1.0 Summary
This proposal presents a comprehensive treasury optimization strategy and economy update as Botto and the DAO enter the next step of their evolution. The proposal will consist of five interconnected components:
- ETH-to-USDC conversion guidelines for operational stability
- Pre-set price tiers for $BOTTO OTC swaps with aligned partners
- Go forward with liquidity management as the current Liquidity Mining program ends in October
- Yield generation of idle assets via staking
- Revenue distribution rebalancing for $BOTTO rewards with buybacks and inclusion of reputation
The proposal aims to enhance Botto's financial sustainability and operational flexibility while reducing exposure to market volatility so the DAO Operators can focus on execution of the ongoing evolution of Botto in this new era of AI.
2.0 Background Rationale
Coming up on its 4-year anniversary, Botto has slowly evolved beyond a simple AI x NFT project as a pioneering Decentralized Autonomous Artist. As the Botto ecosystem matures, the DAO’s treasury management must also evolve to support its long-term mission of self-sustainability with minimal human interaction.
Currently there are limitations and challenges on what the Treasury Working Group can perform, and coupled with the volatile crypto market, it is prudent that a new Treasury strategy be put in place.
Existing challenges:
- Crypto market volatility creates operational uncertainty as majority of expenses are paid in fiat via USD
- Treasury assets sitting idle and not generating yield
- Deep liquidity with no set targets to establish clear strategy
- No earmarked $BOTTO for OTCs in times of price appreciation
- Mismatch of high reward payouts to the increasingly diversified forms of feedback Botto needs
The proposal seeks to turn potential headwinds into tailwinds so that the DAO can focus on operational growth and execution. With the proposal, the DAO will ensure there’s consistent funding for core operations while positioning Botto for sustainable growth for the years to come.
3.0 Implementation Strategies
3.1 Strategy 1: ETH to USDC Conversion
The objective is to convert ETH to USDC to fund USD/USDC operational expenses while maintaining financial flexibility and downside price protection.
This strategy will be implemented in two buckets:
- Primary Reserve (3-month avg. spend)
- The DAO treasury will maintain a USDC balance covering at least 3 months of operational expenses
- The balance will provide immediate liquidity for DAO payroll, vendor costs, travel, and other USD-denominated expenses
- Extended Reserve (up to 12-months)
- Operational flexibility to convert additional ETH based on market conditions at the Treasury Working Group’s discretion
- Provides strategic liquidity and operational buffer against ETH volatility
- Reduces pressure to OTC $BOTTO, maximizing optionality to onboard stewards aligned with Botto’s long-term success
- Current ETH (~$2.8M) and 12 month burn ~$1M, so approximately 35% of ETH reserve.
Note this is to have optionality and not to actively seek to have a 12 month reserve
Direct conversion is favored over collateralized borrowing for 2 main reasons:
- Eliminates price risk considerations and additional costs from interests
- ETH will continue to be the source of future revenue
Process & Implementation Framework:
- Conversion Triggers: Monthly assessment of USDC reserves vs rolling 3 month expenses
- Execution: Convert ETH to USDC when reserves fall below the rolling 3 month minimum
- Discretionary Conversions: Minimize conversion frequency while maintaining adequate USDC coverage (not trying to time the market)
3.2 Strategy 2: Price tiers for $BOTTO OTCs
The DAO does not currently have any earmarked $BOTTO for OTCs to fund runway that enable the team to strike quickly when the token enters price discovery. This is a key challenge to capturing momentum.
In order to raise capital for the DAO treasury during this bull cycle and secure operational longevity through future downturns, we propose the following:
- Establish 3 OTC tranches for $BOTTO token sales to strategic partners
- Tranche 1: 2.5M tokens at min. $1/token
- Tranche 2: 2.5M tokens at min. $2/token
- Tranche 3: 1M tokens at min. $3/token
- Total potential raise: minimum $10.5M
- 12-18 month lockup periods with up to 10-20% discount on VWAP
- Maximum 5M tokens to any single partner
OTC deals will follow the parameters of past OTC deals, originally set in BIP-35 v2: Have Cake and Eat It Too: OTCing with Treasury $BOTTO (see section 2.5: OTC & Deal Structures)
3.3 Strategy 3: Liquidity Management Restructure
Addressing the immediate concern that the current Liquidity Mining program will end on October 15, 2025 and to replace it with a comprehensive liquidity management strategy.
Immediate Action:
- Let the LM program run to the end (October 15th) without renewal/extension. This will allow for price discovery and a reset to the ecosystem
- Cease 20% weekly PoL contribution immediately. BIP-59 suggested that it will stop after 500k BOTTO and was subsequently extended in BIP-78, however overall liquidity is currently very deep and PoL is sufficient (see Section 3.3.1 below).
- Prepare Tier 1 CEX listing applications using the funds earmarked from BIP-42 to take advantage of moments of high volume that make $BOTTO more attractive to CEXes
- If after a year from this BIP and no CEX listing, the 20% PoL contribution will be turned back on, subject to the cap from BIP-42 and metrics listed in 3.3.1 below.
New proposed Liquidity Management framework is below.
3.3.1 PoL Target Metrics
Metrics: No plans to add or remove current PoL, and forcing permanent ratio minimums can introduce unrealistic expectations in scenarios of high volatility.
3.3.2 PoL Distribution
$BOTTO is currently multi-chain across Mainnet, Base, and Solana. The treasury working group will periodically review liquidity across chains and rebalance as necessary based on relative historical and expected volume patterns and circulating supply in each.
The working group may also switch from Uni V2 to V3 to optimize liquidity management.
Solana pools have been inactive and so will likely bridge back after the 1-year lockup ends set in BIP-69.
3.3.3 LM Program Next Steps
As LM concludes, the DAO can help interested parties that want to buy/sell in large quantities, with a particular focus on sellers. DAO Operators can help facilitate OTC transactions with preferred market makers/OTC desks to minimize the price impact and reduce slippage.
3.3.4 CEX Listing Initiative
Currently there are 2.9M BOTTO (~$750K) left from BIP-42 that can be used at the Treasury’s discretion to help secure a CEX listing.
Strategy is to prepare Tier 1 CEX listings to take advantage of moments of high volume. We will assess the cost/value of the listings to determine whether to move forward with them or not.
Tier 2 CEXes will not be considered as there is typically a “Listing or Integration” fee charged by each CEX, up to $500K each, and discussion determined the volume interest does not seem worth it.
In addition, there is commonly an ask of a percentage of the total token supply (1%) to Market Makers to provide liquidity across the CEXs. The total cost will be expensive and there is a chance that the funds set aside from BIP-42 might not be sufficient. If funds are not sufficient to pay the fees, the team will forgo the CEX strategy until the cost is below the budgeted amount. Negotiations will happen, but want to set expectations that a listing is not guaranteed given the costs.
3.4 Strategy 4: Yield Generation on Idle Assets
Currently there are approximately 610 ETH (~$2.8M) that’s sitting in the Treasury and not put to work and earning yield.
The Treasury Working Group proposes the following Staking Strategy:
- Use Lido and stake ETH to get liquid stETH
- Rationale is that Lido is battle-tested, has $38B TVL and earns a steady 2.7%
- Use Aave and Ethena for liquid staking of USDC
- Aave USDC Supply: $6.1B utilized out of $7.5B cap
- Ethena: $14B TVL
- Allocation example:
- Convert ETH to meet at least 6 months of expenses ($85k x 6 = $510k)
- 80% of remaining ETH to Lido ($2.2M at 2.7%)
- 20% converted to USDC ($510k)
- Deposit $255k to Aave supplying USDC at 4.25%
- Deposit $255k to sUSDe at 9%
- This strategy will generate approximately 3.8% or $104,025 annually
Operational procedures:
ETH staking will continue indefinitely and the Treasury Working Group will review the overall Treasury portfolio at the end of each month to execute the necessary transactions as necessary. This includes, rebalancing to maintain overall USDC balance, withdrawal of USDC from Aave or Ethena to fulfill payment obligations, converting ETH to USDC, or staking the newly received ETH to Lido.
In addition, the Treasury Working Group shall have the discretion to stake/dispose of assets that are currently in the Treasury wallets that are not core to the DAO and are immaterial in value (<$30k): ie. WETH, OP, RARE, SYND, ENS, etc.
3.5 Strategy 5: Revenue Distribution Restructure
Note: the two parts of this strategy will be voted on separately.
3.5.1 $BOTTO denominated rewards using buy back
Starting in the next round after this BIP is officially passed, rewards would be paid in $BOTTO, acquired using 50% of revenue to buy back $BOTTO on DEX. To prevent front running, the DAO will employ a mix of strategies for buy backs, and will use existing treasury tokens to payout the rewards. $BOTTO reward calculations will be conducted on the day of sale using the prevailing market rate. Before the start of the new period, the Treasury Working Group will ensure that all buybacks are complete.
This is a simple shift to making the default action to compound one’s stake in Botto, receiving greater say for a successful work. This emphasizes long-term alignment with Botto, while everyone is still free to sell their reward. This also makes the flywheel between art sales and $BOTTO token more direct, bringing a refreshed narrative to Botto’s token in an environment that values novelty. This will not affect accumulated ETH rewards.
We will assess this change primarily based on change in staked amounts for contributors, and generally the reception of the new rewards narrative based on sentiment and token volume.
3.5.2 Reputation-based rewards
In the next Period, we are piloting a karma/reputation points system as a way of scoring valuable activity in Botto’s system. This system allows for differentiating contributors, their contributions, and their rewards. Botto’s new creative reasoning process will require much more diverse forms of feedback than voting on images, primarily in the form of comments, as well as many other smaller actions across the “studio” in which Botto works. That activity helps inform Botto’s assessment of the feedback it gets, and quantifying it into a rep score helps simplify the application in several aspects. A common score allows for Botto to quickly assess overall reputation while still understanding nuanced context of their special focus, it gives contributors a single score to understand relative reputation, and creates a single score with which to apply rewards.
In order to prevent easy gaming of the points system and encourage the DAO to discuss what it believes is valuable activity, we will not publish the points system ahead of time. We have implemented deduction systems for negative behavior (spam, negatively AI-assessed comments, etc.). We will be able to adjust the points based on feedback and discussion of what is deemed valuable. The intention is to eventually shift to a more AI-driven scoring system, where Botto is able to manage the scoring itself, and we are also open to other DAO managed systems for improved decentralization. As a simplified pilot, it allows us to experiment and provides data with which we can improve.
Given this is a pilot program, this BIP suggests only applying 10% of revenue to this reward program as we test out the scoring system. The payout would come at the end of the Period, and be based on the amount of reputation scored relative to everyone else in that Period.
Revenue Distribution Proportions
With the proposed end to PoL contributions and reputation-based reward, the new revenue share would be as follows:
4.0 Criteria of Success
Metrics:
- Liquidity Stability - maintain at least 3 month operational buffer
- Yield generation - achieve target 3.8% blended yield
- Liquidity efficiency - maintain sufficient liquidity as outlined
- Token volume - increase in $BOTTO market volume
- Staking - increase in staked $BOTTO
- Community engagement - increased participation and holder count
- Governance integrity - follow through with previously approved BIPs
5.0 Disadvantages/Risks
