Convert the Entire Treasury in Nim, let's vote on chain

Discussion
#1

Following the blogpost

Our top priority is to ensure that whatever we do serves the health of the Nimiq ecosystem and the NIM token.

I propose to gradually and irreversibly switch the entire Treasury from BTC and ETH into NIM and I suggest to vote this proposal on chain (similarly to supply curves we voted for).

Currently the Game Theory around this project is really not working.
And I mean at very bad levels.

Constantly be sitting on a totally different set of assets (BTC,ETH) doesn’t incentivize “greater good” behaviours and decisions, as you can easily make the case that Team members can privilege to lengthen the broth, to progress with their employment, careers, and payroll, where they never feel on their skin the consequences of good/bad decisions (including not taking any decision).

With the entire Treasury in Nim, we would be sure that Community and Team incentives are finally aligned, such that, if we win, we win together, if we lose, we lose together.

It may sound a risky move but in reality it isn’t, because if you don’t think NIM is worth BTC or ETH, we are just wasting everyone else time to begin with.
Anybody seeking exposure to BTC and ETH, would straight buy those assets on his/her own.

This is not like the old style “buy back program” that was proposed.
It’s a tactical shift in the Treasury.
From now on, Nimiq first and foremost.

2 Likes
#2

I totally support the idea to move the treasury to more NIM, but I’m not sure entirely is a good idea.

Consider the following: Let’s say a Binance listing costs 1M USDT. If the treasury is all in NIM, the only way to pay 1M USDT is to sell NIM. As the listing fee has to be provided in a short period but the Binance listing can’t be announced at this point due to news embargo, the price will tank significantly. Depending on market liquidity it might even kill the whole project.

I think a situation where pursuing a Binance listing once possible is no longer a good thing to do due to the negative price impact of using the treasury in fact misaligns incentives.

I do think however that more than 50% of the treasury should be in NIM and that the team should be paid their salaries in NIM. Salaries, compensation and product development contracting make up for about 50% of the expenses according to last year’s transparency report, so when moving 50% of expenses and 50% of treasury to NIM, those are completely aligned and situations as the hypothetical one with Binance above couldn’t occur.

#3

I have to agree with @longpass; this would be a terrible idea. If you’ve been following the transparency reports (next one is due this month) you will know that one of the main reasons the project has been consistently well-funded is due to BTC. I genuinely think the team would have gone bankrupt by now if it had followed OP’s suggestion was made 3-4 years ago.

Every asset manager would tell you to diversify your assets; this should be no different.

Transferring everything to NIM means that the survival of the Nimiq Team relies solely on the value of NIM. Why would you do this when NIM, and most altcoins in general, are so volatile? The team would have to dedicate themselves to propping up the price as an act of survival; long-term planning would be impossible.

The current portfolio seems like a good enough equilibrium. The team can rely on stablecoins as well as Bitcoin so they don’t have to worry about price here and now. This provides them with room to breathe and space to strategize.

I would disagree that the “game theory” is at very bad levels: according to last year’s transparency report, the team still has the majority of money that they raised initially. In what world is this bad? Surely this is a sign that the team is prudent?

You say that by converting it to NIM we will win together. Do you think the only incentive for the team is financial? Many of these people have spent over half a decade building this organisation. They are already incentivized. A substantial proportion of their balance is already in NIM so what you’re saying is already true anyway.

#4

I think some further context shall be added, from my side as OP.
And I will also touch some points raised on Telegram by other community members.

  1. I am NOT against keeping a relevant amount in stablecoin and fiat to fund annual operations, recursively, on a year to year basis, including but not only, when a big listing shall eventually be considered. The Binance of @longpass example will be very much happy to get the USDT, you don’t need BTC or ETH to make such a deal. At all.

  2. My entire point was “why BTC and ETH ?”
    BTC and ETH served a role when the technical implementation of Nimiq was still a work in progress with no finish line in sight, so in a way you took advantage of more mature projects and that bet (which was a risk itself) paid off. It doesn’t mean it will also pay off for the next phases too.
    So if your counter argument is “but it was a good trade”, I will say “Yes, it was”
    But so what ? Are we here to trade other tokens, or to bring Nim to the masses ?

  3. At what point “prudency” (btw, what’s more prudent than stablecoin/fiat then ?), becomes lack of trust in the Nim token and project ? @ako
    This project has been running for almost a decade, and the elephant in the room, that nobody is saying openly, but you are saying it between the lines very loudly, is that you guys are not confident that Nim can outperform BTC. At all.
    Which translates into, “What are we even doing here ? Why a newcomer shall ever consider Nim over BTC ?”

  4. My proposal isn’t something new in the cryptospace.
    Ethereum Foundation treasuries are in ETH (they don’t hold BTC).
    Ripple has a treasury in XRP.
    Kaspa (which is a fair launched PoW coin, as Bitcoin) doesn’t have any pre-established treasury/allocation. Community crowdfund in KAS tokens whenever an operation/initiative sufficiently voted shall be financed.
    And more and more examples can be made.
    What pattern you see here ?
    They bet on their own token, they don’t DiVeRsIfY.
    (Oh, and they do this since the very start, you can’t say “But they are big projects”).

  5. Now a technical explanation of how the “buyback” would happen.
    As said, it has to be a gradual process. Not over night.
    It can be arranged over the course of 18-24 months.
    And it doesn’t have to happen with “market orders”, it can easily happen with limit orders, so you don’t offer any clear hedge to speculators/frontrunners and you don’t manipulate the chart.

  6. You guys underestimate the fresh air you would get, if Nim was (gradually, again) elevated in the ranks.
    Many times Max said how difficult it was to make deal and partnerships with a project ranked so low.
    You would boost a positive spiral loop, with new people and ideas attracted to the project.

  7. I am saying the Team has misaligned incentives.
    The community is aligned only and exclusively with the Nim token.
    The guys working at the Team have a much wider set of incentives, where Nim is basically irrelevant.

1 Like
#5

I get the spirit of the proposal and maybe there is an argument to be made that with more ‘skin in the game’ developers and team members would somehow be properly incentivized.

The first thing that comes to mind is that the current team has deep familiarity with the code and the structure of the back-end. This is because some have spent many years working on it. It would be difficult to find new developers if the proposal was to be paid in a volatile asset (NIM) and that there is a possibility the project will be bankrupt in a year or two. So the lack of stability might scare away top talent to other projects, and may cause current talent to leave.

The second thing is that if the price of NIM reaches about $0.04 USD, which would be about a $500M USD market cap, that will mean NIM held in treasury would make up about 50% of all treasury holdings, the rest remaining in BTC and ETH. To me, this seems like a reasonable balance and an achievable price target with a bit of marketing from the team and awareness generated from the community.

So although I understand the frustration, I think moving 100% of treasury to NIM will cause more harm to the ecosystem and NIM price than keeping it as is for long-term stability.

#6

Maybe it would be sensible to first wait for the next transparency report to be published, but here’s another angle to consider:

The treasury has been increasing over the last years. This is nice of course, but no reasonable business manager would assume that an operational business with no operational income or investment capital inflow would be able to increase their asset holdings. This means, any and all increase of value of the non-NIM treasury should be considered unexpected and unplanned, meaning this amount, if used to buy NIM, is not missing in any business plan.

At the ICO, the team raised 60k ETH, worth about 13M USD at the time. This was a clear financial statement from the team (we need 13M USD) and likewise the investors (we grant you 13M USD). At no time did the investors express they want the team to have more than 13M USD nor did the team signal they’d need more than 13M USD.

So my proposal here is: Allow the team to have up to 13M USD in non-NIM assets of their choice. Everything else should be turned into NIM. This gives them multiple years of buffer even in bad times (and if they continue to diversify as good as before even forever) and of course they’re free to use and if necessary liquidate the NIM if the non-NIM assets go low.

#7

BTC and ETH are highly liquid investments. Meaning you can easily sell 1M USD worth of BTC on the market with little slippage. In that sense BTC and ETH behave similar to USDT, just that they appreciate in value.

NIM is not remotely as liquid. In that sense it’s more like real estate: Others won’t accept it as a means of payment and selling them is a slow process.

That’s why BTC and NIM should not be considered the same kind of investment, even if they’re both crypto currency.

#8

So, I was waiting for the Transparency Report to reply further, and here we are @Big_Mac and @longpass

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The current state of the project is well funded (above $15M), even over funded I will say later, but we saw that the Team used (likely awarded for tasks and/or campaigns) 266M Nim from their 2024’s Treasury.

So we have a very good representation of what a net 1.26% supply selling/buying pressure (selling in this case) can lead the price to (-62% from Transparency 2024 to Transparency 2025 if measured in USD, -79% if measured in BTC).

Returning to the topic here, it’s evident that some community members at this stage, without an organic community growth (“more people”), are scared that the buyback would be a kind of exit liquidity for existing holders, leading the project into somewhat a death spiral and that even limit orders would not discourage people from exiting (this is what I am being told in Telegram).

I cannot debate this in details by presenting a model, because there is no science that would tell you what people would do with a thicker order book and/or higher prices, and/or how to shape the order book to make the buyback more effective and conservative.
Sure, I could make AI doing something, but that would come with my own bias, and yet, it would not hold any validity.

Today in Telegram the user “Dirk Lehrer” made a good proposal.
The project was envisioned with a $10-13M funding (the ICO money), so why are we keeping it overfunded in foreign assets (BTC, ETH) ?
This cushion shall be very enough to cover its ongoing expenses for years, even more if we consider that PoS blockchain work has been accomplished.

In that sense, I can propose to convert in Nim, 100% of the Treasury exceeding that $10M cushion (with a diluted buyback).

#9

I feel like you are approaching a sensible solution: @longpass’s initial suggestion of converting everything over 13M is perhaps the most sensible thing posted in this thread. I myself was surprised to see such a precipitous fall in held NIM in the transparency report. The team quite literally hold 100x more Bitcoin than their own coin. That doesn’t seem right.

Some rebalancing is surely necessary but the $10M threshold you advise is still quite drastic. Maybe it would be better to look at it on a year-by-year basis? $0.5~1M converted into NIM over the course of this year sounds manageable. Then, after 2026’s transparency report, further rebalancing could then be decided upon.

#10

Hey all, did you see this from Nimiq Team today - NIM Treasury accumulation plan:

#11

lmao

$1M over 6 months… I wasn’t too far off! Although the timing of this announcement is rather serendipitous. Are you an insider @ekamask20 :stuck_out_tongue_winking_eye: ?

The next 6 months should be interesting

#12

It is a solid start.
No, I am not an insider.