As captured in our post covering how we're publicly organize in preparation for launching a DAO , long term collaborators have been assembling as two, then few and now are realizing they should unite as many. This leads to the exploration of new kinds of collaborations.
Notably a DAO-to-DAO model we call Bootstrap Bonds. This partnership-focused model follows a pattern similar to venture-debt-funding with a focus on creating mutual value in a flexible manor, long on the outcome.
Gap: How to DAO
Key observations:
- People don't know how to assemble, participate in governance, mutually align value, properly propose DAOs – therefore struggle to access value.
- Many tend to believe 'only devs matter' - completely missing their positioning is the gap.
- Community DAOs typically don't have protocol revenue, resulting in no capital inflow / cash flow.
Overview
This research has largely been centered around introducing a way to orchestrate smart contracts to automate bond-based collaborations between DAOs.
Fundamentally, a bond is a balloon loan adjusted for the future value of $1
Example: You buy a bond $0.70 on the $1, that pays out $1 at maturity
The high level design goal is to minimize overhead and management while delivering collateralized value through software production that realizes maturity over time.
What is a Bootstrap Bond?
A loan is the beginning of a relationship; a partnership-focused lender will value flexibility and playing a long-term game with your company and investors.
Bootstrap Bonding specific to this design is the process of DAO-1 providing product (as collateral) to DAO-2 at a discount that matures at $1. This is particularly nuanced as it's important to distinguish as collateral and not debt.
Emissions are captured real time from protocol fees based on the implementation of the product and ongoing market activity. It's important for DAO-2 to have autonomy to collect those yields to maximally aligning incentives for both parties.
By design there is no fixed maturity period however there is a fixed return amount, which terminates when the bond reaches maturity.
Emissions Mechanism
Evergreen protocol revenues are first distributed to bootstrap bond holders according to bond return rate percentage. Notably, as part of the smart contract execution, DAO-2 can withdraw the proceeds at any time.
Example Process:
CommunityDAO purchases $500k bootstrap bond for an app from DevDAO. CommunityDAO pays $300k for the bond. DevDAO delivers app to CommunityDAO. DevDAO adapts app for usage across the space. From revenue generation of app and all other protocol revenue earned by DevDAO, a percentage is captured and deposited into contract.
CommunityDAO can withdraw up to $500k from the bond accumulation contract at will.
Meanwhile; CommunityDAO is actively using the software.
In this model, each DAO would respectfully tap its value at their respective desecration.
Features & Benefits
- Participating DAOs retain full autonomy with respect to their treasuries, internal processes and management while maximally aligning incentives
- BootstrapBond is fully collateralized with fully redeemed software product in advance
- Introduces a revenue upside to both DAOs without factoring debt given the unique, mutually collateralized positions
- Protocol fees and yield redemption is trustless & permissionless
- Strengthens token economies in both DAOs through shared and aligned collaborative efforts
Smart Contract
- BondFactory - deploy a BootstrapBond contract permissionlessly with customizable parameters and immutability contracts (0xsplits inspired). Contract would manage execution, receive deposits, enforce thresholds and support role based execution of key distribution functions.
- EmissionsRouter - Fee distribution contract, prioritizing earliest bonds first
Backlog (out of scope)
Additional features connected to Bond factory could take stored emissions and place them in a curve multiplier exposing members of CommunityDAO to experience individual upside.