Token Engineering Commons

Analysis of Stakeholders, Tokens & Governance Processes

Shermin Voshmgir
Jul 10 · 23 min read

The aim of this post is to explain and summarize — in a nutshell — the activities around TEC (Token Engineering Commons) — their goals, their mechanisms, and the co-creation process they are currently going through to collectively design the many governance parameters of their future DAO. Due to the complexities — however — this post it is still a TLDR. It took me a while to foster though their massive online documentation and understand the lingo they created for describing their stakeholders, processes, tokens, etc. and also understand the novel governance primitives they are using. I hope that this post can also be a useful guide for others. Thanks to Tamara Helenius, chuygarcia92, Griff Green and Jessica Zartler for their valuable input and feedback!

The post is structured in following subchapters:

  • Governance Mechanism of the TEC DAO
    -
    Augmented Bonding Curves
    - Conviction Voting & Disputable Voting).
  • TEC DAO Creation Process
  • TEC Stakeholders
  • TEC Tokens
  • Next Steps

Token Engineering Commons (TEC) is a DAO that is emerging out of the Common Stack and is supported by many active members of a still nascent Token Engineering scene. The aim of the TEC DAO will be to fund the development of a tool stack for the modelling, simulation and deployment of token systems, including community building and education around this emerging “Token Engineering” tool stack. The TEC DAO will be using various automated governance mechanisms for funding the research and development of Token Engineering tools. The exact parameters of the governance mechanisms of the TEC DAO will be determined in a co-creation process of the TEC community. The community is planning to use different token types to steer all governance activities along the 3 stages of the creation and deployment process of the TEC DAO.

The Token Engineering Commons is a community designed DAO which is currently in the making. It’s a DAO built by Token Engineers to fund the research and development of future Token Engineering projects. For the past year founding members of the TEC have been conceptualizing the governance rules of a future TEC DAO which will be deployed in various phases, the first of which will be completed soon (more below). The design philosophy of their governance rules is based on Elinor Ostrom’s research — a political economist who was awarded the Nobel Memorial Prize in Economic Sciences for her “analysis of economic governance, especially the commons.”

In a two step process the founding community members are currently collectively defining the governance parameters for the TEC DAO. The core governance mechanism is an “Augmented Bonding Curve” which will be using various alternative voting mechanisms to enable community decision making over the allocation of funds. This collective co-creation process of the governance rules is also a learning by doing process where many of the automated governance mechanisms — such as Augmented Bonding Curve (market mechanism), Conviction Voting and Disputable Voting (voting mechanisms) — are adapted and tested by the TEC community for the first time.

Augmented Bonding Curve

Augmented Bonding Curve (ABC) is a modified token bonding curve that can be used to generate continuous funding for any type of DAO. The mechanism combines elements of crowdfunding with a set of collective decision making processes over communal funds to achieve a common goal. The augmented bonding curve has an additional project funding pool, a vesting mechanism, and inter-system feedback loops. All collected funds for the DAO are managed by a special smart contract — the ABC.

In the context of the TEC DAO the ABC will provide a market mechanism for a common funding pool, which will be using various voting mechanisms for allocating funds to recipients of grants of TE projects. The concept of Augmented Bonding Curves was introduced by Michael Zargham, who proposed an alternative and more robust market mechanism that is less susceptible to manipulation attacks such as “pump and dump” in pursuit of speculative returns, than standard bonding curve mechanisms.

  • Additional Funding Pool: The funds are allocated by the smart contract to two different funding pools, the “Reserve Pool’’ and the “Funding Pool”. Just like in other bonding curves reserve tokens (currency with which contributors fund a DAO) are kept in a smart contract as collateral against newly issued tokens, and the buy and sell price of the newly minted tokens is determined by the bonding curve formula that ties the issuance price of tokens to the demand. However, as opposed to traditional bonding curve contracts, only a percentage of the all funds collected are held in the reserve pool. The rest is allocated in form of a community tax to an additional “Funding Pool” which will be used to distribute grants to TE projects that are in line with the purpose of the DAO.
  • Investors profits: Anyone can become an investor and buy TEC DAO tokens. The buy and sell price is determined by the parameters of the augmented bonding curve formula. The ABC formula has been designed on the assumption that as more people fund the TEC DAO, the demand for TEC tokens will rise, and so will the price. This allows for speculative returns on investments once TEC token holders want to sell their stake in the system. However, as with any bonding curve, the tokens are not sold on an open market but managed by the price mechanism baked into the smart contract.
  • Exit Tax: This is the community tax TEC DAO investors pay when they withdraw their TEC DAO and convert it back into wxDAI (the stable token used for making funding deposits). As Members “cash out” and liquidate their TEC tokens for wxDAI, a percentage of their returns are sent back into the Funding Pool (to fund community projects through grants).
  • Hatch Phase: A DAO managed by an ABC is launched in two stages: the Hatch Phase and the Open Phase. During the Hatch Phase, initial contributors (i.e. founding members of the organization, devoted contributors, initial investors or “Hatchers”) participate in a hatch crowdfunding process. The goal is to also gather contributors who can contribute with “intellectual capital” and “sweat capital” but might not have too much “financial capital” to invest. Depending on the exact parameters defined, Hatchers receive temporary “TEC-H tokens” for their “intellectual capital,” “sweat capital” and “financial capital” invested.
  • Lockup Periods: As opposed to a typical bonding curve setup, where tokens can be sold at any point or after an arbitrary temporal deadline, tokens minted during the Hatch phase of an ABC are locked (burning is disabled) in a vesting process. This vesting period combats any harmful early speculation/arbitrage that would affect the stability of the Reserve Pool. While the TEC-H tokens are vested, they can still be used to vote on future governance rules and capital allocation of the DAO. This way community experts can shape the governance rules without outside interference.
  • The Open Phase: In this phase anyone can invest into the DAO, hence becoming members of the Token Engineering Commons DAO in relative proportion to their tokens held. Their financial contribution will flow into the Reserve Pool, returning newly minted “TEC tokens” that can be held, sold back to the bonding curve (aka burnt) or used to vote within the system.
  • Inter-system feedback loop: In this open phase the Hatchers tokens (TEC-H) are slowly unlocked in correlation to how much capital has been allocated to fund projects that support the commons. This means that for the Hatchers’ tokens to vest, capital from the Funding Pool has to be allocated to fund projects that positively impact the commons. With this vesting process and introduction of special voting mechanisms (such as Conviction Voting), token holders are economically incentivized to participate in the system’s governance process to allocate funding to curated projects that have the most beneficial impact on the TEC DAO.

The exact parameters of the Augmented Bonding Curve Formula are currently being defined by the TEC community. To visualize how changing the parameters of the ABC will affect the market dynamics, the Common Stack has developed this online simulation tool. They also created this video to showcase the simulation tool:

Simulation Video of an ABC, by Common Stack

Conviction Voting & Disputable Voting

Conviction Voting is an alternative voting process where voters continuously express their preference by staking tokens in support of proposals they would like to see approved, and the conviction (i.e. weight) of their vote can grow over time. Votes are not collected in a single time-boxed session. Voters assert their preference for which projects to fund in a continuous manner, rather than in a discreet manner. Anyone can change their voting preference at any time, but the longer one keeps their preference for the same proposal, the “stronger” ones voting “conviction” counts. This mechanism gives long standing community members with consistent preferences more influence than short term participants who might only want to influence a vote.

Collective conviction accumulates until it reaches an algorithmically set threshold based on the proportion of funds requested by a proposal. When conviction accumulates past the threshold, the proposal passes and funds are released so work can begin. Instead of applying “majoritarian decision-making” — as used in regular voting mechanisms — this voting mechanism allows identifying “sufficient support” for a proposal. “A voter could put “half of their voting power behind proposal A, a quarter behind proposal B, and divide the remaining quarter between proposals C and D. Conviction grows according to a half life decay curve, giving more weight to that preference over time, up to a certain limit. This can transform a continuous data stream of individual preferences into discrete acceptance of proposals in a manner similar to that found in nature. Aggregating the opinions of a community in this way, we create a rich temporal data stream of collective preference for use in group decision making.” (Source)

Decision making on the allocation of funds managed by a DAO is therefore based on the aggregated preference of all community members, which is continuously expressed. It is assumed that conviction voting improves on traditional discrete voting processes by allowing participants to vote at any time, and eliminates the need for group consensus on every single proposal. This reduces the mental transaction costs required in token-based voting,

Conviction Voting provides more collusion resistance, and mitigates many of the attack vectors of time-boxed voting mechanisms. The concept was derived from the paper on ‘Social Sensor Fusion’ by Michael Zargham, that proposed how humans can be seen as “social sensors” reacting to proposals in their communities, each broadcasting continuously evolving preferences that are “fused” into an aggregated social signal.

Disputable Voting is another mechanism that offers additional voting features such as (i) the delegation of votes, (ii) a framework for disputing proposals, and (iii) protection against last-minute vote result flipping. Relevant design parameters are (a) duration of “Delegated Voting Period”, ​”Minimum Quorum required”,​ length of the “Quiet Ending Period”, “Support Required,” “Vote Duration”, “Vote Execution Delay.”​ It was originally designed for use in the Aragon Network DAO but was never implemented.

TEC DAO Creation Process

The founding TEC community members are currently collectively defining the governance parameters for the TEC DAO. For that purpose they have organized themselves into several working groups where different community members contribute with time and know how to collectively create the TEC DAO.

  • Phase 1 — Hatch DAO: The purpose of phase 1 is to prepare the Hatch DAO — a temporary DAO where eligible experts — so called “hatchers” — will be appointed to define and vote over the governance parameters of the final TEC DAO. The aim is to identify active community members who contributed with their time and expertise (measured in “Impact Hours”) during the scope of phase 1, and to identify additional experts which will be specifically invited by members of the Common Stack to become “hatchers,” but only after they register as an official member of a Swiss foundation, the legal entity behind the Common Stack. This selective process aims to avoid speculators entering the TEC DAO at a stage where it is still being built by the community; the membership status intends to protect hatchers from being personally liable.
  • Phase 2 — The Commons Upgrade: The first part of this process will be a 4 weeks hatch phase, where Hatchers can fund the preliminary Hatch DAO with the amount of wxDAI they wish (with certain limitations). After termination of the funding of the Hatch DAO, hatchers will have several weeks where they can discuss and vote over final parameters of the automated policy making tools such as the Augmented Bonding Curves, Conviction Voting and Disputable Voting that will shape the final TEC DAO. In this process the Hatchers have voting rights in relative proportion to their tokens held.
TEC Hatch Phase 1 & 2
  • Phase 3 - Live TEC DAO: Upon termination of the voting process the preliminary Hatch DAO (members only DAO) will be upgraded/converted into the final TEC DAO. The TEC DAO is now live and open to everyone to join. Anyone can become a backer and provide funding for R&D grants that will go into a common funding pool, and vote over projects to be funded. On the side of the market, anyone can apply for a grant and become a recipient of these funds for the research and development for Token Engineering projects.
Live TEC DAO

TEC Stakeholders

The Token Engineering Commons has a variety of community members, the composition of which will change along the co-creation process of all project phases:

  • Builders (Community Contributors, Community Stewards, Subject Matter Expert (SME), Gravitons)
  • Future Grant Recipients (showcase only at this stage)
  • Commons Stack (Incubator role)
  • Hatchers: Most important role in this phase
  • Builders (Community Contributors, Community Stewards, Subject Matter Expert (SME), Gravitons). Most of them will also be Hatchers at this point. It is possible however that some will not want to be Hatchers but keep contributing with knowhow without voting power over.
  • Commons Stack (Incubator role)
  • Future Grant Recipients (as a showcase only at this stage)
  • Grant Recipients: People submitting R&D projects for funding
  • Backers: Fund the TEC DAO and receive TEC tokens in proportion to the money they invest.
  • Builders (Community Contributors, Community Stewards, Subject Matter Expert (SME), Gravitons) will continue to manage the TEC DAO and continue necessary research and development of community governance tools.
  • Common Stack (should not have such an active role anymore, however, will still provide legal entity for “trusted seed” members and protect their liability status.)

Here a description of the main roles, activities and rewards of all stakeholders:

Common Stack (all phases): Institution that took over a lead role coordinating, facilitating and funding some of the active community members. They provide funding of around 75% of full time “Community Stewards.” They also provide their organizational infrastructure in the form of a Swiss legal entity (Trusted Seed) and other services to help bootstrap the TEC DAO. The plan is that the final TEC DAO will be self sufficient, and won’t be needing the financial support to maintain the operative activities of the TEC anymore.

Builders (all phases): Anyone who has an interest and inclination can become a builder to contribute to the research & development of creating and later maintaining the TEC DAO. They organize themselves around working groups and can contribute in different roles:

  • Community Contributors are community members who are active in the online meetings and the TEC online forum or incubator chat. Contributors can call their own issues, sync in calls, promote TEC grants and initiatives, vote on parameters and proposals.
  • Community Stewards commit to 5+ hours per week almost every week until the final creation of the TEC DAO. 75% of the community stewards are preliminarily funded by the common stack (Phase 1&2). They need an overall understanding of the TE Commons. are proactive on solving problems, implementing strategies, lead working groups, and assist on the education and onboarding of new community stewards. They work together as a team and are up-to-date with all the decisions taken by the TEC.
  • Subject Matter Experts (SME) can be onboarded bu COmmunity Stewards directly to the working group they wish to contribute with, without a general involvement, but still providing impactful contributions. They provide advice when requested and can make critical contributions but might not have the bandwidth to be a Community Steward or Working Group Lead, participate in the Advice Process and punctual TEC initiatives.
  • Gravitons are the conflict managers of the community and can be onboarded during the so called “Graviton Training’ sessions’ that introduced concepts like Non Violent Communication, Spiral Dynamics and Ostrom’s 8 principles for Governing the Commons. Gravitons are expected to attend most of the Gravity calls and be available for managing conflicts or challenging social situations any time they may arise.

Hatchers (phase 2 only): community members who participate in the Hatch process — aka the process of launching the Hatch DAO. Anyone may become a Hatcher as long as they become a member of the Trusted Seed (Swiss association governing the Common Stack). The Trusted Seed is a curated list of value driven individuals that are invited to hatch the TEC and aid in the governance of the Commons. Once accepted in the Trusted Seed, one can become part of the Commons Stack Swiss Association which protects contributing members from being considered part of a general partnership (under Swiss law & related legal frameworks). The intent is to use crypto-native governance tools to the maximum extent possible and rely on existing legal forms to the minimum extent feasible. Hatchers play a significant role in shaping the governance rules of the TEC DAO. They will need to make key decisions regarding the parameters of the Hatch DAO and how the final TEC DAO. Hatchers can also provide the funding for the Hatch DAO and will have significant influence on the direction of the TEC once the Hatch process is over.

Grant Recipients (Live TEC DAO): Anyone in the wider Token Engineering community who would like to get an R&D project funded can submit a project for funding. While it is already possible to submit a proposal and apply for funding during the building stage (Phase 1 & 2), the funds will only be allocated after the TEC DAO has been fully funded and goes live.

Backers (Live TEC DAO): Anyone can buy TEC tokens with wxDAI, and invest into the funding pool and vote over the projects to be funded in relative proportion to their token holdings. They also have governance rights over the future evolution of the TEC DAO.

Rewards for Community Contribution in Phase 1

Anyone who acts in alignment with the TECs mission, vision, values and code of conduct and wants to contribute to the creation of the TEC can have the agency to become active in the network. The TEC community has developed a few processes to measure and reflect the impact of contributions of the founding members who have been active in phase 1.

  • Praise is a gratitude based reward mechanism that is quantified into “Impact Hours.” During phase 1, all community members have the ability to “dish praise” to other members for their contributions. Through TEC Telegram channel and TEC Discord, community members “dish” Praise to each other to recognize the contribution of other members. The amount of Praises collected by each member is collected in a table. Every two weeks 3–4 community members (so called Praise Quantifiers) hold a meeting to qualify the peer assessment and convert “Praise” to “Impact Hour” tokens. These Impact Hours tokens will turn into TEC-H after the hatch. The conversion parameters are collectively defined by the community during Phase 1.
  • SourceCred is another mechanism that is currently being tested. It is an online tool for communities to measure and reward value creation within the community. It is an automated tool that measures the level of participation and contributions based on likes and other community interactions on community platforms such as Discord and Discourse (open source forum tool). SourceCred is being adapted to allow the TEC to gather reliable and objective contributions data from two of their main platforms where many community members are active — mainly Github and Discourse. A proposal was recently approved to create a committee that will be responsible for the parameters and token distribution decisions. Updates on SourceCred progress happen on the weekly Soft Gov calls and on the SourceCred discord chat in the TEC server (check the “dashboard” for details)

Both SourceCred and Praise complement each other on capturing objective and subjective contributions. However, SourceCred contributions are still being tested, and are not fully deployed. “Praise” is the most important reputation metric in Phase 1 as it will determine the voting rights a community member can have in the creation process of the Hatch DAO and TEC DAO.

Tokens in the TEC Ecosystem

In the scope of the creation of the TEC DAO several types of tokens have been conceptualized for the three phases:

Phase 1: the aim of phase one is to identify eligible community members to become members of the preliminary Hatch DAO. As Hatch DAO members they will be able to vote on policy decisions of the final TEC DAO during Phase 2 with TEC-H tokens. There are two ways to obtain TEC-H tokens: by earning Impact Hour (IH) tokens through proof-of-community-activity (Praise System) or with CSTK tokens that the Common Stack team can award people they think should participate in the Hatch. Alternatively any member can buy TEC-H tokens, by investing money into the preliminary Hatch DAO (you have to buy wxDAI which will be converted into TEC-H tokens). For governance rights during Phase 1, there is a combination of IHT and CSTK score that is used to determine total voting power.

  • Purpose: Reputation tokens that rewards early contributors (builders) in proportion to their community activity.
  • Minted upon: Proof-of-contribution (measured in Impact Hours) which is converted a subjective process by a group of community members by the amount of “Praise” distributed. The number of Impact Hour tokens (IH) determine the numbers of Hatch tokens (TEC-H) one can receive. In the future SourceCred will also be used.
  • Supply: Unlimited, depends on the decision of the “praise quantifiers” who assess the dished out praise by the community every two weeks and converts them into Impact Hour tokens.
  • Price stability: no monetary value (but will be converted into TEC-H who will have a monetary value, the price of which will depend on outcome of total fundraise during the Hatch)
  • Transferable: no
  • Fungible: yes
  • Expiry date/event: Yes, IH’s will become TEC-H if the hatch is successful (minimum raise is reached), frozen at the initialization of the hatch (2 days before)
  • Rights: Reputation token that will convert into voting right once IH tokens are converted into TEC-H tokens (proportion was collectively decided upon).

CSTK is a token from the Common Stack Ecosystem, where it serves as a reputation token for the Common Stack community. There is no economic necessity to have this additional reputation token for TEC DAO. CSTK was introduced as a requirement for becoming a Hacther in TEC mainly for legal reasons, since CSTK requires membership in the Trused Seed Association, which will give limited legal liability to the Hatchers.

  • Purpose: Reputation and membership token that determines the eligibility to participate in the hatch and provide a second type of reputation score that will determine the weight of the Hatchers vote in Phase 1 (during the three voting processes described below). Membership in the Trusted Seed Association and the CSTK score is allocated based on a manual selection process to make sure that people participating in the hatch have aligned values with the mission of the TEC. The purpose to identify eligible founding members based on the trustworthiness and contribution. It is also an additional entry point for people who want to fund the TEC DAO, but had no time to contribute with time and know how and could therefore not collect Impact Hours.
  • Minted upon: Issued by the Commons Stack as based on a subjective process. Requires prior acceptance as a Trusted Seed member (membership status of the Common stack foundation).
  • Supply: unlimited?
  • Price stability: non financial, reputation token
  • Rights: access right (defines eligibility to become a hatcher) voting right (for all three votes in phase 1 in proportion to the score)
  • Transferability: no
  • Expiry date/event: in the context of the TEC, they will lose functionality at the close of the hatch (once the TEC-H tokens are minted) which means that they have no utility in phase 2. (your CSTK Score will keep having functionalities in the context of the Common Stack community), reputation token, in proportion to your CSTK score in common stack, highly curated. max trust score, will be capped, for non trusted members.)
  • Fungible: Yes

wxDai tokens (all Phases)

Xdai is a stable token managed by the XDai blockchain network. It has been defined by the TEC community as the payment token of choice to be used for both DAOs (Hatch DAO, and final TEC DAO)

  • Purpose: The payment token that hatchers use to fund the Hatch DAO and acquire TEC-H tokens (in Phase 1). The payment token that bakers use to fund the TEC DAO and acquire TEC tokens (Phase 3, live TECH DAO).
  • Mint and Burn: according to the governance rules of the bonding curve: In phase 1, wxDAI will convert into TEC-H when you send it to the Hatch DAO smart contract. Backers will get reimbursed if the funding requirements are not met. In the live TEC DAO wxDAI will convert into TEC when sent to the TEC DAO smart contract. Backers will get reimbursed xwDAI when they withdraw their tokens from the smart contract (Augmented Bonding Curve), but minus the community tax that is used to fund all grants and TEC operations.
  • Price stability: yes
  • Rights: Property right (that converts into voting right in phase 2)
  • Transferability: yes
  • Fungible: yes

Phase 2: In this phase only community members who have TEC-H tokens will be able to be members of the Hatch DAO and vote on the governance parameters of the final TEC DAO.
If the minimum funds required for the formation of the Hatch DAO are reached by the end of 4 weeks, the Hatch is completed. At this point all wxDAI will be converted into TEC-H tokens. Hatchers who had previously collected Impact Hour tokens will now receive a percentage of the TEC-H tokens (25%) from the funding pool proportion to the IH collected (the percentage was collectively determined by community vote in phase 1). If the minimum funds required are not reached (the minimum threshold was collectively determined by community vote in phase 1) the funds are returned to the Hatchers who backed the project with wxDAI.

TEC-H (Hatch Tokens)

  • Purpose: Temporary governance rights to vote on the parameters of the final TEC DAO (aka “Commons Upgrade”).
  • Minted upon: TEC-H are minted during the creation process of the Hatch DAO. “Backers” can acquire Hatch converting wxDai in a 1:1 ratio for TEC-H, 25% of which will be awarded to “Builders” in proportion to the Impact Hours they collected.
  • Supply: Minimum supply (1,066,666 TEC-h + 25% allocated to IH) Number of impact hours and the number of wxDai send into the Hach DAO
  • Price stability: ?
  • Rights: property right (investment token) and voting right (in relative proportion to the investment tokens held)
  • Transferability: No. But, Any hatcher may exit the Hatch DAO at any time. Their TEC-H tokens will be redeemable for wxDai minus the community tax (aka ”cultural tribute”)
  • Fungibility: yes
  • Expiry date/event: YES (TEC-H are ceased to have functionality (will leave as a badge of honor) after the “Commons Upgrade” and converted into TEC tokens (1:1).

Live TEC DAO: This is when the TEC DAO will be deployed and becomes open for anyone to participate as a backer (fund into the common investment pool) and anyone to participate as a grant recipient (submit a project proposal to be funded)

  • Purpose: Impact investment token, donation (tribute) based, Funding and governance token to decide over funding of individual projects, and general governance rights (proportional, based conviction voting). two voting apps (funding decisions (disputable conviction voting), general governance rules (disputable voting))
  • Minted upon: According to the parameter of the Augmented Bonding Curve which will be defined and chosen by all Hatchers in Phase 2.
  • Supply: Supply determined by the Augmented Bonding Curve
  • Price stability: probably not, volatility can be interesting. Will depend on the parameter of the Augmented Bonding Curve which will be defined and chosen by all Hatchers in Phase 2.
  • Rights: property right? voting right? oversight of management
    Will depend on the parameter of the Augmented Bonding Curve which will be defined and chosen by all Hatchers in Phase 2.
  • Transferable: Probably yes, but this wIll depend on the parameter of the Augmented Bonding Curve which will be defined and chosen by all Hatchers in Phase 2.
  • Fungible: Yes
  • Expiry event: Will depend on the parameter of the Augmented Bonding Curve which will be defined and chosen by all Hatchers in Phase 2.

Co-creation & Next Steps

The aim of Phase 1 & 2 is to collectively develop and vote on all governance mechanisms for the future TEC DAO according to the following process:

  • Phase 1 Process: The Pre-Hatch phase included all the processes and decisions necessary to deploy the Hatch DAO. The founding community members collectively designed and voted on the design parameters for the preliminary Hatch DAO (various fundraising goals, impact hour rate, hatch membership ratio, hatch mining rate etc) and the final TEC DAO (percentage of support required, minimum quorum, vote duration, vote delay, etc.). They used the Params Dashboard and voted for the best proposals using TokenLog. Phase 1 will be finalized later this summer with the Hatch DAO generation event, where hatcher send wxDAI to the smart contract managing the Hatch DAO to seed fund the Hatch DAO. The community defined that the Hatch DAO will only be created, if a minimum funding goal is reached. Otherwise 100% of the funds are returned to the contributors. In case the minimum funding goal is reached and the funding period ends, all the wxDai tokens are transferred into two separate smart contracts and TEC-H tokens are minted. Contributors are given TEC-H tokens based on the amount of wxDAI they contributed against the total wxDAI contributed to the Hatch. Of those TEC-H tokens freshly minted, a percentage of that is given to the builders (the community that built the TEC and its culture) based on their Impact Hours into a seperate vault.
  • Phase 2 Process: If the minimum funds required for the formation of the Hatch DAO are reached at the end of the 4 weeks, the Hatch is completed. At this point all wxDAI will be converted into TEC-H tokens. Hatchers who had previously collected Impact Hour tokens will now receive a percentage of the TEC-H tokens from the funding pool proportion to the IH collected (the percentage was collectively determined by community vote in phase 1). If the minimum funds required are not reached (threshold was collectively determined by community vote in phase 1) the funds are returned to the Hatchers who backed the project with wxDAI (backers). Upon initialization of the Hatch DAO, TEC-H token holders (hatchers) can vote over the governance parameters Augmented Bonding Curve, Conviction Voting and Disputable Voting in relative proportion to their TEC-H held. At the end of the voting period, all TEC-H tokens will be converted into TEC tokens and the final TEC DAO is created. If a Hatcher vote no or does not vote at all, they will be given the option to exit the hatch DAO before it upgrades. Their TEC-H tokens will be burned and the hatchers will receive an equivalent value of funds in exchange from the vault in wxDAI. The wxDAI and TEC-H token amounts that were contributed to the funding pool and the TEC community contributors will not be reimbursed. If a hatcher votes YES and the upgrade receives the necessary votes, the TEC DAO is created and the tokens are converted.

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Sources and Further reading

Token Kitchen

How the Web3 and Tokenization will reinvent the Internet

Token Kitchen

All about the Web3, DAOs and Tokenization

Shermin Voshmgir

Written by

Author of ‘Token Economy’ https://amzn.to/2W7lQ8h// Founder @tokenkitchen @blockchainhub & @crypto3conomics// Artist @kamikat.se

Token Kitchen

All about the Web3, DAOs and Tokenization