BitDAO's War Chest Quietly Grows $2M Per Day After Token Sales to Thiel and Pantera

The BitDAO treasury is the largest for a DAO you’ve never heard of.

According to Open-Orgs, BitDAO currently has $1.8B in it, making it the second largest treasury of any publicly viewable treasury on Ethereum, following that of Uniswap and just ahead of those of Ethereum Name Service, Lido, and Gitcoin.

BitDAO holds the No. 2 spot largely thanks to its governance token, BIT, which accounts for about $1B of that treasury. Its governance token currently trades for around $1.06. That treasury also grows at a pace of roughly $2M per day without diluting BIT holders.

Coordinating Capital

“I think people in crypto have been excited about coordinating capital better than you can as an individual,” Jonathan Allen, of Mirana Ventures, a sister fund of ByBit, the exchange that managed spinning up the BitDAO concept, told The Defiant.

BitDAO has been building since early last year. It announced $230M in sales of BIT token in June, to Peter Thiel, Founders Fund, Pantera, Dragonfly and others. Then it raised another $365M on SushiSwap’s MISO platform in August, selling BIT to over 9,000 people.

But the real revenue stream into BitDAO comes from its association with ByBit, the exchange. It’s been putting about 2.5 basis points from its volumes, the lion’s share of its profits, into the BitDAO treasury. In exchange, ByBit controls 60% the BIT supply, according to the litepaper.

That’s largely where the daily $2M worth of deposits comes from, which BIT holders then have control over.

“This is pretty much an option on Bybit’s success,” Allen said.

The company behind BitDAO still has controlling interest, but there’s a difference in how it’s operating. Whereas usually a DAO gets set up and investors or projects buy in one time at a specific price, ByBit isn’t doing that. It got its tokens up front and has committed to keep turning over its profits. If it honors that commitment, it could mean that billions more dollars flow in without further dilution of BIT holders.

Provided that happens, it’s easy to understand why BIT would look attractive, but it’s also understandable if people in crypto are skeptical that a deal like that can continue indefinitely.

For now, the kinds of projects it’s taking on so far don’t seem to be squarely aimed at the narrow interest of enhancing business for Bybit.

Stronger Ecosystem

“If you want to distill it to the simplest mental model, it’s an investment DAO,” Allen said, but he cautioned that it’s not nearly so straightforward as that. “It’s really kind of this fundamental ecosystem support,” he said.

In other words, with this much money, BitDAO will be happy to fund things that may not have direct financial value to the DAO, but will make the overall ecosystem stronger and, therefore, ultimately drive value — even if it’s hard to quantify.

For example, BitDAO is doing a lot of token swaps. In DeFi, we have been seeing more and more DAOs swap tokens and make specific commitments to each other about when they would sell. This is often a way of cementing a relationship between two projects that already rely on each other, as we saw with Balancer and the Fei protocol.

With BitDAO, it’s less direct. As an investment DAO, it doesn’t really have operations. Still, other projects may want to do swaps with BitDAO so that they can have influence over how that giant war chest gets invested. For example, one of its first investments was a swap with FTX for its FTT token, with a 3-year lockup.

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In this week’s episode, we speak with Dan Morehead, the founder of one of the longest-standing and largest crypto funds. Dan founded Pantera Capital in 2003 as a global macro hedge fund. In 2013, Pantera began investing in Bitcoin and quickly shifted its entire focus into crypto. Today, Pantera manages $3.8 billion in digital assets and equity in…

The Defiant

With so much money available, the other core idea in BitDAO is autonomous entities. Instead of trying to invest $2B directly through DAO governance, the current plan is to make very large commitments to autonomous entities that can make whatever investments they want in a specific area.

So, for example, it has committed $500M to Game7, a DAO committed to building out the gaming ecosystem in blockchains, but it’s giving the funds out in $100M chunks, Allen explained. BitDAO won’t decide on each grant Game7 makes with the funds, but it can decide not to make further contributions if the partnership isn’t working.

As more funds come into BitDAO, it can fund more of these autonomous entities. And autonomous entities might fund further ones, making for what Allen describes as “fractal growth.”

BitDAO has flown under the radar thus far in part because it seems like the rest of crypto hasn’t noticed how much ByBit is putting in or can’t really believe it.

“As the treasury starts to get larger, it will start to have more stability,” Allen said. “Once people start to understand the mechanics, I think it’s going to be more clear.”