Below is a draft proposal that is the output of the DXD Token Working Group. The proposal draft will be a discussion topic on Wednesday’s Governance call and will be open for comments and feedback for a week before being submitted on-chain to both DXD holders & REP holders
Tldr: The DXD Token Working Group proposes a new token model, where “DXD gets its value from DXdao’s treasury, which grows from product revenue and its investments into decentralized technologies.”
The DXD Bonding Curve was launched in May of 2020 by DXdao. The bonding curve was an effective fundraising tool but the mint/burn functions of the contract were never able to create a liquid market for DXD. In May 2021, DXdao launched the DXD Buyback program which purchased DXD off the open market using ETH from the general treasury as well as from the buyback reserve. The program bought over 15,000 DXD (30% of circulating supply), but it was never viewed as a sustainable long-term model for DXD value accrual.
Since the bonding curve launched, DXdao has built and managed several DeFi and governance products, diversified its treasury into $10m+ of stablecoins, and has a team of 20+ full-time contributors focused on building and growing the DXdao ecosystem. The DXD token is at the center of this ecosystem, but there has not been a formal link between the value that DXdao creates and the DXD token. This creates uncertainty for DXD holders, especially as DXD has traded at a significant discount to book value.
In August 2022, DXdao launched the DXD Token Working Group to draft a long-term model for DXD. The below signal proposal is an output from the Working Group.
The proposal commits DXdao to:
- Introduce four tools in the DXD Monetary Policy Framework that would enable a fair and liquid market for DXD
- Establish a DXD Monetary Policy Committee
- Funding product development and other initiatives that further DXdao’s core mission to enable community freedom
To further simplify and answer the question, “Why is DXD valuable?”, the WG affirms: DXD gets its value from DXdao’s treasury, which grows from product revenue and its investments into decentralized technologies.
DXD Monetary Policy Framework
This proposal establishes four tools to be used by DXdao governance under guidance from the DXD Monetary Policy Committee. These are:
- DXD Floor Price Guarantee - DXdao commits to buying any amount of DXD on the open market
- Inverse bonds - smart contracts where DXD can be deposited for a defined period of time in return for a certain % of DXdao treasury assets
- New DXD minted - allow DXD to be minted in exchange for assets at full NAV
- Protocol-owned liquidity for DXD
DXD Monetary Policy Committee
Management of these tools requires close tracking of the DXD market as well as DXdao’s treasury. The committee should be at least three individuals and also include full-time contributors. This work should be compensated in vested DXD. The committee is tasked with:
- Providing quarterly reports on general general direction and outlook of DXD
- Issue monthly recommendations on inverse bond issuance and protocol-owned liquidity
- Work with DXdao governance and treasury on managing redemptions
Product development funding
DXdao’s mission is to enable community freedom. It was launched in 2019 as a radical experiment in decentralization. The DXD fundraiser was intended to raise funds for product development in line with this vision. The new token model represents a new social contract between REP & DXD holders. The DXD Token WG affirms DXdao’s commitment to building and funding decentralized products that enable community freedom by committing at least 6% of DXdao’s treasury to fund DXdao’s product & operations for a year.
This % can be changed at any time by governance and represents an overall budget suggestion for DXdao and is not a mandate to spend that amount, nor a maximum amount . This incentivizes the community to grow the size of the treasury.
This signal proposal is the output of the DXD Token Working Group, and if passed by REP & DXD holders, should be implemented by DXdao. Some of the elements will require significant development work before they can be put into practice. In the DXD Monetary Policy Framework, the DXD Floor Price Guarantee and the protocol-owned liquidity can be implemented using DXdao’s existing governance tools.
This proposal commits to implement:
- DXD Floor Price Guarantee priced at 70% of the current DXD-NAV Ratio (DXD’s circulating market cap to Treasury NAV)
- Provide $250k in DXD/ETH on mainnet once DXD price hits 60% of Treasury NAV, another $250k deposit at 65%, and a $500k deposit when it hits 70% of NAV
- When ready, DXdao governance commits to issuing:
- $500k in DXD inverse bonds with 85% payout after 6 months will be issued, along with
- $500k in DXD inverse bonds with 90% of NAV payout after one year, and
- $1m in DXD Inverse bonds with 100% NAV payout after two years
- The current DXD token contract should be upgraded and the funds returned to the general treasury
- Treasury NAV - ultimately defined by governance through guidance from the DXD Monetary Policy Committee. This proposal affirms treasury NAV includes all stablecoins, ETH (including staked ETH and other derivatives), Swapr LPs or other liquidity provisioning instruments. It incorporates the value of other treasury assets (like SWPR, ENS, etc) with a pre-defined liquidity discount. The DXD-NAV ratio is the DXD circulating market cap (as defined in the last DXD buyback proposal) divided by the Treasury NAV. This will be calculated at least bi-weekly.
- Inverse bonds - these will be individually launched according to specific parameters (duration, dividend stream, etc). The bonds should payout the % of NAV when they are due, not the NAV when the bond is issued or the DXD deposited. Bonds will need to have a redemption currency of either ETH or Dai/USDC.
- DXD Monetary Policy Committee is meant to involve engaged DXD holders in the formation of policy, but report preparation will need to be completed by DXdao contributors. Details of this will be further provided in the upcoming budget presentations by DXdao governance.
- DXdao may implement other tools to the DXD Monetary Policy Framework in addition to the four listed above. The goal is to incentivize an organic fair market for DXD with minimal open market operations and minimal changes to the underlying liquidity for the treasury.
- Execution of the price floor guarantee will occur on-chain through various trustless models. Previous DXD purchases were in smaller amounts, so executing on a larger scale will require more coordination.