Proposal for DXventures Grant to Hats

Summary

Proposal to make a $100,000 grant in USDC to Hats.Finance through the DXventures program.

DXventures Mission

DXventures is not a traditional investment fund. Its main purpose is to collaborate with and incubate promising projects in need of seed or growth capital that solve problems DAOs and the DeFi space face.

DXdao envisions a future in which DAOs are the optimal vehicle for technologists, scientists, creatives, and industry leaders to organize through and innovate. Thus, teams that DXdao will support are developing solutions to facilitate this transition. Additionally, DXdao develops decentralized applications on the Ethereum blockchain and so naturally supports working with, and investing in, projects advancing the future of DeFi.

Hats.Finance

Hats is a decentralized cybersecurity incentive network. Governed by its community of stakeholders – Hackers, Projects, and Token Holders – to create an incentivized market for protocol security and responsible disclosure.

Hats is creating a scalable model that utilizes the development culture of Ethereum to help secure it. Here is how Hats works:

  • A DeFi protocol appoints a committee of core devs, security researchers, and white hat hackers.
  • The committee creates and interfaces with a Hats bug bounty vault for any hacker that identifies a bug in its smart contracts.
  • In the case of a detected exploit, a hacker will disclose an identified vulnerability to the committee, with an on-chain hash proof of the disclosure.
  • The committee is responsible to approve or deny the vulnerability submitted by the hacker.
  • If approved, and according to the severity, a predetermined amount of tokens will be released to the hacker as a reward. See the Hats Vault for an example of a predetermined severity.
  • See this link for more on Hats Mechanics.

DXdao <> Hats Collaboration

On May 6, 2021, Hats made a forum post for a proposal to collaborate with DXdao to use Hats for bug bounties. Hats proposed the following collaboration structure:

  • Hats governance will create a bounty vault of DXD tokens. This farms hats in the process. Security Farming ™
  • The DXD vault will serve as a continuous bounty that scales with the market cap of DXD and DXdao.
  • The vault is a continuous incentive for hackers to actively look for bugs and exploits in DXdao smart contracts and report on it.
  • This creates an additional utility for the DXD token to secure the DXdao smart contracts.

On May 10, 2021, Hats presented during the DXdao bizdev meeting on the DXdao collaboration along with a follow-up forum post on next steps.

On July 5, 2021, an on-chain signal proposal passed to initiate the Hats bug bounty program for DXdao. Currently, DXdao needs to assign a committee to look through disclosure reports and deposit DXD in the Hats DXD vault (amount TBD) in order to finalize the collaboration.

With this collaboration, DXdao joins protocols like Liquidity and Kleros in securing its smart contracts through Hats vaults.

Proposal for DXventures Grant to Hats

Given DXventures’s mission to fund projects that fill needs for DAOs and dApps, and DXdao’s upcoming collaboration with Hats to start DXdao’s first bug bounty program, DXventures proposes to participate in the initial funding round for Hats. DXdao has been offered 27,777.78 $HATS tokens coming in as rewards for its contribution. HATS tokens will be released linearly over 18 months, starting 3 months from the token genesis event, which began on August 24, 2021.

Hacks are an all too common occurrence in DeFI, and DXdao’s treasury exists entirely on-chain. DXdao protocols have homes on sidechains, like xDai, and on L2s, like Arbitrum. Funds are often moved between chains, which requires DXdao to exercise every available mode of protection to secure its protocols and protect user funds. Through this grant, DXdao will become a strategic partner with Hats in its mission to create a decentralized cyber security network on Ethereum.

Next Steps

If the DXdao community signals interest in going forward with a $100,000 grant to Hats, Hats will make an on-chain proposal for the grant.

11 Likes

We had a good experience working with the Hats team. So I would support the DAO investing in HATS.

What is this amount? What would be given for the 100k$?
If so, why is it considered a “grant” and not buying tokens?

I think the DXdao should also put some DXD in a Hats vault to serve as bounty for white hats.

2 Likes

Thanks taking time to offer support, Clement!

Good point. Yes, DXdao is going ahead with that, as well.

1 Like

Hi @cleasage, good question – Grants can refer to any conveyance of value (property, funds etc.) for a purpose.

As discussed above:

So, I use the term grant here to refer to a conveyance of funds provided to Hats for the specific purpose of building and growing a successful bug bounty program that DXdao and other DeFI projects can use. Since DXventures is not solely focused on providing funds for ROI or some other financial benefit, it made sense to refer to the 100K from DXdao as a grant to Hats.

Like you mentioned, we are receiving HATS tokens because of this grant, which aligns interests between DXdao and Hats. Since the Hats token is in early stages regarding utility and governance use, I wouldn’t necessarily call receiving the token an investment either. DXdao does not necessarily have any direct equity interest in Hats because of these tokens. Perhaps the better term is funds for tokens and resolving problems regarding security that DXdao faces, but I figured a grant more broadly covers that.

1 Like

Got it. In this case we could have a formulation such that DXdao will provide a 100k$ grant to HAT who will provide 27,777.78 $HATS to the DXdao to make what is exchanged more clear.
It would also be good to find out how we got to this 27 777.78 HATS number.