Disclaimer: Delphi Ventures has taken a position in ANJ. While we have sought to consider this proposal as independently as possible, our opinion may be biased by our holdings.
As we pointed out in our report (you can read a summary of our conclusions in our recent governance forum post here), we agree that security is a problem for the Court. However, we do not think this is the right solution for a few different reasons:
(1) As @Xeus pointed out, the cost of a 51% attack is a function of the tokens actively staked by jurors rather than just market cap. Simply merging ANJ into ANT won’t fix this unless it’s accompanied by things like an improved fee model and/or supply-side incentives such as those we described in our recent proposal.
(2) Given that the real problem is not market cap but rather actively staked tokens, we believe it will actually be easier to incentivise juror participation and therefore security using ANJ rather than ANT.
ANJ’s $6M MC and the potential upside this represents effectively acts as additional incentive for jurors over and above the supply-side incentives. If we combine this with the improved fee model and supply-side incentives that we describe in our proposal, we’re confident ANJ will have little trouble bootstrapping a strong juror community.
Our initial conversations with our clients seem to bear this out as response to the report has been excellent with many expressing interest in ANJ. Having spoken to them about the potential conversion, most expressed the same concerns we did and were much less interested in participating. While harsh, this should not be surprising as YFI and others have shown the potential for token performance to attract and nurture an extremely strong community. We believe Aragon should not underestimate the potential to build a strong, independent community around ANJ, and that this will ultimately benefit ANT more broadly.
(3) The Court is a separate stakeholder base with a different set of cryptoeconomic incentives than ANT holders. We believe there are advantages to keeping these separate, especially given the MC and existing stakeholder base of ANT may pose its own security risk to the Court, particularly if juror participation rates remain low.
(4) Having gotten to know the ANJ community a bit during our research process, we’ve found them to be knowledgable, smart and long-term oriented, especially for such a small MC project. We also found surprisingly little overlap with ANT holders, indicating a largely independent group of stakeholders. While this doesn’t apply to us, we feel this move by Aragon may risk alienating this existing ANJ juror community, especially given the purchase price and the fact that ANJ holders are not able to vote on their own destiny.
If a merger was to be executed (which we advise against), we feel it should: a) at least be done at premium to the market price as is typical with takeovers of this sort in traditional markets b) enable ANJ holders to vote in proportion to their converted ANT holdings.
To conclude, we feel an independent court token is better for the product, for the community and ultimately for ANT holders too. To address security issues, we feel the combination if improved fee model, suspending the bonding curve and implementing well-designed supply-side incentives will be sufficient to bootstrap a strong juror community and consequently the Court’s security.
Regardless, we do understand there are tradeoffs and operational efficiencies gained by moving to one token, and we will respect whatever decision the Aragon community arrives at. We’re hugely excited about the Aragon vision and look forward to working together to support the team/community moving forwards.