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 on a curve with price on the Y axis and Supply on the X axis.
The council acts as the project team being funded by the fundraising campaign. Council members are represented through a custom token and enforce their decisions via a dedicated voting app that acts similarly to a traditional multisig account. Their privileges are intentionally limited to protect token holders.
The council only has the ability to:
- Manage council members. The council decides on who is to be included or excluded from the council.
- Open the presale. The council decides on when the presale—and thus the fundraising campaign—is started.
- Handle the fundraising's proceeds. The fundraising proceeds are periodically transferred to a Vault / Finance app controlled by the council at their discretion.
- Open token holder votes. The council decides on when new votes should be opened for token holders to enforce decisions over the organization.
Organization's token holders
The token holders are the accounts contributing to the fundraising campaign. They are represented through a custom bonded-token and a voting app. They hold most of the governance rights over the organization.
Support is the relative percentage of tokens that are required to vote “Yes” for a proposal to be approved. For example, if “Support” is set to 50%, then more than 50% of theLTL used to vote on a proposal must vote “Yes” for it to pass.
Minimum Approval is the percentage of the totalLTL supply that is required to vote “Yes” on a proposal before it can be approved. For example, if the “Minimum Approval” is set to 20%, then more than 20% of the outstandingLTL supply must vote “Yes” on a proposal for it to pass.
Token holders can:
- Buy and redeem tokens. Token holders can buy and redeem tokens through the Aragon Fundraising interface.
- Handle fundraising parameters. Token holders decide on how beneficiary, fees, and collateralization settings should be updated. They also control the amount of funds automatically transferred to the council each month.
- Handle organization settings. Token holders decide on which apps can be installed or upgraded and which permissions are set.
This architecture grants most of the governance rights to token holders, to protect their contribution. However, this also requires the organization to be able to mitigate situations where a token holder could own the whole organization by owning more than 50% of the shares.
This is why token holder votes, where most of the organization’s decisions are made, can only be opened and initiated by the council.
Presale Goal describes the amount of DAI that must be raised during the presale period for it to succeed.
Presale Price is the constant price (in DAI) the organization's LTL tokens will be sold at during the presale. For example: 1 DAI per LTL. Later on, if the presale succeeds and trading opens, the price of the organization's LTL tokens will be dynamically adjusted based on the market.
Initial Tokens Offered % describes the percentage of the initial LTL token supply that will be offered during the presale. The remainder of this supply will be minted and sent to the council if the presale succeeds.
Project Funding % describes the percentage of DAI raised during the presale that will be sent to the council (to bootstrap the campaign's underlying project) if the presale succeeds. The remainder of the raised DAI will be sent to the automated market maker's reserve pool to support trading of $LTL.
LTL tokens purchased during the presale will be vested and thus un-transferable as long as the vesting cliff period has not been reached. The amount of LTL tokens that are unlocked at the cliff is directly proportional to the overall vesting schedule.
When the vesting schedule completes, all LTL tokens will become transferable.
Cliff Period describes the length of time required before any LTL tokens purchased during the presale become transferable.
Vesting schedule describes the length of time required for all LTL tokens purchased during the presale to become transferable.
Tap Rate defines the amount of DAI which can be released every month from the market-maker's reserve pool to the council-controlled vault. For example: 2500 DAI / month. This is the flow of funds that will actually support the campaign's underlying project.
Tap Floor defines the amount of DAI which will be kept in the market-maker's reserve pool regardless of the tap rate. For example: 2500 DAI. This ensures that the market-maker's reserve pool can't be emptied - and thus that the LTL price can't fall down all the way to zero - even if over a long period of time.
Maximum monthly tap rate increases and tap floor decreases defines how fast you can increase the tap rate and decrease the tap floor each month. For example: 50%. This protects holders by controlling how quickly the flow of funds from the market-maker's reserve pool to the council-controlled vault can evolve.
Initial Price per LTLwill be the price in DAI for eachLTL token when trading initially opens. Afterwards, the price will automatically adjust according to the market.
Expected Growth is the expected long-term market capitalization growth of LTL. We use this value to set the parameterization of LTL's bonding curve such that the token's price will be 10x its initial trading price once its reached this capitalization. Setting a high expected growth will cause the bonding curve attached to LTL to be more sensitive to volatility.
Obviously we are not yet launching this organisation, but I think that these screens and comments are much needed to add clarity and transparency about the Fundraising Template we feel is a fantastic match to kickstart the next dev phase of our mobile app. Keen to hear your thoughts ...