Ignite’s Vision — Part 2: Ignite DAO as a Profit Sharing Community
Welcome to part 2 where we take a better look at how we envision Ignite DAO as a Profit Sharing Community. We will start with a preview of the first product that we are releasing, some background information on where Profit Sharing Communities originate from, and lastly how applying it to Ignite DAO is going to work.
TL;DR
Ignite DAO is building a smart wallet named Torch. It will have features like ZilSwap limit orders, automatic ZIL staking, the possibility to instantly unstake your ZIL without a 14-day unbonding period, and more. Profits generated from services inside Torch will be used to continuously buy gZIL from the market and those will be shared with the Ignite DAO community. And in the meantime, we are also working on our second product that will create more value for gZIL holders. Our aim is to keep adding products & services (horizontally and vertically) that will keep flowing back to gZIL holders and the Ignite DAO community.
In Arweave’s ideology Profit Sharing Communities consists of: a decentralized autonomous organization and a related token that gives governance rights, liquidity and access to fees originating from usage of a dApp. Inspired by this approach we decided that the main drivers for Ignite DAO as a Profit Sharing Community will be (funding) product development, governance and profit sharing.
We are at the final stage of setting up the various legal entities and we will inform you when Ignite DAO will become the first legal DAO of The Netherlands (a historic moment).
Torch wallet
Let’s start by introducing you to our core product we are working on called ‘Torch Wallet’.
Torch won’t be your everyday wallet. It is a non-custodial smart wallet that will add new innovative services such as Zilswap limit orders, automatic ZIL staking, and the possibility to instantly unstake your ZIL without a 14-day unbonding period (where the ‘penalty’ for instant withdrawal will go to gZIL holders). Naturally, there are more services and lots of ideas on what to incorporate in upcoming releases which we will elaborate on later. Apart from the new services we will offer, we also have found a way to make sure that you don’t have to bother anymore with transactions that are stuck. In other words, no more need to manually remove them from the app and retry. And, most importantly, all the profits generated from services inside Torch will be used to continuously buy gZIL. The more services that generate profits, the more gZIL will be bought from the open market and shared with the Ignite DAO community.
An internal deadline is set for the first version release and once we release Torch we will also release a road map for Ignite and how Torch will evolve over time. In the meantime, we are also working on our second product that will create more value for gZIL holders.
What are Profit Sharing Communities?
The idea of Profit Sharing Communities comes from the Arweave protocol (pay once, store data forever). On Arweave there is a lively set of communities that utilise the Profit Sharing Community model. See community.xyz for examples.
To quote: “Profit Sharing Communities are a new, fairer structure for web startups. These communities give founders more control and flexibility over their projects, while granting contributors to those projects more power.
In a traditional startup, employees own equity that is unlikely to become liquid any time soon, does not grant governance rights (these are reserved for board members) and almost never issues dividends.
By contrast, all profit sharing community contributors earn tokens that give them fair governance rights, instant liquidity and access to micro-dividends generated by usage of apps.”
“And Profit Sharing Communities (PSCs) go a step further in providing sustainable economics for apps, integrating a decentralized autonomous organization (DAO) governance structure with profit sharing token technology.”
To sum up: a Profit Sharing Community consists of: a decentralized autonomous organization and a related token that gives governance rights, liquidity, and access to fees originating from the usage of a dApp.
Then what are Profit Sharing Tokens?
Part of a Profit Sharing Community is the Profit Sharing Token (PST).
Quoting again from: “Profit-Sharing Tokens (PSTs) allow people who build websites and apps to earn money easily and flexibly. PSTs are a novel way of incentivizing and rewarding both permaweb app (an Arweave product, permanent internet) founders and external contributors to a project.
When building a PST app, the developer adds a mechanism that sends small tips in AR, Arweave’s native token, to PST holders every time a user interacts with the app in a way that generates a transaction on the Arweave network. Tips are automatically distributed to PST holders in proportion to their relative PST holdings. So, if a given app has two founders who each hold 50% of the app’s PSTs, each founder will receive 50% of the user tips from the app.
Developers can determine the size of tips when building the app. Tips are often micropayments for interactions, such as sending a message or posting a status update. PSC creators can also designate larger tips for significant interactions, like pressing a donation button or trading a large quantity of tokens on an exchange. Tips can be a fixed fee for a given interaction or a percentage of the interaction’s value — the PSC creator has control over their own business model. As the app’s user base grows and more people interact with the app, individual tips can add up over time to become a significant source of revenue to sustain a founder, builder or team.”
Although the actual implementation for a PST for Ignite DAO differs from the description above, it shares the concept where usage equals value, allows people to contribute to the overall development, helps govern and share profits with its backers.
An example Profit Sharing Community on Arweave
Next, a clear overview of the building blocks from which a Profit Sharing Community on Arweave is build up:
Founding a Community
- Founders mint some amount of PSTs (e.g. 1mm) and split ownership among founders (e.g. 50/50). This means each founder will earn 50% of tip revenue as PSTs accumulate value.
- Build an application on Arweave.
- Initial usage and adoption begin to generate tips, or Founders can farm work out to Contributors.
Contributing to a Community
- Founders mint additional PSTs to improve or scale the application with help from Contributors.
- Example contributions could be front-end UI improvements, back-end development, marketing, etc.
- Anyone can be a Contributor for a Profit Sharing Community and earn PSTs, so long as their contribution is approved through governance.
- Contributors have far more autonomy than a traditional “employee”. They can own a significant percentage of the Community and have meaningful influence through governance.
Governing a Community
- Upgrades to the application can be posted to a job board or proposed by existing or new Contributors.
- These upgrades from Contributors are voted on by the community of PST holders.
- Voting power is balanced through a function of your ownership share, as well as how long you hold PSTs.
Ignite DAO as a Profit Sharing Community
OK. By now you are probably well-equipped with the concepts needed to start applying PSCs and PSTs to Ignite DAO. First, we will take a closer look into how Ignite DAO differs from the Arweave Profit Sharing Community standard.
We will use the same characteristics to describe and compare Ignite DAO’s Profit Sharing Community against the Arweave PSC example: founding, contributing and governing a community.
Founding a Community
- Before the ‘non-custodial staking’ dApp there already was a large and active community on Zilliqa. However, with the start of non-custodial staking a new subset of the community has been created, which are stakers.
Staked Seed Nodes provide a service to the community and in monetary return they receive a commission in ZIL on the staked ZILs appointed to them.
- With the commission we are building another dApp, Torch. To not only target stakers but Zilliqa users in general, who can also become stakers.
- While being fully financed by the commission, usage of the dApp results in fees being paid by its users in ZIL, those partially end up being profit and are being distributed to the Ignite DAO community and the Ignite DAO team in the form of gZIL.
Contributing to Community
- A crucial difference is that we use gZIL as our Profit Sharing Token, which means that we are not able to freely mint more Profit Sharing Tokens.
- As minting new gZILs as Profit Sharing Tokens is no option we will rely on our products being sufficiently used to keep being able to fund new products and the ongoing development for them.
- People can simply help to contribute by staking with Ignite DAO and by using their Torch wallet.
Governing a Community
- Down the line we will open up a forum with assignments related to dApps, tools and services the community can participate in to help build out Ignite DAO. And also a place to propose ideas and improvements to current products through gZIL.
- These proposals are voted on by Ignite DAO gZIL stakers and the Ignite team.
- Voting outcome results in implementation of proposals or rejection of proposals.
Roles of Ignite DAO’s Profit Sharing Community
Ignite DAO will start with three roles, which can deepen and/or widen over time. As a community we could add more roles over time if we decide to do so.
Product development
The largest part of the received commission via Staked Seed Node services is being used to fund product development.
And while initially the Ignite foundation will take the driver’s seat regarding dApps and services to build, we would like to decentralize this process and eventually let the community decide more and more where commission received from stakers will be appointed to and also participate in building out the ecosystem. The legal DAO has been set up in such a manner to fully accustom to those ideals over time.
But, to be able to share profits in gZIL with the community there needs to be products made first that have a user base and who are paying for various services.
As earlier stated we are working for that matter on the creation of Torch, the core product which allows us to build all kinds of (DeFi, NFT and related) services and integrate them into other protocols, dApps or even other blockchains.
Governance
Governance is at the heart of gZIL and so will it be when you are staking your gZILs with Ignite. With gZIL staking at Ignite, people are incentivized to participate in governance-related matters to help expand the DAO ecosystem. At the same time, you will still be able to vote on L1 governance proposals and active participation in the governance of Ignite DAO also comes with profit sharing rights. More details on the tokenomics will be shared later on.
Profit sharing
Users will eventually have the possibility to stake gZIL in their own smart wallet and receive a pro rata share in profits that are being created by users who are paying fees while using Ignite dApps and services. More details on this will also be shared later on.
We are at the final stage of setting up the various legal entities and we will inform you when Ignite DAO will become the first legal DAO of The Netherlands (a historic moment).
We’ll keep in touch!
Links
02 https://community.xyz/communities
03 https://coinmarketcap.com/alexandria/article/profit-sharing-communities-a-deep-dive-by-arweave
04 https://coinmarketcap.com/alexandria/glossary/decentralized-autonomous-organizations-dao
