percentages gradually evolved over time. The cumulative amounts provided below cover the period from January 2022 to the present.

  • Entry Tributes: 210,490.52 WXDAI
  • Exit Tributes: 116,546.69 WXDAI

Total amount of tributes collected: 327,037.21 WXDAI

What type of expenses have been covered by the Common Pool?

  • Grants: 456.7k WXDAI
  • Operations: 349.5k WXDAI

Reserve Pool

The Reserve Pool’s primary purpose is to primarily serve as a liquidity reserve to support the stability and liquidity of TEC tokens within the TEC ecosystem. It functions as a reserve for the reserve currency (wxDai), ensuring that sufficient funds are available for exchanging TEC tokens when necessary. When TEC tokens are purchased (minted) or sold (burnt) through the Augmented Bonding Curve (ABC), a portion of the funds are respectively allocated to or withdrawn from to the Reserve Pool. These funds are bonded to sustain liquidity and back the value of TEC tokens. Currently, the reserve ratio stands at 19.82%, with 318,665.21 $TEC constituting this percentage of the total 1,607,796.24 $TEC supply, held in reserve and bonded to the ABC. With the $TEC price at 0.42 WXDAI/$TEC, this equates to ~133,288.14 WXDAI stored in the reserve.

Reserve pool balance: 133,288.14 WXDAI

Multisigs and Liquidity Providers

An exploration of the various multisig wallets and LPs within the TEC, highlighting their purpose, balance/liquidity and any relevant observations.

Coordination Team

Purpose: Covers essential operations of the TEC.

Balance: 22,701.83 WXDAI ( $22,639.65 USD)

Observations:

TE Grants Program

Purpose: Funds for the matching pool of the third TEGR.

Balance: 25,717.33 sDAI ($26,360.27 USD)

Observations:

LaserTag

Purpose: Allocations of $TEC from the Initial Buy-in for both the strategic partnerships and secondary market liquidity use cases will be custodied together by an entity known as the Liquidity And Strategic Employment Requests Token Allocation Group (LASERTAG). Current purpose is TBD.

Balance: ~ $29,141.04 USD

  • 57,797.946 $TEC ($24,323.89)
  • 16,662.283 TEC-GIV LP ($2,269.51)
  • 0.8 wETH ($1,882.23)
  • 46,957.164 $GIV ($557.40)
  • 193.894 XDAI ($195.22)
  • 175.14 WXDAI ($174.57)
  • 20 USDC ($20)

Observations:

  • Closing down this multisig is a possibility that should be discussed among the LaserTag members.

Legal

Purpose: Contingency fund for external legal support. Held to have sufficient funds for a quick response in case the TEC encounters legal issues.

Balance: 10,000 WXDAI ($9,972.61)

Observations:

  • The TEC should continue to hold these funds in case of any legal issues.

Rewards Board

Purpose: Rewards distribution which account for praise recipients, quantifiers, rewards board members, and Rewards WG operations

Balance: ~ $21,988.93 USD

  • 20,494.633 WXDAI ($20,556.12 USD)
  • 2,948.80 $TEC ($1,432.82 USD)

Observations:

  • The Aragon DAO stopped working - the app on gnosis chain is no longer maintained and became unusable so funds were moved to a new multisig.
  • Rewards Board and Reward DAO are essentially the same, with the board being part of the DAO. Rewards System refers to the reward distribution configuration via praise. Rewards WG is the inclusive working group, covering both quantifiers and the reward board members.

WATER - TEC Pair

Purpose: Allow each DAO taking part in WATER to have a nice liquidity boost, while also creating a $WATER token that effectively acts as an Index of all the DAOs.

Liquidity: ~ $39,937 USD

Pooled Tokens: 47,969 $TEC and 79,776 $WATER

Observations:

  • A formal proposal has been passed through a vote by the community in order to exit WATER contingent on the migration of the TEC to Optimism.
  • It is important for the TEC to make our withdrawal from $WATER transparent not just to our own community but to our friends within the Gnosis ecosystem. Once we work out details of the process through conversations with the $WATER alliance, we’ll make a formal request to the WATER team for an exit plan on the originating post on 1Hive.
  • A consideration should be made about holding these funds as $TEC in the Common Pool once the exit from WATER gets finalized.

HoneySwap LPs

Purpose: These pairs have been created to provide more liquidity within the TEC ecosystem.

Pairs:

TEC - GIV: $29,318.11 USD

  • 33,245.75 $TEC
  • 1,192,221.51 $GIV

TEC - HNY: $1,191 USD

  • 1,421 $TEC
  • 57.028 $HNY

TEC - WXDAI: $147.73 USD

  • 176.785 $TEC
  • 73.865 $WXDAI

Observations:

  • As part of the TEC migration to Optimism, a token census has been conducted to identify all $TEC held in smart contracts and have it moved away before migrating.

Gravity

Purpose: Cover for Gravity DAO operations.

Balance:

Observations:

  • The TEC should no longer monitor this multisig, treating it like any other external grant recipient at this point.

Review of Governance Models

A quick overview of the governance models employed by TEC for stewarding its financial resources.

Tao Voting

Current Status: Tao Voting has replaced Conviction Voting.

What it is: A voting process with a module that provides a time-boxed, “Yes/No” voting template.

When to use: Use Tao Voting as the main method for making larger funding requests from the common pool.

Parameters:

  • Support Required: 85%
  • Minimum Quorum: 10%
  • Vote Duration: 5 days
  • Delegated Voting Period: 3 days
  • Quiet Ending Period: 3 days
  • Quiet Ending Extension: 2 days
  • Execution Delay: 0.5 days

SWOT Analysis

A straightforward SWOT analysis that emphasizes fiduciary stewardship. This analysis will identify TEC’s strengths, weaknesses, opportunities, and threats concerning resource management and financial responsibility.

Strengths

Areas of financial strength, and successful resource management practices.

  • TEC’s Essential Operating Budget: The Coordination Team has implemented a monthly budget to maintain the TEC’s essential operations with 10,000 xDAI, which is only a quarter of the previous average monthly operating costs of 39,000 xDAI.
  • TE Public Goods Strategic Funding: The TEC is funding TE public goods through the Token Engineering Grants Program (TEGP), allowing for more strategic and predictable allocation of Common Pool funds while also achieving its mission.
  • Successful ABC Operation: The Augmented Bonding Curve (ABC) mechanism has been effective, generating over 300k in tributes, contributing to the sustainability of the TEC ecosystem.
  • Transition to Tao Voting: The decision to shut off Conviction Voting and transition to Tao Voting for larger funding requests from the CP demonstrates an effort to make proposals harder to pass and manage CP resources effectively.
  • Sponsorships for TEGP: The intention to have the TEGP partially or fully funded by sponsors is a proactive approach to sustainably fund Token Engineering public goods without depleting the Common Pool.

Weaknesses

Areas where the TEC is lacking or underperforming in terms of financial responsibility and resource management.

  • Dependence on External Funding: Over reliance on external contributions (like grants) and sponsorships for funding initiatives may create a risk if these sources become uncertain or insufficient.
  • Unclear Financial Strategy: The absence of a well-defined financial strategy and contingency plans for various financial scenarios can leave TEC vulnerable to unexpected financial challenges.
  • Lack of Continuous Financial Reporting: TEC currently lacks continuous financial reporting practices, which could provide greater transparency, more accountability, and a better understanding of the Commons’ financial health. This would enable better and more informed decisions.
  • Lack of Revenue Streams: The Commons faces a challenge in developing reliable revenue streams, which are essential for financial stability and self-sufficiency. Right now, the only revenue for the TEC comes from tributes, primarily derived from exit tributes that can only last for so long.
  • Budget Runout: With the current annual budget of $144k for essential TEC operations through the Coordination Team and an additional $100k allocated for the TE Grants Program (excluding round operating expenses), we anticipate having funds for only one more year at these expenditure levels before depleting the Common Pool.
  • Lack of Token Utility: The $TEC token currently lacks use cases within the Commons ecosystem, affecting its value. Without well-defined purposes, the token may struggle to attract users, generate demand, and maintain its value.

Opportunities

Potential opportunities for improvement in resource management and financial stewardship.

  • Diversify Revenue Streams: Exploring diverse revenue sources, such as fees for services, partnerships, or product development, can enhance financial stability.
  • Strategic Partnerships: Form strategic partnerships with other projects or organizations to access additional resources, funding, or shared operational capabilities.
  • Efficiency Improvements: Identify and implement process improvements and efficiency measures to reduce operational costs.
  • Benefit from a Bull Run: Capitalize on a potential bull run in the cryptocurrency market by strategically managing investments to strengthen financial reserves and fund initiatives.
  • Transition to LST as a Reserve Currency: Embracing LiquidStake (LST) as a reserve currency for the TEC can offer the opportunity to generate additional income and potentially enhance the financial position of the Commons.
  • Optimism Ecosystem Funding Opportunities: With the completion of the migration to the Optimism ecosystem, the TEC can explore a wide variety of funding opportunities within this ecosystem.
  • Investment Income: Explore supplementing TEC grant program with a similar investment program where the TEC takes actual stakes in the projects it funds.

Threats

Threats that could impact TEC’s financial stability and resource management negatively.

  • Internal Mismanagement: Poor financial stewardship, misallocation of resources, or internal disputes can weaken TEC’s financial position and effectiveness.
  • Market Volatility: Fluctuations in cryptocurrency and token markets can impact the value of assets in the Common Pool and the Reserve Pool, affecting financial stability.
  • Regulatory Changes: Evolving and potentially restrictive regulations in the cryptocurrency and blockchain sector could introduce legal challenges and uncertainties.
  • Token Price Depreciation: A significant decline in the value of the TEC token, resulting from sell-offs by token holders due to a continued lack of confidence, could impact the organization’s financial resources and its ability to support projects and initiatives.

Thank you for taking the time to read this post! Feel free to drop in the comments any questions, feedback, suggestions or further analysis you might consider relevant. Or if you prefer, feel free to reach out to the Coordination Team directly here.

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