MIP-2 Broad investment mandate

Please don’t use this proposal to discuss other ideas. We are discussing the current thread.

You can always start your own proposal!

1 Like

Agree with the direction of the proposal, idle assets are depreciating assets so putting them to work is the clear first step in realizing the DAO’s potential. I understand logistically there are times when deploying capital needs to be done in a timely manner and may not be suitable for an individual vote, but will the DAO have a chance to vote on specific protocols if funds are being deployed into smart contracts, i.e. yield farming, or perhaps a set of parameters that if met, a vote would not be necessary, i.e. multiple audits, age of contracts without exploit, or something similar where the DAO can collectively agree that contracts that meet these requirements are considered “safe” and bypass voting

1 Like

Do I understand this correctly that the four authors are proposing to be fully in-charge and deploy our $100mm war chest? With no oversight? Decisions made solely at their discretion?

I understand deploying working capital and would be willing to agree to a percentage of the treasury but 100% sounds nutty to me.

EDIT: To Clarify, the proposal reads as though we are forming a new investment group of 4 signers, the authors of this proposal. It reads as though they will operate with no oversight and can operate as needed without signatures from the main 7 signers. If this is not the case then the proposal should be revised. If that is indeed the case, then I am against this proposal.

The idea of putting the treasury to work is good, but I want to see more safeguards to prevent any of the signers using the $100M to benefit any projects, NFT, token etc. that they are invested or connected to.

This mandate creates a hidden incentive where the signers can direct $5M or more to a project they’re already involved in - either by buying the token/NFT, by providing liquidity or increasing the TVL. Using the MC holders & treasury as exit liquidity.

I’m not saying this is going to happen, but $100M is a lot of money and Flow Ventures, Sergei Chan, CitizenX and Maven11 should inform all MC holders about who they are, what they do and how they think they could make better investment decisions without involving the vote of MC holders. For example, what are their current AUM, what is their experience in directing $100M funds and where will the investment deals in NFT/Tokens and Crypto assets come from.

And precautions for fraud should be taken too, e.g. by:

  • Penalties if MC funds are used for personal gains or gains for affiliated parties
  • Full disclaimer of any positions/connections where the funds are directed too
  • Independent committee of MC holders to evaluate such investments and make sure it’s all done fairly.
  • Potential investments can be submitted by the community only and can’t be connected in any way to any of the 4 signers.

In any case, I don’t think it should be obvious to trust these 4 entities with $100M without checks & balances. Of course, they are seed investors in MC and should be on the same team as the MC holders, but being able to direct $100M is a lot of power that needs to come with even more fiduciary responsibility.

I would greatly appreciate hearing from the four signers on:

  1. How they believe they can do better than the MC holders
  2. How they can ensure the funds will be used for the benefits of MC holders ONLY, and nothing else.
  3. How they view penalties when code of conduct/ethics are breached in investment decisions
  4. Why the community is not involved in having a say where to invest the collective treasury in
7 Likes

To Whom It May Concern;

We hereby present the official Sad Cat Cartel’s response to the recent Merit Circle DAO proposal.

In summary, five proposals were put forward by Flow Ventures et al and we have outlined our initial response to all five individually.

Proposal 1
The Sad Cat Cartel approves of the changes to the multisig wallet signatories. It is vital security is kept to a high standard, whilst also not providing significant friction towards deployment of funds. If the following proposal will allow for easier wallet signing due to time zone alignment then this will ensure more efficient deployment of funds.

Proposal 2
The Sad Cat Cartel approves of seeding the multisig wallets with Ether for gas. As proposed, 0.5 ETH per signatory seems to be an appropriate figure based on current gas fees and price of Ethereum. While it seems unlikely the wallets would run out of gas if seeded in this manner, is there any back-up plan for how the wallets can be seeded with Ether for gas in an emergency? Likewise if the price of Ethereum significantly increased or dropped or if gas fees changed considerably, would this 0.5 ETH figure need to be changed by DAO vote?

Proposal 3
By far the most significant proposal put forward in this mandate and requires the most thought. Deployment of the DAO’s funds is of top priority for the Sad Cat Cartel and so we are glad to see such a proposal pushed forward.

The Sad Cat Cartel approves of the proposal to use an additional 2-3 multisig wallet for deployment of funds to single signature wallets to then deploy within the market. As per the proposal, it is vital that no funds are kept on the single signature wallets for any time other than the bare minimum required to deploy funds. If funds are to be deployed for ‘yield farming’ or ‘liquidity provision’ it is important the multisig wallet controls the withdrawal/deposit of these positions and not a single signature wallet, otherwise this would be no different to holding or storing assets on the single signature wallet. Likewise all purchased assets, be it NFTs or token assets, would need to be transferred to the multisig wallet immediately after purchase.

In terms of additional information regarding what positions will be taken within the mentioned list of:

  • NFT investments
  • Token investments
  • Crypto assets (including crypto assets in yielding positions - yield farms)
  • USD stablecoins (including stablecoins in yielding positions - yield farms)
  • Liquidity Provision token positions such as (but not limited to:) Uniswap or Sushiswap LP tokens

Naturally, these are a very vague set of possible areas in which to deploy funds and would require much further detail before the Sad Cat Cartel can comment on approval of investments made. After receiving clarification from the team, we understand that this merely represents a broad mandate and is not signing off on a ‘blank cheque’ for the investment committee to use as they see fit.
We believe it to be appropriate that wherever possible, individual investments are submitted to the DAO for approval before proceeding. That being said, we understand some potential investment opportunities cannot be publicly disclosed prior to investment (without losing the opportunity for investment). In those circumstances, the Sad Cat Cartel is comfortable deferring to the investment committee to use their combined knowledge and investment experience to make decisions on the DAO’s behalf. In such cases, it would be expected of the investment committee to submit a post-investment explanation on why they felt the undisclosed investment was of benefit to the DAO.

Proposal 4
The Sad Cat Cartel approves of the ongoing Axie Infinity operations which are used to further the strength of the Merit Circle DAO.

Proposal 5
At some point in time, we believe there will be a more beneficial use of operational income than just rebuying the Merit Circle token $MC. However at this point, the Sad Cat Cartel is happy to continue using these funds to add $MC to the DAO treasury until a DAO proposal votes to change this.

9 Likes

I suggested a change to the phrasing of proposal 3:

Proposal 3: Mandate for a combination of the core contributors (team members of Merit Circle LTD) and the multsig holders to deploy up to 100 million in USDC out of the MainDAO’s treasury to utilize for DAO operations. There is no need for an additional proposal if the individual deal amount is below 1% of the total treasury. In case the investment exceeds this, a governance proposal is required.

Which simply means that it’s the core team + the group of multisigs seen the fact they need to approve certain funds outflow anyways. I’m in favor to see an overseeing committee which consists of other members then the one deciding on allocations, which evaluates every X period how the core team is performing. Realistically this will happen in a few weeks or months after the community have been grown and we figured out a process to elect the relevant persons for this.

6 Likes

Very well written and fully described position.

2 Likes

Hi everyone, Sergei Chan here.

First of all, I totally trust Merit’s core team experience and knowledge in the crypto-enabled metaverse space. As a multi-signer, I see my goal in ensuring that all the investment decisions or any other treasury outflow transactions are made for the benefit of MC community and holders. This includes doing due diligence on the projects we invest in, as well as checking if there is any misappropriate behavior has taken place (including other multisigners actions which can damage MC).

@biohzrdUK raised legitimate concerns, some of which @MC_MARK addressed in his suggestions to proposal 3 which I agree on: Broad investment mandate - #19 by MC_MARK

We are currently working on revised proposal 3, which should be more detailed and posted soon.

For more transparency, I would also suggest the following addition to the proposal too:
Each multisigner should disclose his/her interest or position in the project in which Merit Circle DAO invests in. E.g. if DAO invests in Game A and I have invested in Game A too, I should disclose it either in Proposal or Community Discussion

9 Likes

Great idea, that will create a lot of good transparency.

1 Like

Thanks for all the great input. It’s very exciting to see a lively discussion forming around governance.

We take all feedback and our responsibility as shared fiduciaries in the investment committee very seriously. We consulted with the others on the investment committee and decided we need to prolong the discussion 24 hours and re-draft the proposal based on feedback.

We have re-written proposal 3, which raised most concerns among the community, we have included a rationale and some guidelines around %s from the investment committee. We have added a lot of safe-guards and additional transparency rules that should mitigate most of the concerns.

I think it is important to note that a broad mandate like this is by no means the standard of our future governance. Rather, it will let us discuss from a position of power, where time is a force that works in our favour, not against us. Flexibility and speed of execution are critical in the stage where we are in. At the same time, we do not want to take irresponsible risks. With the new amends, we believe we are striking the right balance between execution abilities and risk control.

Future governance proposals will overwrite this broad mandate over time. These proposals can get more detailed around sub-mandates, where votes can be tailored to specific investment decisions.

Please review the edited proposal, specifically proposal three.

2 Likes

" 1. Proposal 1: Replace two multi-signature signers

  • DeFiance Capital to be replaced by Flow Ventures LP
  • OPCrypto to be replaced by Mechanism Capital.
  • Change the key of CitizenX from:
    0x085843dbde124ab8babd558fea60534962628338

To:

0x7fA32E98C5f3C8594DE1785e23905FB0C74bcCd7

  1. Proposal 2: Seed all current and future multisig wallets (as and when appointed) with 0,5 ETH signing fees. The last signer pays a fee in Ether, by seeding these wallets with ETH will have more signatories that are able to be last signer and with it increase the flexibility of the 4-7 multisig. There are currently 7 signatories, therefore the current outlay would be equal to 3,5 ETH total. These will be bought with USDC at market price. It should be noted that the DAO may purchase more ETH to fund existing signatories or newly appointed signatories as and when the multi signatory arrangement changes.

  2. Proposal 3: Mandate for early stakeholders with investment expertise and good reputations to deploy up to 100 million in USDC out of the MainDAO’s treasury to utilize for DAO operations. The following parties will form a discretionary investment committee to make investment decisions:

  • Flow Ventures LP

  • OPCrypto

  • Maven11

  • DeFiance Capital

  • Mechanism Capital

  • Sergei Chan

  • CitizenX

  • Merit Core contributors

The DAO’s investment operations include and are limited to:

  • NFT investments

  • Token investments

  • Crypto assets (including crypto assets in yielding positions)

  • USD stablecoins (including stablecoins in yielding positions)

  • Liquidity Provision token positions such as (but not limited to:) Uniswap or Sushiswap LP tokens

For SAFT or NFT investments there is no need for an additional proposal if the individual deal amount is below 1% of the total treasury value. In case the investment exceeds this, a governance proposal is required.

The committee plans to put 10% in crypto positions (with a maximum of 20%). This will mostly be held in Ether and BTC. The function of the crypto position is not to make a specific bet on a crypto asset. Rather it is to diversify the current cash position that is currently 100% made up of fiat currency. Fiat that currently has a significant inflation rate, meaning a negative APR. The committee believes BTC and ETH are better long term cash positions. A mix of BTC, ETH and USDC is preferable over just Fiat. In the committee’s opinion. It makes sense for a crypto-native DAO to have an operational cash balance that is made up from a mix of “harder” crypto assets. This also hedges against space growth relative to the DAO.

Additionally this hedges against sector growth. If the space grows, by definition more $ is entering the space and at the same time existing protocols with crypto on their balance sheet benefit from increased treasury value. The DAO would become less competitive to other DAO’s in terms of absolute treasury value and, moreover, this could lead to extra sector specific inflation. Increased prices for people and goods within the crypto sector.

The committee further believes it’s prudent to put some fiat in yield farms that the committee deems to have good risk/rewards. As per safeguards no more than 5% can be put in a single position and no more than 20% in total can be put into yielding stable coin positions. This will create additional cash flow for the protocol while the funds sit idle before they can be deployed in P2E and gaming investments.

In general the committee believes the DAO will benefit from a robust and diversified treasury.

The newly formed investment committee will operate a 2-3 multisig wallet. The signatories to this wallet are a combination of the entities detailed above. The 2 out of 3 multisig wallet has 3 cold-storage signers. The operation 2-3 multisig wallet is authorized to use single sign cold-storage wallet for deployment. The single signer cold-storage wallets that are used can only be owned by any of the above listed parties. The single signature wallets are not used for long term holding or storage of asset, only for deployment. Not all chains have multi-signature wallet support yet, on chains where there is no support, the assets will be held for longerterm holding or storage purposes, until there is a multi-signature solution.

  1. Grant the MainDAO authority to fund ongoing Axie Infinity operations of the scholarship vaults and the breeding vaults with ETH.

  2. Authorize buybacks of $MC tokens with $SLP (The reward token used in the Axie Inifinity gaming ecosystem) profits from Axie Infinity operations at market prices, conducted through the Uniswap V2 pool. It should be noted that until new governance proposals are accepted that specify a different use of funds, all (100%) profits from operations will be used to buy back $MC tokens for the DAO, to be held in the DAO treasury.

The above mandate has set specific rules to seek to ensure that the mandate is not breached and therefore prevent any unforeseen circumstances. These specific rules will be in place until a new proposal that overwrites any of the safeguards is voted in.

  • Up to $5 million USD in asset value can be deployed in single signer cold-storage wallets. These are wallets that are earmarked as DAO wallets. Right after deployment, the assets will be transferred back to the MainDAO 4-7 multi-sig or the MainDAO operational 2-3 multi-sig.
  • All used single wallet and operational multisig wallets will be transparently published in a live document.
  • All used wallets are cold-storage and owned by stakeholders that are also in the 4 out of 7 multisig.
  • A maximum of 20% of treasury value can be put in Crypto assets (this only applies to the initial amount, not to an amount after potential price appreciation)
  • A maximum of 20% of treasury value can be put in, crypto or stablecoin yield farms (this only applies to the initial amount, not to an amount after potential price appreciation)
  • A maximum of 5% of treasury value can be put in a single position (this only applies to the initial amount, not to an amount after potential price appreciation)
  • Each multisigner should disclose his/her interest or position in any project in which Merit Circle DAO invests in. The disclosure needs to be on the public governance forum as a reply to the specific proposal (unless disclosed in the actual proposal). This only applies to assets / projects that have a marketcap under 1B $ valuation. Projects with a higher valuation are deemed efficient and deep markets where any impact the DAO would have is minimal."

And:

“**This proposal will be open for discussion until the 13th of November 2PM UTC

To be added into new proposal^

4 Likes

While I don’t have an exact percentage target for this. I think that more revenue should be used for $MC buybacks like some of the other comments on here.

The vote is live for 2 days:
https://vote.meritcircle.io/#/proposal/0xf06600beda3c784822bca0d16023774b7cc5764b43729a049fa97518832605d8

This proposal includes the above amends on proposal 3, quoted in our (Flow Ventures) prior post.

All votes are 1:1 and only staked MC and staked MCETH are eligible. Staked MC is currently “overpowered”.

The next vote will have different voting weights for:

  • Staked vs non-staked (non-staked included with lower weight)
  • Time staked factor (time locked - similar to reward bonus)
  • Higher weight LP tokens

TBD based on feedback and discussion. Same for Quorom.

I support the LPs, I totally respect that they support the price while the market gains appreciation and footing for the future valuation of the firm as a well managed DAO fund. However, the holders of a true DAO fund, should not need 5-15x the incentivization to the other investors. Something rarely nderstood stood in a world of AMMs and HFT, is that DEEP liquidity, the kind that supports you in a black swan event, comes from your holders not selling and in fact buying as they see the asset as intrinsically undervalued despite price action. No matter how you justify it, LPs aren the real source of valuations, those that arent willing to sell anywhere near current prices are…those are your stakers, and your MC holders that the LPs are selling their inflationary rewards to, depressing the price of the asset that the true long term investors seek to support and be patient with. Cutting emissions and saving the money overall for a secondary investment round once we have deployed capital and have a higher valuation seems better for all and of course some of that money could even support the price action if needed, though as always, capital should be used where is it most efficient on a risk-adjusted basis, and I see no need to be devaluing the asset by holding emissions high just to “reward” people for holding a fund that willl already make money if they actually are investors not yield farmers and traders. I propose we reduce emissions until capital is deployed and then reassess rewards, If without LP 10x rewards our price falls to $3, then the real buyer that know the investment thesis and the math will be there to support the price with genuine buying action that will help the profile and commitment of our investors and ensure they are aligned with the goals more than the business of yield farming against the actual long term investors.

I also would consider that while everyone is loving MIM and SPELL was right in moving off of just ETH(major strategic error by Maker DAO, that several of us including myself posted in their forum), and for all the issues with them…For just a moment they were a real DAO/company almost, they didnt pay people to use their service, they actually charged for borrowing like economics requires to sustainably manage the value of money. For a while, DAI was simply useful and that was and is enough to make it organically grow to be the largest decentralized stable coin, created by collateralized debt positions and ultimately backed algorithmically by the value of the protocol to potential owners when under collateralized. I am explaining this because many don’t know the story of the one of the first mega DAOs and non-“ponzi”/incentivized based system for decentralized money. Here we are trying to do do something on that scale, possibly even larger, if we can own the right in game assets relative to the risk- adjusted yields and capital appreciation they offer, then we can genuinely own parts of economies in the digital world that we generate massive profits. In doing so, we are removing any need to rapidly incentivize holders beyond the high yield the business generates. Crabada on AVAX is a great example of a launch that was clearly something that with organized effort we could have owned a lot of possibly, which based on any of the price ranges weve seen will generate nice yields for us through players, so i dont think we need to have or focus on emissions, when all or most of us owners are her to find a way to collectively own a portion of the GameFi/Meta economy. Most in defi will probably hate this, but i would be happy with 20% yield until profits begin to flow, and i think LP for any good name vs eth is under 100% . ANY HOLD that doesn’t think we are a good name to hold shouldn’t need more than the risk adjusted return on the volatility service they are providing and in this case the Implied Vol needs to be based on any other quality name is we want the holders remaining to be quality investors. I believe this DAO is one of the few that launched with enough capital, and from your proposal, clear discipline in cash management, I was kinda shocked by the rate of emissions and I want to know if we can vote to commit to letting the team really build something and save the emitted tokens for a secondary sale to a CEX at premium or to a future or even to all or us once the DAO has operating profits and we dont want more funding(HAHAAHHAAHAH), but let be something special and real in a world of inflation and uncertainty. I vote we build over everything and OWN THE FUTURE TOGETHER. - MERIT CIRCLE FLIPS MAKER:2022, just by announcing profits from Axie, Crabada, and NFTs that you guys are tied to and can reflexively add value to.

Thanks for reading if you made it.
Jordan

Hi Jordan,

Thanks for the answer, however this is basically an entirely new proposal. If you feel strong about this, I suggest you open a new topic to discuss your proposal so people can share their thoughts.

I propose to put FINAL amended text of the proposal to be voted as an attachment to the snapshot voting page. Or put there correct link to this final text. Otherwise it is not clear what exactly are we voting for.

2 Likes

That’s a great idea, I will write it up immediately.

Closed and moved to Governance - Proposal repository