Proposed DXD Token Model

Current DXD Token Model

DXdao issued DXD using a bonding curve based on Fairmint’s code. The “curve” is actually two different straight lines, one that binds the issuance price to the supply of curve-issued DXD, and one that binds the sell price to the total supply of DXD. 48,976.8760 DXD were issued by the bonding curve, raising 25,000 ETH. 90% of the ETH raised was directed to the DXdao treasury while 10% of the ETH raised was retained in the buyback reserve of the bonding curve, supporting the sell price. 100K DXD were also minted to a lockup contract and are in the process of being released to the DXdao treasury over three years; thus the total supply of DXD is 148,976.8760.

DXdao voted to pause minting from the curve and on April 8th, 2021 the curve was paused. Selling is still possible, though the sell price is lower than market. The supply is now fixed at 148,976.8760. About 49K DXD is circulating and about 1.5K DXD have been issued to contributors in 2 year vesting contracts with a 1 year cliff. The treasury is in control of the remaining 98.5K, which is over 65% of the total supply.

DXD currently has no voting rights but is entitled to a portion of fees generated by DXdao. The evolution of DXdao began with the initial REP holders being established in mid-2019. Since DXdao had no capital at the time, this nascent community of REP holders decided to raise capital for DXdao, and did so by launching DXD in the spring of 2020. The REP holders at the time were well aware that DXD was not properly aligned with REP at the technical level but lacked the resources to redesign the governance system. Indeed, Fairmint’s system was chosen to issue DXD in part because it had already been built and audited, and DXdao only had to implement a front-end. The Governance 2.0 working group established a plan to properly align DXD and REP. Development of this system is slated to start later in the year.

Problems with the Bonding Curve

There are several problems with the bonding curve.

  1. The Fairmint model is overly complicated for DXdao’s purposes. Very few people in the DXdao community understand its full capabilities or how it was designed to work.
  2. Since the potentially unlimited minting was unpopular, the curve has been paused. On the other hand the sell price is below market. Thus the curve is not serving any purpose.
  3. The buyback reserve contains 2499 ETH, valued at $7.3 million at time of writing, and this capital is lying idle, not providing any benefit to DXD holders. While the mint and burn model is elegant, the buyback reserve seems inefficient.
  4. Directing a portion of fees to the bonding curve’s buyback reserve on Ethereum mainnet becomes a complex process when fees are collected on other chains or L2s.

Proposed DXD Token Model

The bonding curve served DXdao well. Before its launch, DXdao had no capital and the ability to utilize Fairmint’s code which had already been audited was a boon to the community. There were lots of ideas and aspirations on how bonding curves were a promising fundraising tool. Fairmint’s model is fascinating and exciting in many ways.

At this point, with the problems outlined in the previous section, it has become clear DXdao is ready to move on from the bonding curve. Here I propose a plan on how to transition away from the bonding curve while keeping the elegance of the mint and burn model.

The bonding curve will be retired and replaced with a buyback model. DXdao will use a portion of the protocol fees derived from its products and from yield on the treasury to periodically buy back DXD from the open market. This can be done via mechanisms already being put into play with the proposed DXD buyback. The ability to buyback DXD will shortly be enabled on both mainnet and xDai. Buying back DXD on the chain where fees are collected will be more manageable than directing everything to the bonding curve on mainnet in the form of ETH.

The existing curve should be replaced with a standard token contract, and the buyback reserve, totaling 2499 ETH, should be used to buy back DXD off of the open market. It is a significant amount of funds, worth more than half of the current circulating marketcap of DXD, so the buying should be spread out over time and subject to parameters addressed in the current buyback proposal. Updating the bonding curve will involve dev work, testing, and auditing, and because developer resources are being fully consumed in the pursuit of product development, I propose that the update itself should not be a near term priority. However, the expanded buyback can begin as soon as possible using funds from the DXdao treasury. These funds will later be replenished with the funds from the buyback reserve once the curve is replaced.

Product Tokens

DXdao is moving in the direction of having tokens for each of its products. The tokens will improve the calibration of resource allocation by project, improve brand awareness for each product, and allow better price discovery as it enables the flexibility of being able to purchase individual DXdao product tokens OR the whole bundle in the form of DXD. It’s important to note that all DXdao products serve to benefit DXD and that the issuance of new tokens would only be done with the aim of increasing overall value. In a purely hypothetical example, DXdao could issue a token for product X, airdrop 10% of the supply, commit 20% of the supply to liquidity incentives, and retain the other 70% of supply. Product token holders could then vote to govern the protocol fees.

I propose that a portion of the protocol fee be sent to a staking contract where owners of the product tokens can stake their token to claim their portion of the collected fees. The fee that accrues to the product tokens retained by DXdao for the benefit of DXD will be used towards the periodic DXD buyback described in the previous section.

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I am glad Fairmint’s contract helped dxDAO take off. Long live dxDAO :rocket: :slight_smile:

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:handshake:And long live Fairmint! :slight_smile:

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Sadly I have to admit that John has some very good points on the DXD token model update, and I say sadly because this was one of the main reasons I enter dxdao, because it wanted to use a continuous fundraising model, the fundraising model is not perfect but is very good, and I always thought of how cool would it be to see the DXD curve works and maybe even close the curve :star_struck: .

But, we failed. And is not that bad, at least we tried and raised a shit ton of ETH at a low price ! I knew that it was going to be hard to keep the curve active, but it clearly was more work that the one we predicted and like John said, it is complicated, maybe too complicated for our needs, that in teh end is what just to raise money.

  1. The Fairmint model is overly complicated for DXdao’s purposes. Very few people in the DXdao community understand its full capabilities or how it was designed to work.

Yes, using it is hard and communicating how it works to an ever growing community is even harder! This is were we failed, because we didnt had the resources and time to communicate and push the use of the DXD curve further, I think this happen because we put te resources available on other products development, since we raised soooo much money there was no more need for fundraising we even shut the buy option!

Now for product tokens: Why not just use DXD everywhere? It would be way simpler, easier and increase DXD awareness, I think this over complicates everything and our only and sole objective should be to get ETH to push DXD price to the moon.

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It would be an interesting option, and likely requires a fair bit of minting new dxd to make this happen. I think its worth an analysis for someone with tokenomics experience. Most peopleare likely to push back especially if we are getting 10% of new tokens drops as well potentially buying into the new tokens as well.

I tend to agree with @AugustoL
First, the bonding curve served us well in the beginning but later on became irrelevant and even a burden.

I also agree about multiple tokens vs just DXD.
Nowadays we should recognize the power of memes (brands), we should really try to highlight and promote DXD as much as possible.
If products need more decision sovereignty, they could be managed by product-specific DAOs. Those DAOs can have voting power tied to staked DXD to that product-specific DAO.
Governance is easier because it involves only people interested in the specific product

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Agree with this. There is no need to fracture the value of DXD into separate tokens which become harder to manage and maintain to the same high level.

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DXDAO already have 2 different tokens, my proposal is to raise fund by selling $DXD OTC with time lock maybe through auction and reward investors by $REP.
Targets are long term investors, institutions and potential partners.

Selling DXD does not reward investors at all and does completely the opposite. When you say reward investors with REP, how do they get any monetary value out of it?

Auction will have a floor price above the market and $DXD will time locked for a period.
Buyer by agree on those, shows his long term interest on the project and his loyalty, instead will receive $REP.

I don’t see any reason that DXdao needs to raise more money ATM
Currently the treasury has a lot of unproductive assets and DXD trades below book value.
When DXdao proves it can use the entire treasury productively (product development, DeFi, etc), it should bring DXD to at lest book value where it might make sense to raise additional capital.

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DXdao absolutely does not need to raise any more funds. The current treasury has 1-2 decade’s worth of runway in it.

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DXdao steel need increase advertising efforts, so many person is not familiar with.

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It’s an alpha dao and everyone who learns about it is keeping it a secret. ;D