## 6. MolochDAO Fund Sustainability BACKUP

### Purpose of this Framework

The goal of this analysis is to present a framework for allocating the MolochDAO treasury to the grant program. The amount the DAO should give away annually depends on the following:
<ul>
<li>The desired goal of the DAO - would we like to expend funds quickly, or create a longer-term path for sustainability?
<li>The average price of ETH each year
</ul>
<br/>

The DAO can look ahead, and evaluate these factors on an annual basis, setting a target amount to give away each year. This will inform the budget for each grant round, but will not restrict the DAO regarding the exact allocation of funds.

Specifically, this analysis considers three main factors: (1) the yearly USD price increase of ETH, (2) the increase in grant budget as a proportion of the ETH price increase, and (3) the budget allocation to the ReallyBoringGuild (RBG), for managing MolochDAO's operations. The model starts from 2021 and runs until 2035.

Of these factors, the most important and most complex factor is the price increase in ETH. It is difficult to know exact pricing trend of ETH on an annual basis given the many factors that go into its price. Modeling out a scientific ETH price prediction model is beyond the scope of this report. Therefore the main assumption that has been made is that the price will continue to increase on a yearly basis and the only difference will be how much it will increase.

Regarding the RBG budget allocation, this was projected at a constant 15% of the grants budget per year. However, it has typically been 10% or lower, and can be adjusted annually.

Lastly, the budget allocated to grants has a starting point of 20% based on 2021 numbers and is capped at 80% as it increases on a yearly basis. The cap is needed so the allocation does not exceed 100% of the treasury. Without the annual increase, the amount of grants given becomes too low as the price of ETH rises.

#### Scenarios

| | Scenario 1 | Scenario 2 | Scenario 3 |
| -------- | -------- | -------- | -------- |
| ETH Price Increase | Non-Linear | 50% annual increase | Doubles annually
| Grant Budget Increase as a proportion of ETH price increase | 100% | 50% | 30%
|RBG Operations Budget Percentage | 15% | 15% | 15%

#### Findings
##### Scenario 1
This scenario reaches a peak of USD 5 million in annual grants given by 2023. After which, it steadily decreases to less than USD 1 million by 2027 and runs out by 2035.

##### Scenario 2
With a more predictable and larger price increase in ETH, this scenario peaks at USD 5.8 million in grants given by 2026 and decreases to less than USD 1 million in grants by 2030. The treasury also effectively runs out by 2035.

##### Scenario 3
The most aggressive scenario reaches a yearly peak of USD 28 million in annual grants given by 2027 after which it decreases to sub USD 1 million by 2032. It also runs out 2035 in term of ETH but given the high ETH price increase assumed, there is some dollar value left albeit not much to make a significant impact.

### Recommendations
Further scenarios can be explored by adjusting the factors. As one can see, the change in ETH price has the biggest effect on the grant allocation. Other pricing trends can be explored based on market action and ecosystem developments that help appreciate ETH's value.

The proportional increase in grant allocation can be pushed higher as well to see more aggressive and higher impact scenarios in terms of ETH ecosystem development. This would potentially expend the fund more quickly; the DAO can then use the model to see when we would need to raise additional funds, if so desired. We can also downward adjust the grant allocation in a particular year to compensate for lower-than-expected rise in ETH.

> For now grant value is assessed in USD to normalize historical data and to be able to compare impact year-to-year.

Hopefully this serves as a useful tool for MolochDAO to evaluate and decide how much to give away in each grants round.

A detailed breakdown of the MolochDAO-PlanBudget Model can be found [here](https://docs.google.com/spreadsheets/d/1uUMVfrKou-QKwfAe9Tr-JLqivDA7AO_l4GS64PdZmDQ/edit#gid=0).