Governomy is the governance and economic module of DAOSquare Incubator.
Introduction:
Design Purpose:
The purpose of the governance and economic module of DAOSquare Incubator is to distribute the ownership and governance rights of DAOSquare Incubator to relevant business participants based on the value provided by DAOSquare Incubator, and to provide economic compensation to the maintainers of the entire DAOSquare Incubator system. This encourages more users to participate in DAOSquare Incubator and encourages more system maintainers to ensure the security of the system and provide more suggestions and measures to promote the development of DAOSquare Incubator.
Why Governomy:
DAOSquare Incubator is an on-chain infrastructure and open market focused on venture DAOs. With the advantages of blockchain, people can easily and securely establish and invest in venture DAOs on a global scale.
DAOSquare Incubator is a commercially-oriented product with profit requirements. Therefore, in addition to building excellent products, economics is also an important matter, and governance should also focus on economics. At the same time, the integration of economics and governance is particularly prominent in the crypto field and is a basic principle. It is not only a key factor in whether a product, community, and ecosystem are healthy and sustainable, but also determines the lifeblood of the product, community, and ecosystem. On the other hand, economics can also be a driving factor for governance. Appropriate economic strategies can help achieve governance. Therefore, in DAOSquare Incubator, we design governance and economics in one module, called Governomy.
It should be noted that economics is not simply about incentives. Just like national economics, it is systematic, including how products, communities, and ecosystems generate profits from business, how profits are distributed, how economic strategies are formulated, etc., to promote business development and ensure the structural stability of products, communities, and ecosystems.
Governomy is the brain of DAOSquare Incubator, maintaining and optimizing the protocol code, financial income and expenses, economic strategies, and operational strategies of DAOSquare Incubator in the form of collective decision-making by aggregating the wisdom of community members.
Design Principles:
1. Minimize human control and maximize automatic operation.
2. The fewer governance actions, the better.
3. Only govern executable actions.
4. Executable actions are controlled by verifiable on-chain programs, and on-chain programs are controlled by mechanisms, which are controlled by community governance (the community is defined as the goRICE holder group).
5. The community has 100% ownership and control. There are no special groups with special voting rights, treasury control rights, or contract control rights (such as founders, developers, project teams, boards of directors, etc.).
6. Help real users and direct stakeholders of the product become governors and owners.
7. The motivation for governance comes from the need to maximize individual interests.
8. The realization of individual interests is achieved by maximizing collective interests and balancing the interests of all parties.
9. The purpose of incentives is not to stimulate active data, but to provide feedback on business contributions. The adoption of products depends on product value, not incentives.
Architecture:
In simple terms, DAOSquare Incubator generates revenue through venture DAO investments, namely protocol fees (left in the figure below, DAOSquare Incubator). Governomy regulates and distributes these revenues to the Compensation Pool, Treasury, Buyback & Burn Pool (middle in the figure below, Governomy), and allocates RICE rewards to venture DAOs of DAOSquare Incubator. Users of DAOSquare Incubator (participants of venture DAOs) obtain RICE rewards by contributing protocol fees, while RICE investors in the secondary market acquire RICE by purchasing it (right in the figure below, Sec Market). These RICE holders can become goRICE holders by locking RICE, thereby gaining absolute control over DAOSquare Incubator and Governomy, such as adjusting economic and governance parameters, initiating operational strategies, and upgrading contracts.
Workflow:
The figure below shows the complete business flow of Governomy.
Basic Workflow:
DAOSquare Incubator users generate protocol fees when using DAOSquare Incubator for investment.
Protocol fees are allocated to Treasury, Compensation Pool, and Buyback & Burn Pool.
goRICE holders use the funds in the Treasury through collective decision-making.
goRICE holders can claim compensation from the Compensation Pool.
Funds from the Buyback & Burn Pool are used for the repurchase and burning of RICE.
The RICE reward amount for DAOSquare Incubator users is calculated based on the repurchase quantity, and RICE is extracted from the RICE Reward Pool for transfer to the RICE Claim Pool for DAOSquare Incubator users to claim rewards.
DAOSquare Incubator users and RICE investors in the secondary market become goRICE holders by locking RICE, gaining ownership and governance rights over DAOSquare Incubator.
goRICE holders adjust Governomy parameters, DAOSquare Incubator parameters, upgrade contracts, etc., to maximize individual interests.
Please refer to the introduction of each unit (key participants, key objects, key actions, key parameter adjusters) for specific details of the workflow.
Key Participants:
– RICE reward receivers in DAOSquare Incubator: Various roles including investors, governors, scouts, etc., in a venture DAO. The recipients of RICE rewards are determined by the DAO. These participants are the ones who ultimately receive the RICE rewards.
– RICE investors in the second market: People who purchase and hold RICE in the secondary market.
– goRICE holders: goRICE holders are the owners and governors of DAOSquare Incubator. They become goRICE holders by locking RICE.
Key Objects:
– Venture DAO: An organization that engages in venture capital investment using the DAOSquare Incubator product and contributes protocol fees to DAOSquare Incubator while receiving its services.
– Treasury: The community treasury that provides financial support for the development of DAOSquare Incubator, controlled by goRICE holders. The funds come from the distribution of protocol fees and initial RICE allocation.
– Buyback & Burn Pool: A fund pool used for the repurchase and burning of RICE. The funds come from the distribution of protocol fees.
– Compensation Pool: A fund pool that provides compensation to contributors (goRICE holders) for the safe operation of DAOSquare Incubator. The funds come from the distribution of protocol fees.
– RICE Reward Weight Counter: Records the protocol fee contributions of each venture DAO (Venture DAOs in DAOSquare Incubator) and calculates their respective RICE reward weights after a Distribution Cycle ends. Please refer to the Distribution Cycle section for more information.
– RICE Reward Pool: A reserve pool that provides rewards to Venture DAOs in DAOSquare Incubator. The total supply of RICE in the RICE Reward Pool is 35,000,000 (35% of the total RICE issuance). When the RICE balance in this pool reaches 0, the Buyback & Burn Pool will be adjusted to allow injection of RICE into the RICE Reward Pool, as described in detail later.
– RICE Claim Pool: A pool where Venture DAOs in DAOSquare Incubator can claim RICE rewards.
– RICE Locker: A module that allows RICE holders to lock RICE to obtain goRICE. Please refer to the following sections for detailed mechanisms.
Key Actions:
– Invest: Invest through Venture DAOs in DAOSquare Incubator.
– Convert: Convert protocol fees in multiple currencies into a single currency for subsequent distribution.
– Buyback & Burn: Repurchase and burn RICE, triggering the transfer of RICE for DAOSquare Incubator rewards (details in the RICE Reward Supplement section).
– Claim: Allows goRICE holders to claim compensation from the Compensation Pool.
Key Parameter Adjusters:
– Protocol Fee Scale Adjuster: Adjusts the protocol fee collection ratio as a percentage of the total investment. Protocol fees come from each successful investment in DAOSquare Incubator. Please refer to the Fee & Carry section of the product documentation for details.
– Token List Adjuster: Determines which tokens (protocol fees) can be converted into a single currency (Distribution Token) for subsequent distribution. Protocol fees in the Token List will be converted, while those not in the Token List will go directly to the Treasury. The Token List Adjuster is used to add or remove currencies from the Token List.
– Distribution Token Adjuster: Adjusts the target currency (Distribution Token) for protocol fee conversion in the Convert action. The Distribution Token can only be selected from the Token List.
– Protocol Fee Distribution Adjuster: Adjusts the distribution ratio of the Distribution Token in the Treasury, Buyback & Burn Pool, and Compensation Pool.
– RICE Burn Scale Adjuster: Adjusts the burning ratio of repurchased RICE. When the RICE balance in the RICE Reward Pool is > 0, the burning ratio is 100% and this adjuster is not available. When the RICE balance in the RICE Reward Pool is = 0, this adjuster is activated.
– Buyback & Burn Trigger: Triggers the repurchase and burning of RICE when certain conditions are met.Reward Adjuster adjusts the trigger reward for the Buyback & Burn action (any goRICE holder can execute this action). RICE Release Scale Adjuster adjusts the proportion of RICE rewards given to the Incubator. The calculation base for this proportion is the amount of RICE bought back. The RICE Release Scale proportion allows for values greater than 100%.
Protocol Fee Supplementary Explanation
The protocol fee is only charged when a Venture DAO in the DAOSquare Incubator successfully completes an investment transaction. The protocol fee is calculated as the investment total multiplied by the protocol fee percentage. The investment total includes project investment funds, protocol fees, management fees, and scout fees. Please refer to the Fee & Carry section in the product documentation for more details.
Who pays the protocol fee: The investors participating in the investment will pay the protocol fee proportionally based on their contribution ratio. The protocol fee is separate from the project investment funds. Please refer to the Fee & Carry section in the product documentation for a detailed explanation.
RICE Reward Supplementary Explanation
RICE rewards are distributed per Distribution Cycle, and the rewards for the current cycle can only be processed and claimed in the next cycle. The calculation formula for RICE rewards in a Distribution Cycle is as follows:
– When the RICE balance in the RICE Reward Pool is greater than 0: Buyback Amount x RICE Release Scale %
– When the RICE balance in the RICE Reward Pool is 0: Buyback Amount x (1 – RICE Burn Scale %)
Who can claim RICE rewards: Venture DAOs whose protocol fees have contributed to the RICE Reward Pool and whose contributed protocol fees are listed in the Token List. It is important to note that the rewards are distributed to the Venture DAOs and not to specific members (e.g., investors). The distribution among members depends on the rules set by Venture DAOs.
Distribution Cycle
We use the Distribution Cycle to simplify the calculation and distribution of RICE rewards. In simple terms, RICE rewards generated within a Distribution Cycle need to be processed and distributed in the next Cycle after the current one ends. Here’s an example:
Assuming Distribution Cycle #1 generates $100,000 in protocol fees, and the Buyback & Burn Pool is allocated $20,000 (20%), with a RICE Release Scale of 200%.
When Distribution Cycle #2 begins, the Buyback & Burn function is activated, and goRICE holders can trigger it to complete the Buyback & Burn for Distribution Cycle #1 before Distribution Cycle #2 ends. Additionally, the RICE reward quantity is calculated using the formula: Buyback Amount x RICE Release Scale, i.e., 20,000 x 200% = 40,000 RICE. During the Buyback transaction, the 40,000 RICE will be transferred from the RICE Reward Pool to the RICE Claim Pool. The contributors of the protocol fees within Distribution Cycle #1 can claim their RICE rewards before Distribution Cycle #2 ends.
A few important points to note:
– The later the Buyback is executed, the shorter the time period for protocol fee contributors to claim RICE rewards.
– The execution period for a Distribution Cycle’s Buyback & Burn is until the end of the next Distribution Cycle. If it is not executed within this period, the funds in the Buyback & Burn Pool will accumulate into the next Cycle. This also means that the rewards for the current Cycle will be cleared, and the beneficiaries of the next Cycle will receive additional allocations.
– If RICE rewards in the RICE Claim Pool are not claimed within a Distribution Cycle, they will accumulate into the next Cycle, and the claim weight of the original beneficiaries will be cleared. The beneficiaries of the next Cycle will receive additional allocations.
RICE Locker
Participants who receive RICE rewards from Venture DAOs and RICE investors in the secondary market can lock their RICE to become goRICE holders and gain ownership of DAOSquare Incubator, along with corresponding economic and governance rights. The RICE Locker offers four lock duration options: 90 days, 180 days, 270 days, and 360 days. The lock duration determines the exchange ratio of RICE to goRICE, as shown in the example table.
goRICE features:
– Non-transferable: goRICE in wallets cannot be transferred to any other address.
– Linear decay over time: For example, if you lock 10,000 RICE for 12 months, you will receive 10,000 goRICE. These 10,000 goRICE will linearly decay over the next 12 months, and at the end of the 12th month, your goRICE balance will decay to 0.
goRICE Holder’s Rights:
– Receive compensation from the Compensation Pool.
– Trigger rewards by executing Buyback & Burn transactions in Governomy.
– Modify parameters for all adjusters (by initiating and participating in proposals in the Adjuster category in Governomy).
– Change the protocol fee percentage (by initiating and participating in proposals to adjust the DAOSquare Incubator Protocol Fee).
– Upgrade the DAOSquare Incubator contract (by initiating and participating in proposals to upgrade the DAOSquare Incubator protocol).
– Upgrade the Governomy contract (by initiating and participating in proposals to upgrade the Governomy contract).
– Treasury management and investment (by initiating and participating in Swap proposals).
– Execution of development strategies, such as product development, marketing, BD, operation, service expenses, events, investments, etc. (by initiating and participating in Expense proposals).
Governance
Governance of the DAOSquare Incubator consists of three parts: DAOSquare Incubator, Governomy, and Treasury.
Key proposal constraints:
– The Distribution Token Adjustment proposal cannot be used when the Compensation Pool Balance > 0 or the Buyback & Burn Pool Balance > 0.
– The RICE Burn Scale Adjustment proposal cannot be used when the RICE Reward Pool Balance > 0.
– The RICE Release Scale Adjustment proposal cannot be used when the RICE Reward Pool Balance = 0.
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