TGE questions regarding $GEN

Genesis
#1

Q.) In our community Telegram it was asked by @TDotD "[I]s GEN a security?"

A.) Answered by @Matan [DAOstack Architect]:

To the best of my legal understanding (and perhaps @robertoklein [Roberto Klein, DAOstack CFO] can add on this), there’s no relation between the manner the proceeds will be used and nature of the GEN token.

As far as I can tell, in its nature, GEN is a utility token, but on the other hand this is not an official statement in any jurisdiction, and more so, we operate under the (more restrictive) assumption that the GEN would be treated as security in the US (which is the default unless appoved otherwise), and thus fully comply with the RegD US procedure (meaning, selling tokens in the TGE and earlier sales only to accredited investors in the US. Selling to everyone in all other jurisdictions).

@CaptainN3m0 followed up with: "How many tokens per ETH ? Are tokens pegged to ETH or USD[?]"

GEN are denomindated [sic] in (~ pegged to) ETH. Which means you’ll get X GENs per ETH. X shall be defined at the day of TGE by the ETH-USD rate of that day + data from early-purchasers bonuses & amounts, to fit the statement that:

40M GEN will be sold for a total of $30M over all sales.

Roughly, it’ll lead to something like 1 GEN for 0.8-0.9 at the public sale. (And again, exact number in will vary according to the exact figures of private sale and bonuses, and denomination in ETH will vary according to ETH-$ rate at TGE.)

But most importantly, once again, GEN are denominated in / pegged to ETH, so that X ETH will give Y GEN irrespective of ETH-$ rate at the time of purchase or variation thereafter.

@cgolasangi followed up with: ETH price has dropped significantly so it wont be anymore than $450 in the best case, so to meet $30mil you will have to raise twice the ETH so its more or less pegging to USD …when ETH price increases which it will in the coming month people who bought tokens now will be under loss and if they buy and hold eth now and purchase at exchanges

The purchase of GEN tokens is pegged to ETH. This means that during the entire sale process (private, pre, public), when ETH goes up you gain and when ETH goes down you lose —just as you would so if you would be holding your ETH.

This is the natural thing to do for a purchasing audience of people who usually hold their funds in ETH. Clearly, it’s in tension with people who usually holds their fund in $, as for them pre-purchasing GEN tokens is like purchasing (or be invested in) ETH, and if they would wanted to do so they would be holding their funds in ETH.

But since we estimate that most of our natural audience’s capital is held in ETH we chose that way. And note that choosing the other way around would be in tension with those people who does hold ETH :slight_smile:

The other thing is that the entire sale cap is denominated with $. Although somewhat confusing it does make sense and is pretty much the industry standard.

The implication of that is that if we close tomorrow $15M, and the day after the ETH price goes 2x, we’ll need to close the sale (and skip the public round). On the other side, if we raise $15M and the day after the ETH price goes 1/3x, we’ll have a long way to go to fill the cap :slight_smile:

@dancube followed up with: "What if you hit your cap before the presale time due to a rise in the price of eth, but then it goes back down again? Would the sale just be ‘tentatively’ on hold until the date arrives?"

Good question. Full disclosure: we haven’t yet decided about it (but will do so soon). The decision goes together with the decision of the amount of ETH to convert to USD for hedging against the ETH-USD variation. If we decided to convert the entire fund to USD on the day of closing the sale, then the question is no longer relevant. If we decided to keep the entire fund in ETH, then you have a good point. Hope to bring an update on that very soon.

#2

@JakeCondem followed up with: Also, with ETH being under $390 and if by the time GEN reaches the exchange and ETH is up again all ICO token holders are at a lose. ICO during this bear market is better off pegging ETH to a higher value because if not you will screw your earlier investors and it will be cheaper to buy on the exchange.

Dear Jake, thanks for raising the concern.

The ETH-USD rate is NOT pegged at the TGE. The GEN is denominated in ETH —which means there’s simply NO meaning to ETH-USD fluctuations for the GEN sale. The only thing that is fixed at the TGE is the AMOUNT of ETH to be raised (to fit $30M raise).

$0.75 as a price is not low or high, it is completely arbitrary and only reflecting the (also arbitrary) number of GEN sold.

ICO token holder are not exactly in loss if ETH price goes up before GEN goes on exchanges for a few reasons:

  • firstly we won’t have a significant time-gap between token sale and listing on exchanges

  • secondly, when ETH goes up also ETH-based tokens go up (as you can always see in the markets) for various reasons, but mainly if their capital is held in ETH, and when their capital goes up the value of the project goes up. It’s not exactly linear with the ETH change, but it’s also not even clear whether it’s sub or super linear.

Finally, we also don’t know if ETH goes up or down :slight_smile:

Bottom line, I think it’s hard to assess how the market conditions will impact the GEN-ETH rate, and it can go to both directions; we’re trying our best to neutralize this effect by denominating GEN with ETH (since we believe most of backers are used to hold up in ETH).

But you’re raising good point for discussion!

#3

Please clarify this for me:

The implication of that is that if we close tomorrow $15M, and the day after the ETH price goes 2x, we’ll need to close the sale (and skip the public round).

That will be great. Presumably unsold GEN tokens wil be burned as a result.

On the other side, if we raise $15M and the day after the ETH price goes 1/3x, we’ll have a long way to go to fill the cap :slight_smile:

This part I do not understand. Where do you get an additional GEN tokens to fill 30 mil USD cap? GENs are denominated in ETH, and if ETH goes down and you want to reach 30 mil USD cap you will need to sell more GENs in corwdsale than you planned. Where do these GENs come from?

#4

@Shakkakah followed up with:

Please confirm\clarify below

1. ‘But in their paper they do note they are reserving a high percentage (+50%) to be allocated to the community and partner development’. If so please clarify the mechanism to determine when and how much is distributed. Also these funds be locked for any significant period?

2. Can you please describe the Genesis DAO
2.1. And Is reservation for this aside from the 50%+ r reserved for community and partner development?

3. I have read before that an admin stated, an ICO will definitely occur. But I read in your blog that it is still under deliberation whether to gather all funds in Private sale or not. PLease clarify which one the team is leaning towards

4. Its quite strange that a figure like 30m has been determined without clear justification to investors why that’s so. And no detailed roadmap. Hope this is clarified soon
It gives the impression that a figure may have been pre-determined and now the team is trying to work that figure back into the metrics. This may not be the reality but looking at it from an investors persective, this creates doubt.

5. For reasons outlined to Roberto above the token pricing model chosen is vague and promotes ambiguity.

Thanks @Shakkakah. We’re trying to be as transparent as possible and determine the pricing as fair as possible. It’s pretty simple:

  • Over the course of all token sales (starting with the first private one in November 2017 and ending with a community sale towards the end of this month) we sell 40M GEN for $30M. This means an average token price of $0.75.

  • Earlier buyers get some bonuses (= a slightly lower price) and thus the wide-sale price would be slightly higher. We estimated the latter to be around the $0.9 per GEN and will have the exact figures in the coming week or two.

  • Note that we’ve committed on a raise of up to $30M to our early backers. (See below the explanation of the determination of $30M below.) We’ve kept the freedom to lower that figure given market conditions, but right now it seems there’s significantly more demand than supply so we’re keeping the number as is.

  • Given the belief that most of our target buyers usually prefer holding their capital in ETH, we decided to peg the buy price to ETH (which means buyers would not be sensitive to ETH-USD fluctuations if they’re holding their capital in ETH, and otherwise of course if they’re holding their capital in USD). Meaning, if you buy GEN during all period of sales with 20 ETH, then it’s the same 20 ETH no matter what the ETH-USD rate it at that point.

  • Finally, to fix what a 30M is in ETH we use the ETH-USD rate at the day of TGE. This doesn't fix the price in (which is, again, $0.75 on average), just the amount of ETH to be raised in total.

Most of these answers will be released officially in the coming days via a blog-post announcement. But for the time being I’m writing some quick replies to remove any fog:

  1. I’m not sure which 50% you’re referring to. The breakdown of GEN distribution is as follows:
  • 40M GEN offered for all sales.
  • 10M GEN are allocated to current all-wide team (founders, employees, freelancers, spontaneous contributors, advisers).
  • 10M GEN are allocated to DAOstack non-profit to manage for future contributions, biz dev, etc
    —------------------------------------------------
    In total: 60M GEN in circulation (includig the team’s GEN which are all
    locked up for 2 years.)
    —------------------------------------------------
  • Additional 40M GEN will be minted by the Genesis DAO (that will be founded on top of the DAO stack to support the DAOstack ecosystem) over the course of the years (think of this as the DAOstack mining for contributors). This minting will be controlled by the ecosystem crowd meritocratically (= the Genesis DAO) using its decentralized decision-making protocol. Until the foundation and stabilization of the Genesis DAO, the DAOstack non-profit multisig will secure that ability.

  1. The Genesis DAO will be operating through its decentralized decision-making / governance system. Anyone will be able to suggest proposals for operation (say, supporting this or that project). Agents of the DAO holding reputation (= influence power) will be able to impact decisions by voting or inputing the DAO (and possibly gain/lose reputation). GEN holders would be able of predicting the fate of proposals (and thus helping navgiating the collective attention on one hand, and gaining/losing profits if they were right/wrong on the other hand). Much more detailed explanation of the precise mechanism of operation will be provided in the coming weeks (in writing). Reputation will be initialized in various ways, some will be distributed by the DAOstack non-profit to members and professioanls, some will be (and was already) ground-dropped in ETH conferences, some will be air-dropped to active early adopters, etc. Once again, this Genesis DAO will manage the minting and allocation/distribution of 40M GEN over the course of years. Max mint rate will be fixed before the Genesis DAO foundation, and possibly by the DAO itself.

  2. A wide community sale will definitely take place if it dependson us (i.e. unless at the last minute stopped by regulatury/other considerations which we cannot expect, and that at least for now are not expected). Whether it’s called a community presale or public sale has no importance of course. Precise details on that are in writing and wil be announced in a few days.

  3. $10M from the $30M will be allocated to the DAOstack non-profit to manage further development of the DAO stack and its ecosystem. This is the estimated need for at least additional 4 years of development, which we estimate to be sufficient in order to bring the DAO stack for full capacity. The rest ($20M in case of full raise) will be handed to the Genesis DAO for management, with the aim to support, build and grow the DAOstack ecosystem. In particular supporting:

  • project building components of the DAO stack.

  • projects integrating interfaces / apps onto the DAO stack.

  • promising DAOs established on top of the DAO stack (using those interfaces, including our own Alchemy).

$20M in total will suffice for ~100 medium-size supports , which we estimate is needed to grow a thirving ecosystem in a great pace.

  1. Not sure what you mean by that - can you say what in the token model is vague or promotes ambiguity?

Thanks for wonderful questions!

#5

User tathagata prajna followed up with:

1. Is the quantity of GEN tokens issued fixed? Or will it be issued at a certain rate after the first issue?

2. If many people buy a GEN token, the price will rise. The answer I want is not that common sense answer. What is the most important factor in the system that drives the price increase of the GEN tokens inevitably required to operate the daostack system? For example, to use the daostack system, users of daostack have to stake a certain number of tokens for a certain period of time….

Thanks.

  1. The quantity of Gen tokens minted at the TGE is 60M. The Genesis DAO will have the ability to mint an additional 40M Gens over the course of years. There will be no more than 100M Gens (as far as we mean the same Gens that DAOstack is minting and selling at TGE). The decentralized network would always have the ability to fork and move into a new token that has different economic rules.

  2. So indeed supply is limited. Thus value of tokens will rise by rising demand for the tokens. As you’ve indicated indeed the main utility use of the Gen tokens is for staking over proposals (though there would be other additional uses as well). The gist is that: there is no known way to scale up decision-making processes in scalable decentralized organizations, besides via holographic consensus, that is “outsourcing” the navigation of collective attention and the signaling and closing of social inefficiencies (just as traders and arbitrators provide the signaling and closing of market inefficiencies). Gens would be the tokens for this mechanism. If you believe in this statement, and if you believe the DAOstack ecosystem would have the first-moving network effect of this new type of “miners” - social arbitratirs who’re willing to stake Gens over the prediction that this or that proposal will not be approved in this or that DAO, then you can conclude that the value of Gen will rise up the more DAOs will come on top of the DAO stack, the more they will grow, and more decisions they’ll make, and the more profits they will produce (and thus be willing to stake more tokens to produce those decisions).