MIP-14: Counterproposal to MIP-13

Greetings, and thank you for the counter proposal.

This is Admiral Erik von Pumpson of the MC Enterprise. As mentioned in our earlier post, we’re still remaining on the planet Donster in Sector XZ-1054. We estimate there will only be a few more solar cycles before we warp back into hyperspace towards new ventures. With strongly believe that we’ll be able to harness our new Techyon weapon system and protect the south quadrant once again. It took us a long while, but we’re finally ready.

Nothing much to add to the counter proposal. We’re happy MC Ltd. and YGG found a mutual solution to continue guarding the gamefi universe. We’re incredibly proud of our ecosystem and DAO.

We will vote YES.

Signed,

Erik von Pumpson
Admiral of the MC Enterprise
Ascending Galactic Federation

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I am extremely happy this situation can be resolved without fight and lose-lose kind of outcome. I’m very grateful to both Merit Ltd and @YGG for being mature and smart - not letting it to get out of control (which was quite possible assuming sentiment in both communities). Makes me think this divorce wasn’t really necessary - but anyway now we can leave it behind and move forward. Have no doubts joint statement will be friendly and respectful.

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We believe that this proposal is significantly better than the original proposal MIP-13 to cancel YGG’s SAFT.

First, we believe that all DAOs should honor their agreements. To cancel a SAFT after the fact sets a terrible precedent for the industry as a whole. Investors might choose to no longer participate in DAO investments or create more onerous terms. While we believe that investors should always strive to add value AND we also believe that YGG contributed substantial value to Merit Circle, if “value add” is not a specific clause in the original contract, then there is a cancellation without cause, and in our opinion breach of the spirit of the agreement. If projects want investors to add value OR lose their investment, then there should be a stipulated scope of work in the agreement. This was not the case in the original SAFT, but could be included in future investment agreements.

We also think the claim that YGG did not contribute value was misinformed. At the time of YGG’s investment, they were the only other guild in the market with a publicly-traded token. Their protocol was valued at least over $5 billion, and public market investors were looking for the next YGG. YGG’s inclusion on the cap table alone led to substantial value creation for Merit Circle, as it was certainly a core factor in the successful LBP which secured a $100m+ treasury for the DAO. This does not account for the other valuable contributions that YGG listed in the previous governance proposal, MIP-13

This proposal also helps to avoid a drawn-out legal battle from the execution of MIP-13, which would have sapped value from both Merit Circle and YGG. This comes at a time when both teams need to focus on building. There are other guilds who would take advantage of this negative situation.

The economics of the deal are sound. A 10x buyout is a win for both sides. It is a respectable multiple on YGG’s initial investment and around a 67% discount from the current trading price. With a 3 year lock up on the SAFT that discount is around 22% per year of locked tokens.

Finally, a note on decentralized governance.

Every DAO is experimenting with different governance strucutres. While some decisions are best made by the community, there are certain decisions that are best left to the core team (ie: product development). To vote on every product decision would lead to stagnation and the inability for the DAO to execute its vision. Similarly, revising the legal obligations of the DAO should be excluded from DAO governance.

In addition, is DAO governance truly representative if entire groups of stakeholders are excluded from voting? The seed investors hold a significant economic interest in the DAO, but have nearly 0 voting power. While the intention behind this was to ensure that DAO governance was not dominated by early insiders, we believe the pendulum swung too far. Seed investors and locked tokens should maintain some voting power (even if discounted) so they can stand up for their interests and what they believe to be the best interests of the DAO. We surely would have voted against MIP-13, but were incapable of doing so, thus being dragged along by other members of the DAO.

We know the Merit Circle team thinks very deeply about DAO governance and we look forward to / are happy to contribute to a proposal to update the governance model of Merit Circle to better account for the interests of all stakeholders.

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This is a wonderful proposal which I will certainly be voting yes for.
thank you to all parties involved; MeritLtd, YGG

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I will be voting yes on this proposal. I think we were able to reach middle ground successfully and everyone is fairly happy with the solution.

I also would like to congratulate Merit Circle’s whole team. I am sure this was a strange and stressful situation but you guys dealt with it gracefully. And of course, @HoneyBarrel for being an absolute legend.

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Hello,

Voting power from seed pre-unlock was never and should never be part of this DAO.

You should market buy like everyone else who voted to date, including many who bought at $10+ versus your $0.03 cent entry.

Best regards,
AS

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We surely would have voted against MIP-13, but were incapable of doing so, thus being dragged along by other members of the DAO.

Pre-unlock seed has no vote, and won’t have a vote. If you read your SAFT together with the pitch deck, you’d know this. You can buy from the market like everyone else, as @asam0oo mentioned.

Have a good day.

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Gentlemen. Let us not litter this thread with the discussion regarding seed tokens having voting power or not. I do believe it is an important matter and it does deserve some discussion going forward, in my humble opinion. However, this is not the point of the current thread. I would like to request @MechCap to create a different discussion for this topic if so desired.

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Here you go

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There’s a lot of merit here.
We can agree vested tokens shouldn’t count for voting, without disqualifying the rest of the content which is spot on.

TY to the Ltd for MIP-14, clearly the core team was put on the spot, and all things considered the middle ground achieved is the least of all evils, it could have been much worse.

One thing still bothers me:

Financially speaking, YGG gets to 10x their seed investment after 8 months, MC gets to buy back tokens at c.67% discount to market. Not bad for both sides.

But there are 3 problems with this:

  1. The forced expense for MC:

Effectively MIP-13 forced this DAO to spend 1.75M at this time, that without it doubtful the team would chose to spend. Who says this is the best use of funds of those 1.75M? Perhaps those could be put to better use. This is an example of the DAO forcing an expense on the team, through a dynamic that starts with a partially informed DAO member, snowballing through the community, comprised of additional less than perfectly informed members.

  1. Loss of YGG:

Contrary to some, I’m of the opinion YGG is a unique player in the space, differentiated from VC’s, and did provide substantial benefits to MC both in the past (assistance in the formation and seed raise), present (presence in the “Cap Table”), and potentially future (cooperations, introductions, development and I can think of a myriad other ways).

We’ve lost that now.

Diplomatic as the solution may be, YGG can’t be happy about being singled out and bought out.

  1. Future deals: This process demonstrated the outsized potential of a single DAO member to create a hostile environment within the DAO that carries negative tangible consequences to other DAO members, seed investors or otherwise. This needs to be rectified. While there are positives in the democratic process, there are also negatives that should be dealt with. Decisions effectively being made by an uninformed majority aren’t the way to go imo. If it isn’t, MC (and other DAOs) may find a much tougher environment on both sides of the table, when they negotiate future deals as investors or investees.

Generally speaking, MC would be best served cleansed of the hostility towards seed investors. I don’t own YGG and am not a seed investor in MC, but frustration from down price shouldn’t be directed at those with a lower cost basis than our own, at the expense of the DAO.

Will vote YES.

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I agree this proposal has reached an acceptable conclusion, the right one, as the original MIP-13 was not possible to do.

Afaik, seed investors that wanted a say in the DAO prior to the unlock of their tokens bought during LBP or from the open market due to not having access to their tokens yet as per the SAFT agreement. IF you chose not to have acquired any voting power in those ways like others did, then the best you can do is make posts such as this one and be active. With your reputation and experience, perhaps you could be influencing others towards your opinion or stance. Would still read your proposal with an open mind should you write one, but I’m also not certain it would be technically possible to make the changes you desire.

Don’t agree at all about reducing the role of the DAO, if there are issues in what the DAO wants via voting (such as legal issues or anything else which prevents the proposal from being executable), they can be explained clearly to the DAO voters and then solved like was done here in a respectable manner with MIP-14.

Also don’t agree about the role of YGG in value add nor how you interpret their importance to the LBP raise. They may have brought some minor value add and some additional attention to the LBP which is not really measurable, but there were people prepared to invest 10’s of millions regardless if the brand YGG ever had anything to do with MC and intended to do so before any YGG association was ever known, so I disagree, it is not really possible to claim definitively that YGG was a “core factor” in the successful LBP, it perhaps was an additional boost, the effects of which are not actually measurable in any reliable way.

At the time of LBP, I do agree that YGG had a good reputation. That has deteriorated in my personal view, considering the endless sub-dao cash grabs that they have been running and plan to continue to launch. Such behavior cannot be ignored as it is imo unethical, suggests a potential lack of funding, (was there poor management of existing funds?). I am also not aware of any commitments by YGG to return value to their token holders through the deals they make or their numerous fundraises. This topic alone makes me personally question the legitimacy of YGG as a whole. Which in addition to the lack of value add is why I agreed with and voted for removing them entirely originally. The people I personally know and speak to in the space do NOT have a positive opinion or view of YGG and are as skeptical of their legitimacy and future as I am.

Anyways, thanks for sharing your views, even if we mostly disagree.

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Thank you. I will be voting YES.

This is the right way to address this. Further, I completely agree with the cool down period and making the procedures more robust. Nice job everyone.

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Thank you team for this counterproposal. Very pleased to see that you have reached a solution that also YGG is happy with. I also think it shows great character admitting that there may be certain flaws in the current governance model and that you wish to improve on these (that is obviously a topic that will be subject to a separate discussion, and I am looking forward to having it).

On another note; I might be missing something, but I cannot see that this proposal or MIP-13 state anything about what will be done with the tokens purchased back from YGG. I would assume that they could (wholly or partially) fall back within one (or more) of the pools reflected in the token distribution section of the gitbook (e.g. the community incentives pool) or be (wholly or partially) burned. I do not think we are in a MIP-7 situation in this event, as the funds that will be utilized to buy back the tokens will, presumably, not be funds from realized profits. Consequently, I am uncertain if we have a framework that clearly states how to handle these tokens, and it would be great to hear what the intentions are in this respect.

As the DAO – if this proposal passes – will incur a cost of USDC 1.75m when buying back YGG’s tokens, one could imagine that the DAO holds off with buying back further MC tokens from the market until the DAO has restored the USDC 1.75m. The tokens bought back from YGG could in such situation be treated as we were in a MIP-7 buy back event, i.e. partially burned and partially allocated to future staking purposes etc., in accordance with the percentage split set out in MIP-7. There are naturally also multiple other ways to handle this, and I am aware of that the DAO still holds a lot of cash and is not in any immediate need of additional cash (even in this current market).

Thanks!

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Not much to add here, and I will be voting in favor. Ideal solution, imo. To me, it’s worth the money. We establish to everyone in the MC community and in crypto that we’re serious about DAO governance, we value actual contributions, we are a little wild, we don’t avoid conflict, and we make practical deals always. For every investor we lose because of this ethos, we gain 10 builders.

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Proposal is now live on Snapshot

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Has YGG posted their thoughts on this anywhere publicly? From the proposal it sounds like they are in agreement with this as a resolution but would like to hear it from them directly.

I think the #1 goal should be to have this situation resolved amicably, whatever that means in practice. If YGG is onboard I’ll be voting yes, if they’re not I’ll likely be voting no.

Most of this has already been said in discussion around MIP-13 but I’ll reiterate that our reputation as a partner really should not be treated lightly- our success is going to depend hugely on our ability to form partnerships with other projects and we need to be seen as honoring agreements we make even if they don’t play out exactly how we would have liked.

Merit Circle & Yield Guild Games Joint Statement

On April 28 2022 Merit Circle Ltd posted an initiative on their forum asking seed investors to outline their contributions so far to the Merit Circle DAO. This was not a requirement of the original SAFT that was signed between Merit Circle Ltd and Yield Guild Games. Yield Guild Games published a topic on the governance forum of the Merit Circle DAO with a breakdown of their efforts to date.

In response, the author of the MIP-13 proposal used YGG’s response as the basis to propose canceling YGG’s SAFT, refunding their initial investment, and removing their MC seed tokens. This however, was never the intention or desire of Merit Circle Ltd.

The proposal singled out one early stakeholder on the basis that it had not provided enough value in relation to how many tokens it held. Merit Circle Ltd does not agree with this view. Yield Guild Games added value in many different ways although they were not often called upon to do so. They were also one of the first ones to post their transparency & accountability thread to share and create a dialogue with the community.

After taking in the proposal and observing the community’s feedback, Merit Circle Ltd reached out to Yield Guild Games. Yield Guild Games worked with Merit Circle Ltd in the hopes of helping Merit Circle Ltd find a workable solution to appease their community whilst honoring the SAFT that Merit Circle Ltd had signed.

We both recognized the arbitrary nature of the MIP-13 proposal and the danger a precedent like this could set for the Merit Circle DAO and the industry as a whole if agreements are not upheld and investors are not respected. The chosen tool was too crude and did not do justice to prior agreements.

The divergence between the prior agreement and the DAOs proposal would have likely led to legal action against Merit Circle Ltd. While the legal question is one that could probably be argued at length, both parties agreed it was better to settle. This would spare both parties from a costly, time-consuming, legal process with uncertain outcomes. None of the parties had to settle, but both parties chose the constructive path to help Merit Circle move forward.

YGG’s early inclusion on the cap table alone, when it was the most well-known guild (valued at nearly $10 Billion), contributed to the success of Merit Circle’s LBP. Additionally to the contributions mentioned in this thread, we would like to add these points to that list.

  1. Alongside YGG committing funds, Gabby Dizon also coordinated additional funding from a private angel network that he was a part of to support Merit Circle’s early journey. YGG and Gabby’s support (and financial backing) added significant credibility to the Merit Circle fund raising process.
  2. YGG and Gabby made direct introductions to multiple funds and angels during the seed round. YGG was also very supportive in endorsing Merit Circle to other investors during their negotiations.
  3. YGG’s team leveraged their status and brand in the industry to ensure that Merit Circle Ltd got their first exposure via Coindesk which helped raise the Merit Circle profile greatly ahead of the public sale.
  4. In October 2021, when Merit Circle reached out to YGG asking to lease 1,000 Axie teams (3,000 Axies) to double its scholar base, YGG was open to this request, but the DAO did not proceed with the agreement.
  5. YGG also provided advice about Axie breeding when Merit Circle was still looking to define their approach. YGG’s Head of Game Operations shared their industry-leading expertise and insights with Merit Circle directly. Access to this specific information about team composition, breeding, and the broader Axie-Meta that allowed Merit Circle to improve breeding output and efficiency at a greater rate than would have been possible without YGG’s support

There were other such occasions where Yield Guild Games provided great support as a partner whilst Merit Circle was growing. YGG provided that support in the interest of seeing both Merit Circle and the play-to-earn ecosystem as a whole grow and prosper.

Collaboratively, Merit Circle Ltd and Yield Guild Games came to an agreement that was presented in MIP-14, a counterproposal to MIP-13. A solution that still satisfies the will of the Merit Circle community, but was also acceptable to YGG.

The proposed solution terminates the formal relationship between the Merit Circle DAO and Yield Guild Games. This space would not be where it is today without Yield Guild Games, and not without the Merit Circle DAO.

Merit Circle and Yield Guild Games will continue to give their all to growing the blockchain gaming ecosystem. Through education and onboarding, we are bringing play-to-earn to all corners of the globe so players can upskill and be rewarded for their time spent in game.

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Proposal has been accepted and therefore the topic is closed.

A big thanks to everyone for participating.

https://vote.meritcircle.io/#/proposal/QmanW7dTyF2LvvU9iAGwj3i9D4F3TS7ZbxR33jVCmKMrgR

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