Another in a series exploring the potential of for profit DAOs. Today, the distribution problem!

The SAFG (Simple Agreement for Future Governance) has replaced the SAFT (Simple Agreement for Future Tokens) as a means of fundraising for projects building decentralized protocols. Instead of selling tokens that purely receive a fee from a protocol or are intended to have some other features in the future the tokens being sold are “purely for governance”.

There is a line of logic though that I have a hard time reconciling:

  1. Governance is not an inherently valuable thing (see initial performance of 0x token)
  2. Because…


Overview

Decentralized protocols have many strengths

  1. Composability (money legos!)
  2. Ability to attract large amounts of liquidity
  3. Regulatory insulation for founding teams

To me, it has looked like so far there has been a tradeoff between being able to launch a truly decentralized protocol and having financial upside for the launching team. I believe the main issue with this comes down to 3 things that are not usually explicitly mentioned when discussing decentralized protocols.

  1. Need for seed capital to build & launch
  2. Desire for monetary upside by founders
  3. Desire for monetary upside by investors

Below is my proposal for a new model…


Hey, what kind of token is that?

A trend in DeFi over the last couple months has been the proliferation of “personal” tokens. These are tokens an individual mints that represents a claim on their time or efforts. You send one $JON token to me, I burn it, then I spend an hour doing whatever it is that you ask (within reason). Recently P3terpan had some of his $MAGIC token purchased and redeemed by Totle to write a blog post for them. There are numerous iterations with a wide range of “use cases” espoused by their creators. The general theme…


With the composability of DeFi there is a near infinite design space for new and novel ideas and products. Many of these products rely on building a good pool of liquidity to enable a good user experience while maintaining decentralization. This means that liquidity contribution needs to be open and providers will expect a return. This leaves the builders of the platform without much of an opportunity to monetize its success for themselves. …


Many content creators do what they do to support another venture (VC thought leaders) of theirs. Others though do it just because it is needed or they think it would be useful but they have no easy way to receive value back for the value they produce. Some of the gitcoin grant drama around individuals requesting funding for content creation, things that they were doing anyway, really got me thinking. I, at times, will also create some content and I always post it for free here on medium. …


The hottest thing in DeFi right now is liquidity. In a world where code is open source and users are technically proficient and able to move platforms easily the differentiator for a decentralized product is what is not easily forked— liquidity

Once a protocol or project builds up liquidity in its platform the user experience dramatically increases and it attracts new users. Less slippage and being able to service larger orders are sometimes all users really care about.

It has also been shown that, even without a revenue model, liquidity can be enough to attract major investment. One would assume…


I love DeFi, the design space it opens up is impossible to fully comprehend and it seems like every week there is some new novel-to-mind-blowing product or service being launched. Only a fraction of these will ever reach mainstream adoption or accrue a meaningful amount of liquidity but this iteration through successes and failures is required to find the compelling use cases. I am of the mind that its the products that are doing something completely new, rather than ones re-hashing traditional financial market structures that will catch on but that isn’t the point of this post.

DeFi has been…


A common criticism of the “successful” decentralized finance applications on ethereum (which is dominated by lending platforms) is that the loans are all over-collateralized. In Maker a DAI loan must be kept over 150% collateralized by ETH, with similar ratios required at compound bZx, etc. This is required so that, if the collateral value starts to drop to a point where there would not be an incentive to pay back the loan (below the loan amount + accrued interest) the collateral can automatically be sold to make the borrower whole and provide the expected return. This is all done automagically…


The proliferation of applications like uniswap, compound, pooltogether and other asset-pooling-based applications have shown that the structure of issuing tokens as a representative ownership of a pool of assets that is used for some purpose to provide a yield is attractive to both users and liquidity providers. The complexity of applications can be greatly reduced using these structures but for the best user experience the application needs to attract liquidity (ideally a whole bunch of it) and hold onto it. Most applications (or protocols, dealers choice) have a built in incentives for liquidity providers like some fee (uniswap) or yield…

Jonathan Tompkins

Founder @ Atomica, Crypto Stuff, Dad Stuff.

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