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!
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).
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.
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.
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.
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.
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.
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.
We have some suggestions for the DAO to aid with sentiment, and help alleviate community concerns.
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.
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.
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.
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.
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,
Sad Cat Capital