Treasury Advisory of Major Blockchain Protocol

Context

Since inception and post-ICO, many of the major blockchain protocols have sat on very large multi-million, sometimes billion, dollars of assets in their treasury. Over time these treasury assets are drawn down to fund overheads and make grants to developer teams and strategic partners of new products that operate on their blockchain, with the objective to bring more use cases to their blockchain ecosystem. Blockchain protocols compete for market share by utilising their technology and infrastructures in the real world. Until blockchain technology is fully adopted by major partners, especially institutions, most blockchains continue to run down these treasury holdings, particularly heightened in times of devaluation where digital asset prices are lower, giving them less purchasing power.

Appold was mandated to assist a major protocol in leading a review and strategising to improve its full treasury management process as well as enhance its governance, policies and procedures. The objective was to:

  • Assess and recommend improvements to the current revenue model of the treasury assets held to generate a more balanced yield income.

  • Undertake due diligence on digital asset exchanges, custodians, liquidity providers, staking firms and potential strategic partners.

  • Implement stronger risk management processes.

  • Introduce policies, procedures and reporting standards that would meet the approval of institutional and government partnerships.

  • Improve on-exchange liquidity in terms of tighter bid/offer spreads and open interest volume.
     

At the same time as meeting these objectives, it was essential that any process and allocations added value to the blockchain ecosystem and adoption.

Services

Project requirements:

  • Research & Analysis

  • Operational Due Diligence

  • Technical Integration

  • Strategic Advisory

“Appold's level of knowledge of the sector is of a very high calibre.”
- CFO, Major Blockchain Protocol

Appold Partner Comment:

“With regulation moving in the right direction and the adoption of blockchain increasing, major institutions and governments need to be certain that the blockchain technology they choose is credible and here for the long term. Several blockchain protocols have been rumoured to be running out of capital reserves, having unsuccessfully managed their assets effectively and not earned sufficient revenue back into their corporate structure or sufficient tokens back into their DAO. This is a risk for institutional adopters as they could find themselves building at scale around this technology which then ceases to adequately exist within a few years. In addition to this, many of the blockchain protocols do not have adequate policies, procedures and corporate governance to meet the comfort or trust of the institutions and governments that could find this technology of value.

Every blockchain protocol should consider these factors, amongst others, if they are seeking to expand their engagements across industries and grow their ecosystems. By future-proofing their technology and infrastructure by way of improved governance, deeper treasury liquidity pools and transparency, this will place them ahead of their competitors in attracting and benefitting from corporate, institutional and government contracts and relationships.

In the case of this particular client, the objective was to make an already strong treasury reserve even stronger and ultimately profitable with a plan to expand into traditional assets in the future.

- Rob Gaskell, Partner