From Foundation to DAO — Protecting the move to full decentralisation.
Every DLT, DAO and cryptocurrency project has a similar issue when they first launch. Until they achieve natural decentralisation, they are subject to takeover risk. In the case of a DAO, a single financially significant player could come into the project, buy up a majority supply of governance tokens, and gain full long-term voting control of the DAO. The founders of Spool DAO, or preDAO members as they are sometimes internally referred to, saw this risk from the beginning and knew it needed to be addressed and prevented during the early stages of launch and scaling.
As such, Spool DAO was fully decentralised from the very beginning with approximately 45 founding contributors who built the preDAO systems. These members invested time and money for which they received vested SPOOL tokens tied directly to the governance token voSPOOL. This voSPOOL is non-vested, but 100% available from the start of the voSPOOL governance. At the same time, newer SPOOL holders have the ability to earn voSPOOL over time through staking since March 2022. To find out more about this process, please see this article.
Initially, this deliberately gives founding holders, who have been working with and driving the projects forward since its inception, increased early authority within governance. This is to protect the protocol against the potential hostile takeovers we have seen other DAOs fall foul of. However, the voSPOOL issued in this way is not eligible to vote towards the regular SPOOL emissions used to increase the APY of specific Smart Vaults. This prevents any individual founding member from voting toward increasing rewards for their self-created Smart Vaults. In addition, voSPOOL held in this way does not earn the protocol-staking reward where 80% of the protocol revenue is distributed to SPOOL stakers and out of this again 80% is distributed to voSPOOL holders.
Over time, as these founding contributor SPOOL tokens vest for two years and the preDAO members can claim them, this governance power will shift away as many members will remove their preDAO SPOOL and with it the voSPOOL. They may wish to sell tokens, or they may prefer to stake their SPOOL in the standard manner, earning increasing governance voting rights and protocol revenue rewards over time instead, just as other holders do. Regardless, once they choose to claim their SPOOL, founding holders will lose their according voSPOOL and be treated just as any new SPOOL staker, earning governance voting back over time. This will increase the relative voting power of DAO members who have chosen to stake their SPOOL earlier in exchange for protocol revenue and voting power via voSPOOL.
It’s important to note as well, that preDAO members are not a team following a single set of rules. They are approximately 45 individuals, with individual wallets, who have free reign to vote on governance as they see fit, and may have conflicting views on certain topics. This is the core concept of DAO governance. While they will work to strengthen and improve Spool as a project and true DAO, they may have different approaches to exactly how that will look.
The key feature for any decentralised project is not how decentralised they are when they launch, after all, even Bitcoin started from a single node mining the first blocks. Instead, it is about how consistently they are increasing decentralisation within the project while ensuring it survives to reach a fully decentralised model.
Spool DAO is designed to become consistently more decentralised over time. Those who have long-term faith in the project, as shown by staking SPOOL to earn voSPOOL, will increase their voting power. With this voting power, they can determine where Spool reward emissions are going and how Spool DAO develops as a whole. Additionally, these stakers will get an increasingly bigger share of the protocol revenue, as long as they stake. At the same time, the earliest investors will maintain protocol security in the short term and ensure the last two years of work have not been in vain.
At the end of the day, all participants, be they very early, slightly later, or even those who will join Spool in the upcoming years, are one true DAO that works together to build the backbone of the DeFi infrastructure.
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Spool is a permissionless DeFi platform that connects Capital Aggregators with DeFi Yield Generators. Funds are dynamically and efficiently allocated to ensure optimized yields, for custom strategies, managed by DAO-curated Risk Models.
Spool was established as a DAO, with a selection of founding contributors representing a diverse cross-section of the blockchain community.
Stay tuned as we shine a spotlight on more Spool Team members over the coming weeks.
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