Decentraland DAO Considers Pausing Grants as FTX Collapse Spotlights Diversification
The metaverse platform’s DAO community treasury holds over 99% of its assets in MANA, Decentraland’s native cryptocurrency.
The Decentraland DAO – the metaverse platform’s community decision-making tool – is holding a vote on whether to temporarily pause its grants program and reassess its structure.
The proposal, brought to a vote on Wednesday, cites concerns over the diversity of its treasury holdings as well as a lack of clear guidelines for grants. Through the program, any community member can request funding for efforts to improve the platform or implement new features.
“The grants program has shown to be a key aspect and fantastic addition to Decentraland; however, the time might be right to pause and review its current structure, identifying valuable lessons from its shortcomings,” the proposal states.
Specifically, the proposal notes that its DAO treasury holds funds equal to $19.3 million, with 99.1% of those assets held in MANA, Decentraland’s native cryptocurrency, and only 0.9% held in “other” tokens.
In presenting that information, the proposal references failed cryptocurrency exchange FTX and the risks it took before declaring bankruptcy. Last week, CoinDesk revealed that FTX’s sister company, Alameda, held billions of dollars of FTT – the platform’s exchange token – on its balance sheet, which hinted at an unusually close relationship between the two companies and raised questions about its shaky foundations.
“One of the largest lessons we can learn from FTX’s collapse is that overexposing one’s treasuries and assets to a single type of asset as your primary source of funding and liquidity, is a major risk,” the proposal says.
MANA currently trades at $0.41 cents, after losing about 34% of its value in the past month. The proposal states that further grants could put increased sell pressure on the token.
Thus far, the grants program has invested $7.5 million in metaverse initiatives and has funded 124 grants, according to the DAO’s treasury website. The pause would allow the DAO to diversify its treasury, reevaluate the current grants model and work on building a roadmap.
“FTX has shown our entire industry that accountability, diversification, transparency and prudent and active risk management protocols are an absolute necessity that shouldn’t be ignored,” Sean Ellul, co-founder of Web3 architecture firm Metaverse Architects and co-author of the proposal, told CoinDesk.
The DAO set out a plan in February 2020 to slowly increase its treasury by vesting 222 million MANA tokens over the course of 10 years. Thus far, the DAO has vested about 61 million tokens.
The poll closes Monday, and so far, 62% of voters are in favor of the pause.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.