Dear Douwe,
Let’s start off by expressing our gratitude for this post and the willingness to add value to the Merit Circle DAO. We are fortunate to have such a talented community that’s eager to contribute in their own way. Now, let’s zoom in a little bit and share our thoughts.
Independent contributions
The power of a DAO is the fact that you are home to dozens of individuals that all come together to work on a common goal. This creates a hub for idea generation and collaboration. The stronger the brand and the community, the better the ideas become and the more effective the collaborations will be.
As we proceed, we see the power of the individual becoming more evident. An individual can build a product suiting their own needs while finding the strengths from collaboration when necessary. There’s no friction throughout the development process, only additional knowledge to be gained through the feedback and expertise of others that contribute in their own way. We salute this, and wish to encourage many others to take this very same route.
We have asked the Merit Circle DAO’s main developer to run through the code, to quote; “That aggregator code looks tasty!” This stamp of approval gives us confidence that the author has a certain level of credibility and skills.
Discovering the unknown
Whereas this proposal is well thought-out and describes at length what the idea entails, there are tons of unknowns that have yet to be discovered. Suiting, the author proposes a clear start-up phase that allows the author, and other contributors, to discover these unknown and answer any questions. We believe that we are in the position to strongly advise in terms of user acquisition, branding and marketing.
The use case
We’re thrilled to see the potential of this idea and do agree with the author that there is plenty of space in this industry for an additional aggregator.
We believe NFT aggregation is a very useful application. It is a growing space that we suspect will only grow bigger with the growth of the NFT market. It is likely there will be a few dominant aggregators and a few dominant primary nft marketplaces. Sphere is building a primary marketplace, hence, there is no direct competition in our view, only addition. We also suspect there will be a lot of potential synergies from having the Sphere team and an Aggregation team cooperating.
The strategy to optimize for usability and growth of the user-base first is one we subscribe to. First we need to build something useful, grow a user-base and fuel your application with data. This will allow to further improve the UI/UX of the product and attract even more users. Once you have a large userbase there are always ways to monetize a useful (D)application. We therefore agree on not focussing on monetization too early for this specific application. It’s encouraging to see the author is aware of all these strategic considerations and that these align with the DAOs values.
Value accrual
As the author has described in his post, the goal here is not only to build something that can contribute to the overall NFT space, but by doing so also return value back to the MC DAO.
We will always be looking into ways to maximize revenue for the MC DAO and optimize the volume towards Sphere. Naturally, this goal should not interfere with the usefulness of the aggregation dapp. The useability of both our primary marketplace and the aggregation dapp in itself should always precede other considerations, else it will never be a successful dapp. It is important that an aggregation dapp is neutral in its core offering and has a suitable level of independence. The myriad of potential ways to bring value back to the Merit Circle DAO, either directly through equity ownership (and monetizing the aggregation dapp) or indirectly through cross-selling or expertise/resources exchange is something that we should crystalize later in the journey.
In terms of ownership we think it is important to confirm the proposition to both sides for clarity. As laid out in the proposal, merit Circle DAO will get 50% of the common shares in equity. Please specify to what use the other 50% is labeled, team equity?
As we understand new equity will be raised as preferred shares. Diluting the relative monetary share value of both the team and Merit Circle, but not the voting rights. This part does not have to be set in stone, to maintain flexibility in the best way to structure the raise and get the best result.
We think it is important that in the event that a token is released that Merit Circle DAO (or all common share holders) get an equal pro-rata share of tokens.
Equity/ownership
Through a legal structure with different servicing entities the Merit Circle DAO can hold equities. Infact, it holds a lot of equity and will likely own much more equity in the future. The DAO will be able to monetize on equity, just like it can monetize on tokens. There are just a few structural differences that lead to a general preference for tokens over equity for the DAO. Such as liquidity, transferability and composability.
However, we recognize equities also have their place in this world and the future world. This is why we are structuring in the way we do. We will soon release more details about our structuring. We are structuring in a way that it’s the tokenholders who legally own the underlying equity, through the DAO. This is something that most DAOs do not have, even the ones that have the infrastructure to invest in equity.
Proposal
Given our feedback we believe that the proposal is not complete as of yet. Therefore, we wish to ask the author to include a section in the proposal that clearly states what is being voted on. We believe this should include the following;
- The acceptance of this proposal grants the Merit Circle DAO 50% ownership in the to-be created equity of the proposed project.
- In the event that a token is created, it should give Merit Circle DAO a pro-rata amount of tokens. Proportional to the amount of team tokens the team equity would get in such an event.
- Merit Circle will help with bootstrapping. This includes legals, branding, planning and fundraising. This is where the 50K budget is used for.
- After the bootstrap phase, Merit Circle DAO will remain a founding partner, but the aggregator team will be led by an independent team. The seed raise funds can be used by Douwe to comprise a team.
Housekeeping
This post has been issued in the wrong section of the forum. Has this been intentional or are we good to move this to the ‘Governance’ category?
