DXD Buyback Program Adjustments, Extension #8 and Transfer of 357 ETH

TLDR: Below is draft text for a proposal that would 1. Clarify parameters of the DXD Buyback Program, 2. Extend it for another $1m 3. Transfer 357 ETH ($1m) to DXdao Dev Multichain multi-sig by way of the correct ETHRelayer contract to be deposited into GP Relayer on GC to carry out the buyback.

DXD Buyback Program Background

DXD was launched in May 2020 through a novel bonding curve, which minted 48,976.87 DXD. As part of the launch, there was also 100k DXD that vests to DXdao treasury over 3 years. The bonding curve was later shut down, and the DXD Buyback Program was passed in May 2021 to acquire DXD on the open market in a trustless manner. The original proposal authorized $1m in DXD purchases; the program was clarified and expanded to the buyback reserve and has been extended an additional seven times (each extension authorizing $1m in new purchases).

In the year since the program launched, 13,298.41 DXD have been purchased on mainnet and Gnosis Chain for an average price of 0.177 ETH/DXD. Using the USD price at the time of purchase, $7.5m of DXD has been purchased.

In addition to the DXD minted from the bonding curve, there has also been DXD issuance from DXdao’s original 100k DXD pre-mint. So far, 475 DXD has been issued on-chain to contributors in vested contracts or marketing expenses. An additional 458 DXD was issued to LPs to Swapr LPs for farming last summer, and DXdao has committed to an additional ~2,500 DXD (estimated) to contributors that has not been issued to vesting contracts.

So in total, starting from the original circulating supply of 48,976 DXD, subtracting the 13,298 DXD purchased through the buyback program and adding the 3,433 that’s been issued from the DXdao pre-mint, results in a current circulating supply of ~39,111 DXD, although more than 1,500 DXD is vesting for another 2+ years. The current DXD price on Swapr is $683, so the current market capitalization of DXD is $26.7m, still comfortably below the ~$45m in the DXdao general treasury and the buyback reserve.

After the initial proposal, DXdao governance shifted towards a new token model, where ETH from the bonding curve buyback reserve would be used to purchase DXD. Since the buyback reserve is actually in the DXD token contract, ETH from the general treasury has been used until the token contract is updated.

Adjustments and clarifications

Over the past few months, the community has been trying to reach consensus on issues regarding the Buyback Program, namely 1. The accounting breakdown between DXD in General Treasury vs. DXD buyback reserve 2. Clarification on what counts as NAV 3. Continued support for DXD buyback after the DXD Buyback Reserve is depleted

Regarding these issues, this proposal approves the following:

  1. The DXD purchased through the first buyback proposal (3,659), which did not mention the buyback reserve, can remain in the general treasury where it could be used for liquidity provisioning or other use cases deemed appropriate by DXdao governance. The rest of the DXD purchased through subsequent buyback extensions (9,639.41), as well as any future DXD that’s purchased using funds from the buyback reserve, should be burned. In terms of ETH spent, 481 ETH was used from the general treasury and 1,873 ETH from the buyback reserve (currently).
  2. The Buyback Program has previously defined DXdao’s NAV (or net asset value) as the US dollar amount of ETH and stablecoins in its treasury. This should be clarified to also include any Swapr deposits, staked ETH, staked GNO or any stablecoin deposits on Ethereum mainnet, Gnosis Chain, Arbitrum One and any other sanctioned DXdao base.
  3. If and when the DXD Buyback Program depletes the buyback reserve (623 ETH remaining, 277 ETH if this proposal passes), funds from the DXdao treasury can be used to purchase DXD on the open market at up to 70% of NAV, so long as this calculation accounts for runway and future funding for product development.

The Future of DXD: DXdao governance commits to devote further resources and a dedicated DXD Token Working Group to address long-term questions about DXD value accrual and other questions around NAV calculation, product revenue, DXdao supplied-liquidity, integration into Governance 2.0 as well as runway for product development.

Extension Details

Given the additional funds left in the Buyback Reserve, this proposal authorizes an additional $1m in DXD purchases under the same conditions as the previous extension so long as the circulating market cap of DXD is less than the NAV calculation of its treasury, as further clarified above.

This proposal ends 357 ETH to the ETHrelayer contract for the multichain multisig, identified as, 0x3e99bEd13071176fE06b317b33e2dcd1E1c9f2BE , which will relay the ETH to the Multichain multisig address, previously identified as 0x9467dcFD4519287e3878C018c02f5670465a9003 whose signatories have been verified as REP holders, which will convert it to WETH and bridge it over to be deposited into the GPv1 relayer on Gnosis Chain, 0xA369a0b81ee984a470EA0acf41EF9DdcDB5f7B46.

Risks and considerations

The DXD buyback program continues to take place will take place on Gnosis Chain, a sidechain with less security properties than Ethereum. The Buyback Program has been running for over a year with few problems; the GP Relayer has worked to complete the purchases at the market price. There is a concern that Gnosis Protocol v1 on Gnosis Chain will have limited support, but DXdao community members are striving to maintain the network of solvers. The community is also exploring additional options

DXdao has already spent over $7.5m repurchasing DXD. This has increased the price of DXD relative to ETH but it still falls below the book value of ETH in the treasury.

Full execution of this proposal relies on the Multichain multi-sig, which has already bridged and transferred millions of dollars of assets to Gnosis Chain.

Additional questions on DXD token value accrual after the buyback reserve is depleted, the relationship between the treasury and DXdao operations and product development, as well as integrations with Governance 2.0 still need to be addressed by DXdao governance in the future.

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This proposal has been submitted (with updated numbers) and boosted:

Ethereum Mainnet Proposal

Gnosis Chain Mirror Proposal

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