Panvala Staking Clusters - dxDAO draft proposal

Panvala is a philanthropic organization that uses an economic model to subsidize public-goods projects on Ethereum.

The model is inspired by POW blockchains where network participants subsidize network security with block rewards. The same way that bitcoin holders are diluted by block rewards in exchange for network security, Panvala holders are diluted in exchange for infrastructure funding.

Last quarter, in an effort to grow Gitcoin Grants matching pool, Panvala conducted a double-matching initiative. Gitcoin Grants was an ideal place to gain traction for Panvala, since it has in short time become a significant source of funding for Ethereum infrastructure projects,

The growth in community participation has been more than amazing: What started off with 200 contributions and $38k raised in Round One, grew into 8000 contributions and $475k raised in Round Five.

Of the 1.9M Pan released by Panvala last quarter they used 1.5M (almost 80% of their budget) to match Gitcoin Grants. Donors gave 115,755 PAN to over 100 different projects. For each PAN token donated on Gitcoin Grants, projects received an average of 12.9 PAN—their donations were matched at 12.9x!

dxDAO is in fact already a recipient of Panvala matching, and currently holds 10,654 PAN ($136) at time of writing. The PAN was received as a reward for Mix development work.

Moving forward Panvala will transition from matching Gitcoin grants to allowing communities to vet and match the projects they are most passionate about. Communities earn their matching budget by staking PAN tokens together in a staking cluster for their community. There should be one contact of 50k PAN and one alternate contact of 25K PAN.

dxDAO has the opportunity to become one of the first 5 initial staking clusters, joining organizations like the Commons Stack, Dapp Node, and Meta Cartel.

The goal of a community holding PAN in a staking cluster is to get as many donations as possible; the staking pool is then granted with the the responsibility of distributing whatever matching funds the community receives to the projects that the community deems worthy.

Each community will decide which projects they want to match donations for on Gitcoin Grants. The more donations those projects earn in PAN, the larger the matching budget for that community’s staking cluster. Communities split Panvala’s matching budget based on the donations that each community brings in, but it becomes harder to earn more matching when your community exceeds its capacity. Your cluster’s capacity is determined by the fraction of total staked tokens that are in your cluster. It’s always good to get as many donations as you can, but once your community starts exceeding its capacity, you want to get more stakers to support your community as well

For example, if your cluster has 10% of the staked tokens and your community has 5% of the donations, you’re within your capacity! You’ll get fully matched at the highest available multiplier (12.9x for last quarter).

However, if your cluster has 10% of the staked tokens but your community has 15% of the donations, you’ve exceeded your capacity. You’ll be fully matched for the first 10%, but the more you exceed your capacity, the harder it is to earn more tokens for your matching budget. Your budget always increases with more donations, but your multiplier will end up lower than the communities that didn’t exceed their capacity.

Why should dxDAO maintain a staking cluster
Given that dxDAO is not a philanthropic organization why should we maintain a staking cluster?

  • First we are already holding 15% of the PAN necessary to stake in our Treasury

  • As a proportion of our total Treasury holdings the capital required for entry is low (~4 ETH / $800)

  • Because we mainly fund our own development the chance of exceeding our capacity is low. In other words any PAN donations we do receive from our community will be matched at the maximum rate.

  • Other than the PAN minted in the quarterly budget the only place to acquire PAN is on the open market. There are liquidity problems on Uniswap (acquiring 60k PAN would be 7% slippage), so we can additionally gain exposure for Mesa by making it the preferred place to acquire PAN.

Risks

  • The biggest risk I see is that the price of PAN does not appreciate as fast as the inflation curve. Holding ~5 ETH worth of PAN as a staking cluster dxDAO could experience unrealized losses

Course of Action
The deadline to becoming a staking cluster this quarter is fast approaching. I am not clear how dxDAO will acquire donations from people in the larger DAO and Ethereum communities. However, I know that we have projects deemed as integral for Eth infrastructure, and, maybe more importantly, we are respected and viewed as experts in mainy of these domains; which is too say that it seems the community would have high level of trust in us to distribute matching-rewards to valuable projects.

I see roughly 3 ways to go forward:

  • The first is that we approve the budget to get the remaining PAN necessary for staking on the open market.

  • The second is that appeal to our members to pool any PAN that they have and cluster it in one address. Here, merits full disclosure that I am a Panvala caucus member. I don’t hold very much PAN but I would be willing to acquire it and give it to dxDAO in exchange for REP. I also know of at least one other dxDAO member who is holding PAN and would contribute.

  • Lastly, maybe we decide that there is too much going on right now, and we wait until next quarter.

Ideally I get some feedback from this draft, and then discuss again during weekly call on the 28th, before boosting the proposal through quickly. Any feedback or questions are welcome!

  • Acquiring remaining requisite PAN and start staking.
  • Allow Members to contribute Pan in exchange for Rep
  • Don’t collaborate at all with Panvala

0 voters

6 Likes

Seems like a low risk amount that supports an interesting project. I say, why not :slight_smile:

3 Likes

There’s some additional costs to consider.

  • Governance costs. DxDao will need to allocate staking rewards, which will consume time.
  • Monitoring costs. DxDao will need to monitor the asset value of staked PAN and cost/benefit analysis of continued participation.
  • Capital costs, mentioned. 4 eth is quite small, so the costs to dxDao is dominated by other costs.

These need to be considered against the benefits

  • Supporting an interesting project that’s increasing ecosystem value.
  • Allocation of rewards to projects valued by dxDao.
  • Developing a deep long term relationship with Panvala.

On net I’m positive on this proposal, but hopefully this quick rundown helps others evaluate.

EDIT: Also keep in mind dxDao’s core competency: Good governance of dapp projects. Panvala staking does play into this core competency, albeit somewhat indirectly.

5 Likes

Thanks for the feedback so far. Concerning Governance Costs, you bring up a good point about the time involved, but in my estimations that cost is outweighed by the allocation of rewards. We will be entrusted to allocate the staking rewards and can ensure that we distribute to projects and bounties that are aligned with building infrastructure and building value for dxDAO.

Also I am willing to spearhead the allocation. I have very little rep (less than 1%), and so if it ends up being lots of work I might make a proposal for a few rep, but for the time being, I’m also volunteering my time on this front.

1 Like

I’m curious, why would people want to donate funds to us when they have a portal where they can contribute funds, and acquire DXD?

How much is being asked of the treasury? Based on your numbers it seems like this would only require 5-7 ETH to do? Sorry if I’m way off, but if it’s only that much, it could be good for publicity in addition to diversified reserve management, even if small. I personally don’t think our treasury should remain 95% ETH, despite my respect and admiration for Ethereum.

5 Likes

Yes, it’s actually a little less than 5-7 ETH since we are already holding 10k PAN in the Treasury. You raise a good question, why would someone donate funds to us where they can contribute and acquire actually equity.

The value proposition for someone proposing PAN to our cluster is that we would be approved by Panvala to receive matching funds every quarter. So any potential donor would do so with the understanding that their donations will be multiplied.

Also–and this is subject to confirmation with Panvala–Pan coming into our cluster strictly speaking doesn’t have to be a donation. For example if there was a project that required fees we could charge in PAN and give a fee-discount to encourage users to pay in PAN because we know that we will receive matching funds from Panvala Foundation every quarter. The only caveat is that whatever PAN we have coming in can’t exceed the proportion of the total amount that we are staking. This maybe wasn’t explained well in the first part of my post. But if a cluster is staking 15% of the tokens being staked in a given quarter and receives more than 15% of the donations then that is the case of exceeding capacity the the surplus won’t be matched.

1 Like