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

Thanks Kappy for making this proposal with the will and attempt to make Shimmer a better ecosystem.

I voted YES. Here are some of the reasons,

  1. Shimmer, even though it is the staging network, it has tokens, NFTs and DeFi projects on it. It carries value, creates value, so it has value. And SMR will be a valuable asset, underestimated by many already.

  2. Is 20% of the token an increase in supply? Yes. But 20% of the token is not dumped into the market but will be used to build projects in our Ecosystem. It is the best way we have now to grow the ecosystem and make the blue print into reality. A careful spent 20% will increase the chance to create a successful ecosystem which will attract many builders and users into the ecosystem. The question is if we can use 20% increase in supply to add more than 20% in demand? I think the answer is yes.

  3. When we talk about that price is determined by demand and supply, we are talking about expectations. If we want to increase the supply in a right way, we should better increase now even before SMR is traded in the market. What I suggest in a long run is that we can have a mechanism to burn part of the new created SMR token and this will lower the inflation or even create deflation which will generate an higher price expectation.

However I agree that we have a lot to plan including how to build the DAO and a good mechanism to make sure the SMR is used properly to create value. TanglePay team along with Tangle Rally and I will be extremely glad to contribute time and idea together with the community in the process.

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I VOTE “NO” to 20%, but “YES” to fund a Treasury… Just in a Different Way

I agree that a Treasury is a positive move for the IOTA and Shimmer Ecosystem. However, to start off the creation of a “community” distributed ledger with a re-org on day one, that doesn’t meet the stated token supply at the time of the staking; to me, really starts things off on a bad foot. The community was told that the total supply would be based on the amount tokens staked for a period of time. There was no communication that the total supply would be decided thereafter.

I agree, this was simply a mistake and a missed opportunity. Yet, that doesn’t mean it should take a reorg to correct that mistake.

Do we forget that such an important factor of distributed ledgers is immutability?

Saying all of the above, I wonder if there is a middle ground? How can we fund a treasury in a way that isn’t minting tokens out of thin air?

To me, I believe that if the Treasury Fund (ie: which we voted “build”, with 50-65 Ti) was operational, the community would have voted to stake those funds and thus build an equivalent Shimmer Treasury Fund. We have to be honest that the only reason we, as a community, did not stake those funds is because we didn’t yet have the opportunity to.

So why not agree to Mint the equivalent Shimmer tokens “as if” the Treasury Funds were staked? Yes, it is essentially minting tokens, but these are tokens that people would have been ok with from the start anyways.

Additionally, why not add a percentage of inflation, let’s say 2% of the 8%, to fund the Shimmer Treasury on a yearly basis.

The optics of a re-org and not following what was initially communicated at the staking period will stick with the Shimmer networks life cycle. We have an opportunity to launch in a right way.

My proposal is a sort of middle compromised option:

  • Launch the Shimmer Treasury by minting the equivalent of the IOTA Treasury as if it was staked.

  • Set as a precedence that 2% of yearly inflation goes to fund the Shimmer Treasury

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Thank you for the new proposal. I am also for the 20%, because building and developing has priority.
But the many ideas of the community also sound good and should be reconsidered. For example, the use of inflation to further fill the treasury. Otherwise 8% is way too much.

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No, there are much more I think.

1,450,896,407 MSMR, so roughly half of the supply of MIOTA.

In my humble opinión, before Shimmernet is running, we should not change the initial settings.

Initially the people staked their funds based on certain conditions, like rewards obtained. Even if I understand the posible benefits to increase the 20%, specially in long term basis, for me it must prevail to maintain the the initial rules established at the beginning of the stake.

If not is like change the rules in the middle of the game, what for me It not serious enough. It is a matter legal security.

In example, some people could have decided to cancel the staking and sell their staked IOTAs during the bear merket, in the case they had the información that the rewards were going to be diluted a 20%.

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Position of the IOTA Foundation

The IOTA Foundation supports the proposal at hand, as we think it would greatly benefit the overall ecosystem. The Foundation itself does not have the necessary funding, nor is its existing Ecosystem Development Fund legally capable of funding for-profit projects, DAOs or dApps. That means monetary incentives for integrations of 3rd party systems, service providers, exchanges, bridges, marketing activities or startups with commercial interests can not come from the IOTA Foundation.

Compared to some DLT networks that reserved hundreds of millions of dollars in tokens for themselves, sometimes even billions, the IOTA Foundation itself has little to no means to fund “typical” crypto projects. Any funding for these currently would have to come from external sources. This puts the Shimmer network into a disadvantage when competing about the best teams in the space against networks with big treasuries.

Ultimately, if no-one is capable of providing incentives for builders or funding for typical integrations in the Shimmer network, community members would have to bootstrap everything themselves, which simply takes more time than incentivizing professional teams to integrate existing tools and dApps.

A mild increase of the total supply of the network, allowing the community to fund whatever project they see fit could therefore make a vast difference in the adoption and the activity of users and applications in the Shimmer network. On those grounds, the IOTA Foundation favors the proposed supply increase, even though it would mean an overall dilution. Contrarily, as the total supply for Shimmer does not exist yet and therefore also has no value attached to it, it is questionable whether there would even be a dilution to the value of individual tokens. A larger, diluted supply would mean a lower percentage per individual token holder, but that does not automatically translate into less value per token.

Although it would be in favor of the proposal, the IOTA Foundation will try to remain impartial and not advertise for either choice.

When it comes to the community proposal details, many assumptions were made, and follow-up questions arose. As a vote in favor of the proposal would require the following actions of the IOTA Foundation, we, as a result of this, provide commentary on aspects that would involve the Foundation.

Potential supply increase technically

The total supply of the Shimmer network has been determined utilizing the total allocation of $SMR tokens of users staking IOTA tokens for 90 days. So far, the Shimmer network does not exist. The creation of the $SMR token supply, its genesis, has not yet happened, which would still allow changes to the total supply.

A later change of the token supply would require a transition of “old Shimmer tokens” into “new Shimmer tokens”. Having had a fair share of experience of facilitating token transitions in its past, including having to support years of reclaims, as well as the significant technical debt, ongoing technical support, and maintenance of legacy technology, as well as significant cost for KYC procedures, the IOTA Foundation would not assist with a token increase at any point after the genesis. If the total supply of the Shimmer network is to be increased, it has to happen at its genesis, which will happen very soon. If done later, the community would have to manage a later increase and the following migrations procedures by itself.

Custody of tokens in the absence of smart contracts

DAOs rely on the availability of smart contracts. As the Shimmer network with its “Stardust” upgrade will be the foundational building block to enable smart contract anchoring, handing over the proposed 10% to a DAO-governed community fund depends on the availability of those. As smart contracts will only become available with the release of the ShimmerEVM smart contract chain, community members have rightfully wondered how the proposed 10% could be made available to a community DAO, if a DAO can not yet be set up at network launch.

The IOTA Foundation is in the process of setting up a Swiss-based entity for an Ecosystem Development Fund, allowing for a broader application of ecosystem funding than the existing and strict german-based Ecosystem Development Fund.

It will allocate its own $SMR tokens, gained through staking the IOTA tokens of the German EDF, to the new Swiss EDF. An additional 10% of tokens allocated to the Ecosystem Development Fund, as suggested by the proposal, would also be allocated to the Swiss EDF, again allowing the Swiss EDF to operate on less strict grounds and also fund profit-seeking entities. Any IOTA tokens under the control of the German EDF can be transferred to the new Swiss entity, but would still have to adhere to the same, strict regulations and therefore not be used for commercial activities.

If the community wishes, the IOTA Foundation would be willing to take the proposed 10% Shimmer token allocation reserved for the community into the custody of its Swiss Ecosystem Fund until the community has established its own DAO and the tokens can be transferred to it.
Naturally, the IOTA Foundation would only safeguard, but not make use of the tokens intended for the Community DAO. The legal grounds will, either way, be available at the time of the token genesis and there is nothing hindering the IOTA Foundation to assist the community until a DAO has been formed. The choice is left to the community.

Next steps

The initial proposal was published nearly two months ago with an update being published a week ago. As the Shimmer release is nearing, a vote (which itself takes 10 to 14 days) would have to be facilitated very soon. The initial proposal was received favorably, as was the follow-up refinement.

At the time of writing, the overwhelming majority is in favor of facilitating a community vote on the matter. As time is running out, and it is not in the interest of anyone to artificially delay the Shimmer release, the IOTA Foundation will monitor this forum poll for another 7 days and take the result as grounds to either dismiss the proposal or facilitate a Firefly-based community vote.

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Dear Kappy, dear IF,

At TangleSwap we deem the continued development & funding of the IOTA ecosystem to be a cornerstone in our pursuit of becoming one of the most adopted DLTs out there. Against this background, we stand by our recently voiced opinion to vote in favor of a token supply increase.

As the token supply is not only a matter of high importance, but has also stirred quite a bit of interesting discussion within the community, we would like to bring back up the TangleSwap proposal that was made in the original blog post: [Discussion] Proposal to Increase the Shimmer supply for a Community Treasury - #14 by Odin_TangleSwap

TLDR on our proposal: in order to maximize the benefits of a SMR token supply increase for SMR holders, we proposed requiring projects incubated by the additional funding to airdrop a certain amount of their token supply to SMR holders.

As the single most upvoted comment of the original thread, we deem it fair to say that this slight adjustment has found an astounding amount of community support. While it’s not entirely clear to us why this proposal was neither commented on nor picked up in this official follow-up, we do believe there’s plenty of time over the next 7 days to include such an adjustment, given the level of community support that it raised in the original governance proposal. Allowing the broader community to not only indirectly but directly reap the benefits of the token supply increase alleviates most of the existing inhibitions that can be felt throughout the ecosystem, and should thus truly contribute to giving this proposal widespread acceptance throughout our diverse and vibrant IOTA community. Looking forward to your thoughts.

The TangleSwap Crew

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Hey Odin,

Thanks for bringing this up.

While I really like your proposal and the general idea that projects that are funded need to give back tokens to the community, I personally also think that proposing this would fit more into a later stage of the process that focuses on defining the exact rules for a community treasury.

We hold regular weekly meetings on these topics in the IOTA Discord, currently on Tuesday, Wednesday, and Thursday, where a group of community members actively work on defining these rules for general Governance and the IOTA community Treasury.

I would hope that you present the idea at one of these meetings.
In its current form, it is a bit too vague to be decided on now and would require further detail work in my opinion.

You write “a certain amount” - this is something that needs to be exactly defined if it would become a rule of the Treasury.
For example:
Should projects airdrop 1 token per address? 1 million tokens? x percent of the token supply of the project? But how much? How many project tokens in relation to the value of the grant the project does receive? Which “token price” will be used to determine the airdrop value if the project has not even launched a token or the token is not yet traded? etc…

The other question is as Jelle in Discord pointed out the question of fairness. Not all projects issue a token. Many initiatives may receive funding that does something completely different, like podcasts, education, public goods, etc. So requiring “give back” only from token issuing projects seems as not balanced in regards to others that receive funding. Metrics would need to be defined that take such questions into account and answer them in a way that covers all cases of funding.

So you see, defining exact rules for a treasury can get really complex and that’s why we have a group of dedicated community members and regular meetings to work on such rules for several months already.

I invite you to join the discussions in the IOTA Discord in the

  • :speech_balloon:|governance-discussions
  • shimmer-governance-framework
  • community-treasury-dao channels,
    or one of the meetings (Tuesday, Wednesday, and Thursday in the Discord) to work on details of your idea together with the community and include it into the working constitution and guiding principles for a treasury.
    These very detailed principles and rules would be voted on by the community in the setup process of a treasury in one or even several more votes.

With some detailed work on it, your idea can become a very effective principle that helps to keep projects that receive funding committed, so let us work on exact definitions and play through all kinds of cases to see how it can be fine-tuned to become effective and efficient without leaving room for interpretations of the rules which would certainly lead to disputes in the community and between the projects that request funding.

I agree with @Odin_TangleSwap here. If we are inflating by 20% there should be a strong suggestion that anyone benefiting from the fund should provide a return to all the holders. This could be done by the fund taking a stake in every launched project that receives granted funds similar to what IF is doing with all of the breakout members that are going to for profit companies. long term as they re-establish the funds they could issue an airdrop/ dividend to the original wallet addresses that were diluted

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Hi!

I personally think that before pushing a voting process in the increase of the supply details must be clear! Increasing the supply without the exact details seems rushed and unclear for me, this is a super delicate topic. For example what Odin is proposing is significant enough to be voted before anything is decided.

Why? Because by doing so Shimmer owners are ‘‘forced investors’’, otherwise they are becoming ‘‘forced donators’’
This type of details could really make a difference in the final voting process of increasing or not the supply. And I guess that we have more than enought time to clear out this details before going forward, because thats what put us in this position on the first place!

I personally like @Digidus proposal i think is the most fair for everyone, after that @Odin_TangleSwap is the best suited and probably the most popular

Best regards,

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let’s put Kappy’s proposal up for a FireFly vote ASAP and i vote YES.

the goal of the EDF is to kickstart and grow our ecosystem. Even EDF in its new Swiss form is still restricted in how it can allocate its existing IOTA funds. So therefore it needs those additional SMR funds which doesn’t have these restrictions. Only then EDF can maximize its ecosystem impact. In the end everyone profits (both SMR and IOTA).

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Need a little clarification/education. What I understand: Shimmer will start as the staging network for IOTA. Eventually Shimmer will have its own governance and therefore become its own entity somewhat independent from Iota. So at the beginning (now) developing for Shimmer is developing for Iota. Later… it is a bit unclear. So, in addition to the good arguments presented in your proposal, I see two benefits of your proposal that add value to Shimmer stake holders: 1. providing Shimmer with Ecosystem Funds provides options for the future that could be unavailable otherwise; Why chance it? and 2. Shimmer would become long-term associated with Iota via Iota EDF. Otherwise, what keeps Iota & Shimmer related? We need long term gravity keeping these two networks related. We can decice differently later but for the next few years we want a good relationship between Shimmer & Iota. Please correct me if I am not understanding correctly.

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I see only upsides in increasing the SMR supply by 20%:

SMR holders will profit by an obvious increase in the value of SMR, as attracted projects will increase demand and that will increase the price of SMR. All of those discussions about dilution have been important to express fears and worries, but that increase will play out very positive for the SMR holders imo.

The ecosystem will profit from a healthy ground to grow from, as developers will benefit from a funding, if their projects are convincing to the community.

The IF profits from a strong staging network that draws attention to itself and to IOTA, too.

Let’s put it up in firefly. I’ll vote YES from start to end. That’s the only logical conclusion to me and it makes me even more optimistic regarding the future of IOTA and SMR.

By the way: I’m positive regarding the IF taking care of the 10% community funds until the transfer (smart contracts) are rendered possible, too. Thank‘s for that uncomplicated solution.

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I have been looking at the idea of bonding my own treasury to digital tokens for years .since bitcoin came about actually. For every 1 ounce of silver bullion i hold in my own treasury i can back any worthles token by being personaly responsible and liable for the redemption of that token as long as i can certify it as genuine. Non fungible tokens i create become a hyrid of both fungible or non fungible depending how you wish to use them. The pen or the sword the chicken and the egg type of senario. Thought experiment going on here to be continued.

There is no such thing as a free lunch. Whatever is created now is borrowed from the future. To have the best of both worlds could the extra 20% now required be paid for and backed with somthing tangible from the start. Of course it would be impossible to back all tokens with gold or silver but 20% using phisical silver at its lowest cost in years for the special purpose only looks like a massive potential opportunity. Not the paper price of silver but the actual coin i am holding in my hand and can stand by as a stake holder. As a stake holder how many tokens can i back with real silver ? I know there are 31 grams in a troy ounce. I gram contains one thousand milligrams. Therefore i could back 31,000 iota tokens i already own as an added bonus of real silver with just one single one ounce coin just because i said so and i have faith in the developers building the tech.utimately i control what is conected to my contract as it is me holding the rare unique silver coin that could also be my nft representing my own economic value i stand by and not the paper manipulated speculative price this is being controlled by the fact fiat can just be printed up out of nowhere causing inflation for a slave nation always borrowing from the future of our children. Real weath can never be created unless the man himself backs what is agreed to be valuable with consent of the other party abd without the 3rd party getting in the middle to parasite off the situation that entity controls.

totally agree with your numbers… That’s why I’m not in favor of this dilution. It sounds like sunshine and rainbows when kappy states that this fund will immensly grow the pie, but let’s be real here, this 20% dilution will be a sizable one for token holders and will only bring pennies in real money, especially if they are spent quickly to kickstart the ecosystem.

What impact will a few million dollars do ? None.

So either way, we will have to patiently wait for organic growth. In one case, keeping the full value of our SMR and in the other, with 20% of the supply sucked by a few devs.

Your idea sounds nice for sure, but you never talk numbers.

What’s you USD valuation for these 20% SMR you intend to mint ? Looking at Kusama, if you extrapolate that shimmer’s marketcap will be 10% of Iota’s, then the lifechanging fund you are talking about will be worth the amazing amount of… around 16M$. And that’s praying that bitcoin doesn’t dive further, which, in the shitty macroeconomic climate we are in, is almost wishful thinking.

As much as I want iota’s ecosystem to succeed, I don’t see your fund making the slightest difference about the fact that in any case, the growth will be slow and organic anyways, because it’s not a few millon dollars that will make much of a difference anyways. But in 2 to 4 years, having been diluted by 20% will show, especially for the die hard iota holders who did not sell their iotas in the slump to earn their smr.

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For me it seems everybody here is in just for a quick buck and not for the long success of the IOTA mainnet. People talk about who the supply increase will affect their SMR holding value, instead of talking about what the real purpose of Shimmer is.

Shimmer is supposed to be a fancy testnet with some monetary incentives for builders and attackers. The purpose is to test out and battle-harden upgrades, which after a couple of months land on the IOTA mainnet. So Shimmer is here to serve IOTA and not to become it’s own full fledged network.

As of now more than 60 projects are announced to build on launch on Shimmer. This should be enough to test it for 3-4 months before Stardust hits the mainnet. We just don’t need more to test the network.

However, on the other hand, if the supply increases and incentives are given out to builders the value of Shimmer will probably rise. While one might appreciate that, there will also be serious complications for the future. Let’s just assume Shimmer without the proposal implemented reaches a valuation of $1m - $10m. This would be enough incentive for attackers to proof the network to be secure, but still keeps loses small enough and manageable. By implementing the proposal the value might rise to levels like $50m - $100m or more. These numbers aren’t small and a loss of these funds would be catastrophic for the community. Furthermore, Shimmer can’t be used as a staging network anymore as releasing potentially buggy software on a network that valuable would just be responsible. In the end a staging network for Shimmer would be needed, which defeats its purpose in the first place. On top of this, if Shimmer becomes too successful the IOTA community might split up into two. Do we really want this?

I prefer that Shimmer keeps it’s original purpose of just being a testnet. In the end it will be just another 3-4 months until Stardust then transitions to the IOTA mainnet.

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For me this is the main purpose of Shimmer.

Shimmer is the root of the developers. If we want iota to grow and flourish we must give the developers the best start possible.

Assembly and Iota will be the fruit of the ecosystem.

Everyone with billions & trillions of Shimmer tokens in their wallets want it to have a high valuation. (as do i)

But I view shimmer like a tool to create something of value for the entire ecosystem.

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bold step bold step I will follow its progress closely.

If everybody sees shimmer like that, who will buy shimmer and create the value?

At the end devs, investors, everyone wants real money. If you are creating 20% of supply straight from thin air because you left things out from your tokenomics model before kickstarting the staking it’s not holders fault. You are forcing your holders to become donators, why not take a softer approach and at least force them to become investors.

Nobody is going to buy a token that everyone wants to sell

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