A personal review of 2020: Products & Token

Hello everyone,

I wanted to try to write a post to sum up all my thoughts at the end of the year. As always I am trying to write this from a personal perspective as a DXD holder and a believer in the DAO, as I think that most benefits all of us. I left out governance as I think we’re making steady progress there atm.

Has taken quite a while to get to this stage, but great to finally see the Alpha out and trade happening. Yay! Speed and purposeful direction is now key for me to either prove or disprove our current proposition to the market and find a fit. Looking at the comparison of the AMM landscape, my challenge is still spotting how we really break into the market. Are we focused on LPs, Traders or Projects? Who’s our real customer that’s going to drive network growth? I personally think normal users is a hard route at first due to lack of brand awareness/recognition and real benefit of changing. They won’t care that we are better governed. However, if we can begin to convince new/existing projects to provide their own primary liquidity with us due to the increased control/governance, and we increasingly can tie that into Mesa IDO’s etc - we could be on to a sustainable path to growth.

DXD could also use some of our treasury to seed targeted pairs like DXD and start earning fees (we have 15m USD sitting around doing mostly nothing) - but as discussed before I am opposed to using DXD from the treasury for this purpose as I think we need to focus on DXD circulation (see later)

As I’ve said before, trying to compete in “liquidity mining” on main pairs w. Uniswap and 1Inch seems like a potential suicide to me, and a way to just put more DXD in circulation with no real plan or competitive angle. We can just give the user the best price for now via routing and be competitive. Cheaper fees is the long term play for me to traders.

Short term actual transaction volume could come from having the best price on some pairs and integrate into MM, Balancer and 1INCH to make sure we can also fulfil trades where users want to trade our pairs but may not know about Swapr. That will also get the name out there over time.

Been really interesting to follow the presidential market etc. and I can see Omen can be a great way to spread awareness of DXdao and get the community involved in creating new markets etc. Prediction markets are great for engagement, so the challenge here is simpler: What’s a realistic path to growing Omen into a product with a stable stream of markets and users that is actually delivering revenue for DXdao? It’s quite a complex product, with a lot of tech going into it. How do we make some back?

For me Mesa is an IDO platform by now and the quicker we decide to focus our efforts to make sure the product does its core thing really well, the better. We seem to be leading here, so let’s exploit it? Also love the auto-swapr for instant liquidity after the IDO. Builds very much on my thoughts above.

Question does come here for me too though about a realistic path to a product with a stable stream of revenue or benefits for DXdao, not just another line of continued development costs and overhead?

Here I am more stuck. We’ve built a really cool tool, but what are we hoping to achieve with it longer term? What is its market position or role in DXdao? What’s the path to revenue or benefit (is it a giant marketing machine for DXdao or a way to partner deep with Loopring and earn?). I must admit that looking at the last monthly update it doesn’t scream to me that we ourselves know and this project seems to drift and build new cool stuff - but for what purpose or goal?

In general I think all the projects and their squads would do really well by going through a simple exercise (maybe it is the startup CEO in me talking)… what’s the North Star metric for each product that is telling us we’re moving in the right direction in 2021? This forces us to formulate what we’re trying to achieve, for whom, and whether we are increasingly successful. Secondly, we should be able to formulate how driving that metric in the longer run will allow DXdao to earn revenues or other material benefits. How do we extract value?

Overall the greatest risk of a multi-product decentralized organisation is a lack of focus and leadership. We just have to win big once, and betting on many horses is not necessarily the best way to do that. We can’t be naive, most products will fail to ever become successful businesses (by extracting value).

I want to start this with a sense check:

Since August’s big influx and minting on the curve:
Total DXD: 148,974
DXD in active circulation: 49,169 (DXD held by DXdao treasury 17,067 + 82,737 DXD still locked)

ETH in Treasury: 21,280
ETH in Treasury to Circulating DXD ratio = 0.43
Present price of DXD in secondary market (to ETH ratio) = 0.185

It is therefore very clear to me that;

  • There is not at present a lot of confidence in the market of us getting to revenue to support price
  • Market expects us to burn +50% of our ETH with nothing to show for it
  • That the vote to pause the bonding curve is somewhat a reaction to this overall situation
  • That we need a plan and path to make new funding viable again via the curve

I am not in favour of doing anything to simply please DXD owners here, but I think we need to consider what we can do to optimize the situation as it also relates to our own fundraising ability like I previously argued in the bonding curve discussion. I am particularly interested in exploring the middle ground between not caring about the DXD price at all and supporting it for the sake of investors to the detriment of DXdao. Both are dogmatic to me.

On a personal level I don’t ever want to ever sell DXD from the treasury in the secondary market to fund us (unless it happens over the curve price at that time). If we ever do that the bonding curve is dead once and for all. As described before, I see a future where DXdao could fund its future operations through the revenues from its DXD holding (accruing value the same way as normal DXD holders and aligning their interests naturally), so I want us to retain as much DXD as possible in the treasury for now. Using it as long term worker incentives is also great of course.

I personally think the token price at the moment represents an amazing opportunity. As DXdao we could buy up e.g. $150k worth of DXD in market (subject to proposal) and use it to seed the DXD/ETH Swapr pool further. It would now be the deepest DXD market on any AMM. The Omen idea is also great (and one doesn’t rule out the other), but given the current price and excess circulating DXD in secondary market, I think the better move is to buy, become a large LP in our own pool that way and start earning fees. At the same time we’d show other projects how it is done and the benefits of Swapr (governance, fee control etc). NFTX is e.g. launching its own liquidity soon, we should be all over them making sure they do that on Swapr and not on Uniswap. We can be our own case study here and make money doing it. The above would be using less than 1% of our current ETH funds and we should be able to earn it back in fees over 14-18 months (DXD Uniswap pool is app. 50-60% APY) while still holding all the DXD. So it is more like putting capital to work than an actual DXD burn/buyback, something we have also discussed recently in various forms.

This could be done over a period of time, at a certain price (we can afford to be patient). We could e.g. buy whenever the price goes under x at which point we’d triggger a buy from allocated ETH and pool it. Surely such a buying & pooling setup can be automated easily if a proposal was created and passed with the agreed parameters? Happy to help formulate if there is support.

With the curve now paused, my guess is that we need to see some real appreciation in price and revenues before this is a realistic way for us to raise funds again. This also give us time to work out what we want from the curve (simply restart at higher price, change the slope itself etc). My issue with all of these is they simply “assume” we can restart the curve and raise funds. Only one thing will enable us do that in my opinion, and that is getting the DXD price back to the current curve price.

My proposal above is an attempt to formulate such a middle ground. It is an example of an action we could take that in my opinion benefits both DXdao (acquire cheap DXD, start earning fees and make future fundraising more plausible) and DXD holders (less secondary market supply) - hence helping to also close the divide between the two groups while we get a chance to build out products/revenue.

I am not in favour of standing by and letting animosity and us/them feelings grow and I think DXdao should take action to address such very actively by showing clear intent and willingness to act in our common best interest with the funds that have been entrusted to us.