Buy, invest, vest

Aragon DAO
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As a long term ANT holder I would like to thank @luis for sharing this proposal, as I can personally resonate with many of the points that were mentioned.

That being said, I also believe that we need to be mindful of the potential for complexity as we move forward. Therefore I think it is important that we descope where possible.

With that in mind, here are my suggestions (at time of writing, treasury value of approx 170M):

:one: Allocate 25M to a long term ANT buyback (1-2 years): the buyback tokens can be redistributed to contributors.

:two: Allocate 15M to ANT DEX liquidity pool in Uniswap V3: This would increase accessibility of ANT in the market

:three: Allocate 80M in ETH to stake and delegate the yield towards the DAO: Rather than turning the treasury into a hedge fund, we should focus on staking the ETH to generate yield for the DAO.

:four: Vest 50M to the DAO over 5 years: ANT holders could vote on how to allocate the 10M budget. (e.g. to fund team that build decentralized governance infrastructure)

:five: Consider ANT inflation of 5% per year: This would redistribute more ANT to active participants of the project (voters and contributors), incentivizing participation and growth.

I hope these suggestions are helpful

2 Likes
76

Not to get bogged down with the ins and outs of mechanics or the past.

I think we should start agile and simple and keep the complexity low. Take the quick wins.

Still formulating after the last 24 hours, but here is my thought. I think a buyback to distribute to contributors is good, but not sure it is legal as @F.C.Savigny has stated or will need to be done behind closed doors. And Rage quit will incur a tax of 35% (unconfirmed, but pretty sure), so ANT is trading at book value with Rage quit; no need to implement it. People can sell on the open market now.

If we can and do a buyback, I would distribute it to funded guilds on a 4-year vesting schedule, which can only be used for voting post-vesting. It would solve some of the low distribution issues. I would let the guilds work together on a proposal to distribute it. Maybe some are held for future funded guilds.

I think the quickest win is the Yield generation to wANT holders. Honestly, we should start for 1 year initially. I would see higher wrapping, no selling or ragequits needed, the price gets to BV, and ANT has some utility.

Going to keep iterating and come up with some more structured thoughts though.

1 Like
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There is a lot of things that yield 10-20% apr, i dont think that provides the quickest resolution. I guess the terminology of rage quit is at fault, because it is the same as a buyback just better method, instead its a contract where you set a price and people sell their ant to you, i think the key is to not offer exactly Book Value, but rather the treasury would quote a spread, 0.9x for example, in this perspective the treasury is actually just managing itself i think is what @Yakitori is alluding to. Because with each rage quit, the value of the treasury goes up (if you count ANT tokens as having value, otherwise we can look at it as the book value per ant goes up)

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Indeed – instead of “rage quit”, which is a loaded world, we could just say “buy order at book value”. This can be done pretty easily on-chain with Cowswap nowadays. Aura has done it successfully last year to sell some of its tokens to the market.

It wouldn’t be a redemption (so no 35%, no requalification as droit-valeur), as it would just be a treasury diversification, just like it has been done already. I don’t believe that discussing it here makes it illegal. DAO members have currently no direct power over the treasury, which is in the hands of the AA, who is the one to convince (and who will choose between closed doors).

It is also in line with the financial duty of the AA, as it would allow the DAO to avoid a governance attack.

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@AClay tbqh i think the decision here is simple - not sure who is representing you all legally but I’m sure they’ve said this to you already:

The legal ramifications of the treasury not being managed by the DAO are pretty severe. You and the AA team have a choice of whether you want to be an uncompliant securities issuer or not. The point of the treasury being managed by the DAO is to show decentralization of decision making. You do not have a choice - all roads lead to same answer. The fact that ANT was originally was an ICO puts even more liability on AA and the DAO if AA does not comply. The decision making cannot be centralized.

The arguments against buyback/“RageQuit” also show a fundamental misunderstanding of market mechanics and calls into question AA’s ability to act as a fiduciary.

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Sorry @mleanos. I am not part of the AA. I will let you go back and read my comments I am for a buyback and trying to be helpful here.

I can’t be clearer, if we go down the rage quit/anything that looks like a direct exit for financial gain, only then there would be a change in the classification of ANT, and there is a tax in Switzerland of 35% minimum. Not saying you can’t go down that route, but, I am saying in that case, we are at BV.

This is why I am for incentivising wANT holders with the yield and working on some sort of buyback with distribution to the builders of the product.

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Regardless of legal considerations, the problem ANT is facing is that it trades below its book value. I agree that anything that can be done within the boundaries of available options should be explored, with a strong emphasis on the sole objective of bringing ANT back to its book value.

If this isn’t achieved, it portrays how investors buying ANT tokens and holding ANT tokens consider that any funds allocated to product development are value destructive. If the current management and product development is value destructive, the reasonable solution is to cease any spending and study options to turn this into a viable endeavor.

Despite any effort that could be put to separate the token from the treasury, they are intertwined because of their history and design. The risk is that governance and budget allocation progressively freeze because holders realize that the treasury isn’t producing any return for them. It is important to fix this situation as fast as possible.

As a side note, I wouldn’t qualify a rage quit as a direct exit for financial gain, because it can take many forms, for example, an inverse bond like OHM implemented or a price floor similar to what Temple implemented with RAMOS. We are not looking at how ANT holders can make profit here, but how we can reinstate a sane and viable treasury governance to Aragon.

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I described two mechanisms above to return ANT to BV, avoiding tax. I would appreciate your input on those @Wismerhill.

TBC - wANT Yeild & Buyback with distribution will work on formulating something more

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The “inverse bond” is a slightly more complicated version of rage quit, that has been rebranded to sound more “finance”-y and impress degens who have not smelt a bulge bracket. It’s literal objective is to arbitrage the differential between market cap and treasury balance, or you know “provide direct exit for financial gain”.

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what about a reverse LBP that only wAnt holders can participate in?

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Not sure that is possible as wANT is non-transferable. Would you cap it at BV or allow it to go higher @Orion? Personally, I am not a fan of Reverse LBP’s.

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i think all buybacks should be capped at BV. Any reasonings against a reverse LBP?

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lll echo the same thing as the other forum post.

Where is the AA in this discussion?

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Hi everyone!

First of all, thanks @luis for bringing forward this proposal and for taking the initiative! With former AA teams having successfully transitioned out of AA by Feb 28th 2023, each of them with their own public roadmaps, we have had a reduced bandwidth to discuss about tokenomics and treasury deployment.

I fully agree that it is time for AA to focus on solving the underlying issue you highlighted, and I’m looking forward to focus on solving those as Executive Director of Aragon Association and AA Committee member. I am glad that the proposal kickstarted so many contributions from long term ANT holders (who surprisingly have very short term accounts in Discourse). Looking forward to further discuss about tokenomics and how to further contribute to the long term success of the project.

I would like to clarify a few topics, as I’ve read some confusing messages in the thread:

  • Aragon Project treasury is currently held by an association (AA) incorporated under Swiss laws. As such, both the General Assembly members and AA Committee members are bound to such. We can discuss long about different ideas and topics, but AA is bound to applicable swiss laws and the universe of potential solutions that can be implemented is restricted to what is legal there. This is probably easy to understand for everyone, regardless of their legal background.
  • As @luis comments, it’s ultimately up to AA to decide on a course of action. Aragon Project should not be conflated with Aragon DAO. After the transition there will still be “offchain” entities within the ecosystem that fall outside the DAO, that will help protect the project and promote its development. The DAO is a core component for executing the mission (as it ultimately should control the protocol that DAOs rely upon), and as such, a means towards an end, but it’s not the end itself nor the “whole”. I understand this may be cause some confusion to some people (specially those who think that a Discord server is a DAO)

Having said this, it’s important to bring attention to this reply on the thread and also this:

My point here is that the Aragon Association should not commit to a buy-back, as this may result in a re-qualification of the ANT tokens.

If AA did a buy-back, it would have to be aligned with the further development of the project and could not be communicated beforehand. So, unless the law changes in Switzerland, we’ll have to play by those rules.

Feedback
I really like the proposal in its general terms. I believe it can provide incentive alignment to all set of stakeholders. My 2c on it:

Aragon Dev DAO
Would the Aragon Dev DAO really need 50% of the 20% yearly unlocked treasury? Probably not, at the current burn-rate. I would suggest using a cost-based method based on expected runaway as opposed to a fixed % of the yearly unlocked treasury.

Fully agree on tying fund allocation in with objective and value driven method (NSM based), as this allows the protocol to progressively reduce the dependency on core teams. In fact, the Strategy to Become a Governance Hyperstructure that AA published in Q3 2022, and that is actively being pursued by current Aragon Guilds, was created so that protocol functionality could be extended by external teams. A NSM-based approach to funding teams that push forward towards achieving strategic goals is highly aligned with that.

This said, I also believe current Aragon Guild teams should be able to work with a laser focus on execution in order to get there . We can’t possibly compete with Web2 startups if we are not able to have laser focused teams. We must protect that focus (not at the expense of accountability) for the long term success of the project, as without active teams working on the advancement of the products and underlying protocol and components, there’s no long term value creation. As @alex-arca points out here, we expect that with the new product direction spearheaded by aragonOSx and Aragon App we should start to see meaningful change (and adoption, which precludes value creation). For this reason, I would recommend setting aside enough runaway for those teams to be able to execute, to give them time to execute on their roadma, kickstart value accrual to the new protocol, and create the framework to allow any third-party team to leverage on the modularity of the new stack to further enhance it (and get paid for it based on value added)

veANT
I am a bit concerned on the veANT model (specially if for the Aragon DAO). When we had to decide between wANT and veANT, after analyzing the pros and cons of the latter, we ruled it out due to several causes:

  1. The contract is difficult to manage, highly prone to errors and unexpected issues.
  2. If we wanted to continue with progressive decentralization, this was not an option. Locking people in means we would forever use this contract with almost no exit option. Given the amount of work to be done, locking ourselves into veANT without studying other options or doing something that made more sense for us didn’t seem logical. We can always enter, but once inside, it’s impossible to leave.
  3. It’s not composable. You can’t do lock-related things from contracts, for example.
  4. Withdrawal mechanisms are not included and need to be implemented in Vyper. The (back then) AA tech team was asked for a deployment to be ready by February 28th, and there was no way we could make it in time.
  5. Locking is expensive.
  6. The issue with whitelisting: most of the largest token holders used smart accounts, the process of whitelisting them through the DAO would involve using EVMCrispr every time someone with a multisig wanted to wrap. And the whole DAO had to vote to accept it or not.

I definitely liked the long term alignment veANT offered, but the cons outweight the pros at the time we made the decision. However, I recognize the circumstances may be different now and that the benefits may outweight the cons.

I would like to bootstrap a broader conversation on the pros and cons of the veANT model, as this is as convex as a decision can get, which may have significant impact for future tokenomics models. For instance, the decision to upgrade ANT v1 to ANT v2 that was done in 2020 (with proper reasons) introduced certain design constraints when designing Aragon DAO, as ANT v2 did not have the MiniMe token functions (and therefore it could not be used out of the box for delegate voting, needing wrapping).

Would love to get everyone’s opinion on those pros & cons so we can have a constructive debate on the matter.

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Few questions:

  1. Are you the only person inside the AA? From my understanding the other person left… do we not fear that a singular person spearheading a operation and in sole control of a 200m treasury worrisome?

  2. It has been voted that the entire treasury is moved to the DAO - dont want to sound like a broken record here but the DAO now owns and governs the treasury. When will that process be resumed?

  3. I am not a lawyer here but wouldnt simply moving the treasury assets to the DAO according to what was voted in remove all tax and legal risks?

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Joan, thank you for taking the time to write this out. I will preface that I am not a lawyer, but it does seem like transferring the treasury or a portion of the treasury to the DAO, and allowing the DAO to operate in a decentralized manner removes a lot of the overhang from Swiss law (I am not a lawyer). Additionally, the DAO could use the bought back ANT via either a grants fund or do something similar to Optimism and provide retroactive public goods funding and incentivize projects to use the Aragon stack. To me there is a lot of really interesting solutions that can both align token holders at Book value, incentivize development, and incentivize broader adoption if at least a portion of the treasury was moved over.

In terms of veANT, I don’t see VE as the best solution for Aragon. I don’t currently see anything wrong with the wANT structure but agree with Luis and Clay that it can be improved with incentives. That being said, I think a buyback and the already approved treasury transfer are higher priorities. Thank you again for your insights and joining the discussion!

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  1. Nope, there’s a Committee of (5) and a General assembly of (6). While it is ultimately GA members who elect the AA Committee, it is up for the latter to ultimately decide on the executive decisions (such as treasury transfer).
  2. I’m not following. You mention that the DAO now owns the treasury, but you ask when will the process be resumed? If the DAO owned the treasury, what would there be to resume? Logical inconsistencies apart, the fact is that the Aragon DAO does not currently own nor governs the treasury, as only $300k have been transferred so far as Phase 0 was completed. During this month of May the AA Committee will meet to approve discuss transfer conditions for Phase 1. It’s important to note that AA did not seize any assets from the DAO, as it could not possibly do so (neither from an onchain perspective, nor legal). Funds that are already in the Aragon DAO are to be governed as per the Aragon DAO Rules that were approved by token holders in January 2023.
  3. Glad to provide more context here. As I meantioned, AA is a swiss-based entity. It has a beneficial tax treatment of 5% on expenses as long as the expenses are in alignment with Aragon Association’s purpose. That purpose is:

to disintermediate the creation and maintenance of organizational structures using blockchain technology to build the necessary software infrastructure and tools. These tools and infrastructure empower developers to build functionality and applications for the next generation of decentralized organisations and give people across the world the opportunity to easily, transparently and securely manage their organizations, enabling a borderless, permissionless and more efficient creation of value.

However, if AA were to send funds to the Aragon DAO, and those funds were spent in something that is not in alignment to this purpose, that would trigger:

  • A 12% tax rate to be paid by AA on the amount of funds transferred (as opposed to 5%)
  • Tax liabilities for General Assembly members: if AA is to substantially transfer all funds to Aragon DAO, and then the DAO does not use those funds in alignment with that purpose, then swiss tax authorities would consider the transfer to be a de-facto liquidation of Aragon Association, and this could also trigger personal tax liabilities on the General Assembly members. The rationale for this is that swiss tax authorities would have no way to know whether funds were used to pay beneficial members of the AA.

I hope this provides clarity on the reasons behind the safety measures adopted by AA. It’s not an arbitrary decision.

A way to mitigate for this would be to include a new responsibility to the Legal Guardian of Aragon DAO (who is now in charge of vetoing proposals that may incur in legal liabilities), so that it should veto any proposal that may result in increased tax liabilities for AA. That could only happen if there were proposals that were sent to Delay App that were not in alignment of AA’s purpose (which stems from the Aragon Manifesto). This would help de-risk the treasury transfer from AA to Aragon DAO, and would provide assurances to all ANT holders that the funds will actually be used towards the purpose of the Aragon project.

For more context on Guardians and their role I highly recommend checking the blogpost about Aragon DAO design and the signalling vote that approved the Aragon DAO Rules by token holders in January 2023.

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The fact that you think this is a game of gotcha and insist on approaching it as a reincarnation of Golem watching over a treasury that isn’t yours, speaks volumes. You’re clearly insecure about your value added here, know that siphoning off a comfy salary for as long as you possibly can is the peak of your professional career given the measly deliverables to date, and are clinging to it for dear life. If your mission was truly to empower and further DAOs, then maybe, you know, sticking to the vote to create and fund the largest and most valuable truly on-chain organization on the planet, would not only be a sufficiently aligned action to tick the box of the Swiss tax authorities, but might show that you have a morsel of authenticity and consideration beyond furthering your own self interest.

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The other issues you mention are indeed drawbacks (although IMHO advantages outweight them). But the veToken contract isn’t really prone to errors or unexpected issues. It’s been battle tested by Curve, Balancer, etc. for years. If anything, it’s actually one of the most vetted smart contracts in the industry.

Just to clarify: I think you mean that most of the largest token holders don’t use EOAs, and instead use smart accounts.

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Yep, meant smart accounts. Edited the post.

veANT makes lots of sense to align long term interests (increases the costs of short term capture), and specially as a way to govern protocol revenue. I wanted to highlight the tradeoffs, and that this specific change would entail a hard commitment to the model that would introduce several constraints to what can be done from a tokenomics perspective.

Not saying it’s a bad option, just an option that needs careful evaluation (involving Product Development). But that is probably worth a different thread xD