What is treasury management?

Treasury management is the practice of deciding how an organization holds, spends and protects its reserves. In a token project, the treasury holds the project's own tokens and other assets such as stablecoins, used to pay for development and operations. It matters because a poorly managed treasury can run out of money or lose value at the wrong time.

How it works

A treasury has inflows, such as fees, token sales and grants, and outflows, such as salaries, audits, incentives and buybacks. Its health depends on runway, how long the spending can continue, and on what the reserves are made of. A treasury held entirely in the project's own token falls in value just when the project struggles, so it is exposed to the same risk it is meant to cover.

The usual trade-offs are between liquidity and yield, and between concentration and diversification. Keeping some assets in stable, easily spent forms ensures the bills can be paid, while some in the native token keeps alignment with holders. Rules for spending and selling help avoid pushing the price down.

Example

Say a treasury holds 10 million tokens worth 1 each and 2 million in stablecoins, and spends 500,000 per month. The stablecoins cover 4 months. If it sells tokens to cover spending, each month it sells 500,000 tokens, which is 5% of its token holdings. If the token price halves to 0.50, it must sell twice as many tokens, 1 million, to raise the same cash. These are illustrative numbers.

How to model it in Machinations

Draw two Pools, one for native tokens and one for stable assets, with a Drain for monthly spending and a Source for fee income. Use a Converter to turn tokens into stable assets at a price held in a Register, which can follow a random path. Add an End condition when stable assets reach zero. Play many times at once and change the token share Lever to see how often the treasury runs dry.