An Open Letter - Community feedback to the Merit Circle DAO

Open Letter to the Merit Circle DAO


Dear Merit Circle DAO,

The Merit Circle governance forum, the Telegram channels (community and official), and the Discord, have been a place for discussion since the project launched in November 2021. Recently, we have seen ongoing discussions regarding a number of important topics. The Merit Circle team, community members, investors, stakers, Angels and VCs all have varying opinions regarding the best path forward for Merit Circle, and this has led to ‘passionate’ debates on how to proceed. After speaking to many of these parties, it is clear the community has feedback about what happens next.

All parties have the same goal - to see the Merit Circle DAO treasury increase in value, and for the DAO to expand, and ultimately become more valuable and powerful. Despite successful launches such as Edenhorde, and continuous ongoing seed investments, recent focus has shifted to the MC token price, and the potential impact of future unlocks. While the vast majority of the community understands that recent price-action can be attributed to the decline of the overall market, many are still concerned that upcoming events place further pressure on the token price, and impact the liquidity provided and locked by the community.

We hope to unify all stakeholders through this open letter, and to further harmonize the warm communities within the Merit Circle ecosystem. Everyone is welcome!

Community Feedback

We’ve consolidated most of the feedback we’re measuring across the DAO and the various subcommunities, individuals, and so on. Usually, it comes to two things: direct market sentiment (simple) and other events (more complicated).

Market sentiment

It is clear to most investors that market sentiment is very poor currently. The FED are signaling further interest rate hikes in May, and June, and many are concerned about a potential recession/depression. This has been reflected in crypto price action, with Bitcoin and Ethereum down significantly from their ATHs in November. Looking at the wider market, the SPX isn’t faring much better, and is down over 14% from its high in January. The NDX is also down over 23%, and FAANG (Meta, Apple, Amazon, Netflix, Alphabet/Google) is down almost 34%. Not to mention the various Cathie Woods funds like ARKK (-70%), ARKG (-71%), and so on. Finally, the total market cap of crypto is down ~44% (TOTAL) and 42% (TOTAL2, excluding Bitcoin).

Overall, we can see that both the stock market, and the cryptocurrency market, are experiencing a significant downturn. Many are concerned the worst is yet to come, and that this is only the beginning. While none of us can predict the future, this downturn has led to very poor market sentiment for the near future.

Specifically within the cryptocurrency sphere, we have also recently seen a number of high profile hacks for hundreds of millions of dollars, which have only worsened investor confidence. The Ronin Blockchain bridge was recently exploited for $625m, some Metamask users were hacked after it was discovered that Metamask can back up wallet details to users’ iClouds, and even the BAYC Instagram was hacked and phishing links were posted. There are also countless lower profile hacks occurring on an almost daily basis, further reinforcing the poor market sentiment from crypto investors.

Merit Circle Feedback

With regards to Merit Circle, there are also some points of feedback from the community.

Unlocks from Angels, VCs, Retroactive Rewards and Team

Beginning this month (May), Angels and VCs start getting their seed tokens for 36 months. This represents 14.06% of the total MC supply and is a significant portion of the total supply. Team tokens begin unlocking in November 2023 and represent 20% of the total supply. It is understandable that the community wants to know what is going to happen to these tokens, as there likely isn’t enough liquidity to support these tokens being sold on the market every month. We trust in the MC team to act in the best interests of the DAO. Retroactive rewards are ongoing and represent 3% of the total supply. To date none of these have been sold on chain, and the few tokens that have been sent to Binance were allegedly staked (and we have no reason to believe otherwise currently). While none of these seem to have been sold to date, they still represent a significant portion of the MC total supply.

Mechanism Capital have very kindly written a response with regards to the above. Their response included not only the value they have brought to the DAO, but also their intention to stake their seed tokens upon unlocking. Marc, from Mechanism, even spoke about their ongoing work with the DAO and gave a number of developmental suggestions at the end of the post. I’m sure this is something the MC community greatly appreciates.

Liquidity

There is an ongoing vote regarding the LP pair the MC DAO should proceed with. It appears the DAO is going to vote in favor of MC/USDC, which we believe to be in the best interest of the DAO. However, recently this has been a topic of significant debate. Even if the DAO votes in favor of USDC, it is not decided how the transition will occur or what it will entail for ongoing stakers who have locked their LP. It is likely there will be significant further debate on how the transition occurs and how it is funded, even if USDC is decided upon. We have confidence that this transition will be handled smoothly by the MC team.

Staking Rewards

From November 2022, the staking rewards will begin unlocking. As these rewards are in the hands of the community, it isn’t clear how much will be sold, restaked or held. It is clear that if we want the community to hold or restake these tokens, the DAO will need to give them a reason to do so. Market sentiment, and sentiment around MC, will likely have a large impact on this, as well as token utility. If the rewards aren’t held/restaked, they could represent further ongoing sell pressure. We expect the Staking V2 program to help alleviate this concern.

Decentralization vs. Centralization

As the aforementioned token unlocks begin to take place, if the parties hold their tokens, they will be able to use those tokens to vote in DAO decisions. With Angels and VCs holding up to 14.06% of the total supply, and the team and advisors holding up to 20% of the total supply, it is possible that in time, those parties will have the power to control the DAO’s votes. Again, we trust in the MC team to always act in the best interest of the DAO, however as more unlocks happen, there is a possibility for the DAO to become more centralized, as the community could get outvoted on any proposal. We believe most of these parties, logically, would tend to vote in favor of the health of the MC DAO - further fostering the value of all stakeholders.

Portions of Community Feel Unheard

All public sale/on-the-market investors, fish and whales, have experienced significant price appreciation (up to $12+), and now depreciation (down to $1.65). This has affected short term, mid term, and long term investors alike, and while long term committers to the DAO might be un-phased by the ongoing price, no one enjoys losing money. We want all community members to feel their voices are heard, and there always be a level of mutual respect between VCs, Angels, the team, and the MC community.

It is clear that some members feel their voices haven’t been heard, which could potentially lead to a breakdown in trust. Others might only share their voices through private messages or through more vocal people. Ultimately we want to improve this, and for the governance forum, Discord and Telegram channels to be platforms for positive discussion. We would like each individual person to feel their voices are being heard, and have an impact - no matter your capital position or background.

Our view

We hold a rather unique view on community sentiment. We’re very bullish on what most would describe “FUD”. To us, “Fear”, “Uncertainty” and “Doubt” can be of great help to measure community sentiment. While it is possible some community members are just traders willing to buy lower, more often than not, true community members are excellent at telling you what their concerns are. It is worth listening to in many (not all) cases.

Within the Merit Circle DAO, we have a few - let’s call them ‘interesting’ characters - who are rather unique. Having known quite a number of them for many years on a personal level, they can be your best friend or your worst enemy. Without going too deep into details, these people go very far for their investments. Whether that’s by creating and absorbing liquidity, diplomacy, psychology, networking or other creative and interesting ways.

As with any business or project, lack of interest means ‘death’ in terms of success. When people show you through their activity that they fight for their investment, ideology, community, and enjoyment - they care. When people care, they fight. Some might even - heaven forbid - outright tell you what they like and dislike, what they enjoy or hate - you know, their direct concerns, hopes and dreams.

Let’s continue to handle each member of our precious community and DAO with kindness. We might need them later on. A vibrant city full of life attracts tourists, a desert does not.

What’s next?

Despite these manageable concerns, there is still a huge amount to look forward to for the Merit Circle DAO. The Edenhorde launch was a huge success, and has fostered a loyal community, as well as a respectable floor price. Seed investments are ongoing and are looking promising, with the vast majority still to hit the market. Recently we heard about the new NFT marketplace ‘Sphere’, which looks incredibly promising from the brief snapshots we have seen so far. The DAO has signaled it is looking to build its own games also, and we have a Merit Circle App coming in the near future. It is clear that the DAO is here to build, expand and invest, and we are all looking forward to seeing what comes next. For anyone who is interested in some of the seed investments Merit Circle has made, we made a Twitter thread here.

Currently, GameFi is in a bit of a narrative slump. We have seen some projects perform strongly (GMT), but the wider GameFi market hasn’t been performing nearly as well. This will change. GameFi is here to stay, and the narrative will shift back at some point, and the market will work in our favor. Likewise, the macro outlook will not be terrible forever. Market cycles are ongoing and will shift back in our favor in time, along with changes in interest rates and quantitative tightening/easing. These are not things the MC DAO can control, or influence, and so it is vital the DAO survives, and continues to build, even during times of market-wide hardships. GameFi as a whole will improve, and we’ll see better and better games hitting the market.

Suggestions

We have some suggestions for the DAO to aid with sentiment, and help alleviate community concerns.

  1. A monthly or bi-monthly ‘What’s Going On?’ discussion on the governance forum would help keep the community informed about the current on goings of the DAO, and would encourage friendly discussion. This could also be a dedicated section in the Medium articles Merit Circle posts, in a summarized format - describing the most commonly mentioned community topics or concerns. At the same time, the team would be able to more effectively gather data from the communities.

  2. We want to ensure that the governance forum, the Discord, and the Telegram channels, have an open and relaxed spirit. We want everyone to accept that others might feel differently, and have different motives. Some are interested in profit, others are interested in decentralization or making strategic investments. Some just want to enjoy the DAO community or are interested in gaming. Everyone should feel welcome. We therefore hope to create more unity between all the stakeholders, to make the Merit Circle DAO, community, and ecosystem, the best it can be.

  3. While some community members and parties are more drastic in proposed ideas, we’d like to ask the aforementioned parties (VCs, Angels, Retroactive Rewards etc.) to voluntarily stake for 6-12 months. As mentioned above, we’ve already seen Mechanism Capital write an excellent post on their good intentions, past and future. They mentioned they are going to publicly stake their investment tokens. If others would follow, it would give the Merit Circle DAO extra confidence that all parties are working towards bettering the DAO.

  4. All MC community members should take their token security extremely seriously. Everyday we see countless hacks elsewhere, most of which are preventable by sticking to some basic rules. Always ensure you are using a hardware wallet for storing funds. It is acceptable to use a non-hardware hot wallet for certain types of transactions, but you should never be using a hot wallet for storing significant funds. Any funds which you do not immediately and urgently need to deploy, ensure they are kept on a hardware wallet. The security of your MC tokens protects the entire Merit Circle DAO too.
    Always ensure your browser is up-to-date. It is our personal preference to use Firefox over Chrome due to experiences people we know have had. Regardless of browser, ensure links are never blindly clicked, and are always checked to ensure they are safe. Most hacks come from social engineering, where the targets have a phishing link sent to them, or they are tricked into revealing their seed phrase, or running a hidden script. Remember that Discord, Instagram, Twitter, Telegram, and other accounts can be hacked, and that links posted by ‘official’ accounts can still be malicious.

Looking forward

The Merit Circle DAO has a bright future. There are plenty of developments to look forward to, and once the ongoing seed deals begin to hit the market, we are confident the treasury will continue to grow. We are especially excited for the NFT marketplace, and the Merit Circle App. When considering the wider market, bear markets don’t last forever. Cycles exist for a reason, and are essential to how the market operates. It could be weeks or even months, but momentum will shift in our favor at some point. One thing the whole DAO can agree on, is that GameFi is here to stay. As long as the DAO continues to build, and the treasury continues to grow, the Merit Circle DAO can weather any storm and will come out stronger. We will make it happen.


Signed with right paw,

Empress Whisker
Sad Cat Capital

15 Likes

Great write up and I’d echo many of your thoughts.
It’s pretty straight forward so I’m not here to nitpick, but had an idea while reading.

It might be worth considering hosting such a discussion in a twitter ‘space’ as it can reach a larger audience, and allow for awareness and input from the broader community. However this does create issues of timing and having everyone needed available at a specific time, so alternating between Spaces and forum may be the best way to go about it, to ensure participation is accessible to all.

Cheers!
Joey

5 Likes

Dear Cats,

First and foremost, thank you for this letter.

The way this letter addresses the concerns that have arisen from within the community is truly beneficial to the overall DAO. Whereas most of these concerns have been shared frequently over the past couple of months, it’s good to have everything summarized and written down for everything to read what’s truly going on.

As indicated in the above letter, the team will always strive to act in favor of the overall DAO’s health. The goal is to build a sustainable gaming DAO that will outlive many of us, if not all. We are constantly in-check with our community to ensure our vision aligns with the sentiment of the DAO’s supporters. The mutual feeling remains optimistic for the longer timeframe, but the short-term concerns should always be addressed.

Unlocks from Angels, VCs, Retroactive Rewards and Team
From the very beginning we communicated about the Merit Circle DAO and its economic structure, it has been made clear that at one point, these tokens would hit the market. We have heard the concerns the community have raised about this point, and therefore opened this topic to increase accountability and transparency in terms of what’s happening with these tokens.

Besides the aforementioned points, we would like to raise some further discussion points that we’ve seen rising in both private groups, and public discussion groups;

  • We believe that each party (in any category) that has added value to the DAO has every right to secure any investment they have made. This should however be done in the right manner and not affect the overall market too harshly and abruptly. Therefore, the DAO may always suggest purchasing tokens at a discounted price from such investors to remove this liquidity from the market. MCL has made it clear to all the aforementioned parties to approach MCL first for OTC possibilities when requesting liquidity. Investors that have never shown their face nor added any value can be treated differently and publicly challenged by the DAO with whatever consequences the DAO deems necessary. Naturally, these consequences should be decided upon through DAO governance.

  • There will be situations where the DAO can secure funding from new investors, notable partners that are willing to enter a large position in return of value for the DAO. This will create another cycle of locked tokens that will eventually start unlocking. We are aiming to let this first cycle create a healthy way of morphing these locked tokens with the currently circulating supply. Simultaneously, this will become the breeding ground for future cycles to follow that same pattern.

MCL would like to hear the general opinion of all the other DAO participants on a construction as described above. As a rough example: sell $MC at $1 to strategic parties with a 3 year holding period, OTC (buy) tokens from individuals/entities for $0.7 (creating a positive arbitrage for the DAO + relocking tokens for a significant period of time).

Liquidity
There will be more votes coming up in the coming period to determine the details for the Staking V2 portal. The transition is an open conversation in the DAO and should be treated accordingly. We’re all ears to any suggestion, and aim to open discussion for each step along the way.

Staking rewards
The staking V2 Program is aimed at locking in a large quantity of these unlocked rewards with additional benefits besides $MC. In the position that we are, we can allow stakers to receive airdrops from partner games, DAO’s projects (Edenhorde was an example), and many more. These details are yet to be decided, but this will hopefully convince a large number of stakers to not use these rewards to affect the market price, but to stake and earn additional rewards. Additionally, further utility for $MC is being discussed and explored such as purchasing in-game assets and more.

Decentralization vs. Centralization
As indicated before, we are always acting in favor of the health of the Merit Circle DAO. The early investors (some of them also core DAO contributors) have been selected based on this exact same vision and therefore, we believe that each party will vote accordingly when being able to participate in outstanding proposals. We believe that these additional tokens will only further incentivize governance and increase the DAO’s position.

Anyone with an interest in harming the DAO’s health would have a much more difficult time to have a proposal voted in with such a strong force that’s vouching for the DAO’s future. We understand the concern for centralization, but given the track record of the DAO in terms of transparency, accountability, openness and willingness to collaborate with the community, this is no concern to us Merit Circle Limited.

We need to prevent a situation where the overall sentiment is that the community’s voice doesn’t matter anymore. In essence, a DAO needs to be community driven, and not institutional driven (like f.e. ApeDAO). We will keep monitoring the ratios of circulating tokens and suggest a change if deemed necessary.

Portions of Community Feel Unheard
We regret to hear that a portion of the community feels unheard. We are doing everything we can to create an open and welcoming community where everyone feels proud and comfortable to raise their voices. To emphasize once again, the governance forum is open for every single person on this earth to create a proposal or discussion, even those not holding $MC. However, to improve, we agree with the proposed suggestions, and would like to address these below.

Suggestions

To answer the proposed suggestions;

  1. A monthly or bi-monthly ‘What’s Going On?’ discussion on the governance forum would help keep the community informed about the current on goings of the DAO, and would encourage friendly discussion. This could also be a dedicated section in the Medium articles Merit Circle posts, in a summarized format - describing the most commonly mentioned community topics or concerns. At the same time, the team would be able to more effectively gather data from the communities.

This is a lovely point. Therefore, we would like to propose the following;

Create a monthly summary of everything that’s going on in the DAO’s communities. This summary can simply be a draft of all the ongoing discussion in the format as this letter. One month will be more extensive than the other. After the draft, MCL will invite several key community members such as the Sad Cat Capital to assist in the final touches and collaboratively publish it on the governance forum.

Reason for doing this in collaboration with community members is because of their strong position within the community. Bringing this as an in-house effort would possibly mean neglecting certain aspects that only live within the community that might be overlooked.

This format is open for discussion and time will tell what the right way to approach this will be.

Thereafter, we’d like to host a Q&A in the Merit Circle official Telegram channel answering all outstanding questions.

  1. We want to ensure that the governance forum, the Discord, and the Telegram channels, have an open and relaxed spirit. We want everyone to accept that others might feel differently, and have different motives. Some are interested in profit, others are interested in decentralization or making strategic investments. Some just want to enjoy the DAO community or are interested in gaming. Everyone should feel welcome. We therefore hope to create more unity between all the stakeholders, to make the Merit Circle DAO, community, and ecosystem, the best it can be.

We 100% agree on this topic, hence the reason we have taken such an open and transparent stance in all of our actions so far. We would like to remain operating in this fashion, and continue fostering this open environment.

  1. While some community members and parties are more drastic in proposed ideas, we’d like to ask the aforementioned parties (VCs, Angels, Retroactive Rewards etc.) to voluntarily stake for 6-12 months. As mentioned above, we’ve already seen Mechanism Capital write an excellent post on their good intentions, past and future. They mentioned they are going to publicly stake their investment tokens. If others would follow, it would give the Merit Circle DAO extra confidence that all parties are working towards bettering the DAO.

This is something we have suggested to all of the involved parties as indicated in our earlier posted topic.

  1. All MC community members should take their token security extremely seriously. Everyday we see countless hacks elsewhere, most of which are preventable by sticking to some basic rules. Always ensure you are using a hardware wallet for storing funds. It is acceptable to use a non-hardware hot wallet for certain types of transactions, but you should never be using a hot wallet for storing significant funds. Any funds which you do not immediately and urgently need to deploy, ensure they are kept on a hardware wallet. The security of your MC tokens protects the entire Merit Circle DAO too.

We agree and will always include safety as one of the main topics in any of our educational outlets. Think of the DAO’s Gaming Platform and NFT Marketplace for instance.

A closing word
Miauw.

5 Likes

Thank you to @joebags and @DAOCoreContributors for your responses. We wanted to respond on a few points mentioned in both replies.

Community

Twitter is a platform which is used by a huge amount of the crypto community. A monthly Twitter Space could be a useful tool, especially as it makes a change from just writing/reading. It would be more interactive, more personable, and would include members of the community who perhaps aren’t interested in reading long posts/articles. It would also allow the wider crypto community to join in, and could bring fresh eyes and ears to Merit Circle. This could also be recorded so that those who miss out (due to time zones or work) can still listen back. The DAO can decide whether this would be at a set time, or whether it would change to accommodate different time zones.

We support the Core Contributors suggestion for a monthly summary. A monthly post on the discussion section of the governance forum could serve as a platform for community discussion, as well as providing a round up of the previous month’s Twitter space, and discussion summary.

For instance:
May Community Feedback Topic
Summary of the April topic + discussion/feedback
Summary of the April Twitter space + link to recording
Discussion opens for May

The ongoing Community Feedback Topics would follow the same pattern. This provides a continuous cycle of feedback and monthly summarizing, and ensures there is constant discussion taking place.

Inviting games/MC partners for mini-AMAs or some other community event once a month could also be part of this initiative. It would allow the community to ‘connect’ more with the games Merit Circle is investing in, and would also give the games themselves more exposure. A short summary of these can then be included in the following months Community Feedback Topic.

Values

The administrators of the unofficial Merit Circle trading Telegram group will look to instill certain values in order to promote a sense of community. We hope the official Telegram group moderators will also continue to mirror this. We are confident that a strong, open and inclusive community can be fostered by refocusing on mutual respect between all parties.

Feedback on unlocks

We have already seen a great start from Mechanism Capital with regards to transparency around Angel/VC tokens and how the unlocks could affect the community. We are hopeful other Angels/VCs could follow suit in the near future. We broadly agree that discounted OTC’s from MCL/the DAO can be helpful in removing liquidity from the market, but this should only be done if there is a net-benefit to the DAO in doing so. This likely depends on the amount being bought, and at what discount compared to spot price.

When thinking about non-value/non-show investors, we agree it should be up to the DAO governance to decide on the best course of action. Perhaps a specific discussion topic (similar to the one we had on Staking V2) could be useful to gather community opinions.

We look forward to seeing some of these new initiatives being implemented!

Meow

3 Likes

I endorse the Twitter Spaces once a month suggestion from SadCatCapital.
Will be good to interact with MCL on the ongoings of the previous month.
Audio > Text for this.

1 Like

Thank you Sad Cat Cartel for this extensive letter to address concerns the community may have about the market/their investment. Market sentiment is naturally hurting currently and it has people worried. Your letter has already sparked a discussion in the Discord and it has people talking. Fortunately, combined with the feedback from Mechanism Capital, news has mostly been good.

I am not quite as knowledgeable about the managerial/official aspects of the DAO so I will not delve into those. I do think it is a fantastic space and am learning more and more every day.

With regards to Decentralisation vs Centralisation and the community, I think these topics cannot, as of now, be seen completely apart. Note: the community is retail investors in my mind and the following argument.
The first distinction I would like to make is that there are gamers and there are investors. The investors, and of that a very little portion is actually on the forums, are just interested in the coin and their returns. The difference here is that the bigboy investors such as Mechanism Capital, have a long-term vision. They’re not blinded by market sentiment. These parties make decisions that are best for the DAO in the long-term where true value is created. Combine that with the fact that currently the circulating supply is a fraction of the total number of tokens, and it makes that the DAO is currently rather centralised. This does also mean that decisions are made to create long-term value, which in my opinion is the best way to do it. So that’s the centralised part of the bigger investors.

If the DAO was to become more decentralised, there either ought to be more investors so more discussion is created and it feels more decentralised, or the community has to step up big time and an enormous amount of money needs to come from retail investors so the community feels heard (which needs to have a big enough vote to feel heard). However, retail investors may be hurt by market sentiment and only see dwindling value of the token. What they do not see, yet, is the value that Merit Circle is creating day after day. It’s just the numbers, hence some retail investors becoming worried about their investment since the value keeps going down. Yes this is also because of the broader market and economy, but not everyone sees that.

To sum up the above, I think the crypto space isn’t there yet and retail investors just cannot compete with the amount of money institutions are bringing to the table. Therefore, the DAO is currently centralised. And that’s fine. As these institutions (smart money) have the long-term vision needed to create the most value, I think it’s in everyone’s best interest to keep it that way and gradually steer towards a more decentralised DAO. This may not be needed at all in the end, only time will tell.

That only leaves letting the community feel heard. If this is not through actual votes, since the institutions have the biggest say in the matter, we must be able to address the issues/concerns of the community in another way. I indeed think that is openness and I must commend Merit Circle on the open communication they have shown. I must say that the suggestion of a monthly update will come a very long way to point out to the community what Merit Circle has been doing and it will also allow for highlighting topics or actions that otherwise may go unnoticed. As forums may not be read as much, I think the Sad Cat Cartel makes another good point with Twitter Spaces. I would say using numerous channels to distribute the update; i.e. Twitter Space(s), Discord, Telegram, Forum, maybe even some YouTube for a behind-the-scenes. There’s simple ways to just record audio and spread it to several channels. As long as you have it recorded, you can spread it everywhere. I like the Q&A part as well. The community would be able to send in some questions, these could then be categorised and used in the Q&A. This allows the community to be addressed directly and feel heard that way.

I’m sorry, I didn’t have time to write a concise reply.

Hope that helps.

1 Like