New Token Economy -Increase the value of CDS -

7 min readMay 23, 2024

Dear Capital DAO Protocol Community, thank you for your patience.

Capital DAO has been quietly working behind the scenes, and we apologize for the lack of updates. The current environment is very different from when we first launched Capital DAO, and we’ve been discussing how to move forward while keeping an eye on the situation.

In a bear market, many projects tend to delay their token launches. Since our project plans to democratize Launchpad, it has been challenging to operate without projects launching their tokens.

To address this, we’ve been conserving unnecessary operating funds while continuing our activities as needed. As a result, we’ve made numerous investments behind the scenes. We’ll explain the details in our next article.

The market has significantly recovered, and we expect to see renewed enthusiasm this year and the next. With this in token, we plan to ramp up our activities at Capital DAO, however, there’s a major bottleneck.

This bottleneck is the Tokenomics that were created to match the trends at that time.

The following issues are outlined below:

Triple Token Model
Dividing tokens by purpose was meant to spread out selling pressure and enhance their individual value. However, from today’s perspective, it seems more efficient to increase value by consolidating tokens. Additionally, having multiple tokens can create complexity that confuses users and potentially worsens the user experience (UX).

High Inflation
Back then, high-yield DeFi was at its peak. The common Tokenomics trend was “high inflation” with “short-term distribution.” However, the current trend focuses on “low inflation (or deflation)” and “long-term distribution.” This shift is due to the collapse of token prices in DeFi projects from that era. High inflation requires high demand to maintain the supply-demand balance; otherwise, the market is prone to collapse.

To address this issue and resume operations, a complete redesign of the overall Tokenomics is necessary. This is a crucial step that cannot be avoided.

Improvement Plan

Token Model Changes

As mentioned above, Capital DAO used a Triple Token Model.

CDS
IDO participation rights. Earn CPDT through staking.
CPDT
Governance token required for participation as a DAO Worker. Earn CPDP through staking.
CPDP
Token for distributing profits from Capital DAO activities. Sell to realize profits.

To solve the issues arising from this, we will significantly restructure and focus the roles more towards CDS.

New Token Model

CDS
Staking grants rights for IDO, governance, and DAO Worker participation. When you stake, you will receive pCDS at a 1:1 ratio. Providing liquidity and staking CDS-ETH LP yields 4x amount of pCDS.
pCDS (Profit CDS)
Non-transferable SBT. Holding it allows participation in governance and as a DAO Worker. Additionally, pCDS holders (Stakers) will receive profit distributions from Capital DAO.

By changing the Token Model, we will concentrate value on CDS, making it simpler to understand. Additionally, since profits will be directly returned to pCDS holders, there will no longer be a need to sell CPDP. CPDT tokens will be integrated into CDS tokens, allowing for the conversion of CPDT to CDS. Further details will be provided later.

New Inflation & Distribution Schedule

First and foremost, we are not a DeFi project, and providing yields is not our primary goal. However, at the time of our launch, there were no immediate projects or investments for Capital DAO to conduct IDOs. Therefore, we issued tokens to reward holders and attract users. Ideally, real yield would be generated through CPDP (pCDS in the New Token Model).

As mentioned earlier, high inflation is not recommended from the current Tokenomics perspective. Due to operating at a slow pace while waiting for the market to recover, the emission of CPDT has completely ended. Although no reward emissions are being made for CDS, all locked-up tokens have been fully released.

Continuing in this state is difficult, so we will make significant changes to the future Distribution Schedule.

1. All previously unlocked CDS will be re-locked, and the unlock schedule will be reset.

Founder (10%): 12-month cliff, 24-month linear unlock
Devs (8%): 12-month cliff, 24-month linear unlock
Marketing (10%): 36-month linear unlock
Treasury (21.61%): 36-month linear unlock, with an initial 6% unlock from the 21.61% (this is the CPDT to CDS bonus, will be mentioned later)

2. Rewards emission will be changed to a 10-year linear emission. However, it will be calculated as 8 years remaining, considering 2 years have already been emitted. During this period, the amount converted from CPDT will be excluded from the 2-year portion and added to the 8-year reward.

Chain Migration

At this current state, all Capital DAO contracts are on Ethereum, but there are scalability issues with gas fees and transactions. Therefore, along with the new Tokenomics changes, all contracts will be migrated to Arbitrum. Those holding CDS on Ethereum can use the bridge provided by Capital DAO to receive CDS on Arbitrum.

CPDT→CDS Conversion

In the new Token Model, CPDT will be integrated into CDS. CPDT holders can convert their tokens at a 1:1 ratio via the Web App. This feature will be available for six months.

Additionally, contributors who earned CPDT by staking CDS or CDS-ETH LP will receive a bonus on the conversion rate. A snapshot will be taken on June 6, 2024, at 00:00 UTC.

CDS Solo-staking: +10% bonus
CDS-ETH LP Provider: +40% bonus

*The higher bonus will be applied.

A simple example: Converting 10,000 CPDT

Standard: Receive 10,000 CDS
CDS Solo-staking: Receive 11,000 CDS
CDS-ETH LP Provider: Receive 14,000 CDS

While there’s no immediate rush, please remember to convert your tokens. After six months, any unconverted CDS allocated for conversion will be sent to the Treasury. Additionally, at the time of the snapshot, the liquidity provided by the Fund wallet will be withdrawn and used for a new liquidity pool on Arbitrum.

Shift in Product Focus

The initial goal of Capital DAO was to democratize IDOs. However, as mentioned earlier, it is now rare for promising projects to conduct IDOs. Instead, token sales are often conducted privately in seed rounds with select investors, while general investors receive airdrops based on their contributions. Given this trend, it is challenging to bring promising projects to an IDO and share profits with the community.

Since our primary goal of democratizing IDOs is currently difficult to achieve, we have decided to shift our focus. We are now concentrating on one of our other missions: “democratizing investment profits.” The profits that were initially planned to be distributed as CPDP will now be distributed as stablecoins (USDC or USDT) to pCDS holders, which are obtained by staking CDS or CDS-ETH LP.

Through our behind-the-scenes activities, we have already invested in 17 promising projects. In the near future, these investments will start generating profits, which will be returned to pCDS holders.

Investment profits will be allocated as follows (aggregated monthly when profits are generated):

60%: Distributed to pCDS holders
20%: Buyback and burn of CDS
20%: Operation fees
*The investment principal will be returned to the Fund wallet for reinvestment.

Each month, we will take a random snapshot of pCDS holders and distribute profits based on their share ratio.

With this change, IDO and DAO Worker will be put on hold. DAO Worker is included because it relies on conducting IDOs. Both systems are already complete, and we may consider launching them depending on future circumstances.

By shifting our focus, user actions will become much simpler.

Stake CDS or CDS-ETH LP to earn CDS rewards (Anytime).
Receive rewards based on the pCDS you hold when investment profits are generated (once a month).

Conclusion

Changing the Tokenomics was a very difficult decision. It may seem like a betrayal to the community that has been continuously acquiring CPDT. However, we believe the greatest betrayal would be to stick with a strategy that is unlikely to succeed. Therefore, we decided to make this difficult pivot.

We will explain in detail in the next article, but we have not stopped our activities. However, due to the preferences of the projects we invested in, it has been difficult to disclose early-stage deals to the community. This situation is likely to continue, forcing us to change our strategy.

This update may come as a surprise to the community, and we expect some criticism. However, we are confident that these measures are necessary for our future activities. Please read the next article to get a sense of our direction.

Capital DAO will not give up on its vision. Please continue to follow and participate in our efforts!