For additional context and discussion around this proposal, please see the draft proposal thread here: Draft Proposal: Tokenomics Workstream Q3/Q4 - #11 by seven7hwave
Fund the Tokenomics Workstream Through the end of 2022 and Re-elect Kent as its Leader
The most recently-approved phase of the Tokenomics Workstream ends on June 30, 2022. This proposal outlines the scope and budget for the following six months, through the end of 2022.
In this section I’ll take a look at our stated goals from the prior proposal (Q2) and evaluate our performance.
1a.) Reach our current goal of $10,000,000 worth of stablecoins in our treasury.
Our number-one-priority goal was a big one–and on this count we fell short. The logic for having $10M in stables was that it would give us roughly 18 months of runway at a monthly budgetary spend of $550,000/month. Currently we have $4.56M in stables , and roughly 10 months of runway . This is a good amount to work with, and the DAO is in a much better position than other DAO’s–but the bottom line is we didn’t reach this goal. Why is that?
For starters, I should have been more aggressive about advocating for stacking stables when the price of FOX was much higher. In late-2021 I suspected a bear market could be coming and believed that the DAO was woefully unprepared for this eventuality. (Additionally, regardless of views on market direction, basic risk management principles dictate that partial diversification out of a volatile native token is a mandatory best practice.) Hence, I made stablecoin accrual our number-one priority upon getting things rolling in December. I believe this focus helped inspire the DAO and TMDC to build a meaningful stablecoin treasury, which was funded primarily through FOX/USDC Olympus Pro bonds, along with an assist from Success Token sales to Coinbase Ventures and other strategic partners.
Ultimately I’m just one Workstream leader and community member out of many, and have no carte blanche over the proceedings. However, more could have been done. I advocated for selling FOX on the open market during Q1/Q2, but backed down when confronted with community concerns about optics. I should have been more adamant about the logic behind this; we could have parted with a relatively small amount of FOX when the price was in the $.50-$1.00 range, and would have a much higher stablecoin reserve. But I’m also consensus-seeking and generally avoid conflict. I feel like my conflict-aversion tendencies resulted in me not arguing as vociferously as I should have with respect to selling FOX for stables. I should have been more confident and adamant in making these arguments to the community and the TMDC. An interesting lesson, and one that I will carry forward in this role as I aim to be a more effective Workstream Leader.
There were additional factors that played a role in our stable shortfall. One is the growing community aversion to FOX emissions (via our bond sales)–particularly those tied to bond discounts. This resulted in us sharply reducing our bond emissions in Q2, which led to less stables flowing into our treasury. Currently we’re generating about $100,000/month via those bonds. Previously we were generating roughly $100,000 every day!
In addition to having fewer stables incoming into our treasury, we also were forced to deposit stables into Rari Fuse in order to service those debts and lower our liquidation points. These expenses added up to roughly $1.5 million in Q2. This is a good lesson for the TMDC, Tokenomics Workstream, and DAO in general: be careful with debt! It’s all too easy to take out loans in a bull market, but those chickens can come home to roost in painful ways when the price of underlying collateral suffers a steep decline.
Exiting our Ichi-related positions (OneFOX and AngelVault, which had been approved by the TMDC), resulted in a one-time expense of 90,000 USDC. The TMDC also approved 100,000 USDC for the vFOX / ElasticSwap allocation. Additionally, monthly payrolls for the quarter were almost exclusively funded by stables. This negated the need for additional loans, at the expense of having less stablecoin reserves.
1b.) Expand our diversification beyond stablecoins.
Via our liquidity mining program we gained exposure to WETH and ETH. In June we were able to leverage some of this diversification by selling our WETH, which netted our treasury a little over $300,000. Additional diversification will be important down the road, and is a natural function of our current Liquidity Provider strategy–however, accumulating stables takes priority in this bearish market environment.
2.) Complete the DAOshboard.
Done! Thanks to the tireless work of Darwin, with an early assist from Seth in getting things rolling, ShapeShift DAO has a transparent, updated window into all aspects of its financial condition and performance. Check them out here:
I can’t overstate the value that Darwin provided by making this happen. Thank you, ser, for your dedication and efforts!
3.) Contribute to new value-accrual mechanisms.
In Q2, Tokenomics played a crucial role in getting FOXy up and running (specifically, deliberating alongside the TMDC on tweaking the FOXY Tokemak strategy). Additionally, the Workstream has championed the creation and funding of Yieldies–a financial primitive building on FOXy in order to generalize the yield-generation approach to ETH and ERC-20’s. Yieldies are currently undergoing the audit process, and will soon be on Snapshot for governance approval.
Q2 also saw vFOX get up and running. vFOX is technically a sub-DAO, with members of the Tokenomics Workstream on its Committee. The sub-DAO’s first strategic allocation was ElasticSwap, with many more projects vetted.
4.) Continue to increase awareness of the DAO.
I was able to contribute to DAO awareness via a variety of writing opportunities that Lindsay provided me. Having ShapeShift featured in articles is a great way to raise awareness about what we’re doing here at the DAO.
THE PRIMARY GOAL FOR THE SECOND HALF OF 2022:
Preserve and extend our runway
The paramount, number-one goal of Tokenomics in Q3/Q4 is to help ensure that the DAO remains financially solvent for as long as possible. There are a handful of core tools we have at our disposal to make this happen:
a.) An updated and accurate view of how much runway we have remaining.
This is being tracked by the DAO Runway Spreadsheet I’ve created, which factors in our current stablecoin reserves (all visible on-chain or via the DAOshboard), our monthly budgetary outlay, and debt service expenses.
b.) Our Olympus FOX/USDC bonds
c.) Selling FOX on the open market
d.) Other tools, such as Hedgey OTC or Porter bonds
e.) Budget austerity
In the wake of the violent downswing in both FOX and the broader crypto market, various Workstream Leaders have reacted by enacting or proposing budget cuts. While this is not a fun step to take, we’re in good company; many crypto projects and companies, big and small, are taking similar steps. While the Tokenomics Workstream has no ability (and no desire) to tell other Workstreams what to do with their budgets, it can still play a helpful role in modeling various scenarios, providing timely updates on the status of our finances, and offering advice on how to move forward.
Note that this section lacks a specific stablecoin goal, like the Q2 proposal. I hesitate to shoot for a specific target because: a.) the community has expressed discomfort at the idea, and b.) it’s difficult to advocate for a specific amount of stablecoin accrual in this highly depressed market, where liquidity has dried up and buyers are harder to find. Additionally, the community currently seems divided on whether we should continue to accrue stablecoins or simply make our stand with our current warchest. (I, for one, am strongly in favor of continued stablecoin accrual).
That said, 18 months of runway remains a good goal to shoot for–albeit an aggressive one in this bear market. It may be possible to get there through a combination of the tools described above–for instance, FOX bonds combined with monthly budget reductions. This would be much more feasible if FOX sees a sustained increase in price at some point.
A more conservative goal is to aim for the DAO to raise enough stablecoin income each month to pay for its monthly expenses. 10 months of runway is perfectly feasible over the long-run if we rein in our budget and increase our stablecoin income.
Build upon the existing DAOshboard
Now that it’s created, what else can be done?
The logical next steps are to create ways to more easily visualize this data, detect trends, and suss out information and conclusions that could be beneficial from a strategic intelligence standpoint.
Contribute to new value-accrual mechanisms.
Reprising this goal from last quarter is an easy choice. In Q2 the focus was on FOXy. This time around, we have Yieldies to champion. This new financial primitive is concurrently moving though the audit and governance processes. Upon its release, the Tokenomics Workstream (along with the TMDC) will provide feedback and input on its strategies and parameters.
The next few quarters will also be a great time to assess new business strategies. Bear markets provide a few silver linings, and this is one of them: an opportunity to sit back and calmly assess what’s working, what’s not, and how to build back better for the next cyclical upswing.
Continue to increase awareness of the DAO.
I already have some potential opportunities lined up for spreading the word via articles, podcasts, and other avenues. With the assistance of our expert PR team, I look forward to continuing to help on this front.
Workstream Leader Compensation
The Q2 proposal included a 14,000 USDC/month Workstream Leader salary–an amount commensurate with other Workstream Leaders.
This new proposal stipulates that the Tokenomics Workstream Leader will instead receive $14,000 worth of FOX each month. This will help to reduce our monthly stablecoin spend. Additionally, by going “Full FOX” I want to signal my own deeply-held belief that we’ll survive this bear market, find a lasting product-market fit, and wind up in a much stronger position than we currently are. It’s my sincere belief that WAGMI.
In order to allay any concerns about the FOX immediately being converted and dumped on the open market, this proposal also stipulates that these payments will be made via Boosted FOX, with a 12-month timelock. Per the Boosted FOX proposal, this option provides an extra 20% of FOX following the end of the timelock period. (In the unlikely event that there’s a technical issue preventing Boosted FOX payments from being made, payment will default to regular, non-timelocked FOX.)
Funding for Workstream projects and bounties
In Q2, the Tokenomics Workstream spent a total of 17,681 USDC. These expenses included DAO contributor compensation for their work on the DAOshboard, an analysis of our Ichi AngelVault, and the Boosted FOX proposal. The largest expense (roughly 14,000 USDC) was for an audit of the Yieldy smart contracts.
The Workstream currently has 32,000 USDC, of which 25,000 has been earmarked for the completion of the Yieldy smart contract code. That payment will leave us with 7,000 USDC for Q3/Q4. This proposal requests an additional funding of 13,000 USDC, payable up-front (concurrent with July payroll), which will provide the Workstream with 20,000 USDC to spend in Q3/Q4. These funds could be spent on all manner of projects, from code reviews to detailed financial analysis to in-depth audits of projects that are seeking to partner with the DAO.
POTENTIAL DRAWBACKS OF THIS PROPOSAL:
Imagine a ShapeShift DAO where there was only an unofficial, non-funded, Tokenomics Workstream. In this scenario, a lot of meaningful work would still get done; the TMDC would still function (its budget is not a subset of Tokenomics), and contributors could still find myriad ways to collaborate–all without needing to spend funds from the DAO treasury on Tokenomics functionality or leadership.
WHAT THIS VOTE DOES:
For the period of July 1st, 2022 through December 31st, 2022:
1.) Fund the Tokenomics Workstream with a one-time distribution of 13,000 USDC (payable in July) and a monthly Workstream Leader salary of $14,000 worth of FOX (payable in 12-month-timelock Boosted FOX).
2.) Re-elect Kent as the Tokenomics Workstream Leader.