March 1, 2022 (V 1.0)
Treasury Management is a key component of business operations (financial and holdings) for any project or DAO. In the current crypto landscape, the importance of treasury management from liquidity management, operational finances, and reputation cannot be understated. Teams are increasingly coming under pressure to put proper procedures for planning, operation, and reporting in place.
The objective of this Treasury Operations Guide is to outline the procedure required to run and operate a Web 3.0 operation wallet efficiently and transparently. Below you will find a template we use for operating Exponent. Our hope is that it can serve as a useful starting point for other projects and DAOs as they set up their treasury operations. The guide is primarily targeted for early-stage smaller project teams and DAOs but can be adapted to your own operational needs.
Multisigs are crypto wallets that require two or more private keys to sign and send a transaction. The storage method requires multiple cryptographic signatures (a private key’s unique fingerprint) to access the wallet.
You can choose how many keys are allowed to open the vault as well as the minimum number of keys needed to unlock it (e.g. 2 out of 3, 3 out of 5, 5 out of 7, etc.).
Crypto companies, DAOs, exchanges, brokers/OTCs, and funds use multisig storage to secure their cold storage funds with the objectives to reduce risks of hackers that want access to their reserves and to ensure no one person in the team is able to unilaterally withdraw funds from the account. The more signatures you need to execute a transaction, the more distributed the decision-making process tends to become.
Our decision was to go with Gnosis SAFE multisig as it provides the ability to customize and integrate with other dApps in the Ethereum ecosystem and is compatible with other EVM-based blockchains.
Reference: Gnosis SAFE Overview
It is worth noting that there are many different types of key management solutions and practices in the market including Shamir's Secret Sharing (SSS), multisig, and multi-party computation (MPC). It is worth spending some time researching and selecting the option that best fits your business requirements.
Crypto transactions require the use of cryptographic private keys to sign. There are a number of different types of wallets including hot wallets (which are online), mobile wallets (wallets in smartphones), paper wallets (stored on paper), hardware wallets (offline storage) and custodial wallets.
For treasury management, we recommend using non-custodial multi-signature solution paired hardware wallets as they are less susceptible to thefts and hacks.
A hardware wallet is a cryptocurrency wallet that stores the user's private keys (a critical piece of information used to authorize outgoing transactions on the blockchain network) in a secure hardware device. Well-known hardware wallet solutions include Ledger and Trezor which are device-based solutions that use storage mechanisms—USB drives—to store private keys. This makes it difficult for hackers to access the key from an online location. A comparison between Ledger and Trezor can be found [here](https://www.investopedia.com/trezor-vs-ledger-5193580#:~:text=Ledger%3A Currencies,to 1%2C649 supported by Trezor.&text=While Ledger Nano S and,currencies than the Model T.).
We use a combination of Ledger Nano S and X.
<aside> ⚠️ Always buy your hardware wallet from the official distribution site.
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