Problems & differences

Problems with existing treasuries and some differences they have with Web3 treasuries

Existing treasury problems

There are a number of issues with existing treasury systems being used by nation states and corporations. Some of those potential issues include:

• Bureaucracy: Treasury systems that have processes dependent on layers of management and control can become easily bogged down by layers of bureaucracy, making them slower to respond to crises or implement innovative solutions.

• Lack of transparency: Full transparency over how decisions are being made and how budgets get allocated is not always guaranteed. Low transparency can lead to a lack of trust in the systems and processes being used which could also lead to speculation on whether there is any corruption or mismanagement of a treasuries assets.

• Political influence: If a treasury is centralised and controlled by a small group of actors it could potentially be more easily swayed in how it makes it decisions through a mix of influences coming from external actors or incentives. These influences could lead to corruption, mismanagement of assets or suboptimal decisions.

• Debt accumulation: Many nation states have accumulated significant public debt which has increased the risks of long term financial stability and prosperity for these treasuries.

• Limited participation: Many nation and corporate treasury systems are often operated and governed by an elected or appointed group of individuals. This can reduces the diversity of opinion involved in treasury decisions and means the community might have less influence on the decisions made.

Differences between existing treasuries and emerging Web3 treasuries

There are a number of differences between existing treasuries that are widely adopted and emerging Web3 treasuries:

• Scope & scale - Nation state treasuries manage the finances of entire countries, meaning they can impact millions or billions of people. They deal with vast budgets covering areas ranging from healthcare, infrastructure to defence. Web3 treasuries usually only manage the funds for a specific decentralized project or platform which currently has less scale and often a narrower focus.

• Regulation & oversight - Nation states treasuries operate within established legal and regulatory frameworks and are subject to numerous checks and balances, audits and governmental oversight. Web3 treasuries being still in their infancy are often operating in a more fluid regulatory environment where the legal status is still uncertain.

• Decentralisation - A key difference between nation state and corporate treasuries with Web3 treasuries is the increased level of decentralisation for the treasuries adopting distributed ledger technology. Distributed ledger technology can help with increasing the amount of community governance and participation through governance mechanisms and token holder voting instead of only using elected officials and representatives.

• Income sources - Nation state treasuries often rely on taxation such as through income tax or capital gains tax. Web3 treasuries often rely on protocol transaction fees. A key advantage for Web3 networks is that these fees are collected automatically at the point of completing a transaction rather than manually at end of a fiscal year.

• Transparency - Existing nation state and corporate treasuries have more choice on exactly how transparent they are with any financial budgets, statements and transactions relevant to the treasury. It is usually the case that nation states have the mandate to provide complete transparency, however this can still be hard to fully verify. In contrast, transparency in public blockchains is inherently provided at all times due to the use of a public ledger. It becomes more difficult or impossible to tamper with or hide how treasury assets are being disbursed and used.

• Geopolitical differences: Nation state treasuries must account for geopolitical considerations, international trade, and diplomacy in their decisions. Web3 treasuries, while operating globally, do not yet have these same concerns and instead are currently more focused on technological development, community growth, and protocol sustainability.