Crypto Unicorns Treasury Report 2024 Q2

Read more about the Q2 2024 Treasury Report in this article.

Q2 has presented numerous developments. Within this treasury report, we will examine several asset movements related to migration activities, including new transactions such as the $CU burn following the approval of CUIP-049 and CUIP-050, and the $CU unlocks for team and investor allocations.

Before we delve into the details, let us review the treasury balances at the beginning and end of the quarter.

April 1, 2024 Balances

June 30, 2024 Balances

*Note: This reflects the treasury valuation on June 30, 2024.

Understanding this report necessitates familiarity with the factors influencing treasury flows within our project. These are categorized into four areas: disbursement, NFT sales, treasury diversification events, and token transfer events. And lastly, while not exactly a type of treasury flow, price fluctuations greatly affect the total valuation of our treasury report.

1. Disbursements (↓): In the CU project, disbursements encompass operational costs, marketing, market-making, and payments for goods and services from partners. These transactions invariably result in a decrease in our treasury balance.

2. Treasury Diversification

   a. LP/Yield Positions (↑): These primarily consist of staked tokens aimed at generating a regular token yield. Examples include staking ETH for stETH to earn token rewards These transactions typically increase our treasury balance.

   b. Loans (-): Depending on whether we are borrowing or lending, loans can affect us in two different ways. For instance, borrowing involves staking w/stETH or sfrxETH, where tokens are staked with the option to borrow an equivalent value in stablecoins, subject to repayment to prevent liquidation. Lending involves loaning $CU to market-makers for market-making operations in exchange for a small monthly yield.

3. Token Transfer (-): Token transfer events, such as the $CU token burn, investor and team $CU allocation unlocks, and Safe migration, do not directly affect the overall treasury value. While these events may impact the market, they do not alter the total dollar value of our treasury.

4. NFT Sales and LP Fees (↑): Revenue is generated through secondary sale fees on marketplaces and direct primary sales via the Land Vending Machine. This also includes fees earned from transactions conducted on our protocol-owned liquidity pools.

5. Price Fluctuations (-): Depending on the velocity of the market movement, our treasury’s valuation may increase or decrease along with the price of ETH. As our treasury is mostly composed of stables and ETH, any fluctuation ETH prices can significantly affect our treasury’s valuation. This quarter, we’ve seen a general decrease in ETH price with Q1 ETH price closing at a higher level than Q2’s ETH closing price.

I. Summary

We commenced the quarter with a total treasury value of $10,233,759 and concluded with $4,758,005. Similar to the previous quarter, we observed limited income from yield positions and NFT sales. Additional collateral positions were deployed on AAVE to support regular operations.

Q2 is marked by the introduction of three new transaction types: migration-related transactions, the $CU burn transaction, and the $CU unlocks. While these transactions do not affect the dollar value of the treasury, they impact the $CU balances in the Safe for their respective allocations.

II. Disbursements

Disbursements encompass all expenses related to the DAO’s operations and influence the overall liquid portion of our treasury.

A. Business Development

Our business development activities include marketing and market-making to enhance project visibility and facilitate onboarding in-game and in the token market.

1. Marketing: This quarter, $338,610 was spent on marketing, considering the month-end ETH price. This includes KOL campaigns, play-to-airdrop campaigns, the affiliate program, partnerships, merch, and NFT purchases for airdrops.

fig. 1 - A Summary of Marketing

fig. 2 - A Summary of Bundle Disbursements for Marketing

2. Market Making: During the migration, $RBW was delisted and $CU relisted on the CEX. Additionally, the listing of $CU on Gate was timed around the migration to maximize exposure. A total of $70,000 was paid as a relisting fee to Bitmart and MEXC, and $200,000 was paid to Gate as a listing fee.

   
   Due to the size of trading operations at BTSE, we opted not to relist $CU on BTSE, returning the market-making assets to the treasury.
   

   $CU was also loaned to market-makers for liquidity provision on CEXes. Note that funds allocated for market-making should not be classified as long-term expenses, as these tokens only undergo rebalancing between the tokens in the pair.

B. Core Game Operations

1. Game Bank Maintenance: Regular replenishment of the game bank ensures smooth in-game operations. $CU is sourced from the P&E allocation. No top-up was performed on UNIM this cycle, and thus no UNIM was minted during the quarter.

2. Staking Reward Maintenance: With the introduction of $CU LP staking rewards, outside of maintaining the regular $CU staking pool reward, maintenance on the $CU LP staking rewards, which includes XAI and Grail, were also introduced this quarter.

   

3. Operations Cost: The quarterly draw of $3,011,500 supports core and second-party game development. This section also includes gas/bridging fees and other auxiliary operations.

   
   This quarter, additional transactions include the Vault team fee, the Hyacinth audit fee, and the $CU platform listing fee. The Vault team fee covers work supporting the migration and backend of our staking operations. The Hyacinth audit fee covers the payment for auditing the $CU contract. The $CU platform listing fee covers payments to service providers for expediting the listing and updating of $CU on $CMC, $CG, and Dexscreener. Additionally, the XAI gas subsidy accounts for all gas for in-game transactions subsidized by the XAI team.

fig. 3 - A Summary of Operations-related Expenses

fig. 4 - Operations Draw Allocation - This section provides a breakdown of the Q2 operations expense draw across various departments.

C. Grants and Rewards

1. Development Grants: The CU community has seen an increase in contributions from community developers funded by ecosystem grants. Using the end-of-month prices of ETH and XAI, a total of $403,475* was spent on grants this quarter.

   • As of June 30, 2024, ongoing grants include UnicornParty.com, UniWU.me, and Unicorn Fight Club. The final transfers for Unicorn Fight Club and Unicorn Party are scheduled for July 31, 2024.

   • Following the council’s decision on July 22, 2024, the Crypto Unicorns DAO will cease support for the Unicorn Party IP, with associated games temporarily shelved and potentially revisited in the future when the DAO find the right partner. We are currently in the process of coordinating the service closure plans with the Unicorn Party team.

2. White Hat Bug Bounty: 1,000 was spent on White Hat bounties this quarter to reward security researchers who report bugs and help maintain system security.

3. Mod Program Honorarium: 100 XAI was awarded to each of the 10 CU moderators as recognition for their continued contributions.

*Note that as our Ecosystem Fund grant is denominated in $CU, we transfer an equivalent amount of $CU from the Ecosystem Fund allocation into the Treasury in return for the USDT/C and ETH being disbursed.

4. Ecosystem Fund Grants: These grants support contributors and creators beyond game development.

   • As of June 30, 2024, the only ongoing grant is the Community Support and Creator Program.

III. Token Transfer Events

As mentioned in the introduction, token transfer events cover operations that do not impact the overall dollar value of our treasury but are of interest to the $CU economy and DAO.

A. Migration-related Events

1. RBW to CU Migration

   This operation involves migrating $RBW to $CU for Safe multi-sig holdings. Notably, 52M RBW from the P&E allocation remains on Polygon and shall be migrated in Q3.

2. LP Migration

   In line with the migration, we exited our LP positions on Polygon, including the 50RBW-50WETH on Balance, the UNIM-USDC, and Uniswap POS positions. These were replaced by CU/WETH on Camelot v2 on Arbitrum and the UNIM/XAI Camelot v3 position on Xai.

   
   To scale liquidity, the XAI team loaned the CU DAO some XAI, which was added to the CU/WETH liquidity pool on Camelot. This loan is expected to be repaid from the XAI grant upon disbursement.

   

B. Governance-related Events

1. Burn Operations: With the approval of CUIP-049 and CUIP-050, burn operations will be discussed regularly in the treasury report.

   
   The initial in-game burn occurred on June 26, 2024, involving 6,480,000 $CU, retroactively accounting for $CU used in-game since the game’s launch. Going forward, additional $CU used in in-game operations will be burned regularly. Additionally, 50% of ETH treasury income accrued from June 4, 2024, will be used to purchase $CU for burning.

2. CU Token Unlocks: Since March 2024, the Team and Investor allocation unlocks have commenced. Due to migration, disbursement was deferred until completion, with the retroactive disbursement for March and April first occurring on May 10, 2024.

3. Team and Investor $CU Staking for Voting Power: A portion of the Team and Investor allocation has been staked for voting power, granting a 1:1 voting power ratio and is not subject to grant rewards.

III. Treasury Diversification

Our ongoing experimentation with diversification strategies aims to fund operations, marketing, and market-making. This includes staking tokens for yield and managing loans.

1. AAVE Loan: During this quarter, we staked 1,805 stETH on Aave, which allowed us to secure a loan of $4,363,980 in stablecoins against this position.

   
   Including the 350 wstETH from Q1, we’ve put up a total of 1,849 wstETH in collateral, with a valuation of $7,331,692. Utilizing this collateral enables us to borrow stablecoins without directly depleting our ETH reserves. Consequently, as the price of ETH moves, the value of our collateral adjusts accordingly, permitting us to borrow a greater amount of stablecoins over time than if we had directly converted our ETH at the current market price. By employing this strategy, we can effectively extend our operational runway whenever the price of ETH appreciates.

2. Market-maker Loan

   As detailed in the market-making section, 1,000,000 CU was loaned to market-makers for maintaining liquidity on CEXes. These loans generate a minimal monthly yield, as shown in the Yields section of this report.

   
   Initially, market-making tokens were sourced from the CU from the treasury. With the introduction of the buyback and burn proposal, all CU used in market-making activities shall be sourced from the Ecosystem Fund as these activities facilitate a smooth onboarding experience for $CU buyers. These funds are not considered outright expenses, as the market-maker will either return the full amount to the DAO or purchase them with stablecoins by the end of the loan period.

IV. Revenues

While the Treasury Diversification section shows new positions deployed, in Revenues, we will review yields from existing positions, along with fees earned from NFT sales and LP transactions.

1. Yield Positions:

   During Q2, we exited LP positions on RBW/wETH, UNIM/USDC, and Uniswap UNIM LP. In exchange, we deployed CU/ETH LP and UNIM/XAI LP on Camelot. The total earnings for Q2 from all positions amounted to $2,311.

2. NFT Sales: Primary sales from the Land Vending Machine have significantly declined over the past year. However, secondary sales fees continue to contribute small amounts of ETH to the treasury.

3. LP Fees: No LP fees have been withdrawn to date. With the implementation of the buy-back and burn in June 2024, LP fees are expected to be withdrawn and included in the Q3 report as a portion is used for buy-back and burn operations.

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As we conclude this treasury report, it is important to acknowledge the current status of the treasury and understand that our DAO has multiple levers that may be pulled in response to the rapidly changing market conditions.

As the XAI grant disburses from July 10, 2024, XAI grant-related transactions will be reflected in the Q3 treasury report. The XAI grant is currently not being used to augment the treasury stables or ETH. For now, the XAI grant is exclusively allocated to user acquisition initiatives, although this decision may change depending on future market conditions. For the time being, the team has also decided to implement cost-saving strategies to mitigate the quarterly burn rate which takes effect from August 2024.

The Crypto Unicorns development team remains committed to ongoing development and marketing operations. We anticipate continuing with our treasury diversification strategy, and acknowledge that an increase in ETH price significantly extends our runway.