Aragon Fundraising, is an app built on top of Aragon, providing Aragon users an easy way to raise funds through an emergent organization. This innovative model distinguishes itself by a batched bonding curve implementation that incentivizes “skin in the game” and curation with multiple collateral token support, novel measures preventing front-running, and a tap mechanism that sustains the underlying project while safeguarding the majority of funds from depletion.
It is a softer and more gradual token distribution/issuance mechanism.
The cornerstone of this application is a bonding curve smart contract: an automated-market maker where any user can deposit collateral in exchange for an organization-specific token. This market maker accepts both ETH and / or any ERC20 as a collateral. However, the first released default template will be set to accept DAI and ANT only.
The market maker contract mints tokens to stakers at a price determined by the initialization parameters according to the existing token supply. This guarantees continuous liquidity while incentivizing curation and funding for social good.
The collaterals deposited along the curve are automatically transferred into a reserve pool. However, the funds held in this reserve pool cannot be spent directly. A tap mechanism controls the percent of this reserve that can be withdrawn in a given time period to a discretionary vault to encourage a reasonable use of the funds. Token holders of the organization can then vote to allocate funds held by the discretionary vault and fund the tasks their project encompasses.
Sensitive actions such as raising the tap are permissioned so that changes require consent of the patrons. There is even a patrons-controlled 30 day buffer for raising tap percentages in case a conflict arises. Setting a continuously updatable tap for raised funds instead of a lump sum transfer provides accountability and alignment of interests between different parties related to the curve. The Fundraising app thus enables exploration, curation, and staking into networks that are allocating and producing value as Decentralized Autonomous Organizations (DAOs).
The bonding curve contract is the first implementation of a batched bonding curve conceived by Aragon own Billy Rennekamp. By batching orders and pricing them at a Common Clearing Price front-running is prevented. As a beneficial side effect mass exits are able to occur at a uniform price.
Aragon Fundraising reduces barriers to collaboration. It enables organizations to raise capital while granting contributors a clear set of associated rights and privileges. As a user it makes it easy to join and participate in a decentralized organization, and as an organization it provides a framework for attracting and rewarding contributors.
Thanks to Alexandre Rouxel, Billy Rennekamp, Cem F Dagdelen, Cory Dickson, Daniel Shavit, John Light, Luis Cuende, Luke Duncan, Maria Gomez, Nolwenn Jollivet, Olivier Sarrouy, and Owi Sixseven for contributing to this post.
There are a few main differences between the Aragon Fundraising template and the Company template, aside from the Fundraising app.
- In Fundraising, there is a Board comprised of holders of Token A and Stakeholders comprised of holders of Token B.
- Stakeholders receive Token B in exchange for depositing funds into the Fundraising app.
- Stakeholders can sell Token B back to the Fundraising app in exchange for their share of the funds left in the Fundraising app bonding curve (i.e. they have exit rights)
- When you create the Fundraising organization, you set up a few Fundraising app parameters (which can be changed) such as how much of the funds raised immediately become available for the Board to spend, how much the Board can withdraw from the funds raised each month going forward (the "tap"), and how much the tap can increase or decrease each month. You can of course effectively eliminate the tap limits by setting it to 100%, then 100% of funds raised are immediately spendable if needed.
We also want the ability to reward users for completing tasks, is that also possible within a fundraising model?
"Yes, you could simply create a proposal to reward the user and have the stakeholders vote to approve the proposal. You could also designate a "task manager" who is granted a budget and has permission to approve payouts for tasks, without having to put every payout to a vote. So the stakeholders allocate the budget and the task manager decides where to spend it (transparently of course). Aragon orgs are very flexible with the permissions and apps that are available. Definitely play around on the Rinkeby testnet, try a few workflows and configurations until you find one that you like."
In a Company org, once you transfer the funds to the Vault 100% of them become immediately available for spending via proposals. Stakeholders will not be able to sell their tokens back to the original Fundraising bonding curve (i.e. no exit rights) since all of the funds will have been transferred from the curve to the Company Vault.
Venture capitalist Tim Draper bought 1M ANT tokens to join the Aragon network
Aragon Network announced a small investment from Tim Draper, the billionaire VC who has previously backed Tesla, SpaceX and Coinbase. Draper Associates is buying into the Aragon network’s ANT token to the tune of $1 million. Not a lot in the “normal” tech investing world, but quite a lot in terms of the still very nascent blockchain world. Draper is the latest addition to Aragon’s backers, which include New York-based firms Placeholder and CoinFund, and Silicon Valley-based firm BoostVC.
Luis Cuende, executive director at Aragon Associate, told CoinDesk that Draper’s decision was prompted by “the recent launch of Aragon Court and the realization that Aragon can be to governance what bitcoin is to money.” Cuende revealed that Draper is also becoming a member of Aragon’s advisory board.
The Aragon project offers a platform for DAOs to manage their cap tables, vesting, payments, voting, bylaws, fundraising, and identity aspects. According to the company’s official blog post, it now has over 1,000 DAOs created with approximately $8 million under management.
On Feb. 10, 2020, Aragon Court – a digital judicial protocol to mitigate disputes for DAOs – was formally released. The court recruits human jurors to review conflicts and grant them rewards and penalties to motivate them to judge well. Every ecosystem member holding more than 1,000 ANT tokens – a list that now includes Draper – can participate in Aragon Court.
Aragon has also announced Aragon Chain, a blockchain built specifically for Aragon, after issues with Ethereum have arisen.
Aragon Chain will be built by implementing existing Aragon smart contracts and associated components on Ethermint, which was also built by ChainSafe. The project will also include a bridge to Ethereum to enable data and value transfer between Aragon Chain and Aragon on Ethereum. Data passed across the bridge will be able to trigger actions on Aragon Chain through an Aragon Agent on Ethereum. More details: github.com/aragon
Thibauld dives in to the elephant in the room: REGULATION.
Simon gets us started with an early 2017 template
In its simplest form, a Bonding Curve is a way to fund and coordinate work around an objective, orchestrated in a smart contract(s). Bonding Curve gets its name from bonding a base currency (DAI in the example below) to mint a new token (LTL in the example below) on a curve with price on the Y axis and Supply on the X axis.
Here is a high level step-by-step example for how it can work:
- When people are passionate about a project or idea (launching a new social network), they commune and get involved.
- Continuous token model allows mint and burn for all kinds of goals using a hypothetical “LTL” token
- The way it works is you stake DAI in the “real world” and mint LTL in “goal bubble”, this is done in a smart contract. Exchange rate is supply/demand algorithmic. Increase LTL supply = higher price, for (arbitrary) example 1st persons price for 10 LTL is 1 DAI, 2nd persons price is 1.1 DAI, etc.
- Goal bubble may even have a set goal, and a defined resolution (token curated community), to unlock proceeds of the smart contract to be applied to winners of the goal as well as dividends to early supporters
- Goals can be gamified into contests requiring staking LTL to participate, and with intrinsic (reputation, pride, passion) and extrinsic (money, usefulness) benefits for participants. Contests may be quantified goals, peer review, curation markets, etc.
- Participants in the goal bubble may gain or lose LTL subject to their contest results. Loser LTL may be burned or used as reward for winners. LTL can also be used for discounts, voting, tipping, etc.
- LTL can be sold for DAI at algorithmic price in the smart contract, and said LTL burned. When LTL supply decreases, the exchange rate to DAI becomes less favorable.
Aside from any taxes in the smart contract that runs the bonding curve, you should be able to redeem your LTL for the remaining DAI, likely getting back 80% or more of your initial stake. While it’s true you could apply bonding curves to music videos and all kinds of incredible art, the benefits of continuous token models with bonding curves can also help transparent fundraising around shared goals, while being legally compliant. Regulation Crowdfunding: sec.gov/rccomplianceguide
"Front-running is a legitimate theoretical concern for bonding curve mechanisms but we must weigh the risk versus practical usability.
Specifying a maxGasPrice will prevent front-running by non-block producers and given the possibility of liquidating the reserve pool pro-rata in the event of a black swan event the issue of intermittent illiquidity seems like a reasonable tradeoff for security.
Implementing minReturn can be effective mitigation against front-running by block-producers who are only able to front-run when they are in the position to produce a new block. Additionally as Ethereum moves to proof-of-stake, the incentives of the long-term incentives of block-producers will more closely align with the long-term usability of the network, so sustained malicious front running by block producers may be uncommon.
If despite these mitigations front-running becomes a significant problem more robust solutions such as commit-reveal transactions can be implemented to resolve the issue."