This blog will introduce the on-chain equivalent of a Treasury Management System (TMS) and share tangible resources for each of the TMS elements that you can use to streamline your financial processes.
While mainstream attention to Web 3.0 has slowed down over the past year, the capacity of on-chain financial applications has improved significantly. In tandem, better treasury management frameworks and guidelines are being established by on-chain organizations. We’re seeing an on-chain renaissance driven by actual cost savings and increased opportunities.
When we started Kolektivo Labs in 2020, on-chain finance operations and accounting were not advanced, with few on-chain organizations having insights into and managing their finances. This lack of insight and control might have been the most significant blocker for on-chain organizations’ ability to thrive.
However, as regularity clarity comes closer and with vastly improved tools, more individuals and organizations are likely moving on-chain to benefit from the increased access, efficiency, and transparency of Blockchain. Being able to operate on-chain safely and effectively will be critical for the success of Web 3.0 at large.
One of the critical drivers for succesfull on-chain financial operations is setting up a Treasury Management System that streamlines processes and information, reducing time spent while improving control over finance, capital management, reporting, and bottom-line decisions.
What’s a Treasury Management Systems
Treasury Management Systems (TMS) are software applications that automate the management process of a company’s financial operations. Traditional TMS connect to various systems to provide a real-time overview of cash and assets and manage banking, payments, trade finance, cash flow, and reporting.
While traditional TMS significantly improve the financial operations of organizations, they are limited by the conventional boundaries of the silo-ed systems they depend on.
Traditional boundaries do not limit on-chain tools; they are more interoperable and connected than their counterparts. They are creating never-seen-before levels of utility, security, and speed.
On-chain Treasury Management Systems
The on-chain equivalent of a TMS revolves around your organization's on-chain accounts. At the center of your TMS setup, you’ll often have a Multi-sig Wallet or Smart Account, a wallet with extended functionalities that allow you to increase the security, control, and utility of your assets.
The most adopted and battle-tested standard is Safe. The Safe contracts, securing dozens of Billions of US Dollars in value, have become the industry standard for professional on-chain users. By being open-source and highly interoperable, hundreds of solutions have been built on top of Safe, creating an easy-to-use toolkit for on-chain finance.
Creating your FinOps Workspace
The first step is setting up your on-chain workspace. The best place to start is Coinshift, an application built on Safe that provides a complete Workspace for all your organization's accounts and financial operations.
When connecting to the Coinshift App for the first time, you can create your organization and import your existing Safes. After importing your Safes, the app automatically loads all important information and creates an overview. Don’t have a Safe yet? You can create one through the Coinshift UI.
Coinshift adds essential features to the regular Safe experience, such as insights into your on-chain cash flow, risk management, and various reporting resources.
Through your Coinshift Dashboard, you can interact with Applications that enhance your TMS functionality. Below are the most used features and some tested tools to streamline your FinOps process.
Invoicing and Payments: Creating and tracking on-chain invoices and payroll is simple with the Request app. Connecting directly to your Coinshift Dashboard, you can select which Safe to connect to each Request account.
Token Stream Management: With applications such as Hedgey, creating on-chain streams of tokens, for example, for Vesting schedules or streamed payments, becomes easy and costly. After creating the token streams, you can easily manage them through the application.
Bank Account Connectivity: IBANs for Web3 are here. Solutions such as Monerium allow you to connect your on-chain wallet to a SEPA bank account directly. Seamlessly send and spend Euros from your wallet to your bank accounts and vice versa. This setup lets you keep 100% of your accounting connected to your on-chain TMS.
Yield and Liquidity Management: Managing on-chain liquidity and generating returns (yield) is an important element of Treasury Management, especially for DAOs with a native token. Most Decentralized Exchanges have integrations with Safe and can be used as part of your on-chain TMS without hassle. CoWSwap often provides the best price when making trades and can place limit orders, perfect for creating predictable outcomes for your swaps.
Governance and Control: on-chain voting through solutions such as Snapshot has become a well-adopted method for on-chain decision-making. However, on-chain systems can further program and standardize decision-making and control. Through more advanced solutions such as Zodiac by Gnosis Guild, on-chain roles and contract changes can be executed.
Transaction Fee Management: When interacting with Public Blockchains, there is merit in managing transaction fees. As fees are higher when the network is busy, you can reduce costs by executing transactions during periods of low network activity. You can download the Ethereum Gas Price Chrome Extension to keep the current gas price in sight. Gas is generally lower outside working hours - often reaching a weekly low on Saturdays.
The on-chain finance space is evolving rapidly, and new tools and best practices will likely emerge in the coming year. We’ll continue to follow the space closely and share our insights and best practices.
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