DAO-NET: DAO Token Market

Goals

1. Facilitate a market for DAO Tokens by integrating with existing DeFi solutions that will utilize the tokens.
2. Create a DAO which will focus on ways to maintain and improve on DAO token utility and value going forward.

Cardano Ecosystem Value

The value and exchange of DAO tokens, underpins the entire DAO-NET value proposition which in turn drives the expansion of members, DIDs and DAOs in the Cardano ecosystem.

Action Plan Details

The DAO Token Market is an example of how the DAO-NET smart contract template for DAOs can be used to quickly start up new DAOs to fund operational costs of projects and activities pertaining to a specific community, cause or of a specific type. These examples are to show specific use case on how the DAOs can be used to provide ongoing funding for solutions to any challenge fund problem, any Community Hub or any cause so that once the platform is deployed that others can start up their own DAOs with DAO-NET.

Operational funding for DAO Token Market activities will be assigned using the DAO-NET Treasury hourly funding disbursement that allows members to assign a portion of the Treasury to those DAOs or projects that they support. Details of the Treasury funding mechanism can be found in the DAO-NET proposal linked below and that same funding mechanism is used by DAO Token Market to allow members to allocate the DAO funds received to those projects or activities within DAO Token Market that the member supports based upon a proportional vote.

The tokenomics of DAO tokens are radically different then the traditional initial token offerings or ICOs which mint millions or billions of tokens to sell for startup capital. To start there are 0 DAO tokens and the only way that DAO tokens can be minted is through the CryptoFusion Funder process (see proposal by that name linked below for details) which mints DAO tokens whenever the community, funders and proposers reach a free market price point at which they agree to fund a proposal. This token minting process is believed to be completely free of potential SEC rulings of being a security however legal counsel will be sought to confirm through the DAO-NET proposal (see link below).

The number of DAO tokens in circulation will be minimal initially, likely numbering in the thousands for the first week, tens to hundreds of thousands for the first month and is unlikely to surpass a million tokens until 2-3 months after launch unless there is a large early membership adoption. This limited token pool size is likely to be problematic for most DEX or Automated Market Maker solutions as a reserve pool of tokens is required for the market to function. 

This proposal is to bootstrap the initial DAO token market by creating a temporary smart contract that will purchase a fixed amount of DAO tokens at the floor price of 0.25 ADA per DAO token using a small seed capital from this proposal, possibly donations and some of the potential surplus if many of the DAO-NET proposals are funded. If all 12 DAO-NET proposals are funded then an estimated $30K USD in DAO tokens would be purchased through the temporary smart contract. When the initial token purchases are complete then the $30K of Dao tokens along with $30K in ADA would be transferred to an existing Automated Market Maker solution to form the initial market reserve.

If the CryptoFusion Funder proposal is not funded then the budget portion of this proposal related to the temporary smart contract and the seed capital are not to be released by Project Catalyst until the CryptoFusion Funder or some alternative DAO token minting process is successfully implemented.

Scalability

DAO tokens are only minted as part of the CryptoFusion funding process and require Moments tokens that can only be earned at a fixed rate by each member. DAO tokens therefore scale up with increased total membership time within DAO-NET which is a much more equitable and scalable solution then the current ADA solution.

Imagine if Cardano achieves its goal of a billion ADA users in 5 years. There can only ever be 45 billion ADA in total, which would be an average of 45 ADA per user however there are several users with tens of millions of ADA currently which would lead to massive unsustainable inequality as most users would only have a fraction of an ADA each.

If there were a billion DAO-NET users then up to 1.46 trillion DAO tokens could be minted per year (1460 DAO per user). Individuals can still accumulate large DAO holdings compared to others however the idea of becoming a trillionaire simply by sitting on a cryptocurrency for a few years won't happen in this more sustainable model.

Market

The total possible market size for DAO tokens is deterministic and can be calculated as 4 times (the sum of each member's total number of days as a member). The total actual market size of DAO tokens is reduced to 4 times (the number of Moments tokens successfully used to fund proposals in the CryptoFusion funding process). 

The Token Market DAO has a potential market of every holder of DAO tokens, which is expected to be in the tens of thousands during the first year after launch.

Acquisition Plan

Initial outreach via relevant Discord and Telegram forums.

Skills Required

Product Manager

• have a holistic understanding of the DAO-NET suite of proposals
• experienced in managing multidisciplinary teams in up to a dozen projects simultaneously
• ability to articulate and fluently translate between business and technical requirements
• able to manage large complex budgets
• experienced in hiring consultants and third party contract negotiations

Lead Developer

• Full stack developer experience
• Plutus development, especially algorithmic DAO smart contract primitive
• Define technical requirements
• Integrate multiple software components into a larger solution

Plutus Developer

• Full stack developer experience
• Plutus development of smart contracts, Plutus Pioneer preferred
• Knowledgeable of DeFi and token markets

Team

Product Manager: Dwayne Collard - 20 years+ IT Consultant, Solutions Analyst, IT Manager, Community Advisor https://www.linkedin.com/in/dwayne-collard/

Lead Developer: Jude Ben - 9 years+ Software Development , Plutus Smart Contract Development , Cloud and Infrastructure Engineer https://www.linkedin.com/in/judeebene/

Plutus Developer: Contractor to be determined.

Partners:

DEX: Partners to be determined

AMM: Partners to be determined

Roadmap

February 2022

• Prototype algorithmic DAO smart contract (only required if DAO Deployment Platform proposal not funded in which case cost is shared among funded DAO-NET proposals)
• Outreach to existing DEX and AMM providers for DAO token market services

March 2022

• Prototype Backend API

April 2022

• Web interface for voting development (only required if DAO Deployment Platform and Voting DApp proposals are not funded in which case cost is shared among funded DAO-NET proposals)
• Prototype DAO token market bootstrap smart contract

May 2022

• Third Party Smart Contract Audits

June 2022

• Test algorithmic DAO smart contract on Testnet
• Test DAO token market bootstrap smart contract

 July 2022

• Launch DAO Token Market DAO (an instance of the algorithmic DAO smart contract) on Mainnet
• Launch DAO token market bootstrap smart contract
• Migrate reserve pool of DAO/ADA to partner Automated Market Maker

Key Performance Indicators

• Number of DeFi services in which DAO tokens can be exchanged or utilized
• Number of DAO token holders
• Distribution of DAO tokens among the community
• Daily DAO token transaction volume
• DAO token value in ADA

Success Definition

3 months

• Prototype algorithmic DAO smart contract with voting interface created
• Prototype DAO token market bootstrap smart contract created

6 months

• DAO Token Market DAO launched
• At least 10 DAO members in DAO Token Market DAO
• DAO token market bootstrap smart contract launched
• At least 1,000 DAO token holders
• At least 20,000 DAO tokens minted through CryptoFusion Funder process
• Third party Automated Market Maker seeded with a minimum of 2500 ADA and 10,000 DAO tokens

12 months

• At least 50 members in DAO Token Market DAO
• At least 2 new DeFi services using DAO tokens
• DAO Token price above 0.25 ADA each
• Total funding, through DAO-NET, equivalent to at least 10,000 ADA received for the DAO Token Market DAO
• At least 1 new DAO Token Market DAO improvement proposal funded and implemented
• At least 50,000 DAO token holders
• At least 1,200,000 DAO tokens minted through CryptoFusion Funder process
• DeFi services exchanging over 50,000 DAO tokens daily

Budget

Plutus Developer ($4000/month): $24,000

Initial Reserve Pool for AMM: $10,000

Product Manager ($500/month): $3,000

Algorithmic DAO Smart Contract*: $10,000

Total: $47,000

* Algorithmic DAO Smart Contract budget is for a very scaled down unaudited DAO solution, including hosting services, which is required to make this proposal deliverable in a stand-alone funding scenario however if the DAO Deployment Platform proposal is funded then this budget will be used to cover additional contractor expenses if required including for smart contract audits otherwise it will be added to the DAO Token / ADA reserve pool mentioned in the DAO Token Market proposal. If the DAO Deployment Platform is not funded however 4 other DAO-NET proposals are funded then the DAO Deployment Platform will be fully implemented with the combined funds of the 4 DAO-NET proposals.

Future Funding

Subject to legal review, DAO-NET intends to have a Bootstrap Funding contingency as further incentives to contractors, in which a small percentage of the DAO-NET Treasury can be set aside in a smart contract to retroactively fund contractors.

Proposals for additional enhancements to the DAO-NET ecosystem and new DAOs will be submitted in future Project Catalyst funding rounds.

If the CryptoFusion Funder proposal is funded then DAO-NET is expected to be self-funding when launched on the mainnet including the ability to fund other DAO proposals.

IP

All intellectual property is intended to be freely shared with the world so that any insights can be duplicated in other experiments to rapidly advance decentralized governance therefore:

All software developed as part of this proposal will be Open Source under Apache License, version 2.0

All documentation will be licensed under the Creative Commons Attribution 4.0 International Public License

Challenges/Risks

1 ) Likely regulations hostile to DAOs and decentralized blockchain applications

• Factions within the global elite publicly seek to thwart decentralization, as seen in recent and proposed legislation that is overtly hostile to decentralized blockchain ecosystems
• Most likely lawfare attacks against DAOs will be tax evasion and know your client requirements to comply with anti-money laundering and anti-terrorist financing regulations
• Typical member managed DAOs use a herd defense strategy in which there are so many anonymous members that individuals feel safe that they will not be identified and targeted however these DAOs normally have identifiable influential members managing some aspects of the DAO
• Traditional law enforcement strategy against herd defenses is to identify the prominent members of an organization and make an example of them through prosecution to deter the rest
• The dominant legal position is that DAOs are considered general partnerships, exposing members to personal liability for any of the DAO's actions and obligations
• Therefore there is a significant risk that prominent members of many successful DAOs will be subject to legal prosecution in the foreseeable future

Risk Mitigations

• DAO-NET to attain DAO Limited Liability Company status under Wyoming law. If funding for the DAO-NET proposal is not approved then contingent funding strategies are available including reapplying under Project Catalyst Fund 8, using standalone DAO smart contract funds in the event multiple proposals are funded and offsetting labor costs using a retroactive payment plan from the DAO-NET Treasury to free sufficient capital to complete DAO LLC filing.
• DAO-NET to use a totally algorithmic solution to reduce the number of identifiable influential members as much as possible
• All DAO-NET software developed will be open source allowing others to replicate and expand upon the decentralized solution in the wort case scenario of DAO-NET being legally disbanded

2 ) Bias by some Community Advisors and Voters against large solutions being divided into multiple proposals

• Current Project Catalyst funding process has a known limitation in which large proposals are unlikely to be funded unless the proposal is ranked number 1 in voting
• A solution to this limitation is to break a large proposal into smaller proposals funded under multiple challenges however some members view this as gaming the system or argue that large proposals should be funded by incremental funding in multiple funding rounds so that funding can be based upon achieving milestones
• This negative view of parallel funding is slowing innovation and making it more likely that projects are not completed due to lack of later funding regardless of success in achieving milestones up to that point
• Project Catalyst process already has auditing requirements for achieving milestones before funds are released which would apply to each proposal individually so that line of argument is not really valid
• Another known limitation of the Project Catalyst funding process is that there are insufficient funds to pay competitive living wages for labor costs in developed countries which results in jobs being shipped overseas to developing countries or requires workers to take on multiple gigs simultaneously however this wage gap can be addressed using the multiple proposal approach

Risk Mitigations

• This proposal seeks to change the discussion from whether or not multiple proposal solutions are a valid approach, to what are the proposal elements and challenges that need to be addressed in multiple proposal solutions
• As an experienced Community Advisor, with industry experience in the writing and assessing of proposals, this proposer has included all the elements required in the CA guide plus contingencies for the various funding scenarios like a single proposal being funded up to all the proposals being funded with the intention that CAs objecting to the idea of multiple proposals will provide feedback on what elements or concerns are not being addressed from their perspective so that future solutions will be more complete
• With the exception of the Product Manager and Lead Developer, who are required to participate in every proposal for integration purposes and have manageable workloads, no contractor will be involved in multiple proposals to prevent resource contention as being a reason to doubt feasibility of the solution overall

3 ) Recruitment of contractors required

• While the core integration team is filled, several specific proposal roles remain to be filled

Risk Mitigations

• Skill requirements have been clearly defined
• Labor budgets in the proposal are competitive with similar Project Catalyst proposals, with contingencies for higher wages if required including using standalone DAO smart contract funds in the event multiple proposals are funded or offsetting labor costs using a retroactive payment plan from the DAO-NET Treasury
• A number of Cardano experienced consulting firms have been identified that offer development services

Related Links

DAO Net Proposal: https://cardano.ideascale.com/a/dtd/DAO-Net/380999-48088

CryptoFusion Funder Proposal: https://cardano.ideascale.com/a/dtd/CryptoFusion-Funder-DAO-Net/381146-48088