Note: This is a draft for discussion. These allocation numbers are placeholders and have not been blessed by any core contributors. Everything is subject to discussion and approval by the DAO.

Introduction: Mango raised $70mm in its August 2021 IDO for a Treasury fund. The proceeds were sent to a USDC account and have sat unused since then, steadily eroding in value. We propose the DAO invest this capital in a conservative manner to grow project assets while ensuring trader confidence and protocol funding in any market environment.

Proposed Allocations [FOR DISCUSSION]:

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Spreadsheet link: https://docs.google.com/spreadsheets/d/1JahAFty9_1eR81ScxmJd3Ffpx7u_g9t6nie-sxHemBs/edit?usp=sharing

Part I: Treasury Objective

The Treasury’s primary goal is to provide insurance for trading on Mango Markets. The Treasury will backstop losses from liquidated accounts and market participants are exposed to socialized losses only if the insurance fund is depleted. Mango’s liquidation system has performed well despite market volatility during Solana network outages. Any insurance fund withdrawals would occur during extreme market drawdowns. Therefore, capital expected for insurance usage should be in non-cyclical assets which can be monetized at attractive pricing even during serious crashes.

The second goal of the Treasury is supporting Mango development. Mango is principally funded via trading revenue and MNGO token grants but it is important for contributors and the broader community to trust Mango can continue operating in any market environment, no matter how long a downturn may last. As with the insurance fund, these liquidity needs are most likely during periods when risk assets are severely depressed. Development reserves do not require short-term liquidity but should be in non-cyclical assets.

The Treasury will aim to earn high returns while respecting the above considerations. There are ample precedents for managing funds with a comparable mandate: insurance funds, banks and endowments. The optimal solution will be a mix of highly liquid short-term collateral to meet urgent withdrawals balanced with longer-term investments that should generate greater returns.

Mango’s mission is to become the leading investment application for the Solana ecosystem. Not just the on-chain FTX, but the on-chain JP Morgan. Until Mango has critical mass, Treasury management is not core to this purpose and should not distract from application development and customer service. When in conflict, the Treasury should default to safer, passive strategies that enable the team to focus on more critical priorities.

Part II: Asset Class Scope

The assets for initial consideration are major non-stable assets (BTC, SOL, ETH), USDC-denominated yield strategies, off-chain USDC lending, MNGO-denominated option strategies and partner investments. Not all of these are currently attractive but each of them merits evaluation.

The Treasury has operational constraints that eliminate higher touch strategies such as active yield farming. Our investment framework is not setup for short-term strategies as they require more resources and security compromises. Other strategies may be considered in the future as we establish more robust processes.

Part III: Non-Stable Asset Review

Asset Allocation: