Regenerative treasuries reimagine the default corporate incentive structure through novel compensation mechanisms and use of treasury assets. The primary benefits include:
The company’s runway increases when employees sell their shares
The company’s equity value (per share) increases when investors sell their shares
Employees receive 100% equity-based compensation with instant vesting
Employees’ minimum level of compensation is a guaranteed USD-denominated salary
Investors enjoy elevated levels of capital protection through liquidation preferences
The company benefits from severe market volatility (both exuberance and depression)
Companies are incentivized to optimize for growth of balance sheet and cash flows, not price
Employees and investors have long-term incentives, but no lock-ups or vesting
Moreover, there are substantial benefits to building regenerative treasuries on-chain:
The public can view, audit, and analyze cap tables with no hidden agreements
Corporate taxation may occur instantly and programmatically at the moment of payments
Reporting of corporate financials, assets, reporting will be instant and totally transparent
The company may choose to liquidate programmatically, instantaneously, and transparency
Before we get into the details, there are a few clarifications putting up front:
Many components of regenerative treasuries are incredibly difficult (or impossible) to recreate off-chain due to systemic friction of equity issuance, liquidation, and public markets, and regulation. However, some components could be applied to off-chain companies.
The system optimizes for incentive alignment, not ease of satisfying existing regulatory frameworks. Current US laws and regulations create substantial challenges for implementing this type of incentive structure, so incorporation of these types of organizations may need to occur internationally.
Some components are capable of being implemented individually. There are also many variations of this model which will be more suitable for other types of organizations. Before we discuss the multitude of exciting derivations, we must set a base-line for the general model.
I mostly use traditional terms like “company”, “employee”, and “shares”, in lieu of crypto-native terms like “DAO”, “contributor”, and “token”. Although terms don’t always translate perfectly, my interest is to make this as consumable as possible for a general (non-crypto) audience. Please do not misinterpret my use of terminology as a lack of understanding of the nuances of web3.
For the sake of simplicity and abstraction, some details and features have been excluded for now. I also fully expect the model to continue to evolve based on community feedback.
UP NEXT: How Regenerative Treasuries Work and Why Regenerative Treasuries are better On-Chain.