Our Stance on #2

4 min readJan 18, 2023


For some time tokenomics have been at the forefront of people’s minds. Here we will outline reasons for being against this proposal and list what would need to change in order for us to be convinced.

  • The allocations outlined at genesis are not random

When the allocations were initially decided by the founding team (and agreed upon by you, the holders), we were aware of the negative connotations of low float. We are also wary of tokens with low float — given the history of the space. However, done correctly, low float has a non-predatory purpose that resonates with the ethos of web3.

“Inflation” (as used by crypto denizens, to describe existing tokens entering a given circulating supply) is unwanted by token holders, ourselves included, for obvious reasons. Thus, the goal was to have a low float, but allow holders to escape inflation through staking, and the vested rewards would be determined by KPIs (Key Performance Indicators).

These KPIs which track metrics like contributions to the codebase, TVL growth, net new user acquisition, etc. are valuable metrics that can be used to incentivize DAO members to collectively grow the project and be rewarded with the project’s native token. This mechanism is a powerful Web3 lever that can accelerate the usage and adoption of innovations built in the space. That is exactly why platforms such as Sourcecred, UMA, Coordinape, Collab.land and many others are continuing to grow, in part through offering tools that link token distribution to impactful work done by the members of the DAO.

The main role of communities is to evangelize and use the product and, as such, the KPIs should reflect these two metrics in order to align both parties — community, and DAO. As such, the token allocation is strategic in nature, because it allows for alignment of vision and distribution of the native token as rewards to impactful work done by DAO members to grow the platform.

  • The DAO will partially lose its ability to incentivize growth in the future

Tokens are the web3 native way of incentivizing growth via distribution of ownership. It is understood in the venture world that market capture via aggressive spending is the most effective tactic to succeed. However, we are also of the opinion that this spending must be structured and timed correctly such that the CAC is always equal to or lower than the profit generated. While bear markets present a good opportunity to capture market share as others ramp down their marketing efforts, DeFi protocols are sensitive to liquidity conditions which, when low, result in lower TVL and collapsed yields, as a result of decreased economic activity. Thus, such tactics should only be employed when deemed appropriate.


  • The DAO will partially lose its ability to raise funds in the future

In a similar vein as above, it is important for DAOs to retain the ability to diversify their treasuries when markets are bullish. This greatly increases their resilience. Debasing the token for no reason other than to minimize the founding team’s voting power is counterproductive.

  • Dilutive events may trigger negative feedback loops

If you know there’s going to be a dilutive event, it will get priced in in the present — predicting that others will sell in the future, present holders have an incentive to sell. This would take place before the actual dilution so that when that event would come, the price would collapse further, potentially resulting in a death spiral. This rings even truer with the proposed discrete, single time allocation event.

Bottom Line

The above opinions and reasons have been publicly known for a while, but it is this last one that forces us to vote against this proposal, and we urge that others do the same.

We are not against warding off “inflation” — it was always the plan. We would consider a similar proposal if it were integrated with SCRC-1 (and we will likely be the ones to make it), the staking contract, the distribution occurs over a long enough period of time, and made use of KPI options that actually aligned incentives, in order to distribute vested QUARTZ tokens. Being integrated with staking would help with incentive alignment, be continuous, and address some issues.

Lastly, we urge that proposals be more professional and include actionable items and technical specifications.


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