Combining ideas from Native discussions, CO Blockchain discussions, the Native whitepaper, the literature (sources listed below), Vitalik Buterin, blockchains like Gitcoin, DAOs like Aragon, platforms like Wyzant, and the community in general, we have the following draft of a funding and voting system:
A DAO’s members consist of some or all of the following: a) a team who works on a project and b) investors who contribute funds.
Each investment takes the form of a smart contract/payment channel/EIP1337 subscription/escrow wallet/self-destructing ERC721/etc. which must specify beforehand:
a) how the funds are split between the equity (“reserve”) fund and the project (“community”) fund
b) how the community funds are split between the team members
c) the timeline for payment
d) the amount of the community fund, reserve fund, and DAO tokens now owned by each member of the DAO
- For example, see how traditional businesses divvy up Angel investments and Series A, B, C seed funds (https://www.investopedia.com/articles/personal-finance/102015/series-b-c-funding-what-it-all-means-and-how-it-works.asp) and how decentralized versions of those use token bonding curves to divvy up investments at any time (https://blog.goodaudience.com/rewriting-the-story-of-human-collaboration-c33a8a4cd5b8).
We implement the above in a way that ensures 1) the value of tokens increases over time and 2) all tokens are always fully backed by the reserve:
Prospective members can
a) contribute work to projects and receive a portion of the community funds
b) contribute funds to the reserve and community funds and receive minted tokens at the exchange rate (“token value”) At the Time of Investment.
The price to buy a token (“buy price”) increases over time and is set by a bonding curve: p(t) = buy price at time t.
When an investor contributes Z amount of funds at time T, they specify through a smart contract that:
i. An amount w from Z plus an additional amount y (to balance the reserve, determined below) from Z goes to the reserve fund.
ii. The remaining Z - w - y goes to the community fund according to the timeline and distribution of the investor’s choice.
iii. In exchange, the investor receives w worth of tokens, each having a value of p(T). That is, they receive w/p(T) tokens.
iv. The investor can sell their tokens (burn them in exchange for reserve funds) at any time, at the exchange rate (“token value”) At the Time of Sell.
The token value at time t must equal (total reserve funds) ÷ (total existing tokens), which must equal p(T) at time T. Thus y is determined as follows:
v(t) = token value at time t = r(t)/m(t)
r(t) = total reserve funds at time t
m(t) = total tokens at time t
r(T-) = total reserve funds at time T prior to the investor’s investment
m(T-) = total tokens at time T prior to the investor’s investment
v(T+) = token value at time T after the investor’s investment = [r(T-) + w + y]/[m(T-) + w/p(T)] = p(T)
[r(T-) + w + y]/[m(T-) + w/p(T)] = p(T)
r(T-) + w + y = p(T)[m(T-) + w/p(T)] = p(T)m(T-) + w
y = p(T)m(T-) - r(T-)
For example, if the first investor contributes $5,000 to the reserve and $5,000 to the community fund, and the price of tokens is $1/token, they now own 5,000 tokens valued at $1 each.
If the next investor contributes $10,000 + y to the reserve and $10,000 - y to the community fund, and the price of tokens is now $2/token, the second investor now owns 5,000 tokens valued at $2 each and the first investor now owns 5,000 tokens valued at $2 each.
All 10,000 existing tokens are backed by $20,000 in the reserve, so y = $5,000, so $15,000 of the second investor’s contribution goes to the reserve and the remaining $5,000 goes to the community fund.
If the second investor had contributed twice as much, $25,000 would go to the reserve and $15,000 would go the community fund, and the second investor would now own 10,000 tokens valued at $2 each and the first investor would now own 5,000 token valued at $2 each.
This incentivizes members to invest earlier, increase the value of the organization, invest more (they still get the same amount w of their investment in fully backed tokens, and now a greater % of their investment goes to the community projects which increase the value of the organization), and not sell their tokens for cheap on other exchanges.
Any member can sell their membership tokens (which get burned) for reserve funds at any time for the sell value/exchange rate At the Time of Sell (quit). Again this uses the smart contract/pricing described in 2-3.
The community/project funds pay for expenses/contributions according to the timeline specified. For example, see how contracting platforms like Gitcoin, Wyzant, Colony, etc. work. Our understanding is:
For a Platform Fee:
Customer chooses their own timeline for paying worker.
i. Customer funds are locked in escrow upon acceptance of a worker/contract
ii. 50% is automatically paid upon worker’s work submission
iii. automatically unlocks customer’s review (optional) and rating (scale of 1 to 3) capability
iv. the remaining 50% is automatically paid upon a rating of 3, or 25% is paid upon a rating of 2, or 0% is paid upon a rating of 1
v. automatically unlocks the worker’s review (optional) and rating (scale of 1 to 3) capability.
All customers’ and workers’ average ratings/project histories/submissions/reviews are displayed prominently on their profile, so unsatisfactory ratings make them a LOT less competitive relative to the plethora of highly rated customers and workers out there.
It is key that the rules can be changed:
The only way voting can be fair is if there are no votes involved.
Anyone makes a proposal anytime by making a fork/branch from the current project and directly working on that.
Anyone votes for a proposal anytime by becoming an investor or team member of that project, using the same process described by Funding 1-5.
The above by design addresses funding, decentralization, consensus, futarchy, meritocracy, plutarchy, corruption (51% attack, collusion, nepotism, bribery, ad abuse…), innovation, transparency, trustlessness, security (money laundering, sybil attack, prejudice, anonymity, single point of failure…), HR, customer service, etc.
I. “Decentralized Patreon” (Currencyless DAO)
Q: Say a musician wants to make a living as a musician, without depending on copyright restrictions/paywalls/producer contracts/expensive venues/tours/conforming to mainstream tastes. How do we connect musicians that actually care with audiences that actually care, without the middleman?
A: Well, the musician can create their own DAO using the funding and voting mechanisms described above, except there are no investors/tokens. Anyone can create a proposal (for example, concert/event times/dates/venues/collaborations) by forking the DAO (for example, to modify the calendar) and anyone can vote for any proposal by joining/contributing to that fork (for example, by rsvping/contributing subproposals), in other words the fork is just another DAO within the DAO (recursion! or fractal?).
II. Decentralized Academy
Similar to Decentralized Patreon, except with:
A wiki for lecture content/student content (only page creators can edit their own pages, but anyone can create a page, and anyone can suggest edits).
A whiteboard/screenshare/chat-enabled chatroom for class/discussion use (anyone can post to chat, but only the teacher can toggle audio/whiteboard permissions).
III. Reversing the debt/war/oppression cycle
IV. Redefining countries
V. Retirement Investments
- Deep Dive: Augmented Bonding Curves
- Rewriting the Story of Human Collaboration (or, an Introduction to Token Bonding and Curation Markets)
- Continuous Organizations whitepaper
- A DAO Story
- Explanation of DAICOs
- How the ASF Works
- Futarchy (Vitalik Buterin’s website)
- Nested Multisigs: Or Turtles All the Way Down
- BUIDL Academy
- Aragon Governance