Renew vFOX Committee for another 6-month term

Summary

This proposal is a continuation of SCP-69, which created a new sub-DAO called “vFOX” dedicated to making strategic allocations from the DAO’s treasury into early-stage tokenized projects. Specifically, this outlines a six-month extension of the current vFOX Committee, which consists of JonisJon, willyfox, and Kent.

Motivation

In the current bear market, making strategic allocations is not top of mind. However, these types of market environments are arguably ideal for doing just that; valuations tend to drop with crypto prices, and the pool of entities that can direct funds towards early-stage projects shrinks substantially. Thus, those entities that can still make allocations may find themselves with a.) superior access to b.) more deals, offering c.) better terms.

This proposal positions vFOX to develop new opportunities in the coming months, extending its work thus far. To date, vFOX’s allocations consist of:

1.) 100,000 USDC and 17,500 FOX into Elastic Swap–a decentralized AMM protocol specifically built for rebasing tokens. Elastic Swap is used by ShapeShift’s FOXy (and soon, Yieldy) staking contracts in order to facilitate their rebasing mechanisms.

Date Completed: 4/29/22

vFOX Allocation: 15,000 TIC. (Current price: $4.46. Current value of holdings: $66,900)

2.) 50,000 USDC into an early-stage project in the crypto gaming space. (While the DAO’s–and vFOX’s–default modes are maximal transparency, this particular project has opted to remain in stealth mode while it prepares for launch.)

Date Completed: 7/29/22

vFOX Allocation: A pro-rata distribution that will be deposited into the sub-DAO treasury after the project launches its token.

Specification

This proposal would renew the existing vFOX Committee for another six-month term, beginning on the date of its approval via community governance. Specifically, a “yes” vote would stipulate that the DAO use its VFOX tokens to vote in favor of this extension.

The three Committee members consider themselves to be highly effective at working with one another, and share a diverse mix of perspectives on strategic allocations and risk management. Combined, they have a deep range of expertise around a wide range of crypto verticals (scaling, DEXes and AMM’s, gaming, NFT’s, etc.) that is useful when assessing potential allocations.

Benefits

A continuation of the current committee would allow vFOX to expand on its work thus far, and position it to develop new opportunities over the next six months. Although the sub-DAO needs to be extremely selective about allocating from the DAO’s limited stablecoin holdings, even relatively small allocations in the current market environment could lead to substantial gains for the DAO in the future. Additionally, vFOX also has the ability to allocate from the DAO’s more extensive FOX holdings.

Drawbacks

The community may believe that other DAO contributors are a better fit for the vFOX committee. In this case, it may determine that some members–or all members–should be replaced.

It could also be argued that the DAO should not be allocating any of its limited stablecoin reserves into early-stage projects. A “NO” vote would effectively halt vFOX’s ability to make future allocations unless another Committee was approved.

VOTE

YES: The DAO will use its VFOX to vote in favor of renewing the current vFOX Committee of JonisJon, willyfox, and Kent for another six-month period, beginning on the day this proposal is approved.

NO: Do not renew the Committee as described above.

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Could you talk about the strategy of continuing highly speculative investing in this bear market when many other aspects of the DAO have been tightening their belts?

The one that is most concerning is an anon crypto gaming space project that we are unable to make any sort of assessment as a DAO on if that seems like a reasonable investment or not.

The Elastic Swap one makes sense for yieldy’s, but would like to know what level of research was done before committing significant resources there. While there is obviously a need that was requiring being filled, there were no public members in their GitHub repo, but I did notice that @0xean is a contributor there as well. Which I see as a bit of a conflict of interest, so I am curious how and why they were chosen above others that could have fulfilled the needs?

Could you provide a bit more of the process that is done before choosing a project that is going to be partnered with vFOX?

An aggregated spreadsheet with the holdings and paid-out costs of vFOX so far would be awesome to be able to view and make a better-educated decision on if we should support another 6 months of vFOX would be great as well.

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Thanks for the questions PTT.

Due diligence and careful allocation is part of vFOX’s DNA - but especially so in this bear market. This is precisely why we’ve been so selective about new opportunities. For every allocation vFOX pursues, there are many more that it passes on.

“Belt-tightening” doesn’t really apply to vFOX since it’s not an actual Workstream, but the impact on our stable runway certainly does matter. We made one allocation of just 50,000 USDC after the market turned sharply lower and budget-reductions began across the DAO. That feels like a manageable trade-off; our bonds have until recently been earning that much per week.

Also consider that allocations in the current environment could lead to outsized benefits for the DAO in the future; it’s vFOX’s job to find these opportunities (while of course being very careful about the impact on our runway). Additionally, vFOX is in a position to potentially allocate FOX rather than USDC (as we did partially with our ElasticSwap agreement). These types of arrangements are ideal in a bear market, since they don’t impact our stable stack.

Ultimately this sub-DAO only exists at the community’s behest, and in order for the DAO to pursue its goals of diversifying and growing its treasury. If the community believes these goals are a poor fit for the current market environment, a “NO” vote would effectively halt its ability to make additional allocations.

In terms of determining whether a given project is a reasonable allocation, recall that it’s vFOX’s job to apply this due diligence; the DAO has delegated the sub-DAO this responsibility. That said, we did present this to the TMDC prior to obtaining the stablecoin allocation from the TMDC. Again, the lack of transparency here is not ideal, but it’s essential given that the project wishes to remain in stealth mode. That said, within the next 1-2 quarters the project should go live and the sub-DAO should receive its tokens.

Many contributors to the DAO, and each of the vFOX members, became intimately familiar with ElasticSwap thanks to our work together on FOXy. That provided hands-on experience with both the project and its team. Our positive assessment of the team is part of what made this opportunity so compelling; they’re doing rebasing AMM’s in a way that nobody else is, in our opinion. I personally don’t see any conflict of interest with @0xean’s involvement. If he were actually on the vFOX Committee, then yes - that case could certainly be made. IMO, the fact that we had such excellent visibility into the ElasticSwap team translated to a much more well-considered and well-researched allocation.

Great point on the spreadsheet; this will be important over time as vFOX makes more allocations. In lieu of that, please refer to the two allocations listed above since they’re the only ones that vFOX has made thus far.

As always, this data is all on-chain. We can post that information as well, for improved transparency. (Also note that the sub-DAO’s 15,000 TIC is currently in the ElasticSwap staking contract in order to generate yield on this deposit).

Regarding our process, I’ll leave some space for @jonisjon and @willy to chime in. Suffice it to say we dig into a lot of areas, including a project’s tokenomics, team, product-market-fit, roadmap, and much more.

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I had a question, the 1 million USDC/FOX used to fund the vFOX sub-DAO as laid out in SCP-69, was that amount transferred out of the ShapeShift treasury to a sub-DAO treasury? Or are these funds still in our treasury and just ear marked to be used if needed? If these assets were transferred to a different treasury as laid out in the proposal, what was the breakdown of amounts USDC/FOX that were actually sent? From the above I am assuming $150,000 USDC and 17,500 FOX is that correct?

Also I saw the statement that “belt-tightening” doesn’t really apply. While this isn’t a WorkStream, it is a funded DAO endeavor and as such is under the purview of this community. If the ask or objective is to protect the treasury then this would most definitely apply correct?

As a community member I would feel comfortable if the stated funds have been sent to a different treasury with asking the vFOX committee to refund up to $500,000 to the ShapeShift treasury, funds that could then be used to protect our liquidity positions and concerns vs asking the treasury for additional spend as in a forthcoming proposal.
Durning this Bear market $250,000 to $300,000 might better reflect the vFOX sub-DAO tolerance for investment for the next 6 months in projects rather than the Bull $1,000,000 previously determined. I would like to hear the vFox committee members thoughts on this if possible.

If the funds haven’t left the ShapeShift treasury , what is the worth of the 90% holdings of the vFox issued. Is it just ~60k from the stated TIC? Also if this TIC is being vested additionally any plans or strategy on how the DAO maximizes this moving forward while mitigating any risk of this disappearing during the bear trend. All eggs in a basket type of thing for TIC.

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Felt it best to create a new reply for keeping the topics clearly differentiated.

A few more questions, this being the first term expiring during the experiment of vFOX and it’s sub-DAO. For the two stated projects that received funding, what are the vesting terms? Repayment, shares of the project, profit percentages, combinations of such? What type of schedule has been determined, has the bear trend changed this?

As an example I do see that for Elastic Swap the ~$110,000 investment 15,000 TIC was initially received, what valuation of TIC was determined?
What if any, other terms were reached; timelines, protocol fees, so forth.

If the bear trend significantly impacts the value of TIC as it sits, does the committee have plans to help mitigate this ensuring the value of the investment isn’t a total loss?

For the second project (even in stealth mode) similar questions, the project not being disclosed, what terms is the vFOX committee willing and able to share?

Are there any projections as it pertains to these current investments? I personally haven’t seen much public activity from the committee, are there meetings, votes, stats?

Is this excluded from any all fox meetings?
Is the plan to just give the updates at term renewal moving forward?

Ok that is a-lot let me pause and allow for any replies, thank you for the reading.

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Hey just to pop in and help respond to some of the latest questions, @seven7hwave gave a great overview above of a lot of this so I will try not to be redundant and repeat anything.

Generally the process right now is to consider the potential of a project (and the project’s associated token) on a number of different fronts of which Kent outlined. We then try to consider all of these factors against the DAO’s overall needs with a perspective on what the upcoming narratives/opportunities may be in the market and how to best position vFOX to have exposure to all of that. We also consider strategic partnership opportunities and how the ShapeShift DAO may be able to both assist and benefit from the project as it launches and grows. Once we feel we have a good sense of all of these factors, the vFOX committee votes on an opportunity, so far only two votes have passed the committee of more than 10+ we have done due diligence on. This is actually pretty hefty due diligence for allocations of these size, but I think is appropriate considering how careful we want to be with affecting DAO runway vs any significant potential upside vFOX may bring to the DAO.

The funds were never transferred out of the DAO treasury, as per SCP-69, funds are only allocated on a “as needed” basis related to deal flow and only at the approval of TMDC to transfer of those funds. So there is nothing additional that has moved out of the treasury other than the 2 allocations that have been made.

Certainly the committee has taken a far more conservative approach to allocations than originally anticipated with SCP-69 primarily because of the situation around the DAO’s treasury and runway. We only want to allocate (and have been allocating lesser amounts than originally envisioned) when we see a high potential project with all the right factors. So far that has led to the 2 allocations described above, and I think it is a fair point to bring up that we are unlikely to run through the whole 1 mil allocation anytime soon, I would expect the next 6 months to be more in line with the last 6, so wouldn’t expect allocations much above another 150-200k or so (though that heavily depends on what opportunities present themselves and overall market conditions). This is a hard line to walk in that we don’t want to spend precious DAO stables and reduce runway while at the same time the best opportunities are available when market conditions are poor like they are right now. If the community to wishes to bring down the potential allocation to vFOX for now given market conditions and revisit if/when things improve that seems reasonable to me, but I also think the committee has been doing a good job of keeping that in mind and not overzealously trying to allocate just because it can.

Not sure I understand the question around 90% of vFOX worth. The worth of the sub-DAO (which is controlled by the DAO) is simply the allocations it has made. Regarding the TIC the sub-DAO now owns, that is being staked in the elasticswap staking program to earn more TIC over time, but the idea here was to hold that for years as elasticswap develops and perhaps revisit that as markets and the opportunity improves, but for the moment we aren’t looking to reduce risk on a allocation recently made, we are taking a long term view on any of these allocations.

The elasticswap allocation does not have any vesting terms, but we are committed with all of our allocations to be taking long term views in line with the projects we are allocating to. The Stealth project will have the same terms as others who participated, which in this case looks to be a linear vest over 3-4 years once the token launches but some of those details could change closer to launch (though we will always get the same as everyone else). Not sure what “repayment, shares of the project, profit percentages” would mean in any of these contexts so can’t comment on that, generally our upside is in the token if things go well.

Generally vFOX is viewing allocations as long term with high risk/high reward (which is generally what you get with the stages we are seeing). Our barometer is that something has to have 100x+ potential to be worthy of a vFOX allocation, we have to be willing to sit through what might seem like “paper losses” during a bear market in order to realize that potential upside so we aren’t looking to change allocations during normal bear market swings. If something dramatic changed, such as an allocated project looking likely to fold or shut down, then we would try to alter the allocation at that point, but generally these are allocations vFOX looks to hold for years at a time.

I am not sure it really makes sense to show “projections” on such early projects that are either just starting to grow or haven’t launched yet as there is very limited data to go off of at this time, as stated above vFOX wouldn’t make the allocation unless the committee believes in 100x+ potential over time. As things develop vFOX can update on the state of its allocations in the treasury and their worth/performance over time.

We had originally planned to do more regular meetings and I would like to see that occur, a lot of that got derailed by the market and the fact that vFOX was not being as aggressive with allocations as originally planned due to the factors already stated, as a result there wasn’t a whole ton to update on. I know we are planning to spend some time in the upcoming tokenomics meeting updating the community on vFOX’s activities and progress, though I would support something like a bi-monthly vFOX update meeting as well as we move forward or at least when there is activity that warrants an update. Regarding the all-fox, im not sure there is enough every month for that to make sense for vFOX, but if the community wants to see that we could try to have an update along those lines in the future even if its only a quick minute or two.

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Thank you as always for your responses

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Great questions so far from @PTT and @Neverwas. I think @jonisjon and @seven7hwave addressed these well and don’t have anything to add beyond +1.

If there are any further questions, it will be my turn to respond :slight_smile:

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