[GIP-10] Strategic DAO Funding Proposal. PART 1

Proposals
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UPDATES

Hi everyone, we have quite a topic for this week! While working on v2 & integrations, core contributors have been chatting to teams, whales, farmers, buildooors - many of whom got excited about the idea of composable leverage in DeFi & NFTs. So as we head further into V2 release & Gearbox DAO growth, it’s natural to have the questions of funding for compensations, audits, hackathons, bounties, and so on. We have a journey ahead of us with product iterations, protocol design improvements, and other tasks as the DAO scales up. So, I would like to propose this ​​Strategic DAO Funding sized at approx. $5.5M.

Rationale and some narrative sprinkles

Gearbox is a new design primitive for on-chain leverage.

Many might be asking, “Why would we need a mechanism for more leverage in DeFi? Hasn’t leverage been the problem over the past weeks?” Despite it all, core DeFi protocols like Maker, Aave, Curve, Compound, and others have functioned without hitch - the core tenets of transparency, instant settlement, and programmatic rulesets are, over time, prevailing in public.

But access to leverage even or greater than your collateral level has not been available as a primitive so far. This makes sense: allowing someone to deposit $1 and take out $4 in a permissionless context will lead to -$3 more often than it’s worth. That’s what we have observed over the past days. Gearbox changes how leverage is perceived, and turns it from an “all-in gamble, bro, liquidate me Sam” concept → into capital efficiency for sustainable long-term positions. Gearbox saw this issue in the EthGlobal MarketMake Hackathon in 2021 and realized that - as long as you programmatically ensure a borrower cannot walk away with the $4 - it can work. Credit Accounts were born, like little money sandboxes.

Imagine the concept of a permissionless leverage layer that can be integrated into any protocol! That’s right: leveraged LPing into Curve and Convex, leveraged structured finance and DOVs, leveraging into NFTs and UNI V3 positions, and more… Gearbox can potentially do it all!

Opportunity and objectives

The goal of this round is not to do DAO diversification in large quantities, but to secure financial resources to work on iterating on the product suite and achieving a strong PMF. V2 is coming and lifted capacity constraints on Credit Accounts will be an inflection point for the product.

Proceeds would go to the DAO’s financial multisig for the governance to decide on the spending. In turn, the tokens for this round would also come from the DAO allocation. Core contributors have been openly working with the community since the DAO-First launch back in December 2021, committing to monthly-quarterly updates on the progress and spending.

Given the objectives described above and the size of the round, I believe Gearbox DAO could benefit from partnering with key industry participants, who bring to the table - cumulatively across the group - proven track record, domain expertise, and more. The objective is to help Gearbox Protocol grow, especially with the upcoming release of v2 & Leverage Ninja mode!

Terms

Core contributors have made it a priority to honor commitments from the community round’s Credit Account Mining average gas price spent back then, which was 7,306,296/5,000 = 146M FDV.

As a result, I would like to propose:

  • $150M FDV
  • 1 year cliff lockup from the day of the token receipt, and 1 year linear vesting after that

Despite the market having gone down by more than 2 times since the Credit Account mining, I want to point out how chad and committed the participants have been, taking a long-term vision and honoring the community valuation. Respect to them!

TOTAL currently: $5,650,000

GEAR total: 376,666,666 GEAR representing 3.766% of total supply. Even after this round, DAO reserves would still remain at above 47% of total supply.

PS: this was done by Lido and other protocols in the past, seemed like good practice.

Next practical steps

  1. Hear the token holders’ and other contributors’ opinions
  2. Give a few days (up until the end of this week) for other potential angels and parties that are willing to get involved in this round, to suggest their candidacy
  3. After some deliberation, in case there is evident interest from Gearbox DAO community - a delegate with enough minimum required proposal-making quorum could initiate a formal snapshot vote with the details
  4. Should the vote end up as a YES, the next steps would be for the dev team to prepare vesting contracts similar to how that was done in the contributor round - and initiate DAO multisig transfers as per the protocol policies: accepting USDC (or another stable, as the DAO can always swap it to their preferred asset) and giving GEAR tokens into the vesting contracts

FYI: Funding history so far

The protocol has been bootstrapped by the ex-team’s personal funds prior to autumn 2021, as evident from the docs on the stages of development. Closer to the DAO launch in December 2021 and the subsequent protocol launch, core team fundraised a 2.3M contributor round majorly consisting of angels-founders. More context can be found on Discord and on Medium here.

Some of the participants and to-date active contributors have been: Konstantin Lomashuk with the Lido team, 1inch founders Anton Bukov and Sergej Kunz, Darren Lau and Daryl Lau, Dean Eigenmann with the Dialectic team, Fiskantes with ZeePrime, FocusLabs angel fund, Stani from Aave, Nik and Charles from Maker Mafia, Cobie, Elias Simos from BisonTrails, EncodeClub, as well as eGirl angels. From the institutional side, there has been great support by 1kx and Variant Fund <3 especially!

Those $2.3< have been used for audits and advancing some of the DAO compensations and hiring so far. Those resources are naturally depleting and sunsetting (have been already) as the life of Gearbox has moved away from the “company that started it all” notion to “decentralized organization that is not owned by anyone, advancing the protocol forward in new ways”.

Going forward, the DAO with its own treasury & multisig will have the main say in the next stages of protocol development and growth. Meaning that the compensations, salaries, and expenses will be coming from there pending whatever budgets the DAO approves. The resources proposed in this topic are to sustain DAO operations, product pivots if needed, and growth - for the next stages.

As a note to that, Gearbox Protocol & DAO already have protocol revenue sourced turned on, with the emphasis on the fee structure of Credit Accounts. All those fees have been and are streaming into the DAO’s financial multisig. The “company” (which, again, has been sunsetting) has no relation to them.

PS: also thx to Will Nuelle from Galaxy Digital for helping with the texts.

Learn more about Gearbox and V2

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Disclaimer: idk if this post prompts a disclaimer, but just for those not aware - I am one of the early (core, I suppose) contributors of Gearbox. My main and only interest in this is to have the protocol and GEAR value grow (hopefully, as a result). But neither I nor anyone can actually control it. Moreover, as a result of being a bagholder, please keep in mind that I might be overly-optimistic on the entire DeFi space or Gearbox Protocol in particular. All of the mentions of “future products, this and that v3” and other things - come from Discord open discussions and contributor calls, where each DAO contributor eventually individually decides what & how to work on. There is no roadmap, promise to deliver, or any control vector any of the members can execute. The protocol was launched by a DAO and is operated by a DAO, so there is that. Contributors might get bored, leave, retire, or just not deliver the exciting things I or you want to see, and so on. Yes, we are all optimistic about DeFi and Gearbox, but keep in mind that it’s a very risky organism which I don’t even fully understand (as a non-dev). Anyway, let’s build!

As I own a chunk of GEAR tokens, please treat all of my messages with a high degree of scrutiny. None of my messages are financial advice. I am a paid contributor to Gearbox Protocol on behalf of my company Rising Vista FZE LLC, and thus cannot be seen as impartial, as I act on behalf of the contractee.

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a great strategy， For the better development of DAO, I agree with this proposal.

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Proposal looks fine but I would recommend a higher FDV and/or longer vesting schedule (2-4 year vesting). The participants should be okay with a longer vesting schedule if they really believe in the product, no?

1-year vesting means 1Million+ $GEAR tokens will be released daily once the cliff lockup is complete. too much dumpage opportunities.

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sounds great，let‘s make it to be voted and happen :grinning:

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A longer vesting schedule would probably imply a lower sell price for each token. Current set price sounds OK to me as in line with USD-basis costs of the initial credit accounts deployment.

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oh that’s perfect, I also want to be involved in this round!!!

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if the participants want a lower price because of 1 additional vesting year gets added, then let them back out of the deal since it shows they don’t really believe in the product as much.

I still don’t see why these VC’s should receive a similar deal to CA miners who have been locked up from the get go.

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The vesting schedule is definitely too short.

If you were just looking to secure financial resources, you could with 100% certainty raise the same amount, with the same vesting and higher FDV from users.

If the goal is to get funding from those long-term key-industry participants, their values should be aligned enough for a 3-4 year vesting schedule.

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this 100%

I’m willing to provide $50k-$100k even with a longer vesting schedule if needed. I’m sure if information that Gearbox is willing to accept other participants with a $50k minimum, a lot of other DeFi users will also be interested with 1 year cliff + 2-4 vesting schedule.

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I wouldn’t call it primitive. It’s a building block!

  1. Hear the token holders’ and other contributors’ opinions

Fully support.

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This is correct.
There would be several gearheads willing to lay down dollar on a 1 plus 4.

Either way its worth raising the funds. Just the terms that need ironing out.

@RV_ivangbi can i set you up with a call with the team at coinvise? They have a super simple and cost effective setup for the vesting of tokens.

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I still don’t see why these VC’s should receive a similar deal to CA miners who have been locked up from the get go.

I agree and disagree at the same time.

  • Credit Account mining was done during a reasonably positive market trend / hype period. Now is potentially a more “cash is king” period so I’d say a 5M deal in current context is more valuable than a 5M deal 1 year ago.
  • Also the account credit mining funded account creation, not DAO treasury (as far as I understood). How much is there in the DAO treasury currently ?
  • Having backers also means having entities with which our interests are aligned - advises, communications and maybe be users of the product (providing more capital on the “supply” side)

One thing that doesn’t seem to be justified in the proposal is the 50k minimum ticket price for volunteering participants.

  1. There is no technical reason for this minimum threshold, unlike in traditional finance.
  2. Users might want to volunteer for the gas costs if this is the main argument against it: The best example are Credit Account miners that know enough about gas and tx costs :stuck_out_tongue: Some of those original miners might be in acquiring more GEAR tokens at the same conditions as VCs. That would sound fair to me.
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CAM bought with ETH when ETh was much higher. It’s ridiculous to think that despite an 80% market drawdown with DeFi facing even bigger drawdowns that we should expect our FDV to somehow go up. CAMers will also have their tokens unlocked far sooner than these investors. So we are offering:

  1. Longer lockup that CAMers
  2. The same FDV despite a massive crypto drawdown
  3. They are also locked out of selling when the token releases, where all CAMers, discordooors, and testooors can dump if they wish.
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vesting schedule should be 2-4 years imo. 1 year is way too short.

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As a participant in the contributor round, Credit Account miner, member of the technical multisig, and Gearbox user I’m happy to add additional support in this round if the DAO approves.

Regardless of my participation, I support the proposal for the purposes of diversifying the Gearbox DAO treasury with stables.

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GN, was eating and reading all of the comments. First of all, wanna point out how productively active Gearheads are - across the forum and Discord, you properly laid out some of the arguments. Admiration, sers!

Now onto the topic of subjective numbers… I guess I will split the message into a subjective personal first, and then into a more call-to-action objective one. But before I begin, please keep in mind (1) I am just one of the contributors (2) I am not even a dev or a tech person, my opinion is not as valuable - truly, honestly (3) I am not a director of any company that can have conflict of interest here, and (4) I hate the word equity and non-token accrual mechanisms. SoI guess I can see the picture from both sides.

Subjective perception of any FDV and its formation

Having been on the project side and angel side quite a few times, it’s always a drag-and-pull scenario even if parties try to avoid these measly materialistic things. Let’s say a founder you like raises a seed round in a bull market. Is giving at 60M FDV retarded? Yes, most likely. But you kinda believe in them, so you give anyway… and then they release while bull is still there, and you make 10x! But you could have said FDV is too high, right, and pass? Well, the same goes for inverse conditions, where investing at 10M FDV seed is actually inverse result just due to market conditions. So what am I trying to say? It’s hella subjective. I personally look at Solana’s old projects raising at 500M+ and cry. I find it truly retarded. But there were willing buyers at a fair market price. And you know what? Buying SPY or MATIC 2 years ago seemed retarded just before Covid hit… but oh well, they turned out to be right.

Everybody has their own tolerance, their own risk management system in plans, their own understanding of the market cycle, their own horizon. You will never be right or wrong here, because that is only determined by time and by subjective things like DAO willingness and ability to be agile with products, security breaches being avoided and so on. Basically, this conversation doesn’t have any meaning.

But okay back to data: look at Yearn, Curve, Aave, and other FDVs and CMCs… If you want some “but ser, we gonna be 1B protocol”. Do I subjectively believe in it and want to see it? Hell ye! But it’s a dumb argument to make when trying to secure resources for growth, because by that logic you should never give any equity away, never do an airdrop, and so on. You see how it makes no sense? Then maybe Credit Account Mining should have never happened, and GEAR token should have never launched? This is silly!

Keep in mind that the terms are:

  • The same FDV as an average of Credit Account mining (see the dune dashboard in the OP post) from December 2021 in USD terms - despite ETH having gone down 3 times since then. I am personally badmouthing large capital players often, but here I admire them for sticking to this benchmark and respecting the community! Wanna keep same ETH terms… oef, well let’s not count, you’d “lose”.
  • The lockup is 1 year from basically July 1 or whenever the DAO approves this proposal (if at all) + 1 year linear vesting after that. While all community stages are fully unlocked. Yes I know the token is not transferable yet, but imagine the level of risk one is taking in case the transferability i allowed like Q3-4 2022? Right, that’s not a small amount of risk. Or however you call that. What if it dips below then, and you could have bought in secondary? This is not the speculation I wanna be doing, but it is what goes through the mind of anyone taking any position be it monetary or not. Opportunity costs.

What have the parties done so far? Well, just check what the contributor round of over a year ago has done already back then - and they continue with it now! Here is the old medium post.

The above is arguing as a devil’s advocate, literally making the case “weaker”. But the parties willing to dive in the Strategic Funding Round are chads so far. So keep that in mind. Don’t be one-sided.

Actually practical things a DAO member can do

Disagreeing is fine, asking questions is encouraged. But a talk doesn’t get one far. So what we have on the table is the need for the DAO to have more finance before a few PMF approaches (V2 being the first one) are tested & revenue flows in. So, to fill that gap, this proposal was created.

If you do not like it and do not buy into the arguments / storyline - you must (yes, must) talk to other parties who would be willing to get involved at higher terms and propose them to the DAO as counter-proposal. Yes, that means selecting your own group of potential participants who have connections in the space and have done something before + making sure the aggregate size is worthy of DAO’s attention. Meaning that one single 500K cheque at 300M FDV doesn’t actually mean anything. It has to be meaningful to support the DAO for the next few months of building and iterating!

IDEA TIME

As per Sha’s message, and Juan’s on Discord - I believe it is not cool to fully silo this "great deal " (for those who think that) and that is exactly why the total participation list in my proposal framework is not finalized. I also believe that members who want to dive into this DAO Strategic Round should have the opportunity to. I don’t think it’s fair to ask to lay all your cards on the table, but a few suggestions on what you can be doing - are welcome. As for the sizes, I am sure a few angel cheques would be totally in order here.

IMHO (in my honest opinion)

I love transparency and going back and forth. Helps see the picture from different sides. But disagreeing must come from a stance of concrete alternative solutions. Bring them up then!

Now onto a bit of fun:

If the goal is to get funding from those long-term key-industry participants, their values should be aligned enough for a 3-4 year vesting schedule.

Well, @grin, lock your tokens and others’ for 2 years and let’s see how things align? Don’t think so. And maybe if you yourself want to do it, I am not sure others would want to per se. And you can’t un-coordinate these things, in my opinion. So this suggestion is not practical.

I’m willing to provide $50k-$100k even with a longer vesting schedule if needed. I’m sure if information that Gearbox is willing to accept other participants with a $50k minimum, a lot of other DeFi users will also be interested with 1 year cliff + 2-4 vesting schedule.

Respectable move, love seeing action. @Sha256 please feel free to check the above section “what a DAO member can do” and maybe you can change course with regard to this? I have to be honest, I don’t think you will magically get 5M out of good parties at like 2x of the current terms, so keep that in mind. But I am being subjective again, and can be totally wrong. This is why we are discussing now!

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100% agreed!

Happy to provide $100k like @Sha256 with a longer term vesting, I’d put my money where my mouth is :grin: I share @Sha256 's conviction that other DeFi power-users would likely be interested, and I’m open to DMs about coordinating with other like-minded users of the protocol at those terms

I’m definitely not questioning the contributions of the potential participants of this proposal! I’d actually vote in favor of those being the participants, yet I’d also vote for a longer vesting (not higher FDV) to be proposed to them as I subjectively find those terms still very appealing

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great posts with a lot of information. After thinking about it more and reading others replies, the FDV of $150m seems perfectly fine. I redact my previous comments about having a higher FDV for this funding proposal. :+1:

still in favor of a slightly higher vesting schedule (2years maybe?) but I’ll leave it up to the DAO to decide. 1 year cliff with 1 year vest isnt bad honestly.

Either way, funding for the DAO will be good

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First of all, great work for organizing this! I agree on many pros and cons as well.

How about creating on-chain-auction?

DAO needs X $ for the next Y months. Anyone can place their price and desired amount to buy. Highest bids get served until the funding target is reached. Anyone can place bids and always see if they would be eligible. One bid per day to throttle bots/sniping? Auction ends after fixed time or if the would-be-allocation doesn’t change anymore for a certain time. Smart contract could lock and release all funds to reliably execute this auction.

This should be:

  1. very fair and permissionless
  2. find the market price for that point in time
  3. enable to frequently distribute just as much GEAR that is necessary to operate the next months (like quaterly) which in theory should lead to the least (or most appropriate) amount of GEAR spent: true market pricing + cost averaging = most capital efficient financing, right?

Imho an intesting question: Is a VC a more valuable investor than anyone? They are known to dump as soon as possible right? But they don’t just bring in capital if they are angels (how about the proposed candidates?). On the other hand if retailers are bidding agressively for a relatively small amount of GEAR, is that fair? And will they HODL more likely then?

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Hi!

First of all; congratulations on the funding proposal. I think a $150M FDV in todays current market (which equates Gearbox to Yearn) is a great achievement. Bravo. This is especially important considering Yearn is revenue generating, battle-tested and very prominent within the industry. I don’t think terms such as these would be easy to find elsewhere.

Considering my aspirations for the protocol, I’m willing to put my money where my mouth is, so if there’s space to join the round (under same conditions) as those listed above I’d be very much interested.

Credentials: https://degenscore.com/profile/0xBeckoningCat
Top 10% DeFI user, Credit Account Genesis miner and current user of Gearbox. Hoping to get early access to V2 Leverage Ninja.

What can I bring to the table?
Primarily: Size and heavy use of V2 yield farming capabilities and resultant feedback on the platform. Have recently gone FT Crypto and looking to get more involved in the protocols I am interested in.

Thanks.

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