Exploring the Commons Upgrade Proposals
The Param Parties are still in full swing and the amount of proposals that are being submitted to the TEC through the configuration dashboard are continuing to grow! In this article we asked some of our proposal authors to share their thoughts around the design choices for the TEC economy. After we have listened to their arguments, we will be reviewing some of the diverse approaches within our current submissions, understand the reasoning for some of the design choices we are observing and hopefully inform any potential new submissions on some of the more nuanced parameter relationships.
The proposals for the Commons Upgrade will continue for another few weeks. Param parties and debates are scheduled to end on December 21st. After this, submissions will be closed, and the voting period will start through TokenLog.
If you are interested in creating your own submission, please join one of our many Param Parties and Param Debates! Now, let’s take a look at some of the current proposals and give their authors a moment to explain their designs!
The opening Price is balanced allowing for initial token buyers to get in at a perceived bargain even after the initial buy-in. The Token Freeze (18 weeks) provides a 4+ month buffer to allow enough economic activity to occur on the ABC while minimizing the amount of time for value-aligned members to begin putting their tokens to use. The Token Thaw period (52 weeks) allows for a responsible amount of time to effectively distribute potential sell pressure placed on the ABC.
The Commons Tribute (50%) will allow for a substantial amount of funds to be available for distribution granting the TEC Token more opportunity for external utility. The Entry Tribute (1%) is extremely low which encourages economic activity to occur on the ABC from individual buyers as well as providing for buy-side arbitrage opportunities on secondary markets. The Exit Tribute (12%) de-incentivizes sell-side arbitrage opportunities and individual sell-offs while providing a method for raising significant funds for the Commons Pool by agents wishing to exit the TEC economy.
With the conviction voting module, I set the Spending Limit (11%) on the lower side ensuring that we fund proposals incrementally if possible, and not risk a large amount of funds on any single project. The Minimum Conviction (0.8%) reduces the minimum effective supply which reflects the spending limit strategy — allowing for an abundance of funding proposals all with the chance of passing with smaller amounts of tokens staked. The Conviction Growth (42 days) ensures that proposals aren’t passed too quickly and that the community has an opportunity to move their tokens between proposals without impacting their conviction too quickly.
We’ve joined forces like Voltron and created the most powerful set of parameters ever to be beholden. This is a joint proposal between JuanK, Zeptimus and Mitch. We really are in favour of keeping a relatively low amount of Hatcher vesting. Six months is PLENTY of time for the Commons to get started creating value. We will also have an additional year of Token Thaw so even at the end of the Freeze, Hatcher’s won’t be able to sell their tokens en masse.
In regards to the Opening Price, 1.50 wxDAI is a happy medium that will keep Hatcher’s and builders happy with their instant gains without providing too much buy/sell pressure on the token once tokens begin to thaw. Combining this with our Commons Tribute provides us with an excellent Reserve Ratio to keep price volatility in check and the Common Pool should have ample funds at launch with over 500k wxDAI to keep working groups funded and allowing funding for TE projects.
When we want to disburse funds from the Common Pool via funding requests we have a solid set of parameters. 5% means that still a considerable amount of tokens need to be committed for any proposal to pass, this helps protect us from people taking small amounts from our Common Pool. We also believe there shouldn’t be a case for releasing more than 12% of our Common Pool at a time so anything above that would be incredibly hard to pass. The Tao Voting settings are hovering around the default values, however with sufficient amount of time for non-delegates to review their delegates vote and recast any misaligned votes. In the case of any contention we add a generous 3 days for the community to mobilize and add more votes.
In the Casino Proposal the value of the token will be high as long as we have funds in the common pool and we are using this funding to actually advance TE. I decided to set 95% of the funds to be allocated to the Common Pool that will be governed by the token holders guided by our MVV. The bonding curve is designed to be a casino where people can make a lot of money through speculating on the volatility of the TEC price while at the same time generating more funds through the Entry & Exit Tribute. There will be a lot of “FOMO” because the price will go up easily at the beginning and since the hatch tokens are frozen, there is a high incentive to buy TEC right away allowing new token holders to engage in price discovery. Since there is going to be a lot of volatility there will probably be a lot of people doing daily trading through the Bonding Curve — and guess what?! They are funding TE public goods while doing it! After the initial fomo there will still be alot of volatility continuously incentivizing more speculation which is why I proposed that hatch tributes should remain low.
The TAO voting parameters are pretty standard and similar to our hatch dao and they are working just fine. Regarding conviction voting, voting params will make proposals somewhat hard to pass but with enough support from the community we should be able to pass early proposals. If people are staking enough we can encourage our culture that we implemented within the TEC to fund projects that will help the future value of the token and encourage speculators to hold onto a percentage of those tokens in the long-term.
So now that we have read some of the justifications for these proposals, let’s evaluate each module and the details of each proposal’s parameters.
Module 1: Token Freeze & Token Thaw
The Token Freeze parameter dictates how long minted TEC tokens must remain locked, and the Token Thaw Parameter determines how much time it takes for all locked tokens to be distributed to token-holders. These parameters allow for a gradual release of tokens over a period of time in order to relieve any form of token sell-off from our token-holders that would adversely impact the price and stability of our Augmented Bonding Curve.
As you can see, of the three proposals we have very different takes on Token Freeze & Token Thaw. Generally with startups, vesting periods can last up to 4 or 5 years, but within our proposal submissions we are seeing vesting periods that have a maximum of around 2.5 years total.
When we combine the parameters of Opening Price, Token Freeze, and Token Thaw, we provide backers and builders a Price Floor value for our TEC token. The Price Floor is the guaranteed minimum possible price at which TEC tokens may be priced at a specific point in time. Early buyers of TEC tokens benefit from the price floor in that their investment will never drop below a certain threshold amount, thus reducing the market risk inherent in the purchase of a digital asset.
Module 2: Augmented Bonding Curve
Alright, let’s take a look at our economic engine: the Augmented Bonding Curve (ABC). There are three very important concepts to evaluate when configuring the ABC: the Reserve Ratio, the amount of funds in the Common Pool, and our Entry & Exit Tributes.
The Commons Tribute parameter determines how much wxDAI for the Bonding Curve is sent to the Common Pool (a floating pool of capital that can be used by the TEC), and how much is allocated to the Reserve Balance of the ABC. The amount in the Common Pool is something we should pay close attention to because we want to have at least 500,000 wxDAI if we want to adequately fund our working groups and fund proposals that support the creation of TE public goods.
The Reserve Ratio determines the amount of volatility associated with the TEC token price during minting and burning events. The lower the ratio, the more dynamic the price movement becomes. This ratio is derived from the opening price and commons tribute parameter inputs. The higher the opening price of the token, and the higher the commons tribute, the lower the Reserve Ratio is, and the more volatile the price movements will be.
The Entry & Exit Tributes determine the amount of funds that are taken from each transaction through the ABC and sent to the Common Pool. If we set these percentages on the higher side we can adequately fund the Common Pool, but we also discourage participants from entering and exiting the TEC economy. If these tributes are too low, we encourage more activity on the ABC but we raise less funds for Common Pool funding.
As we can see from the three proposals we are reviewing, there are some different approaches. The TEC Casino stands out having a 95% Commons Tribute with nearly 1.2 million wxDai in the Common Pool. As a result, the price volatility (due to a low Reserve Ratio) on purchases and sells makes it very attractive for speculators to play with the ABC. While this is a good strategy to raise funds for the Common Pool (more transaction volume generating funds from Entry & Exit Tributes) it presents questions for Governance as speculative agents continue to amass tokens that can be used to extract value from the Common Pool via the Conviction Voting module.
The Commons Orogeny and Juantimus Mitch take a more conservative approach with their design sacrificing the amount of funds in the Common Pool in exchange for price stability. Each of these proposals hold a healthy Reserve Ratio. The Commons Orogeny proposal also offers a unique stance on the Entry & Exit tributes, choosing to minimize the cost for entering the TEC economy but increasing the cost for exiting. The Juantimus Mitch proposal takes a balanced approach, keeping the tributes low on both entry and exit taking into account that most of the transaction volume will come from arbitrage opportunities, and that the token will be traded on secondary markets.
Module 3: TAO Voting
TAO Voting determines the voting process and environment for any decisions that involve altering the DAO. While most of these parameters are familiar to most of you, the Quiet Ending Period, the Quiet Ending Extension, and the Execution Delay are important features within TAO voting.
The Quiet Ending Period is the amount of time the community has to alter the outcome of any vote, specifically after the delegated voting period ends. If during this time period, the outcome of the vote changes, the Quiet Ending Extension provides a set amount of time for others to participate in a controversial vote. The Execution Delay gives a set amount of time for those who are unhappy with the outcome to exit the TEC before any changes occur.
The TAO voting parameters are almost identical for all three proposals. This is not an accident, but rather by design. Most of the TAO voting parameters fall within the range of a week long voting duration with high support required, and a low minimum quorum. A reason for this is because the parameters for the Hatch DAO voting module has worked very well for the TEC and most submissions have showed a willingness to keep it within this range.
Another reason for this is that each submission can be Forked by another proposal, meaning that the same parameters can be adopted and slightly altered to fit the design choice of that submission. The ability to fork proposals offers authors to identify and iterate on desirable design strategies. As we move forward, each fork limits the diversity of certain parameters, suggesting that the community has a general consensus on what it should look like.
So if you see some parameters you like, please feel free to Fork the proposal and make smaller alterations!
Module 4: Conviction Voting
The Conviction Voting module allows for members to express their support for TE projects by staking their TEC tokens behind specific proposals. The parameters that are configured within this module are the Spending Limit, Minimum Conviction, and Conviction Growth.
The Spending Limit sets restrictions on how much funding any one proposal can request from the Common Pool. Conviction Growth determines how long it takes for a voter’s tokens to maximize their conviction for a single proposal, and the Minimum Conviction determines the minimal amount of tokens necessary to be staked in order for a proposal to pass.
The Conviction Voting module has provided some very diverse proposals within all of the submissions we have received. This module is largely designed based upon the design choices of the earlier modules. The spending limit is unique because it represents the vision of the authors economy and how we fund TE projects.
The Commons Orogeny proposal set the Spending Limit to 11% of the Common Pool, which would require all funding proposals to be small and therefore incremental. Juantimus Mitch, and The Casino have much larger spending limits that match their desire to fund larger TE projects.
Conviction Growth is another area that we see a lot of diversity. A low Conviction Growth as we see in the Juantimus Mitch proposal means that tokens will reach maximum conviction much more quickly allowing proposals to pass in shorter time periods. However, if tokens are moved from those proposals their support erodes just as quickly as it was built, forcing supporters of a specific proposal to keep their tokens locked in until they are passed.
Higher Conviction Growth such as the Commons Orogeny means that tokens will reach maximum conviction much slower, but ensures that proposals are widely supported over longer periods of time. The benefit to the design is that token holders can move their tokens to a different proposal without eroding the conviction they already built which matches the low spending limit reflecting small and incremental proposals to be submitted.
If you are interested in what we are building, feel free to join one of our Param Parties and attend a Param Debate! Collaborative Economics is about engaging and educating the community on Token Engineering! Come join the commons, and be a part of the first collaboratively designed economy!
