Tokenomics 101: BanklessDAO
How a Movement Becomes a Tokenized Start-up Incubator
In the Beginning
Back in June 2021, I had no idea what it was going to be about, but was curious enough to buy the 35K BANK tokens required to become a BanklessDAO member with full access to the Discord server. I knew that if I didn’t like it, I could just sell my tokens and likely break even, minus gas fees.
Spoiler alert: I still hold the tokens and haven’t ever really questioned this from an investment perspective. I’m biased, but BanklessDAO’s future has me quite excited.
Social tokens and their fundamentals are hard to evaluate, but looking at how cool this community is, how passionate the members are in driving all sorts of projects, and how the whole thing evolved into an ever-growing hive of activity over its first 10 months — the gravity of all these moving pieces makes it easy to hold on to my BANK.
BanklessDAO (or bDAO, for short) inspires confidence because it was built from nothing but the sweat of volunteer members; no one is forced to do anything. If there is a topic that interests you, just raise your hand and get involved. It’s this acting on the stuff that we really love doing that has made the DAO, and the community behind it, successful. BanklessDAO’s hirokennelly.eth calls it our ‘secret heart’, and I think it’s the secret sauce of DAOs.
Going for a role or position or stepping up to do work is not about who else wants it or has it. It’s about what you want. It’s about acting on your desires. DAOs are different from TradCorps for many reasons. For me, one of the most important distinctions is that DAOs facilitate us acting on our deepest wishes, our hidden desires. What I call our secret heart.
Acting out our secret heart, however, will only get us so far. The BANK token is a tool for the alignment of incentives; it’s a reward for acting out our secret heart towards a common goal. In this Twitter thread, Lucas, one of the founding members, breaks down the DAO’s Season 2 achievements and attributes these wins to incentives and ownership.
Social tokens can allow us to capture the value that has been created by the community. I’ve explored tokenomics of various different protocols in previous articles and have even written about DAOs, but it took a nudge from the DAO (thanks Sam) to actually dive into the obvious topic hiding in plain sight. BanklessDAO and other social tokens.
BanklessDAO is a decentralized community to coordinate and propagate bankless media, culture, and education. Its goal is to drive adoption and awareness of truly bankless money systems like Ethereum, DeFi, and Bitcoin.
With this purpose in mind a token was created, a fair launch initiated, and the community took over, shaping the way BanklessDAO looks today.
The mission is to help one billion people go bankless; inspired by this goal, the token has a total supply of 1 billion BANK. As a fair launch token, it was distributed to the early contributors to the ecosystem, and has since been established as a reward mechanism within the DAO, incentivizing members to collaborate on revenue-generating projects and education programs that serve the common goal. The diagram below shows how the token is used in the DAO and how it helps to capture value (a zoomable, interactive version can be found here).
BanklessDAO’s central piece is the treasury. At genesis it started off with 50 million BANK tokens and has since diversified through various initiatives. paulapavit, a BanklessDAO contributor, is running some great dashboards showing the treasury holdings over time and how the community has managed to bring in other assets through value creation like writing, NFT art campaigns, and Web3 merchandise.
BanklessDAO is decentralised, with governance processes involved to access and use the treasury. The main mechanism for allocating BANK from the treasury is seasonal funding to the guilds and projects.
In the corporate world they are called quarters, lasting for three months, allowing for a more nuanced reporting and budgeting of a year. Seasons are the timeframes upon which budgets are proposed, refined, and ratified in order to be allocated to projects, guilds, and contributor rewards.
Prior to every season, proposals for the amount of BANK required are submitted by champions of the initiative (the process is documented here). Proposals are typically posted on the BanklessDAO Forum and specify the funding needed. This gives members the opportunity to view and comment if they wish. For example, the Writers Guild Season 3 budget proposal can be found here and breaks down in detail what the BANK tokens will be used for once approved.
All the funding proposals then roll up into the season’s guild and projects funding round vote. BANK holders can connect their wallets to Snapshot and cast their votes to ratify distribution of funds according to the discussed proposals (the vote for the Season 3 funding proposals can be found here).
Once approved, the agreed amount of BANK tokens are distributed to multisig wallets owned by the guilds and projects. From there they will trickle down to members as rewards for contributions.
Guilds and Projects
New members can choose from a long list of guilds and projects to contribute to. Most discipline areas a media DAO needs are covered here and anything additional fits into projects.
There is something for everyone to do, with different levels of commitment. I’m part of the Writers Guild, so I’ll stick to this as an example. The Writers Guild has regular contributor roles which include, among others, a talent scout, responsible for onboarding new members, rewarded with a regular pay for the duration of the season.
Projects often don’t align with seasonal timelines so to allow for flexibility, the Grants Committee has a grants treasury that can be used to fund projects mid-season.
Members and Contributors
Anyone can join BanklessDAO. Join the Discord, say hi, take the First Quest, and choose a guild. A Guest Pass gives hesitant daoists the chance to try things out before buying tokens, and even lets them earn their way up to full Level 1 membership. The membership unlocks some additional perks and as long as the connected wallet holds a minimum of 35K BANK, the member has access to all Discord channels. There are more roles — most notably that of Level 2 contributors, who are strong contributors voted into the role by other members — but these have little impact on tokens or the available opportunities within the DAO.
- Identify your personal value-add
- Show up to meetings
- Raise your hand to help
- Be dependable
- Connect with others.
This bDAO newsletter piece has great advice about how to make it in DAO life and get recognised and rewarded by your peers.
Interestingly, peer-to-peer gifts of appreciation are often a significant part of the remuneration structure and add a layer of social benefits to active DAO members. ‘Tipping’ via Collab.Land as well as monthly Coordinape rounds within the DAO are novel ways for members to reward each other, something that can’t quite be found in the corporate world. Tipping rewards are integrated into the Bankless Discord and let members send BANK directly to peers with no gas fees as literal tokens of appreciation for value contributed.
More than one million BANK has been tipped to date, showing that this is a feature widely used within the community and a great, decentralised reward mechanism.
Coordinape is another way to distribute BANK among members. Typically in monthly intervals, a certain amount of BANK is set aside for Coordinape rounds, where each member distributes an allocation of funds to other members they think have added value.
Without deep liquidity, a token’s price is often unstable, so any project will naturally have this topic on their to-do list. Liquidity pools offered by SushiSwap, Uniswap, and Balancer reward anyone for providing liquidity, giving those BANK holders willing to pool their tokens access to yield from the trading fees (and sometimes token issuance) of the particular platform.
BanklessDAO has utilised Olympus Pro to own a portion of its own liquidity, a strategy being employed by many DeFi protocols to diversify their treasuries and participate in market making. The concept of protocol-owned liquidity is a recent innovation that I’ve described in my piece on Klima DAO. Instead of paying yield farmers to provide liquidity, the protocol issues discounted BANK with a bonding mechanism for liquidity tokens. BANK can be bought at a discount and the BanklessDAO, using Olympus Pro (full story here), can accumulate more of their own liquidity profiting from fees users pay for exchanging tokens.
Distribution and Fair Launch
The total supply of one billion BANK was distributed to the Bankless community (full breakdown here) and the DAO’s treasury. To ensure it was a fair launch, the Bankless LLC founders (whose brainchild this is and who put in the initial work to get the DAO off the ground) did not receive any tokens from the launch. Instead, in true DAO fashion, they launched a genesis proposal right after launch, allowing every BANK holder to have their say on allocating 250 million BANK from the treasury to the LLC. The proposal was approved, leaving BANK with the following distribution:
- 50 million BANK to the BanklessDAO treasury as initial liquidity.
- 250 million BANK to Bankless LLC, vested over 3 years, starting after 6 months.
- 300 million BANK to the community as a retroactive reward for supporting the early ecosystem.
- 400 million BANK to the BanklessDAO treasury, linearly vested over 3 years.
According to Forefront, BANK is now the most widely held social token, with about 4300 holders at the time of writing.
Value Creation and Value Capture
Seeing the token so widely distributed across the community raises the question of how the token captures the created value. Why do all these people hold their tokens? Certainly many of them will see the great community and what it is producing and will therefore hold onto their tokens in anticipation of even more great things that will be built in the future. In this case, the token provides a sort of fractional ownership of the DAO to the community. Others may only buy in as investors and speculate on an increase in price, as more people start their journey into Web3 by joining DAOs like BanklessDAO.
Most agree that we are early in this space and if more people see that it can actually be a lot of fun working in this free and flexible way, collaborating with other individuals acting out our secret heart, even more will quit their traditional jobs and pursue something they are passionate about. They might end up creating value for the BanklessDAO by writing content, producing podcasts, designing NFTs or building DAO tooling, for example. The diagram below is how I see value flowing within the ecosystem. Green means value flows to BanklessDAO, red means value flows from BanklessDAO.
Outlier Ventures has proposed the model of intrinsic community value to measure the value derived from belonging to a community. A concept like this makes sense, even though it might be hard to quantify something as diverse as BanklessDAO and the value that can be derived from its community. A good way to measure it might just be how many people are willing to work in return for BANK, or buy BANK and subsequently hold that BANK to retain access and enjoy the perks of being in the community. If that number can continue to grow, then the community has gravity, and the value of that growth might then be reflected in the value of the token.
After writing this, I thought about why I hold BANK personally. It’s a token created out of thin air, backed by nothing, and if the community lost belief in this venture, there likely wouldn’t be enough demand to give everybody an exit into other tokens. On top, it doesn’t even pay a dividend. Still, I haven’t sold any of my BANK. It’s hard to describe, but holding it makes one feel part of the community.
As a writer, it gives me access to a very professional editing and publishing mechanism, making my articles much better. The DAO provides a platform on which my content can be published and an audience of 45k+ people on Twitter. The token gives me access to all of this, and it’s a favourable exchange for a writer in Web3.
The token also brings so many people together worldwide to make projects happen. That too creates a lot of value. It’s easy to find great people to collaborate with and build interesting things together. Plus, there are many more in the community from which you can learn and grow, and always some fresh minds joining from all walks of life, adding their personal experience into this community pool of talent. It’s free from any traditional boundaries — working for a DAO is like freelancing but within a community of the like-minded. DAO members will go on to build great things, and the BANK token unites them toward a common goal, incentivising the creation of value.
The results have been quite amazing to watch. I recommend reading 0xLucas` summary of the Season 2 accomplishments. From analytic dashboards for DAOs (DAO Dash), to rethinking the services industry with Bankless Consulting, and a Web3 education platform (Bankless Academy), there is a great deal of potential in these community projects. The whole initiative is still very early — keep in mind that this DAO started in May 2021 — but its come a long way.
The DAO and the BANK social token are the mechanisms to unleash this potential and enable the acting out of members’ secret hearts in pursuit of the bankless lifestyle. I’m sure it will be a blueprint for great things to come.
BanklessDAO is an education and media engine dedicated to helping the individuals achieve financial independence.
This post does not contain financial advice, only educational information. By reading this article, you agree and affirm the above, as well as that you are not being solicited to make a financial decision, and that you in no way are receiving any fiduciary projection, promise, or tacit inference of your ability to achieve financial gains.