Honey Barrel - The Freefolk Fellowship
Henlo. This proposal aims to demonstrate the lack of value YGG has provided the DAO since becoming a seed investor. It also aims to cancel YGG’s SAFT, refund their initial investment, and remove their MC seed tokens.
The topic of seed investors has become particularly relevant due to the 36 month linear unlock beginning this month. These seed investors were given the opportunity to invest at a cost of $0.032. Even with the vesting terms, this has proven to be a rather lucrative investment for those seed investors. For example, at $1 MC this would represent a multiple of 32x. At $12, this represented a multiple of 375x.
The Merit Circle team has made it clear to the community and DAO, that when seed investors were selected, they were selected due to the value they could bring to Merit Circle. This value add could have taken any form, including marketing, content creation, assisting seed purchases, DAO contributions, deal flow, and so on. Six months on, the DAO has decided to look at what the seed investors have brought to Merit Circle since launch, in the form of Transparency & Accountability posts.
Maven11 - Maven11 - Fund - Contributions - #3 by Maven11
Mechanism Capital - Mechanism Capital / Mechanism Play – Fund - Contributions - #4 by CryptoRJ
DeFiance Capital - DeFiance Capital - Fund - Contributions
We have seen three measured responses from the above firms on the value they have brought to Merit Circle, and their visions for the future of the DAO. Please find them above if you haven’t read them yet. These firms have highlighted specific deals they brought to Merit Circle, introductions to exchanges and partners, and even events organized with Merit Circle in mind.
Let’s compare these responses to YGG’s response.
We also saw YGG post a thread on their contributions to the DAO. It is worth mentioning that YGG didn’t even have a governance account, or any governance posts until 2 weeks ago. We’re talking over half a year of nothing. This thread was initially much shorter, until the community response led them to add more vague information.
This was their section on where they have ‘added value’ prior to editing it:
In their updated thread, YGG’s listed contributions include:
Yahoo Finance, and Coindesk, are both extremely easy to publish articles on. For Yahoo Finance, there are multiple Fiverr services which you can purchase to get your article published. You can find the same for Coindesk and other similar sites such as CoinTelegraph. These are cheap (often $500 and under), and easily purchasable services, which take about 5 minutes to organize.
The YGG co-founder, Gabby, also posted a tweet the same day here. More recently, Gabby also posted this tweet on March 3rd 2022. Aside from these 5 tweets, 4 of which were posted on the same day, it is difficult to see any other social media posts regarding Merit Circle from YGG Twitter accounts. A quick search in the YGG Discord also only shows one Merit Circle post which was also posted on October 7th 2021.
Even if there have been other retweets or content shares (which I’m not convinced there has been), is that all we expect from our seed investors? If all we cared about was retweets, then we could have paid influencers with far more followers to share Merit Circle content, and it would have been much cheaper than 5.5m MC tokens.
While this might be a nice gesture, no assets have been lent to Merit Circle to date. We do not know what the lending terms might have been, or what assets were offered. What if YGG didn’t have the assets Merit Circle needed? Or if the lending terms were so unfavorable that it would have disadvantaged the DAO, and only benefited YGG?
Finally, there is a vague mention of early investor introductions and also co-investing in certain deals such as Big Time and Cyball. It is outrageous to suggest that investing in the same games as Merit Circle is adding value to the DAO. This is like saying I added value to the Merit Circle DAO because I bought a Fancy Birds NFT. What about other VCs who ‘co-invest’ who aren’t even part of the Merit Circle DAO - are they adding value as well?
Likewise, it is difficult to gauge how helpful any introductions YGG made were, or how many introductions were actually made, due to the post’s vagueness. Did any of these introductions actually happen? If they did, did any of them lead to an investment by the DAO?
Overall, I do not consider YGG’s response to be acceptable, and in my mind it demonstrates how little value they have added to the DAO since becoming seed investors. There isn’t a single point they made which makes me believe they deserve to be seed investors in Merit Circle.
YGG’s New Raises and Treasury Reports
Recently, YGG postponed the LBP public sale for a new YGG South-East Asia subDAO token. We currently already have both the original YGG token (YGG), and YGG India IndiGG token (INDI) trading. Instead of providing further value and utility to the original YGG token, YGG has decided to remove and dilute value by simply creating new tokens. More subDAO tokens are also planned for the future, to raise further capital for the YGG team. Consider the outrage from the MC DAO if the team suggested that they weren’t going to bother with the MC token anymore, and just wanted to make new tokens so they could obtain more cash from investors. That is what YGG is doing.
The last monthly treasury report that YGG posted was for September 2021. That means no transparency about what is happening with the YGG treasury for 8 months now. There have been constant questions about the lack of reports in the YGG Discord, which are either ignored or simply answered with ‘No ETA at this time’
Is the YGG team trying to hide something? Unlike Merit Circle (which produces consistent monthly treasury reports), this lack of transparency about treasury funds is quite alarming and is certainly a red flag.
These ongoing raises do not fit in with the ethos of Merit Circle and are designed purely as a cash grab, and are not intended to benefit the YGG token and ecosystem. Likewise, a distinct lack of transparency about DAO funds goes against everything the Merit Circle DAO believes in.
Is this the type of project we want Merit Circle to be closely associated with?
On a separate note, a YGG Discord mod acknowledged that Merit Circle is likely one of YGG’s top competitors. Likewise, I’m sure parts of the MC community see YGG as a competitor, and not a partner. Do we really expect YGG to provide significant value and effort for one of its top competitors? If Merit Circle wants to progress as the top Gaming DAO, we shouldn’t expect help from competitors to accomplish this. It’s likely YGG’s aim is to simply profit from the MC DAO, and would rather see us fail so that they can take the top spot.
Recently, Cryptorank ranked the DAOs which are actively investing, and placed Merit Circle in 2nd place with 54 investments. Despite launching months before Merit Circle, YGG comes in 4th with 34 investments. Even if we included the subDAOs, YGG SEA and IndiGG, this adds up to a combined 57 investments, of which many are shared investments between the various subDAOs. This is a perfect example of YGG losing traction to its own subDAOs, further showcasing the lack of value-add to the YGG token.
Is YGG now having to compete with its own subDAOs for investment opportunities? This is only going to get worse, as even more subDAOs are planned to launch in the future.
I propose to find a solution to terminate the financial obligations the Merit Circle DAO has with YGG, through removing YGG’s seed tokens and refunding their initial 175K USDC contribution.
Merit Circle ltd has argued for a clause (link (MIP-13: Merit Circle: A New Era - #58 by MeritLtd)), that will give time for Merit Circle ltd and YGG to propose a solution that would be more beneficial for the DAO and all parties involved in case of a YES vote. I think this is a fair ask as it would give the DAO more options.
Therefore, I am proposing the following two options for vote;
- Yes, with clause*
Clause as described here *;
Clause that, in the case of acceptance of this proposal (YES, with clause), delays the proposed actions by 2 weeks and gives a 1 week time period for a counter proposal.
For reference, YGG and YGG co-founder Gabby Dizon 66 (https://twitter.com/gabusch) invested $175k at a price of $0.032 which gives them 5,468,750 MC tokens in total. This was split between $100,000 directly invested through YGG, and $75,000 invested through Gabby’s personal fund Nifty 109 (https://twitter.com/fundnifty).
Motivation and Rationale
The Merit Circle DAO needs seed investors who are adding value. This is something that the team, community and investors agree upon. I have demonstrated that YGG does not fit into this criteria. They are competitors who are only interested in extracting value, and profit, from the DAO, and their actions go against the ethical principles that Merit Circle upholds.
For anyone reading and thinking “But how will removing YGG help Merit Circle? What difference does it make if they get to keep their tokens?” Please consider the following.
The DAO relies on ongoing effort, and contributions, from all members, including the community, team, and seed investors. We have seen huge efforts from some members over the past 7 months, and those efforts deserve to be recognized. By removing an investor who provides zero value, we can ‘trim the fat’ from the DAO, and ensure only those who want to see Merit Circle succeed remain.
We can show our appreciation to seed investors who are pulling their weight. We can recognize the effort these seed investors have put into Merit Circle, and show them their efforts haven’t gone to waste, by taking action against those who do not provide the same level of input. It is likely this action will also encourage other seed investors to provide even more value and input, thus further improving the DAO.
Ultimately, YGG is shining a poor light on the Angels, VCs, and community members who are working hard to improve the DAO. They have shown that they do not care about adding value to their own YGG token, so why would they care about adding value to the MC token. This is not something that can be tolerated, and if we want our Angels, VCs, and wider community to continue helping us, then we must take immediate action.
$175,000 USDC - The amount that was paid by YGG and Gabby as part of their seed investment.
YES - YGG and Gabby should have their seed investment refunded, and their MC seed tokens returned to the DAO.
NO - YGG and Gabby shouldn’t have their seed investment refunded, and should keep their MC seed tokens.
In order to mitigate potential unforeseen second order effects, we amend the proposal with the following:
- In the case of acceptance of this proposal (YES), the proposed actions are to be delayed by 2 weeks and creates a 1 week time period for a counter proposal.
Copyright and related rights waived via Creative Commons CC0 7
Thank you for reading,
Vanquisher of non-Frens
The Freefolk Fellowship