The Cultural Impacts of our Commons Upgrade Proposals

We have spent countless hours debating the technical implications of the design space for our Commons Upgrade, but we have yet to really delve deep into the social implications of our decisions. Within this article, I will be exploring some aspects of the Commons Configuration Dashboard and what implications could be lurking underneath some of our most popular proposals when we take into consideration token-holder bias, behavioral implications, our reward system and more.

Module One: Token Freeze & Token Thaw

As most of us know, the Token Freeze & Token Thaw parameters are describing the amount of time TEC tokens must be vested for the Hatchers of the Commons Upgrade. The freeze describes the amount of time the TEC tokens will be frozen, while the thaw describes the rate at which these tokens will be released to the Hatchers.

Token Freeze & Token Thaw - Cultural Implications & Observations:

  • The end of the Hatch Raise was on August 14th, 2021. This means that the capital Hatchers have contributed to the TEC have already been locked up for at least three months, and a desire to release those tokens sooner have been voiced by some members of the community.
  • The Token Freeze parameter is meant to provide a specific amount of time for activity to occur on the Augmented Bonding Curve (ABC); in particular, the ability to increase the amount of funds within the Reserve raising the floor price of the token for Hatchers.
  • Token Thaw allows for a gradual release of tokens over time, rather than all the tokens released at once, preventing any form of sell-off of TEC tokens en-masse. While this is highly unlikely since the Hatchers are all Trusted Seed members, it is nice to have a gradual release of tokens to prevent any type of price shock on the ABC.
  • Concerns around long vesting periods brings up issues around capital allocations, and freedom of mobility for token-holders to exit the TEC economy.
  • Potential TAO voting proposals could create issues around the ability for Hatchers to rage-quit in response to decisions they are not in agreement with due to the Token Freeze parameter. Long Token Freeze parameters could be a source of tension when TAO voting proposals are submitted within the DAO before the vesting period is over.

Top Proposals and Module 1: A Different Perspective, Vesting Ratio

The Vesting Ratio describes the amount of time TEC tokens are frozen vs. the amount of time TEC tokens are distributed. As you can see there are only 2 proposals with a vesting ratio above 1. There are clear benefits to having a longer freeze, and a longer thaw period. However, combining the two to see how long the vesting period lasts in total and understanding the dynamics of the ratio hold good insight on which of these proposals provide a healthy balance for token-holder behavior when those tokens become available to sell.

Module 2: Augmented Bonding Curve

The Augmented Bonding Curve is something that has several implications on token-holder behavior and cultural dynamics for the TEC. The most common parameters that will have significant cultural implications are the Opening Price, Common Pool funds, Reserve Ratio, and the Entry & Exit Tributes. It is important to note that with the exception of the Entry & Exit Tributes, all of these parameters are permanent settings of the ABC that cannot be changed.

Another concern for design is who the end-user of the ABC will be! Considering that all the proposals currently leading are transferable (meaning they can be traded on secondary markets), it is easy to assume that most people will acquire their tokens on secondary exchanges and not directly through the ABC itself. This means that the users of the ABC will likely be bots and individuals who are seeking to take advantage of arbitrage opportunities between the ABC and secondary markets.

Opening Price - Cultural Implications & Observations:

  • The Hatchers all paid approximately 1wxDAI per token, so it is important to acknowledge that we want the Hatchers to feel rewarded for their contributions and have the ability to enjoy a return on the capital they have locked up. A 0.50wxDAI proposal is not an attractive proposition for Hatchers (even if it is a better overall design strategy), and a 10wxDAI opening price is not an attractive proposal for new participants entering into the TEC economy.
  • The Opening Price (along with the Commons Tribute) has a direct impact on our Reserve Ratio. The higher the opening price, the lower the Reserve Ratio.
  • A higher opening price along with short vesting periods could result in more tokens being sold-off by value-aligned members who seek to take advantage of their gains early on.

Common Pool - Cultural Implications & Observations:

  • The amount of funds in the Common Pool is extremely important for jump-starting the TEC economy. The general estimate is that we need at least 500,000wxDAI in the common pool in order to fund our Working Groups and to fund the initial TE proposals submitted to the Commons.
  • The more money that is in the Common Pool equates to less money that exists within the Reserve.

Reserve Ratio - Cultural Implications & Observations:

  • The Reserve Ratio has a direct impact on the price volatility of the TEC token. A low Reserve Ratio (1–15%) vs. a moderate Reserve Ratio (16–25%) has drastically different implications for who participates in the TEC economy.
  • The more volatility the TEC token has, the more speculative activity will occur on the ABC from both individuals and abritragists. Depending on the entry & exit tributes of the proposal, such volatility can generate a significant amount of funds for the Common Pool to fund Common initiatives.
  • Concerns around incentivizing speculative behavior bring the potential to alter the demographics of the DAO from those who are aligned with the values and mission of the TEC to those who are interested in maximizing their own personal returns. This could bring issues around cohesion and execution of the TEC mission.

Entry & Exit Tributes - Cultural Implications & Observations:

  • The Entry & Exit Tributes can and more than likely will be changed later to better align the activity of the ABC with the TEC mission. It is the only set of parameters within the ABC that can (and more than likely will) be changed at a later date.
  • Low Entry & Exit Tributes are ideal for our ABC, but perhaps not during its initialization. There is a general consensus among proposals that giving the ABC some time for activity and witnessing how it is being used by the public is important to determining the appropriate entry & exit tribute percentages.
  • A High Entry & Low Exit tribute allows for more aligned individuals to join the TEC and less speculative members to join. This also means less funds generated for the Common Pool.
  • A Low Entry & High Exit tribute allows for everyone to join early, but makes it difficult for individuals to exit the TEC economy.
  • Our Reward system is designed to reward contributors in TEC tokens, and a High Exit Tribute is a further tax on those who rely upon their Rewards as vital income. Depending on how quickly we can establish the TEC token on secondary markets, this issue could become problematic.

Top Proposals and Module 2: A Different Perspective, Governance

The total amount of tokens in existence once the ABC is initiated and the DAO makes the first purchase will be 1,956,421.69 TEC Tokens. These tokens are held by the Trusted Seed, and therefore the governance of the Commons is in the hands of a trusted group of individuals who will champion the mission of the TEC.

A specific set of questions arise when developing the parameters of the ABC regarding the long-term governance of the DAO. How much would it cost for someone to match the Trusted Seed in governance power, and could it be done quickly? Below we can see the parameters for some of our leading proposals and the amount of money it would take to acquire nearly 2 million TEC Tokens after the Commons Upgrade is initiated. A pattern emerges that shows that lower Reserve Ratios and a higher Opening Price makes it much more difficult for wealthy challengers to compete for governance within the TEC, while more stable designs lower the cost of such an approach.

Module 3: TAO Voting

The TAO voting module is the one module that is frequently overlooked. Most of our proposals fall within a certain range of parameters, but there are some very important cultural implications to TAO voting that will have an impact on Governance.

Minimum Quorum - Cultural Implications & Observations:

  • The minimum Quorum parameter describes the percentage of YES votes that exist among all active voting tokens. (This is different than the traditional conceptions of Quorum that equate to a percentage of ALL tokens that must be voting).
  • Depending on the list of top Token Holders and percentages of tokens they hold, the minimum quorum should be able to prevent any one or two holders in the TEC from holding veto power of the majority.

Delegated Voting - Cultural Implications & Observations:

  • Delegated voting is something that we rarely discuss, mainly because it is not an exercise that we have practiced within the TEC. The TAO voting module allows for token-holders to delegate their voting power to individuals who can submit votes on their behalf. The Delegated Voting period is the amount of time the delegates have to vote.
  • If your delegate votes against your decision, you will have the Quiet Ending period to change your vote in favor of another decision. After this vote, your tokens will return to your delegate.
  • Delegated voting introduces a political environment that has been largely absent in the TEC up to this point. Considering that proposals submitted for TAO voting are extremely infrequent, but very important, this delegated voting period should be much shorter than the quiet ending period, giving individuals enough time to evaluate their choice and alter the outcome of a decision if necessary.

Top Proposals & Module 3: A Different Perspective, Top Token Holders

A major concern for most token-economies is the distribution of tokens among the community and how much influence “whales” have over the decision-making within instances of voting. It is unlikely to be a concern for the TEC, but it is also responsible for us to be transparent about this distribution and what it means when we are designing our voting modules. Below is a list of the TECH top Token-Holders.

From this chart we can clearly see that the top six token-holders control approximately 30% of the tokens within the TEC.

However, it is important to note that these six individuals are all part of the Trusted Seed, and therefore value aligned with the TEC Mission. The top token-holder has approximately 9% followed by 7% of the next person. This means, that these individuals, if they so choose to go against a decision that the majority agrees with, they would likely provide a failure in achieving minimum quorum. So setting the parameters too low could cause issues further down the line. (Please note that this is highly unlikely, but good information to have when making decisions around TAO Voting parameters)

It is also important to note that the DAO itself will be using 250k wxDAI to complete the first purchase from the ABC which depending on the configuration selected will be anywhere between 600,000 to 800,000 TEC tokens. These tokens are controlled by a multi-sig held by 7 individuals collectively selected by the DAO.

Module 4: Conviction Voting

The Conviction Voting Module will dictate the funding behavior around TE Project & Proposals. There are a few design considerations that are present within our leading proposals that have implications for how Conviction Voting is executed and what it means for the culture of funding within the TEC.

Spending Limit - Cultural Implications & Observations

  • The Spending Limit is a % of the Common Pool at any given time, and the Common Pool is expected to grow considerably.
  • The Spending Limit will determine how we consider, develop, and monitor TE proposals into the future. If we have a small Spending Limit, the proposals that we receive will be small and therefore incremental, which will require monitoring and evaluation on a more frequent basis. Concerns for having the infrastructure for transparency and accountability are a concern, especially if we have 50 small proposals rather than 10 large proposals.
  • Having too high of a spending limit opens up the Common Pool for manipulation, more difficulty for projects to deliver on proposal milestones, and potentially less support for allocated to smaller proposals.

Minimum Conviction - Cultural Implications & Observations

  • The Minimum Conviction dictates how many TEC tokens are needed to pass a proposal, no matter how small the amount requested. On the Commons Config Dashboard (CCD), the Minimum Conviction is set as a percentage of the effective supply, where effective supply is the number of tokens actively voting on proposals.
  • The minimum conviction is important for many reasons, but from a cultural perspective it is important to realize that not all proposals are the same. Not only will we be funding TE projects and proposals, but we will also be approving funds for compensation to members of the TEC. If we have a high minimum conviction, we could run into problems where we have difficulty prioritizing compensation for our contributors.

Conviction Growth - Cultural Implications & Observations

  • The Conviction Growth parameter dictates how quickly tokens staked behind proposals gain and lose conviction.
  • Longer Conviction Growth equates to a longer time for tokens to be staked in order for a proposal to pass, but it also means that it takes a longer time for that conviction to erode once those tokens have been removed.
  • Shorter Conviction Growth equates to a shorter time for tokens to be staked in order for a proposal to pass, but it also means that it takes a shorter time for that conviction to erode once those tokens have been removed.
  • The dynamics between a short vs. long conviction growth relate to how token-holders measure their conviction when there is more than one proposal that they want to fund. A long conviction growth allows a token-holder to build conviction with one proposal, and move their tokens to another without impacting the potential of the original proposal passing. A shorter conviction growth forces token-holders to make decisions on how to distribute their tokens among many different proposals all at once.
  • The combination of all three parameters will have a significant impact on the amount of attention required by token-holders to participate in Conviction voting for potential TE proposals.

Top Proposals & Module 4: A Different Perspective, Funding Time

It is important for us to evaluate the Conviction Voting parameters in terms of how much time it will take a proposal to pass. In the following illustrations, we can evaluate our leading proposals in relation to how long it will take to pass both a 1,000wxDAI proposal and a 25,000wxDAI proposal at both 3 days time and 6 months time. These proposals hold the assumption that there is at least 1,000,000wxDAI in the Common Pool at the time of funding.

While there are many other cultural implications that were not fully explored here, it is important that you at least have some important ones on your radar for when you make decisions in the upcoming vote on TokenLog.

Here is a link to the top 10 proposals currently in the running. This is not an exhaustive list, and there are many other proposals that you can explore.

The Fledge

Reserve Ratio Matters, change my mind.

A Token Orogeny that Slaps but with better TAO Voting

Goldilocks $1 bet for $1million to advance Token Engineering

Ostroms 1 Million Dollar Baby

Iron Curtain Voting (Revolutionary Opening Price/The Bolsheviks Gambit)

Ostroms 1 Million Dollar Hatch, Fledge & Fly

Montana Rusa: The Communist Roller-Coaster

420 Opening Price

Damped Ostroms

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Nathan Suits

Nathan Suits

M.P.A./Geology/Political-Science/Microscopy. I am many things to many people, but I am first and foremost a student of the world. Education Matters.