Even Allocation of Curve Reserves Among 4 Pillars of the Ecosystem

Proposals by Gotchi Gov'nuhs
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Through this post I wish to engage the entire community and all participants to consider very important virtues to be found in even and equitable distribution of the curve unlocked DAI.

The idea sprung from discussion in this prior thread for a different split/approach:

The proper beginning to this post should be the explanation as to what are the 4 pillars referenced and why. They simply have been identified as the 4 areas that either need/deserve or are entitled to these funds in the event of a curve closure.

#1- Liquidity : We cannot ignore the effects curve removal would have on overall market liquidity for our protocol token, so it is widely assumed and expected that the DAI will be required as a new backstop of liquidity in some proportion/capacity.

#2 Pixelcraft : A non-controversial beneficiary, being main developer/summoner of Aavegotchi. The controversy lies in again directing 40% (more than any of the other 3 pillars) of the unlocked DAI, without a proper structure of accountability or deliverables.

#3 DAO : Perhaps the least controversial destination for the DAI. As a DAO we widely believe in the funding and empowering of DAOs

#4 Product: This is the most controversial and difficult pillar to understand and analyze. Often, advocates of the product are questioned in their intentions due to the innate conflict of interest in advocating for a financial product you own. Unfortunately, this can lead to neglect of the product itself, creating negative value cycles instead of positive ones. It will be incumbent on the reader/voter to understand that punishing individuals or blocking them from gains via hurting the product, is a losing game for everybody involved in the project. We should strive for the product to be successful and a desirable product in the market, or we might as well close the project altogether. The original Pixelcraft proposal makes no mention anywhere of allocating any percentages to protocol rewards, yet the advantage has been identified in separating DAO funding from protocol rewards at the outset of funds distribution- in order to prevent enormous waste of time and energy in allocating DAO funds for RF or other shapes that protocol rewards take in the future.

it is therefore proposed that any incoming DAI from curve closure be distributed as:
25% Liquidity / 25% DAO treasury / 25% Pixelcraft (over 2 years with deliverables) / 25% protocol rewards (Over 6 RF Seasons or 2 years if RF is rescheduled or modified otherwise)

There is plenty to present and argue for each pillar and how they each deserve 25%, but instead I want to focus on a single point/merit for this proposal:

There is enormous benefit to an even/fair distribution and simply moving on to better/greater things

I urge everyone in the community, whether it’s Pixelcraft, a DAO leader, or just a humble reader, to realize we are all better served with a fair and even distribution, vs. the endless mistrust/doubt/auditing that is going to ensue for whoever “succeeds” in winning out an extra allocation of the DAI than the other parties. In much simpler terms, the “table” where our gotchiverse stands is the firmest when we reinforce all 4 of its legs, not just one or few.

To close things off, I’d like to share what ChatGPT had for us on this topic:

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Thanks fren, this is my favorite proposal so far. Asset holders have been totally overlooked in all the recent discussion in turning off the curve. Historically, for those who don’t know, passively sitting on the sidelines and staking GHST for frens was the most profitable strategy. You could get up 100% APR on your liquid GHST whilst asset holders got constantly diluted through sales and raffles. This lead to all the value in our ecosystem getting extracted by passive investors whilst asset prices dropped 90%. The uncertainty of the future of Rarity Farming has further damaged asset holders whilst this proposal solves that uncertainty and ensures that asset holders are actually protected from the mistakes of the past.
The simplest solutions are often the best and an equal split between liquidity, PC, DAO and asset holders is the most equitable and courteous proposal currently available.

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Funny, I did an entire case study on Kodak back in the day. The ChatGPT crutch is cute but the metaphor doesnt align at all. Kodak failed to invest in innovation, but in our situation, what is the innovation? The DAO has no track record of producing anything on the scale of Pixelcraft Studios. No offense but lets speak frankly and run the numbers. Rarity Farming in its current form isn’t attracting any new players. To allocate a flat 25% of all the DAI seems like a misuse of funds, given that we’ve done 4 seasons (going on five) and know that RF has diminishing returns in terms of a marketing budget for this game.

From our perspective, 2023 is Year of the Gotchi and we want to turn up the volume on Aavegotchi in a big way. Speaking from the product side, we believe we can deliver all of the items on the 2023 roadmap (and previous roadmaps) with our current burn rate. But as many have always noted, PC has not typically spent a large % of our funds on marketing. That has to change, and as we outlined in our previous post, a serious chunk of the 40% will be going towards promoting the Aavegotchi brand. IRL meetups, event sponsorships, paid article placement, these all cost money.

The DAO has not historically showed a strong capability to spend money to grow the protocol. Its biggest expense is Rarity Farming, and that generally does not attract new players. What will attract new players is spending hard on actual product, games that people can play, and marketing those games to a wide audience. And since all of those games use Aavegotchi and other assets like GHST, Alchemica, and GLTR, you’re bringing value to asset holders.

Whether you’re a GHST whale or an asset whale, you should be excited about the prospect of Pixecraft upping its marketing budget to a level of some of our biggest competitors. All while maintaining full control of our brand. No selling out to the VCs or mega corps.

Ultimately this is up to all voters, but I hope you all have a sense of context for what is possible. This DAI allocated to PC in the original proposal isn’t take home, this 40% is to go to work for Aavegotchi asset holders through game development and much stronger marketing in 2023.

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If the DAO wants to vote on earmarking certain funds for protocol rewards that’s fine and I think could be healthy, if the meta of rarity farming can be improved.

Our original proposal is actually an even distribution: 20% for liquidity provision (which is DAO-controlled, but specifically earmarked for this purpose). Then the remaining 80% is split between DAO and PC. To me that seems just as fair and equitable as your proposal, maybe more so. And as Jesse said above, this isn’t some slush fund that Pixelcraft is going to hoard. We’re putting this capital to work on behalf of growing Aavegotchi through more aggressive marketing, sponsorships, IRL events, etc. Ultimately, our goal is to attract more players into the ecosystem, and so long as asset supplies remain fixed (which they should, thanks to the bigbrains at the Forge) and the DAO doesn’t vote to have Haunt 3 (which I don’t think it will…) more players coming in + scarcity = value for asset holders.

And btw, as I’ve said in the forums, I love Rarity Farming as a concept, but in its current form it’s not attracting new players or investment, which ultimately means it’s unsustainable. We need to do some serious iterating on Rarity Farming as a mechanic before we flat out decide to fund six more seasons of it!

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Funny, I thought rampant cynicism and sarcasm was a concern of Pixelcraft’s- looks like you have chosen not to lead by example on that regard today…

To be fair, I can equally quote your reference back the “Circle of Win V2” and call it a cute, yet huge miss of an analogy.

As you see, the prior deployments of “Circle of Win” whether V1 or V2 or I guess this upcoming V3 curve allocation of yours, haven’t resulted in wins for everyone involved- mainly just PC. The consumers buying the assets in these prior “Circle of Win” scenarios have to a large degree been rekt in GBM, or slowly burned by holding the assets long-term, believing in prior promises and roadmaps. The fact that you romantically exalt the “Circle Win” as a winning formula highlights a disconnect between the success so far for Pixelcraft and the painful reality for many buyers of the NFTs.

If we are going to be “analogy police” here, I can also say your referencing the “Circle of Win” is a huge stretch- or are we planning to burn 5% of the DAI?

Overall I’m largely disappointed at the tone of your response, where this proposal aims/comes from a place of peace and DAO unity but you seem already jaded past that point - I must say that doesn’t necessarily breed trust or confidence at a time of funds allocation.

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I agree fren! That’s why I’m following @Immaterial’s suggestion that we move to using the wording “Protocol Rewards”, so that people understand perfecting/iterating or maybe fully reimagining our RF paradigm is in order. It is definitely something worthy of it’s own post/thread which is something I was contemplating on doing depending on the reception of this thread/idea.

Overall, thank you for replying with more open-mindedness and benevolence than your predecessor.

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What’s with the thin skin? I legit found it fascinating on a personal level that Kodak is cited for this situation. especially since I did spend a significant amount of time researching Kodak’s mistakes in university.

In any case, you deflected from answering my concerns about why allocating 25% of curve funds to Rarity Farming is an idea worthy of support. I would still like a reply if you can help me understand.

Ironically, the Circle of Win model you now deride is the same model that has funded Rarity Farming’s majority of GHST rewards. It has also funded AavegotchiDAO to the tune of millions of GHST that have yet to be put to any use.

There is no animosity in my response, but do expect to be challenged; especially on the most extreme concepts put forward.

I fail to see how this proposal relies on any precedent in the relationship between PC and the DAO. I also fail to see how it is superior in putting funds to work for all asset holders. I do however welcome your further explanation.

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I like the idea of earmarking protocol rewards as a % of the distribution. I don’t feel the rewards should always come entirely from the DAO when PC has brought in multiple $10M NFT sales over the last few years. As a heavy protocol asset owner, I need to see more funds being set aside for rewarding the people that helped provide this early stage funding and provided the majority of the funds in the Curve.

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More than thin skin, I continue to believe you missed the spirit of the OP and brought some of the external cynicism and low-quality-dialog I acknowledge you have been bombarded with as of late outside of this thread. I respect why you do that as a human being, but on the topic of leadership it is a miss in my book and have expressed so. Another thing where we could agree to disagree.

There is a difference between deflecting and losing inspiration. I don’t want to harp on more about how disappointing your response was, I think you get the point.
I will indeed reply exactly why I think it is a good idea:

Most of the large asset holders I know and interface with are looking for a way out of their assets. People are selling the NFTs wholesale at incredible losses of 90% and more- they believe so little in the future of the NFT product when compared to GHST (@Immaterial already expanded on why that is in this thread) given the prior history of supporting GHST by diluting assets.
Literally the same situation is taking shape once again. The economic model is tampered with and anybody holding illiquid assets is just that: somebody stuck at the mercy of what other decision makers in the DAO are up to. In the past as assets plummeted after the many raffles, the response was " You didn’t DYOR".

We are empowering the same kind of GHST-maxi voices this time around, as they have been preparing to play the markets with liquid assets (GHST) while asset holders just sit by idly and watch (or dump at huge losses to chase the GHST spike).

In the prior thread I mentioned this 25% for protocol rewards should be swapped and held in GHST over 2 years. The advantage/difference of this is enormous vs the current paradigm of talking down RF, exalting GHST while neglecting assets. The meta has become to dump assets no matter how low the price, as at least a short-lived GHST spike can erase the losses of those NFT purchases. If people see assets as a proxy to acquire more GHST via rewards, we can regain a virtous cycle in assets vs the death spiral we continue to witness.

I think we need to work hard at breaking this cycle and mindset that GHST> NFTs and funding DAO +PC > Protocol Rewards. The death spiral in asset value perceptions will soon enough dry up any funds for any party involved. I do think my original analogy of a table with 4 pillars is good, probably why you have focused on criticizing ChatGPT’s choice of Kodak instead of going after the analogy I actually came up with myself.

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Could you elaborate on that? Do you mean the DAO would DCA into GHST over a 2-yr period? Or do you mean it would swap into GHST quickly and then hold it for a 2-yr period?

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GM, rereading this thread and I find my original response was admittedly incendiary. Apologies for that, as your posts are written on a level worthy of a more thoughtful response. I was tired and rushed to get to bed meaning I probably shouldn’t have responded til morning.

I find I agree with the majority of your points, especially your central thesis that an even split is the most fair and healthy way forward. That’s because as Dan more eloquently states above, we also designed our proposal along the same thesis.

The original proposal only earmarks a significant amount to liquidity provisions because it is an unavoidably time sensitive task. The liquidity needs to find its way into DEXs or exchanges as soon as possible to avoid a dangerous environment for GHST post curve.

Outside of such a necessary earmark, we opted to avoid baking in any further decision making regarding funds. Whether funds should be directed towards protocol rewards, building products, etc is up to the DAO on its own time and contemplation.

This is why I maintain that your original position, while thoughtful and well intentioned, introduces more bias and is less of an even distribution than PC’s original proposal.

I am sympathetic to your concerns about various NFTs performance against GHST but you are aware of the complexity of the topic and other considerations that could be equally important. I don’t want to derail this thread into that debate so my conclusion is simply: why not maintain the spirit we agree on and let all non-time sensitive use of DAO funds be decided later?

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PC often puts our GHST treasury to work bringing value to the ecosystem. One recent example was our commitment of 25K GHST towards the Gotchiboard competition. But that’s just one. We occasionally do giveaways and engage in promotion where we gift assets to new holders. Do we make a big fanfare about this? Not usually.

I don’t believe it’s PC’s duty to directly reward asset holders for holding assets. Maybe that’s where we disagree. We view our mandate as growing the protocol by expanding the audience of Aavegotchi through product development and marketing. It’s up to the DAO to vote on how it wants to use its treasury.

Correction: The 25K was from Gotchiverse rewards pool, not PC directly. But we do often do giveaways using our own GHST.

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I’m curious if your proposal would actually change any minds of those holding Gotchi assets. 25% of the treasury over two years is still a very long time. Seems like those who are deciding to move into GHST because of the curve turning off will not likely be swayed to not do so just because there’s a budget allocated in the future for rewards. Wouldn’t they just sell their assets now, wait for the curve to turn off, and then buy them back later once rewards are announced?

The natural tendency of liquidity in crypto is to move from illiquid to liquid, especially when risk or uncertainty is involved. Turning off the curve is a major tokenomics change so it makes sense that some players would want to diversify their holdings into GHST. Balanced portfolio and all that.

I guess I’m skeptical that a proposal to allocate 25% of the curve DAI to future rewards, when we’re literally about to begin a rarity farming season, doesn’t really add up for me.

If rewards were enticing enough, why would these asset holders be selling when a major reward season is about to begin? :thinking:

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Hey fren and thanks for posting an alternative suggestion to the previous 40/40/20.

I would not directly benefit from your proposal as I have sold many of my wearables at significant loss over the past several months. However, I am in support of your plans. Turning off the Curve is a once in a lifetime opportunity for the project. I see two things here happening at once:

  1. RF is essential because it rewards long-term holders and provides value to assets.
  2. RF is boring, un-engaging, and does not bring new participants into the ecosystem.

I’d like to zoom out a bit and look at things from a broader perspective.

Over the cycle of the project, PC has done great work to widen the audience capture funnel. We have Observor mode which is free and gotchis can also be rented for pennies. This is great for adoption.

Where we struggle though currently is a vertical sink in value.

Let’s look at Yuga Labs. Their OG product was the Bored Apes. If you own one, you’re a god. They work tirelessly to drive value to their holders and build brand loyalty. I lost count, but something like over $200k of value was airdropped to each one over the last few years.

They’ve gone on to drop Mutant Apes, the Tier 2 value hold, Kennel Club, Otherside lands, and so on. What they’ve actually built is a great funnel of value that creates desire to buy and hold their assets.

This builds intense brand loyalty. Everyone wants to hold their Apes as it brings $$$ value as well as exclusivity and status.

This is only true when there is no value-add to the NFTs. See above example. I didn’t see many people liquidating their Apes to run into $APE.

Now let’s look at Aavegotchi. Where is the drive for building brand loyalty? Through the entire lifespan of the project, the best ROI was from the least amount of commitment. You stake GHST for frens and dump the tickets / rewards.

This system is backwards and broken. It rewards the least committed people to the project. Bear in mind those rewards dropped to token stakers was at the expense of those who invested into the NFT ecosystem.

Rarity farming has been one mechanism that holds investor value. However, ever since all wearables have been diluted with impunity and a prop was raised to stop inflation, RF has been under constant attack. It’s seen as a terrible thing out to benefit only the rich.

The big challenge we face as a community is the need for shift in culture. The great news is we have a massive event on the horizon (curve off) which allows for us to rethink everything, change our perspective, and set some new precedents moving forward.

What I would love so much is the rebuild the community in a way that views the top gotchis, lands, and wearables as THE thing to crave. The reason people want them isn’t just for flex, but also because PC and the DAO are persistently thinking of ways to build for their user base.

Unfortunately, the current hive mind I witness is “moar free stuff for everyone!” While this may work temporarily, it does nothing to build brand loyalty.

As we potentially move into the next bull market, we have the chance to capture a ton of attention. If we don’t focus on how to build this vertical value funnel, then all we’re going to do is lure in a group of unsuspecting people to dump our assets onto. And then after the bull, we’ll again see a mass exodus.

My Proposal

I vote we adopt this 25/25/25/25 split. However, I do agree with the sentiment that RF in its current form is not very valuable or attractive to new eyes. I vote we take this money and lock it into the multi-sig and develop some ingenious ways to use the funds to deliver value for the loyal holders. We can evolve RF into a new mechanic that both rewards OG holders AND draws hype and desire to newcomers.

We would earmark some of the money to fund a team who’s interests are the whole spectrum and come up with some really brilliant and innovative ways to bring value.

Thoughts?

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These two statements contradict each other. Yes, Yuga Labs did multiple airdrops of new asset classes to their holders. Yet above, you say that airdropping free stuff does not build brand loyalty.

Ultimately though I agree that airdropping or giving away free stuff is absolutely not a way to build brand loyalty. When airdrops are the primary source of value, your collection is only worth the amount of the next airdrop.

Apes are not a great example to be comparing because they have already established themselves as cultural icons. They are not just NFTs anymore.

The true way to establish brand loyalty is by making an amazing product that people want to hold, no matter whether it poops them out money or not.

IMO instead of debating on how to best reward asset holders, we should be talking more about how to tell the story of Aavegotchi and growing the brand on a more personal level so that more people want to hold Aavegotchis.

I do agree that the curve closing is a huge cultural moment for Aavegotchi. It’s a reset button for our ecosystem, a chance to change how people perceive Aavegotchi. Although in general, I think people have a very positive impression of our community, from what we generally hear when we talk to strangers. So let’s get out there and tell our story on a bigger scale!

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They don’t contradict each other. The first is a communist approach where everyone gets free stuff equally. This is a race to the bottom and does not build brand loyalty.

The second builds a value funnel. Call it what you will, but rewarding OG holders through various means is a great way to build holder confidence and loyalty.

How did Apes become cultural icons? They did so by building brand loyalty. How is brand loyalty built in crypto? Through value delivering mechanics. I am not too invested in Yuga, but I haven’t really seen some huge back story around the Apes. I may be mistaken, but I haven’t seen an entire world and storyline released with them (especially in the beginning).

I believe these two points go hand-in-hand. My big fear about PC and the culture of aavegotchi is an aversion to focus on celebrating top-tier holders. The general sentiment is whales are bad, want to extract from us, and must be punished.

I agree. The general sentiment from outside is that aavegotchi is awesome. However, having spoken to a number of OG’s and top holders, the sentiment is vastly different. Largely, they feel dunked on, ignored, attacked, and unappreciated. This feedback has been given countless times over the last year. I wonder how much of it is being absorbed at the top.

This circles back to my original point: we have a great funnel to attract new users, but where is the value add for the loyal fanbase? In present state holding gotchis, wearables, and lands is a big question mark of uncertainty where each new day there’s ways in which their ROI is being shut down or inflated away.

Why would anyone want to hold one, other than the cuteness? Collecting a gotchi for cuteness only goes so far.

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Ok, so by “give free stuff to everyone” you literally mean everyone. I haven’t heard many people saying that though, especially as it relates to this curve discussion. It’s basic economics that you can’t give free stuff away to everyone all the time. Once? Maybe. Twice? Good luck.

Yes, I like that you used the term “value-delivering mechanics” vs. airdrops. There are many ways to deliver value. Airdrops are one way. Marginal rewards (like channeling) are another way. Good storytelling and raising awareness is another way.

The problem with airdrops and marginal rewards is that they have diminishing returns, as the yield must come from somewhere. People often cite the fact that wearables were diluted to support GHST staking returns. Alchemica is diluted to support Gotchi returns (via channeling), etc.

Ultimately, diluting one asset to reward holders of another asset is unsustainable and is the reason why DeFi ponzi farms all crashed. You’ve got to generate more than you give out.

I would argue a truly loyal fanbase is a group of people defined by their love of the asset, not for the ROI it provides them. I believe we do have a ton of loyal fans in this community who love the assets, and the ROI is secondary. So IMO we should be fixating less on specific ROIs (ponzinomics) vs. more on telling the story of Aavegotchi and attracting more people who love this cute little ghost for what it is.

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Anyways, as planned, we are planning to put out the two SigProps very soon and we’ll see how things go. I do strongly agree with @Jesse_gldnXross that the fairest allocation of the DAI would be a 50/50 split between the DAO and PC. Since 20% is being earmarked for liquidity rewards, that leaves 80%, which means a 40/40 split.

Let Pixelcraft continue to grow the Aavegotchi brand in 2023 and ensure that we’re the #1 NFT on Polygon. The DAO will have plenty of funds to thinktank on new ways of rewarding asset holders.

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I believe raising a prop with only your proposed 40/40/20 split as an option is incredibly rushed and honestly quite tone-deaf when a large number of community members, many of whom have been around since day one, have proposed otherwise. It goes against the ethos of aavegotchi where the DAO discusses things passionately and raises a prop only after there are viable options which support the consensus of the community.

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Agree. Yet we did it for GHST stakers with FRENS.

Let’s go back in time a moment and imagine for a moment the vibe if:

Haunt 2 announcement
PC comes out and says “surprise! to show our love for loyal holders. we took a snapshot of all wallets holding a gotchi since day one and haven’t sold. we’re going to airdrop you a portal! (or at least a chance to get a free one)!!!”

People come out and say holy shit! PC loves their holders. I shouldn’t have flipped my gotchi for profits. Maybe next time I’ll hold it and see what else PC has in store.

Holders feel loved and acknowledged. Outsiders feel fomo. There’s minimum dilution or value extraction. Everybody wins.

The sad thing is throughout the entire lifespan of the project, we loyal holders haven’t felt any kind of love or appreciation.