[Discussion] Follow up proposal to the establishment of a Shimmer Ecosystem Fund

It’s been some time since I posted my initial proposal which you can find here: [Discussion] Proposal to Increase the Shimmer supply for a Community Treasury. First I’d like to thank everyone that’s taken the time to read and provide feedback either positive or constructive. It’s greatly appreciated and is required for such a proposal.

I’d like to take this opportunity to follow up on my proposal and attempt to answer some unanswered questions and concerns I’ve heard.

Why I strongly believe we need an Ecosystem Fund

Put simply, I have yet to come across one successful smart contract ecosystem without an ecosystem fund to provide incentives to Developers to grow the ecosystem. Developers bring activity in the form of user growth, volume and liquidity. Without sufficient activity on Shimmer the value of the token will not grow. There is a clear connection between activity on a chain and the value of the utility token, this is because the utility token is used:

  1. Smart contract fees
  2. Within defi applications for staking/liquidity/collateral which locks up a huge amount of supply which cannot easily be sold
  3. Visibility of the token and speculative price nature increase with the supply/demand mechanics in a popular ecosystem which uses the utility token

Diluting the supply of Shimmer

There’s no denying that increasing the supply of Shimmer by 20% would dilute the supply, the strong argument I am making is that the value created is far greater, especially if we’re able to deploy successful management of the funds which could grow over time.

As a reminder only 52%of the potential Shimmer supply was created due to inactive wallets during the staking period.

The token proposal for ecosystem funding is far smaller than a lot of the competition, but I believe that by learning from their mistakes we can make our fund allocation go much further.

I believe it’s the builders, community and IF which will provide the long term value needed on Shimmer, so let’s target and support the necessary builders with the resources needed to build unique use cases.

An additional idea to consider for a future proposal is the general approach to Inflation of the Shimmer supply. Currently there is a plan to have a yearly 8% Inflation which was proposed by the IF, however this is also open to the community deciding on the future changes to the Inflationary model. A future proposal could tackle this question and perhaps put forward a lower inflationary or fixed model which could reduce dilution further of the supply of Shimmer.

Do you want 100% of a small and uninteresting cake, or 80% of a huge cake of which everyone is piling up to get a piece?

Use of “build or burn” funds

Some within the community have raised the prospect of using the IOTA Community Treasury funds. Unfortunately this is not possible at least in the short term due to some legal challenges and hurdles required to use such funds within the Shimmer Ecosystem.It is also not something that the IOTA voters in the Burn / Build vote have voted for. The Funds belong to the IOTA network and cannot just be used for a different network. I am also of the opinion that it would benefit IOTA to have its own Treasury Fund to help support additional use cases and utility on IOTA.

By supporting this proposal we as a collective for the first time would have seperated / independent Ecosystem/Treasury funding within our control on IOTA, Shimmer and Assembly all focused on building value in their own right but with strong synergies between the three tokens and value propositions.

Should this token proposal pass we should then look to put forward future proposals which could be used to shape the Governance of the Treasury and use of the funds. Please note that I would not look to seek a seat at the Treasury committee as I feel I may have too many conflicts of interest, however there are many within the community that I feel would be capable.

I propose to put the following question up for a vote by all IOTA token holders using the Firefly Wallet Governance functionality:

Question: Should the Shimmer token supply at network launch be increased by 20% and be split in equal parts. One part given to a Shimmer community Treasury DAO and the second part given to the Ecosystem Development Fund managed by the IOTA Foundation?

  • Yes, launch the Shimmer network with additional 20% supply and give 10% to a Shimmer community Treasury DAO and 10% to the EDF
  • No, do not increase the Shimmer supply

0 voters

29 Likes

Option a is giving 10% to a Dao. How would this work when smart contracts are going to take quite a while until they go live on shimmer? I don’t think the soonaverse is an option for what’s at stake.

3 Likes

Hello, thanks for responding. This is why 10% would be given to the new IOTA EDF based in Switzerland which could have community involvement. The EDF could fill the gap between the DAO being setup, this also allows the IF to utilise it’s contacts to incentivise ecosystem growth with partners not accessible to the DAO.

9 Likes

Thanx, I really appreciate that you, Kappy, uploaded this Proposal we’ve been working on too.

In Crypto its really necessary to have additional incentives for getting really good projects to deploy on Shimmer. It’s not only necesary to have a superior tech, bc teams that have already running projects with a high revenue on other chains dont have the urge to change the underlying asset / chain. So, giving them funds to have the manpower to transfer existing structures to other ecosystems could / will be a strong incentive to get them to SMR.
That said, some mechanisms to select the right projects with the right mindset / intentions is a must have for getting funds efficiently to coders worth a shot.

10 Likes

I agree 100%, there will be further future proposal which should tackle:

  • DAO governance
  • Developer selection
  • Funding avenues, should we provide liquidity, buy tokens, give grants or a selection of these. I’d love to see us try and grow the fund over time or at least ensure it goes further.
  • Inflation of SMR
6 Likes

I todally agree with the proposal an the split of the 20% to community and EDF.
A way more important topic will be, how the DAO will be govern. Who will recieve funds, and because of what and so on. Maybe we can elaborate this already? This could maybe a crucial point for some voters?

Edit: Rob was a bit faster and mentoined that this will be tackled in a further proposal.

2 Likes

Fully agreee… and I like numbers - running some (roughly estimated) numbers:

Total Supply of SMR is at 1451 MSMR (1450896407 SMR),
with an increase of 20% it would be at 1741 MSMR (1741075688 SMR),
so a total of 290 MSMR would be minted.

Split 50/50%: 145 MSMR for a DAO, 145 MSMR for the EDF.

So, in case 1 SMR will have a valuation of 1 USD, means that the DAO- and the EDF-Treasury would control 145m USD worth of Funds. In terms of crypto warchestst that wouldnt be alot - there are warchests billions USD worth - but imagine SMR is a success ant get way above 10USD…

(That doesnt mean that I think that 1USD is a fair value - I hope it gets higher. Its just for a quick and dirty comparison.)

3 Likes

I agree totally with the principle of creating and funding a Shimmer community Treasury DAO. Ideally the decision would have been taken at the earliest stages so that people didn’t feel that they were being deprived of something, but that is water under the bridge.

I do have problems with the proposed question though. I think in order to pass a question needs to be very clearly put, and the inclusion of the EDF seems unnecessary and confusing. In my mind it is possible that Shimmer and IOTA may go completely different directions before too long. A well funded Shimmer community DAO may decide that IOTA is slowing it down (a not unlikely event due to IOTA’s extensive and diverse development interests). That being the case, a clear separation of funding and management from the start is essential.

Personally I would not worry if the Shimmer TF was slow off the ground. You could even put a 12 month hold on any spending (except maybe in initial setup and management costs) so that people could be reassured about the existence of appropriate systems before money was spent.

So, in summary, allocate the funds now but keep Shimmer independent and clear of all things IOTA.

2 Likes

Lowering inflation as a consolation for the dilution as proposed by Kappy won’t make us whole for the 20% dilution. Inflation in Shimmer won’t necessarily dilute us, because we can participate via staking. Stakers always keep their share of total supply.

4 Likes

I am absolutely in favor of this proposal and find the amount appropriate.
Wouldn’t the DAO also make a great test for the Iota Community Treasury? Isn’t that the way Shimmer is intended? Maybe there could be some kind of synergy?

Thank you for your effort Kappy!! Keep it up!

2 Likes

100% in favor FOR

and I can’t echo this statement loud enough:

“Do you want 100% of a small and uninteresting cake, or 80% of a huge cake of which everyone is piling up to get a piece?”

This should INCREASE the perceived value of the token just knowing there is a Warchest ready to drive growth of the ecosystem and it’s value.

Would this need to go thru Phylo’s ( Governace proposal proccess and lifecycle ) before getting it on FF for a vote? Shimmer is right around the corner…

3 Likes

Actually DumDaves Web of Trust would work great for something like this on Shimmer

I dont at all like this proposal. Shimmer is a ground for degenism, making it grow its value with less supply gives it more value. I really now get it why iota is not a financial material and it is gonna be always just a testnet for developers to fuck up the supply/time/material with.

2 Likes

I would abstain from voting until we get more concrete information from the IF about a release date. These tokens weren’t gifted, they were earned from staking and holding IOTA tokens. I don’t feel it’s appropriate to decide this matter until we know when, where, how these additional tokens would be deployed. I would gladly vote or participate in a measure once these questions are resolved. That being said, I am usually always in favour of any measures that assist in growing the ecosystem.

7 Likes

Very good proposal. Hopefully this can be put for an official vote on the Firefly wallet.

Hey dumdave! :slight_smile:

SMR funds allocated to the EDF would be for projects building on Shimmer and bringing value to that network. One advantage of this is that the IF could start funding projects while the community DAO structure was being decided on.

Previously, the EDF had its hands tied as to what types of things we could fund, limiting ecosystem development. However, these SMR tokens would not be as restricted, and we could judiciously pick projects with the greatest chance of impacting the ecosystem.

2 Likes

I see two problems:

  • the DAO will not be functional until smart contracts are here. Likely months away still.
  • we have limited info on what the Swiss EDF will be capable of. From what I’ve read on discord, people weren’t all that stoked about it. Correct me if I’m wrong :slightly_smiling_face:

Thanks for the proposal and the discussion!
Will vote yes regardless for now.

Voting NO

I do like the idea of having a community managed fund, but I don’t like the way how the fund is created. The IF introduced Shimmer and said it’s supply will be set by the stakers of IOTA.

I have a problem with being forced to donate 20% of my stake. It should have been clear by the time of staking that 20% of your staking rewards would go into a community/IF managed fund so that every IOTA holder who was staking would have been fully aware of that by that time already. I was aware of 8% inflation, which doesn’t dilute my stake if I stake my funds but not of the possibility being forced to donate X% of my funds.

Increasing the supply afterwards by a vote is like minting 20% of tokens out of nowhere, this shouldn’t be possible at all in a crypto environment. Even the possibility of reducing my stake of the network, by increasing the total supply afterwards is a no go for me. Person A holds X% of a network, that percentage was set by staking and it shouldn’t be possible to change that afterwards by anyone! Person A was fully aware of what the risks and possibilities looked like when staking back then. We would lose a lot of trust if everyones stake by getting this proposal through.

We should create this fund differently by

A. increasing the staking rewards of everyone by X% and make it up to everyone wether they want to donate those funds or not, that way no one is forced to get diluted.

B. Leave the supply as it is, set up a fund which size will only be defined by donations. Similar to how the IF was funded by the community back then.

C. Wait until Shimmer launch, set up a DAO and sell utility NFT‘s which give access to the DAO and hold a certain voting power, which could also be delegated to someone. The DAO receives all the money which was raised by every buyer of the NFT and is managed by them. Those NFT‘s should have no cap when selling and shouldn’t be able to resell, that way no whale could manipulate the funds afterwards. This would also dilute no holders.

7 Likes

One issue with the Swiss EDF was that funds transferred from the German entity still fell under German regulations. However, this does not apply to new funds/tokens (as proposed here)! @mark.schmidt could probably expand on this more than I could :slight_smile:

I think same! I vote NO

3 Likes