Discussion: Budgeting in Tokens vs Dollars

I thought this topic would be better discussed in long-form in the Forum, rather than short-form in the Discord chat rooms. This is a discussion, and there is no objective ‘right’ or ‘wrong’. Instead, the goal is always to achieve balance.

About two years ago, I founded PSF DAO. We are a very small DOA of JavaScript developers. Because we’re so small, we are much more ‘price sensitive’ to how the PSF token is used. This discussion thread is my attempt to pass on some valuable lessons that we’ve learned.

Some of the workstream proposals pitch their budget in FOX tokens, and some of them pitch their budget in US dollars. There is a trade-off here that every FOX holder needs to consider before voting on a proposal.

TL;DR: Budgets in tokens present downside risk. Budgets in US dollars present upside risk.

I’ll try to keep this explanation short. I can expand the reasoning in additional posts:

From the perspective of FOX token holders, who want to see the price of FOX token increase, they should prefer proposals that are budgeted in tokens. In the event of a bear market, dollar-denominated budgets can put significant downward pressure on a token.

At the same time, budgets based on tokens (and not dollars) are naturally attractive to workers who want earn the token and hold it. It attracts workers who do not want to simply cash out of the token into fiat or other cryptos.

There is no way to avoid some budgets denominated in dollars. In particular, business-critical infrastructure like Dev Ops is closely coupled to the fiat world, and it needs to continue operation regardless of a bear or bull market.

To summarize, for the sake of the health of the token and thus of the longevity of the DAO, token-denominated budgets should be preferred.

Feel free to push back on this idea. I’m happy to expand on this idea, based on my experience, and learn from others experience too.

These are great points - while I am generally in favor of letting any workstream or proposal define for themselves which side of the risk spectrum they want to take, you hit the nail on the head IMO why fox token holders should generally prefer things to be denominated in tokens instead of USD to best align incentives.

It is definitely something that should be considered in every proposal, and in general I hope the community pushes things more towards denomination in fox tokens wherever appropriate.

That said, some of this problem can be somewhat mitigated once the treasury has acquired some stablecoins which it can use to pay usd denominated proposals out in without causing further FOX sell pressure, but overall your point stands and it’s something every voter should be acutely aware of when considering any funding request.

Thanks for the thoughts. We thought about this in the engineering workstream. When it comes to people needing to pay their bills with salaries from the DAO, we will propose budgets in US equivalent of FOX. We are planning to make most bounties, for features and bug fixes, to be allocated in tokens.

Great feedback, , it’s easy for me to forget this because I’m so deep in the woods here. I made the conscious choice to make my proposal in FOX tokens for these reason. Also understand others not being able to think of it that way.

This is something i had been thinking over myself and glad to see how much focus there is on this at an early stage. I agree with the reasoning behind this post and the consideration of stability vs potential growth and why its important to payout as much in tokens as possible. I’d like to add a thought. When budgeting for a long term work stream treasury to pay its members in predictable amounts, and proposals that include recurring payouts… even if the members are payed in shapeshift tokens i think theres definitely an advantage to having a proposal written to specify the % working budget to be given in stablecoins vs Fox, and highlight the fact that requesting mostly stablecoin would prevent having to propose for more capital for a workstream in the future due to unforseen volatility. Theres plenty of room for debate, just felt that was worth keeping in mind when thinking about all the different proposals in workstreams when giving feedback on their budget proposals

I didn’t realize until recently, but the Colony system only rewards reputation for payments in FOX. Until that’s configurable, people will probably need to be paid in FOX to keep their reputation score up. To make payment motions (“submitting invoices”, sorta) requires reputation, and it’s better not to have all of it concentrated in one place.

(This doesn’t actually address the issue of what denomination to budget in, but it’s an interesting constraint. The tentatively proposed convention among workstream leaders is to use the Uniswap v2 FOX/ETH price at 12:00 AM on the day of payment to do conversions for USD-denominated payments, and for any subsequent price movement which results in underpayment to be made up in the next one.)