The past seven years we have been exploring the world of blockchain. We have seen both mind blowing innovation and untrustworthy projects. The biggest fail is no doubt the ICO, a kind of kickstarter with cryptocurrencies, or as Ryder Taff said: a crowdfunded crowdfunding operation. Many launched without having a MVP and even the proof of concept. Some took advantage of the absence of a clear regulatory scene. In my opinion, the fact that there was no controlled release of funds and delayed founder liquidity, were the biggest downfall.
Lack of interest and necessary traction, disappointing product developments, challenges in execution, no existence or decline of a suitable market, and poor marketing or go-to-market strategy are quoted as some of the major reasons for cryptocurrency project failures.
Blockchain often adds a thick layer of extra complexity. But the advantage is that the technology is evolving and there is no doubt that there are some opportunities.
What crypto needs to do is commoditize business models with smart contracts & displace inefficient payment rails.
I don't believe that blockchain should replace crowdfunding, business angels and venture capital, instead it should leverage smart contract to make these processes more efficient. Instead of drawing a Blockchain solution around a problem that we think would come up after a period of time, we focus our energy on developing a solution that would solve a real problem which exists today. Yes, our mobile app!
Since building an app is very capital intensive, it will require an initial fundraise to get things started.
Various projects are investigating blockchain-based financing options and Token Bonding Curves (TBCs) are emerging as a new mean for fundraising. The team around the Commons Stack and others see more potential in crowdfunding for philanthropic efforts. Aragon is building a fundraising mechanism for DAOs formed on their platform, while Continuous Organisations describe a new business model that could be applied to any for-profit enterprise.
This is why I started reading more into some of these concepts and honestly, the more I read, the more I'm sold on the solutions they offer. We also had a good look at the innovations around the DAO. If you haven't heard about Aragon, I'm sorry, but you must be living under a crypto rock. They recently launched on main net and we highly appreciate what they have been building the past 3 years.
It goes without saying that nothing here is legal advice. In particular I stress that I make no judgment on whether The DAO would actually be treated as a general partnership under the law of any real-world jurisdiction.
Some of the main tools that DAOs offer, described in layman terms, are:
- An internet bank account
- Digital membership
- Voting to collaboratively make decisions
- Systems that reward contributors & early adopters
We should go where existing communities live and supercharge them. DAOs offer new tools to attract, incentivize and reward contributions that would be very useful if embedded into existing social platforms. Onboarding should be as easy as writing your phone number and credit card. Voting should be as easy as getting a push notification and clicking a button. The particular implementation described here is just one possible model. Thanks to the modularity of current DAO frameworks, the sky is the limit. The point is that the building blocks are now ready — now it’s just a matter of plumbing things together! (Credit: Luis)
Aragon empowers you to organize and collaborate without borders, and above all create global communities.
However, I must admit, I'm pretty impressed. (Full documentation here.) The video below is showcasing some solid storytelling talent, and an exciting new mindset.
With continuous token models, tokens are minted as needed and used within the protocol or application when required. There is no “ICO”, “Token Generation Event” or “Token Launch”. The network forms around the need of the token and dissolves naturally if it is not useful anymore. This sounds like ICO's 3.0, in a good way.
Instead of pre-selling tokens, the tokens are minted according to a pre-determined algorithmic curve. ETH is used to buy this token and it is kept in a communal pool. With more tokens in circulation, the cost to buy the token increases.
Combining continuous token models with token-curated registries can create a liquid, low-barrier market for global games of curation & categorization.
Users can create a list of places to live the life. Superb spots to sleep, eat or play, and set criteria for inclusion. #ltlmaps
Tokens are bought and sold according to a “bonding curve” — an equation that defines the token price as a function of token supply. It’s like having a market that’s just determined by the software.
At any point in time, a token holder can sell their token back into the pool, burning the token, and taking out a proportional amount of ETH.
When you buy tokens into a curve what you are doing is you’re for example sending DAI or ether into this curve and this curve is minting new tokens for you, and so what happens in the other way around, is you sell these tokens and then you get part of these reserves out in ether or DAI or whatever the reserve ratio is defined in, and so that’s how bonding curve works and it’s very exciting because you can, in the case of Aragon fundraising, get rid of centralized exchanges.
Bonding curves can help anchor or influence the “time value” of participation in the network, helping projects overcome the issues of initial hype and demand as well as sustaining continued support from their communities. The value of the network is more naturally tied to interest. Networks are allowed to grow and die naturally.
Aragon Fundraising is a suite of Aragon apps providing Aragon organizations continuous fundraising capabilities. It enables users to buy and redeem one organization's token through an automated market maker automatically matching orders according to a bonding curve tied to the Bancor formula. The funds held by this market maker reserve pool are released over time into a discretionary pool controlled by the organization's board to sustain the project.
This architecture provides smart-contract enforced accountability between investors and board members throughout the lifecycle of a project while simultaneously ensuring sufficient liquidity to support the emergence of a long-tail of micro-organizations.
Sometimes referred to as the “Stripe” of cryptocurrency industry, crypto payments firm Wyre has honed in on helping mainstream users interact with digital assets in seconds. Now, the next frontier for the firm is the rising decentralized finance ecosystem built atop Ethereum.
Back in October, the San Francisco-based Wyre noted its coming upgraded “V2” platform would enable so-called meta transactions, which would give the firm’s users the ability to “effectively turn their Apple Pay or Google Pay wallets into secure Ethereum wallets to fund [DeFi] transactions,” the company explained at the time. On December 3rd, Wyre confirmed it would launch such meta transactions in 2020, meaning the Ethereum community was on the verge of receiving its first direct fiat on-ramp to DeFi services.
“Considering our existing banking relationships, payment rails, regulatory licenses, and compliance program, it seemed we were the perfect candidate to connect [DeFi and the mainstream],” the Wyre team said.
The grand takeaway? Wyre’s fiat on-ramp for DeFi could help bring millions of new users into the arena, a significant possibility at a time when cryptocurrencies, while insurgent, remain on the cusp of mainstream adoption.
Might it be impossible to build a dApp with mainstream appeal? We believe that Web3 is going to be the next big platform and that millions of dApps will come to market and displace Web 2.0 monopolies. Not only that but we expect to see the first dApps achieve product market fit this upcoming year, in 2020.
Getting the basic building blocks of our business model right is crucial and Continuous Token Models (CTM) have some under-appreciated benefits in this regard. Obviously nothing matter more than finding product-market fit but to get there we will need some amount of pre-seed and a brilliant model like Fairmint is not yet suited for this stage of our journey, the LAO is an exciting legal wrapper around a DAO and will be no doubt the next step to attract business angels ...
The blockchain-y reinvention of everything in the financial world -- money, contracts, companies -- is fascinating and impressive and, viewed from a certain angle, adorable. But sometimes it could stand to learn from what has gone before. After all, the elements of finance -- money, contracts, companies -- have already been invented. Perhaps their historical development might hold some lessons for their re-inventors.
There is this project called OpenLaw and they build a very cool integration with Aragon. They have this online wizard in which you can create an LLC and it automatically creates an Aragon DAO and it links both. So, you have legal agreements that literally says how members are going to be defined and services are going to be defined by this token app on Aragon.
When you implement these legal wrappers, so like you open an LLC that manages shares on your Aragon corporation, the DAO runs the finances, but if you want to install a new app on Aragon ... for example, the new fundraising app and use a bonding curve for one of these ... how do you translate that to a legal system? That sounds like out of the reach of the legal system. So, I think if you want to exploit like a hundred percent of the potential of a DAO you have to disrupt the old way.
Or you simply use a solution like Fairmint that solves these issues ...
We have Palaeolithic emotions, medieval institutions, and god-like technology.
DAOs represent a radical rethink of how organisations, such as companies, can be structured and run, including changes in ownership, governance, decision-making and profit distribution. DAOs not only lower transaction costs dramatically through their use of smart contracts they can prevent laws and other rules being broken. Business structures have evolved and DAOs are simply another evolution. DAOs require a rethink of the law, including the granting of legal personality to DAOs as well as granting limited liability to DAO token holders.
Dash is an example of a DAO. Dash runs a blockchain, the purpose of which is to create and maintain a cryptocurrency that is used as a form of payment. As with Bitcoin, miners validate transactions. In Dash, the miners receive 45 per cent of the block reward. Next are masternodes that perform other functions including sending transactions, for which they also receive 45 per cent of the block reward. Decisions are made by masternodes and thus governance rests with them. Anyone can be a masternode if they stake 1,000 dash. The final 10 per cent goes to the Treasury and is used to pay developers and others that contribute to the Dash eco-system. Any holder of dash can submit a proposal for funding. Crucially the Treasury does not receive the dash to distribute, nor does a person or group of people make the actual distribution, instead at the end of the voting cycle all the dash is distributed automatically to those with successful proposals.
Practically, however, it would not be prudent for a DAO to create its own blockchain as it would be akin to a company deciding to create and maintain its own suite of computer programmes because it was concerned that changes could be made to, for example, Microsoft Office. Creating and maintaining a blockchain is a complicated and time consuming endeavour, indeed, Dash is a DAO that has been created simply to run a blockchain.
DAOs represent a radical departure from what has gone before because code can literally become the law. Take the crowdfunding example used earlier. The smart contract would be coded so that if the pre-set amount was not met the cryptocurrency is returned automatically to the putative investors. The DAO, or others acting on its behalf, cannot chose to retain the cryptocurrency.
Crucially, the DAO in making payments in its tokens could go some way towards reducing inequality between capital and labour because participants would, if they retained the tokens, in effect gain a share of ownership of the DAO. Currently, those working for or providing services to the likes of Amazon and Uber do not share in the increase of value of Uber and Amazon’s shares.
A reputation system could also be used so that those who had acquired a higher reputation because of the work they had contributed to the DAO or the esteem with which they were held by other DAO token holders, meant the value of their tokens in terms of their voting rights was higher than other token holders.
Who decides what is voted upon? Some DAOs, such as Tezos and Dash can be seen as an example of direct democracy as any token holder can put forward proposals. In Tezos there are rounds of voting to determine which, if any, are adopted. DAOs such as Tezos and Dash go further because of the ability for just one person to put a proposal forward, unlike the more traditional system of requiring a person to gather the support of a substantial number of others. The drawback, of course, is that token holders may be overwhelmed with proposals to choose between. Dash attempts to limit the number of proposals by requiring the payment of a set fee.
A DAO’s use of smart contracts means that rules and laws can be coded directly into the DAO’s operations. The murky waters are beginning to clear.
During the ICO craziness one ICO would basically stop the network from being operational and now with Aragon fundraising we are going to see that maybe multiply by like one order of magnitude more because you can open a fundraiser with like two clicks, and it’s on chain because it’s a bonding curve so like basically all transactions happen on chain so they are even more expensive than like the ICO craze back in 2017. We experienced this first hand when testing some of the Aragon features and ended up having a conflict between Brave and MetaMask, resulting in 3 times $30 fees, and a failed deployment. It was an expensive learning curve and I'm now worried about scalability issues in the near future. But I will keep exploring some of the brilliant features on the Rinkeby Test Network ...
I think there is one missing piece which is onboarding. In a perfect world you don’t need to install MetaMask. We need an infrastructure for seamless user experiences without having to learn about wallets, crypto or pay any tx fees.
Open Raise is a Toolkit for accountable on-chain fundraising, and being developed through a collaboration by dOrg and Level K. DXdao commissioned them to develop its fundraiser dapp using @FairmintCO smart contracts. DXdao recently ratified the configuration parameters, including pre-mint, curve slope, dividend split, and kickstarter threshold. See the proposal here. Details below:
DAO Reserve (amount and vesting period)
100,000 DXD Tokens will be issued to the dxDAO in a pre-mint, vested monthly over 3 years (i.e. 1/36th = ~2775 DXD will be vested each month for 3 years)
Curve slope / issuance
The curve slope is linear, as per the cOrg model.
Will be calculated such that 300,000 USD (in ETH, at current market price) would be raised in exchange for 12,000 DXD, or about 11% of the total supply.
This is a minimum threshold for the fundraise, until which point investors can withdraw the entirety of their investment.
Will be set to an amount equivalent to 50,000 USD denominated in ETH using current market price at deployment.
A portion of the collateral invested in the curve is held in reserve to facilitate sell orders (providing a liquidity guarantee).
Will be set at 10% as per cOrg model recommendations. Investors want their money to be used to grow the dxDAO, not sit in reserve.
A portion of revenue is allocated to the reserve, increasing the value of all outstanding bonding curve tokens.
Will be set to 10% of the revenue, for a minimum of 5 years. The duration of revenue allocation here can be increased at a later date, but never decreased.
Last but not least, we are keeping an eye on SourceCred: A Social Algorithm, presented by Dandelion Mane at SustainWeb3. The goal is effectively incentivize contributions in a decentralized and incentive-compatible way. A tool for communities to measure and reward value creation: read more. (video)
The Augmented Bonding Curve design can be conceptualized as a typical bonding curve with the addition of a funding pool, a token lock-up/vesting mechanism, and inter-system feedback loops.