An Insight Into CitadelDAO Treasury Strategies
As a Bitcoin focused treasury DAO, Citadel’s Treasury Strategies are the cornerstone of the protocol’s utility. As such, Citadel’s Partners (“Knights”) have been strategically chosen to assist and enable Citadel to implement Treasury Strategies worthy of our ambitions. Over the past several weeks we have worked closely with our partners to design initial Treasury Strategies, the structure of Citadel Strategy Proposals, and the policy needed for actively managing Citadel’s Treasury.
Our goal is to create a clear Treasury Strategy proposal, implementation, and management structure — allowing our partners and community members to participate and shape the future of Citadel. In this post we will outline the goal of Citadel’s treasury, the initial Treasury Strategies, and the structure for both proposing and managing new strategies.
Treasury Strategies are the core infrastructure behind Citadel’s ambition to become the largest community-owned Bitcoin treasury in the world. Being a sub-DAO of Badger puts us in the perfect position to hit the ground running with yield strategies tailored to the specific goals of Citadel, built by experts in bespoke vault creation.
Citadel deploying its treasury into Badger-built vaults is a way to ensure the treasury is receiving yield through battle-tested strategies from day 1. But this is just the start, not the endgame. In the weeks following our launch, Citadel will be working closely with our community and partners to develop innovative new treasury strategies across multiple protocols.
With the above in mind, we would like to introduce the first Citadel Treasury Strategy.
Citadel Strategy #1: Convex + Badger
Citadel’s initial strategy is focused on the Curve & Convex ecosystem, which is currently the most reliable source of yield on liquidity pool deposits in DeFi. The strategy will increase Citadel’s holdings of Bitcoin, Badger, vlCVX, and CTDL/WBTC treasury controlled liquidity while also providing BTC that can be distributed to lockers.
The following components would be deposited into custom-built Badger vaults:
ibBTC/sBTC LP Tokens
- Earn Badger rewards that are used to grow the Badger/WBTC Curve V2 position
Badger/WBTC Curve V2 pool tokens
- Boost the Badger rewards on ibBTC/sBTC
- Earn CRV and CVX rewards voted by bveCVX and bveCVXctdl, which are converted into more Badger/WBTC and bveCVXctdl
- Deposit into bveCVXctdl: the vault that manages Citadel’s vote locked CVX, built as a fork of Badger’s bveCVX
- CVX would be used to vote for Badger/WBTC pool within the strategy, but could also be utilized as a part of Citadel’s other Convex-related strategies or to harvest bribe revenue depending on profitability and impact.
- Citadel’s Treasury Controlled Liquidity (TCL) position
- Citadel would use a part of emissions for bribing veCRV/vlCVX holders to direct CRV and CVX emissions to the pool as a way to grow its liquidity and acquire funding
Assuming sufficient funds are deployed into the strategy, Citadel will have a high pool capture on the two Convex pools that are core to the strategy: Badger/WBTC and CTDL/WBTC. If desired pool capture is achieved, Citadel will have a highly efficient voting and bribing strategy — leading to increased yield and treasury growth.
Beyond the initial strategies outlined above, Citadel will actively seek to engage with our partners and other DeFi protocols to build strategy optimization frameworks that could include leveraged farming using strategy positions as collateral and options selling strategies.
Strategy Proposal Structure
The Strategy Proposal Structure allows our partners and community members to have a say in the direction of Citadel’s Treasury. The more Bitcoin that Citadel accumulates, the more protocols will find value in building Citadel Treasury Strategies around their protocols. As such, we envision a future where protocols will want to direct a portion of Citadel’s Bitcoin treasury to themselves to help bootstrap BTC liquidity, which in turn will generate yield on our position while simultaneously supporting their protocol. With that in mind, we have developed a structure and process for whitelisting and proposing Treasury Strategies, the protocols they interact with, and the assets that can be acquired through funding.
Protocol Whitelist & Strategy Proposals
Any holder of vlCTDL will be able to put forward a proposal to whitelist a Treasury Strategy and the protocol that the Treasury Strategy relies on. The proposed Treasury Strategy must follow the standard Citadel Strategy Proposal (CSP) Structure. Before a Strategy Proposal passes a snapshot vote, it will be reviewed by Citadel’s Risk Committee. The Risk Committee will consist of Citadel and Partner’s team members to start— over time it will expand with governance, adding more contributors and community members.
The Citadel Strategy Proposal structure will be posted on the forum soon. The general flow for a proposal is outlined there, but will involve RFFs (which will have dedicated threads on Discord) and revisions on the forum. Forum CSPs will act as the official drafts before Snapshot votes.
Within this structure, there is nothing that should be particularly surprising — however, we want to emphasize risk assessment and how that will fit into a larger tranche (“Tier”) system. How this will work is: certain Treasury Strategies will fall into Tiers based on criteria such as risk, how much can be automated, external assets needed, total strategy correlation to BTC, and of course anticipated yield. Based on these Tiers, percentages of BTC and supporting assets will be allocated for each strategy. This approach ensures Citadel has the healthiest blend of upside strategies with safe and consistent yield generation.
Once a Strategy Proposal is whitelisted, adjusting the exposure to the given strategy will follow a less in-depth process since the strategy has already been whitelisted and approved by the Risk Committee. After approval from the risk committee, Citadel’s policy team will begin implementing the new treasury strategy.
As the treasury raises more assets through funding, assets will be distributed to the various treasury strategies until their max asset allocation amount is reached (dictated by their Tier). The rate at which a strategy is topped up will be tailored specifically to the strategy in question. If a strategy exceeds its maximum % allocation, the strategy can be re-balanced as soon as the end of the epoch — however, the exact duration will be determined by the specific strategy in question. For instance, re-balancing of the initial strategies detailed above will be a less frequent process, as these strategies may serve as the foundation for additional strategies and the treasury as a whole. It is also possible if a strategy is succeeding, some of the criteria in play will improve and it may naturally rise in Tier, warranting a new range of allocation.
Treasury Yield Policy
As described in the Tokenomics Deep Dive, Citadel will be distributing a portion of its treasury yield and funding revenue (revenue generated from users directly purchasing xCTDL from the treasury) to users who lock their xCTDL. Due to the complex nature of harvesting yield from a variety of treasury strategies, we have developed a simple policy framework to guide these efforts. The treasury yield policy is designed to support the overall aims of the treasury:
- Drive BTC yield to users who lock their xCTDL
- Support the overall health of the DAO & Treasury by ensuring it has sufficient runway to withstand varying market conditions.
Citadel’s Treasury yield and funding revenue distribution will be divided as follows:
- 10% to holders of vlCTDL
- 10% to the DAO
- 80% to the Treasury
- 50% of yield to holders of vlCTDL
- 50% of the yield will be used for auto-compounding treasury positions
As always, feedback and governance will be pivotal in deciding and confirming these initial divisions. Of course, governance can also adjust them over time as well.
Treasury yield will be harvested at the end of each 21 week locking period to allow for ample planning and execution of multi-sig operations. However, it’s important to note that treasury yield harvesting may not be consistent across all strategies due to strategy specific intricacies. As Citadel’s treasury strategy management practices mature, the frequency at which treasury yield is harvested may increase.
Future of Yield Strategies
As Citadel’s Bitcoin holdings grow, there will naturally be demand from protocols to orient Funding and Bitcoin towards their protocols. We anticipate this to create a sort of meta game for protocols — in the beginning, we foresee interest in motivating funding to be for certain LPs on Curve. Over time, it is quite possible there will be motivation to keep or expand strategies by motivating accumulation of certain assets as well. To accomplish either of these, protocols will want to acquire voting weight. They can do this by acquiring vlCTDL directly, or by bribing vlCTDL holders to vote in favor of their LPs and strategies.
It’s extremely exciting to unfold the framework and Strategies that will help shape the DAO into a yield generating machine. Perhaps the most exciting part of this is wise minds — from the protocol and community alike — that are stepping forward to help us with this vision. The DAO and its paths are likely to touch all corners of DeFi — Badger, our partners, existing protocols, and many yet to be imagined.
If this journey excites you as much as us and you want to help, please join the Discord and go through the
Roles flow to find like-minded individuals bringing this future together.