The DAO Token Market is an example of how the DAO-NET smart contract template for DAOs can be used to quickly start up new DAOs to fund operational costs of projects and activities pertaining to a specific community, cause or of a specific type. These examples are to show specific use case on how the DAOs can be used to provide ongoing funding for solutions to any challenge fund problem, any Community Hub or any cause so that once the platform is deployed that others can start up their own DAOs with DAO-NET.
The tokenomics of DAO tokens are radically different then the traditional initial token offerings or ICOs which mint millions or billions of tokens to sell for startup capital. To start there are 0 DAO tokens and the only way that DAO tokens can be minted is through the Development Funder process which mints DAO tokens whenever the community, funders and proposers reach a free market price point at which they agree to fund a proposal. This token minting process is believed to be completely free of potential SEC rulings of being a security however legal counsel will be sought to confirm through the DAO-NET: DAO Atala Prism DIDs proposal.
The number of DAO tokens in circulation will be minimal initially, likely numbering in the thousands for the first week, tens to hundreds of thousands for the first month and is unlikely to surpass a million tokens until 2-3 months after launch unless there is a large early membership adoption. This limited token pool size is likely to be problematic for most DEX or Automated Market Maker solutions as a reserve pool of tokens is required for the market to function.
This proposal is to bootstrap the initial DAO token market by creating a temporary smart contract that will purchase a fixed amount of DAO tokens at the floor price of 0.25 ADA per DAO token using the seed capital from this proposal. When the initial token purchases are complete then the $5K of DAO tokens along with $5K in ADA would be transferred to an existing Automated Market Maker solution to form the initial market reserve.
If the DAO-NET: Development Funder proposal is not funded then the budget portion of this proposal related to the temporary smart contract and the seed capital are not to be released by Project Catalyst until the Develpment Funder or some alternative DAO token minting process is successfully implemented.
The long term strategy is to build up the DAO-NET ecosystem to be a self-sustaining collection of DAOs offering services and products to one another, similar to how companies currently offer services and products to one another, using DAO tokens for transactions. Due to the numerous complex smart contracts required for DAO-NET as it scales, DAO-NET will eventually require its own sidechain, at which point DAO tokens will be used to pay for transaction fees, see the DAO-NET & A2T Sidechain Design proposal for details.
DAO-NET will have multiple funding sources for growth including a Mission Driven Stake Pool to be launched in May, a merchandising campaign (see the Merchandise Store project) and the DAO-NET: Development Funder project.
This proposal meets the real business need for a starting market for the tokens in the DAO-NET suite of applications and aligns with the key metrics listed in the challenge including:
- the DAO Token Market will be used to fund development of Cardano Dapps to support business solution development as an integral part of the DAO-NET: Development Funder project
- involves partnering with Dex and AMM companies
- involves additional funding from multiple sources for the proposal as outlined above
- will involve a significant increase in mainnet activity as part of the DAO-NET suite of applications
The outcome of the project will be communicated via Town Halls and a DAO-NET & A2T Marketing campaign.
There are minimal risks for delivering this project successfully however post-delivery there is a risk that interest and the value proposition for DAO tokens are not sufficient to maintain a market due to its minimal initial utility. This will be addressed with the development of a dedicated side chain using DAO tokens to pay for transaction fees.