Rari Tokenomics Plan for the next 3 years

ghosts_in_the_code

Author: Samuel
In consultation with: Jai, Jack, Sharad, community input received in Sustaining the DAO long-term

Summary

Signalling in favour of:

2.5M RGT mint into DAO treasury now intent to use this primarily as allocations for taskforces over next 3 years 7.5M RGT linear mint into DAO treasury over 3 years (2.5M RGT / year) intent to use this primarily for liquidity mining over next 3 years can also be used for other things if needed Timelock the RGT minting contract for 3 years

Execute now:

2.5M RGT mint on-chain

Execution in 1-2 months:

7.5M RGT linear mint on-chain Timelock RGT minter for 3 years Make more precise plans for the 7.5M RGT On-chain automation of above plan as much as possible. May or may not includes include gauges, profit-sharing, hack victim compensation and so on. All subject to future discussion and DAO appoval. Background

Tokenomic structure decided in October 2020
1.25M RGT under 2 year vesting for founding members
8.75M RGT used for aggressive liquidity mining campaign soon after the launch of Rari, has long completed, currently all owned by community

RIP-1 proposed in December 2020
Link to RIP-1
Mints 10M RGT
Got voted on but never executed

New discussion started over RIP-1 in August 2021
Sustaining the DAO long-term
Received valuable community feedback

This proposal being posted today. Intent to finalise ASAP.

Abstract

Mostly covered in Summary

Motivation Motivation 1

We wish to aggressively expand and gain more full-time as well as part-time contributors. We have gained a number of contributors now who are being paid on salaried or grant basis from a rapidly diminishing treasury. Transitioning any of them into full-time roles requires vested RGT allocation. This is urgent to avoid losing any of these members.
Salaried:

Sharad - now leads all frontend work for Rari Samuel (myself) - leads risk for Fuse pools, contributor management, assists with strategy

Grantees:

Contracts - Sri yantra, Veil, Zac, ?? Bizdev / marketing - parogia, cryptofameboy, more community mods, derectum, ?? Frontend - Nosedrop, Zane, 100X, cryptickoan, Gautham, ??

Other potential taskforces:

Market XYZ - led by Rahul and Erik, atleast 8-membered team tornado clone for Rari users - anon team of atleast 3 members (to be announced) Rari stablecoin - Kirk and others (to be announced) ?? Motivation 2

We do not wish to do multiple mints as that leads to uncertainty in the minds of RGT investors. We'd rather formalise one clear long-term RGT tokenomic plan. What we can have is multiple allocation votes and decisions over already minted RGT - as new contributors are onboarded and new projects (taskforces) are spawned off the Rari Capital DAO

Motivation 3

We wish to do liquidity mining, however have not finalised the liquidity mining plan today. Once finalised we wish to automate it on-chain as much as possible to avoid uncertainty and human discretion (after it is approved). We also don't yet have audited code for the long-term inflation or specific liquidity mining plans. This will take 1-2 months.

For: Approve this plan
Against: Back to the drawing board

0xNosedrop

Initially I was absolutely against an initial mint of this size, here's where I conceded a bit...

I may have misunderstood the mechanics of it. Minting to the treasury may have some short term price impact, however it would not cause immediate supply shock to the market as I thought. Therefore, I'd like to hear about the focus on the guardrails in place to the distribution of these 2.5M RGT. I do not have a full enough understanding on how this supply would be distributed to contributors(full time, grantees, task forces) and would like to discuss this further before having such a strong opinion either way(asap without gov mechanics paralysis ofc)!

0xNosedrop

@"0xNosedrop"#p649 If anyone can discuss in more detail the % distributions highlighted in Jai's post earlier, let me know!

ghosts_in_the_code

@"0xNosedrop"#p649 The guard rails are essentially on-chain voting and vesting.

Every quarter (or period), taskforces will request resources which they need. Taskforces must figure out which of their members need just salary, which need vesting, and request in bulk. So the core infra team does this separately, the Market XYZ team does this separatelty, so do any future taskforces.

We will have to ensure on-chain voting is active and everyone actively offers opinions and guides the process, this including core contributors, RGT holders and those with delegated votes. Community calls will be organised too, this is something we wish to work on.

ghosts_in_the_code

@"ghosts_in_the_code"#p651

The only feasible alternative to on-chain voting is for a few core team members (Jai, Jack and others) to control the entire 2.5M RGT in a multisig while it is yet to be allocated to anyone, I don't see that as ideal.

0xMew

In principle, I stand by RIP-1 and agree that the DAO needs to continue incentivising the ecosystem and continue maintaining/attracting talent. It goes without saying that the Rari team have done an incredible job to date and the project has top tier potential with great vision. As a long term investor, I appreciate the thought that's gone into RIP-1 and the original emissions schedule proposed. That said, the "productive asset" meme has become critical (and competitive) in attracting long-term investors, but only if there are clear and strong value accrual mechanisms. To draw from other ecosystems, Terra and Thorchain have clearly defined token design/value accrual that the community points to first, whenever a high-level investment thesis is pitched. Furthermore, I really appreciate the clarity with which Dopex have presented their token(s) model. I have nothing to add in this regard that advisors, far more insightful and experienced than I ( @"Tetranode"#56 et al), haven't already. That said, I would encourage the team to consult with specialists in this regard, such as the team at Delphi Digital or individuals like Adam Cochran whom I believe would add immeasurable value in helping to design a RIP-1 roadmap that a) Instills confidence and excitement in existing investors, and b) acts as a powerful marketing and sales tool with which Rari evangelists can proudly defend and promote the protocol to draw more investors. In short, I would like the team to produce (but more importantly to visually present) the most powerful, thoughtful and exciting tokenomic roadmap possible, so much so that "hyper-bullish mint" becomes a Rari owned meme.

TraderNoah

Looking at this under a "shareholder's" lens (although not directly applicable), dilution is acceptable if its beneficial to the long term value of $RGT. Given the diminishing treasury and rapid expansion plans, I'm in favor of minting $RGT.

The one thing I'd suggest is providing more clarity around the use of the funds. 10 mil RGT mint seems quite arbitrary and I rather not overdilute, or have to mint more in the future. Models to measure the impact of liq mining for yield products are easy enough to make so we can have a pretty good idea of how much RGT we need for $X of liquidity. Also, maybe provide a more concrete hiring plan around how many people are needed, average salaries, etc...

ghosts_in_the_code

@"TraderNoah"#p655 Regarding hiring, we can only provide plans for next 3 months if given some time, these will definitely go through on-chain vote separately. We cannot predict hiring for the next 3 years or what all independent projects will spawn off the DAO over the next 3 years. The 2.5M RGT is supposed to last for 3 years, and it is the responsbility of the DAO to carefully allocate small amounts at a time as needed.

And regarding liquidity mining, we will require some time to plan all the details of the liquidity mining program. And then implement and then audit, before finally doing an on-chain vote to finalise it. This can easily take 2-3 months depending on priorities. I've proposed agreeing in favour of mint now so we don't need to revisit minting decisions 3 months from now, just the details of how it is allocated. This provides RGT holders more confidence that nobody changes their mind later on.

austin

I think it would be nice to have some clarifications around the liquidity mining program before RIP-1 is executed rather than before.

I know the discussion has been around a crv-gauge esque lockup which I am in high support of. Can we confirm this and include this type of language into the proposal?

Adonis

Hey guys! I would like to make some observations, comments and ideas.

Regarding the activity of this DAO Treasury, some questions and definitions should be clarified. Some examples:

a) Main Purpose of the Treasury
b) Secondary Treasury Objectives
c) Badget
d) Allocation Definitions
e) Technical Details

Starting with the main objective of the treasury, I understood that the costs involving the ecosystem are the emergency of the moment, between full-time and part-time employees. But will the treasury also support the expansion of the ecosystem? It's one thing to keep what you have, it's another thing to grow.

The secondary objectives deal precisely with the growth of teams focused on engagement, engineering, research, products and marketing.

The badget has to be seen in two ways, short term and long term expenses, think days and weeks for short and months for long. The short term must be considered for recurring expenses and an emergency cash. The long term must be stipulated based on the expectations of growth in a given period of time.

Adoption growth, participation, automotive, everything.

With the perspective of two years and we can do some studies to have a better chance of forecasting these expenses, we can base ourselves on other similar projects with 1 year or 2 years.

The definition of allocations is something very important, the directions will be made directly to the people or teams where they will manage, or even other DAOs, making the DAO of the Treasury as the DAO of DAOs in Rari Capital.

The technical details are stipulated closer to the time when the constitution of the Treasury is formed, but some relevant questions at the beginning are:

Will there be blocking of resources destined to achieve metrics in the long term? Will a quorum be required to approve proposals? What are the other potential allocations? Grants? Marketing? Who will be the representatives of this treasure? Will those responsible have mandates? For how long? What type of governance? direct democracy, delegate or liquid democracy?

Of course, it all depends on how willing they are to innovate, experiment and find a more custom-made model for us, or if it's something more timeline emergency.

ghosts_in_the_code

@"ghosts_in_the_code"#p656 I don't think we have the plan finalised or audited contracts for liquidity mining. However we want to pass a proposal for contributor allocations today. Would you prefer leaving an "undecided" amount of RGT for liquidity mining for a future proposal?

ghosts_in_the_code

@"Adonis"#p660

a) Main Purpose of the Treasury - allocated to contributors and grantees in infra taskforce, or to new taskforces who can internally manage their own contributors pay however they wish to.
b) Secondary Treasury Objectives - Miscellaneous expenses such as audits
c) Badget - 2.5M RGT for 3 years. This is very much a long-term plan, and therefore each vote to allocate any of it will have to take that it consideration. Emphasis on giving taskforces more RGT only after they have proven their ability to execute and have working products.
d) Allocation Definitions - Allocations will be done to multisig of specific taskforce usually, on a periodic (typically quarterly) basis as is needed.
e) Technical Details - Blocking won't be implemented at protocol-level (beyond quorum requirement, which exists). However core contributors and delegates will offer their opinions and voters are to take those into consideration. Ofcourse the core contributors themselves own some fraction of votes so it is unlikely (although entirely possible) for a proposal to be passed against the wishes of the core contributors.
Quorm is currently 400k RGT, we use governor bravo which ia a liquid plutocratic system. Represntatives - if you can even call it that - will be Jai, Jack, me and any other core contributors who will actively work together with any outside taskforces. Mandates will be prescribed for individual taskforces. As for the treasury itself, that is still somewhat of an open question but the main requirement is that the product or work being proposed is useful and can immediately demonstrate how this project accrues value to the Rari Capital DAO.

Hope that answers some of your questions!

Adonis

Right. I'm thinking more about the health of the community in the long term, budget changes, even if they have plausible justifications, can be misinterpreted by the participants.

That's why I think it would be interesting to decentralize these decision-making.

You mentioned "prove their ability to run and have products working", who would rate? would the evaluators be the same funders (approvers)? Because that's the initial moment, ok. But at a time with a tight badget or one that may have conflicts of interest, they can hinder the development of the ecosystem.

I would recommend decentralizing into three groups:

Proposers (Who will propose the project) - Anyone who proposes an idea and project (a minimum amount could be charged to serve as a fundraiser and deter spammers. Evaluators (responsible for evaluating whether the projects meet the requirements) - they should not assess the project needs for DAO or not, just assess the project and mitigate risks. Financiers (who gives the ok, based on the badget planning and sends the resource) - It needs a better name, because DAO is financing it lol

Determining this and separating the roles, not being able to escape the process, helps not to have surprises along the way.

austin

@"ghosts_in_the_code"#p661 I want to do what the team thinks is best for the long term value of Rari capital. So if the teams wants to pass this now then I’m okay with it because I believe in them.

ghosts_in_the_code

@"Adonis"#p663 That's a great idea and somerhing we internally considered as well. I agree that as Rari grows it can make sense to have an independent committee just to advice on grants and token allocations.

As of today I think the core contributors themselves will play this guiding process.

Saypien

100% behind this. Need to cook with more sauce if we're going to grow significantly. No questions asked

That said, believe this needs to be done in a slightly new, innovative way that further propagates the Rari brand and maximized fund efficiency

Specifically, around the 2.5M taskforce allocation, propose we look into using something like UMA's KPI option token. Idea is to tie each taskforce to a KPI (onchain preferably) that controls the payout of the option. Take TVL for example, if Rari hits a TVL KPI then taskforce holders get more upside in return. If we fail to reach, the payout is less and the treasury retains some capital. Ideally, KPIs are more in line with what a specific taskforce is contributing.

Objective with something like this is
a) Increase fund efficiency. Pay up for shit that's killer and generates results. Save money when it misses the mark
b) further align incentives between protocol objectives and builders
c) enhances Rari brand as innovative and aggressive
d) ideally decrease bureaucratic bitching how funds are spent. (If everyone knows a good portion is tied to KPIs it allows a faster, more autonomous funding mechanism)
e) related, in enables a funding mechanism for high-risk proposals. Taskforces can request funds overweighted in the KPI payout portion for projects with high execution risk that may not get funding otherwise.

Can even do something similar with the liquidity mining portion. Incentivize liquidity with options tied to specific KPIs instead of raw RGT. This is to both attract long-term capital vs mercenary capital and incentive new KPI option holders to spread the word in order to hit the KPI metric.

paperhands

What @"ghosts_in_the_code"#p651 described is the way. Here's how you operationalize it:

Rari core team and task for leaders propose quarterly operating budget every quarter for on-chain vote Community votes to approve budgets Upon approval, funds are transferred out of treasury into multi sig wallets controlled by core Rari team, task force leaders, delegates, etc. During quarter, tokens get spent by multi sig holders in accordance with the plans approved by the on-chain vote

This gives the team speed and flexibility. It gives token holders certainty on dilution.

jai

Moved to Snapshot here:
https://vote.rari.capital/#/rari/proposal/QmVicTJNufeLk3zbdDzfpxF1kLQ6rjDcTWnC8CxvnoSoK5