Co-Creating Collective Value
PrimeDAO’s mission is to facilitate the wide adoption of open finance by coordinating and cultivating projects that promote safety, reliability, liquidity, and open access, while avoiding centralized appropriation of critical financial infrastructure through decentralized governance.
While some readers may only be interested in the distribution breakdown of PRIME — the native token of PrimeDAO — and Initial Decentralized Offering (IDO) mechanics, it’s important to understand the underlying philosophy and strategy guiding such offering, and align on common definitions. An IDO is a decentralized fundraising tool where an organization offers to exchange their native cryptocurrency tokens in exchange for a different token. This is intended to help bootstrap virtuous, value-creating feedback loops for the organization. In Prime’s case, the organization is decentralized, meaning that its governance is on-chain, transparent, and open for new participants to join. These types of open organizations are known as “DAOs,” which stands for “Decentralized Autonomous Organization.” Many DAOs exist today and the ecosystem is rapidly growing.
Perspective PRIME IDO participants will find that co-creating collective value through a DAO will be very different in comparison to many token offerings of the past: no centralized team, designated business, or pre-determined management are responsible for the DAO’s ultimate success, nor do they have ownership of or control the DAO. For Prime to succeed, the combined efforts of a collaborative network are needed, requiring additional considerations for the DAO’s token economics — alternatively referred to as token engineering or tokenomics.
Tokenomics has proven to be a powerful design tool to facilitate resource coordination, exchange of value, and stakeholder alignment in decentralized ecosystems. The myriad successes and failures of token driven projects across the Open Finance (DeFi) industry have showcased the effectiveness of good tokenomic design — as well as generated a graveyard of failed designs. Good tokenomics helps incentivize all stakeholders towards optimal outcomes by aligning their motives and actions, using such design principles as “skin in the game,” where users who have contributed most receive due attribution In the case of Prime, these stakeholder groups broadly consist of:
1. The PRIME token holder ecosystem
This group is assuredly motivated to see value accrue to the PRIME token, and supports DAO initiatives, product and protocol launches that provide this function. However, this group may not care about actively governing Prime — so they don’t necessarily need voting rights. Voting rights in Prime are referred to as Reputation (REP) — a non-transferable right that can be taken away by the DAO. Many DeFi projects have made the mistake of being entirely governed by their token holders, which leads to high rates of voter apathy and a plutocratic accumulation of voting rights — a centralizing force that must be avoided to maintain the political decentralization of Prime. This being said, the inverse is also true: in DAOs where Reputation holders possess all of the authority, the token holder ecosystem is apathetic and unsupportive. Sunny moods quickly change when token holders believe they’ve been treated unfairly — supporters can quickly morph into FUD producers. To mitigate this, mechanisms must be implemented that offer an opportunity for their active engagement. With this in mind, PRIME token holders should have the option to govern. To this end, there will be a mechanism for PRIME where token holders can lock PRIME to generate REP (more on this later!).
2. The DAO’s ecosystemic governors, or Reputation holders
REP holders — the DAO’s voter assembly — provide the service of good governance to the DAO. Prime’s current governors are made up of experts with proven experience in DeFi and DAOs. For a recap of their composition, check out this blog post. The main motivation of the ecosystem governors is to see Prime’s values and objectives be achieved: that is, the realization of safe, ubiquitous, and sustainable open finance. But what ensures that they will practice good governance aligned with PRIME holders? The answer here is for the governors to also receive a small PRIME stipend, so that they are directly impacted by the value that they help create.
3. The DAO’s builder collective, who overlap with categories (1) and (2)
Unlike a centralized team, Prime will need a builder ecosystem where active builders and squads feel like co-owners in the collective. It’s expected that funds raised in the IDO will be heavily allocated to this formative collective, as they are the primary value creators. Yet, treating builders like service providers isn’t enough to be aligned with the other two stakeholder groups — co-ownership requires more. To this end, a contributor reward budget of PRIME has been established. In addition to imbuing feelings of co-ownership, the contributor rewards budget will doubly serve as a carrot to attract the strongest talent in the DeFi ecosystem.
One final thing to consider is that builders aren’t just developers. A vast range of builders exists: architects, researchers, designers, product experts, auditors, operations personnel, marketing, and communications staff, ecosystem facilitators, recruiters, legal, project managers, and copywriters are all builders too. You may find that you have a skill set that can add value to the DAO, making you a potential builder!
All of this considered, why does Prime need an IDO in the first place? The answer is clear: without funding, DAO activity dies completely. This IDO is primarily purposed to bootstrap the Prime ecosystem to a point of sustainability, where it is creating more value than expensed through its native token. But decentralized sustainability means more than clever token mechanics: it also means working to progressively upgrade the governance architecture to reflect a synergistic, ever-evolving ecosystem of participants. The three groups above make up a near-complete breakdown of most of the DAO’s early participants, but we can imagine in the future a dynamically expanding cryptonetwork of DAOs, joint ventures between DAOs and centralized organizations, and sub-DAOs of Prime with given tasks and budgets.
PRIME functions as a utility and reward token in Prime, alternatively referred to as a work token. It borrows from the Web3 Sustainability Loop model in Token Engineering, where a mission-aligned and decentralized builder collective creates value for the ecosystem. The center of this model is that of a loop, where the collective creates value for the token, and the voters of Prime act as curators, either passing or dismissing work proposals submitted to the DAO. Through a recently submitted proposal, PrimeDAO has agreed that in its Growth phase, proposals that increase the utility of the PRIME token will be prioritized. Overall, the Growth phase strategy is oriented around stacking token sinks, where tokens are removed from the circulating supply through either:
- Permanent removal — also known as token burning, where tokens are purchased and removed from the supply forever.
- Temporary removal — many mechanisms fit into this category. Tokens can be locked, or staked, or purchased by and returned to the DAO’s treasury for further use (referred to as “buyback and make”), and by doing so, are removed from the circulating supply.
Prime will utilize two such token sinks shortly after the IDO concludes:
1. PRIME locking
PRIME may be locked to generate REP and join the DAO’s governance body — recall earlier, where we identified that having the option to govern is a suitable means of aligning token holders. With the transition to the Growth phase, a six-month locking period will be opened that doubles the DAO’s REP. Alternatively, you could look at it as halving the current voting power of the DAO’s voters today. Locked PRIME is non-transferrable, similar to the way vesting works in traditional start-ups.
2. Prime Liquidity Pool Manager
One of the DAO’s first plugins will be the ability to govern Balancer Pools, alternatively referred to as Liquidity Pools (LP). LP’s are a type of automated market with a basket of tokens that have varying weights. This first pool will include PRIME tokens at a high weight. For this first pool, Prime will experiment with co-farming, where liquidity providers receive PRIME token rewards in exchange for depositing liquidity to the pool. This is a token sink because in order to earn additional PRIME, LP tokens (tokens received as a “receipt” for providing liquidity) must be staked.
In the future, we can imagine more Prime token sinks, such as an embedded fee in the Prime Aggregator that automatically buys and burns PRIME, or common DeFi mechanics like collateralization, where PRIME is locked to mint a stablecoin or other synthetic assets. If PrimeDAO becomes revenue-positive, there’s always the possibility of engaging in open market operations as well to directly increase PRIME’s value — but this depends entirely on the appetite of its decentralized governance body.
The PRIME distribution can be understood in two ways:
- As a circulating supply and release schedule — how many tokens are expected to be part of the circulating supply, and when?
- As a budget breakdown — for what purposes and which groups are PRIME tokens being allocated?
The above pie chart contains the budget breakdown by stakeholder group. The below table details the release schedule, from which the circulating supply over time can be inferred. Further down is a table with detailed descriptions of each token allocation group:
Supply Breakdown by Release Schedule
Token Allocation Groups
Mesa and the Initial Decentralized Offering
After much deliberation, the Prime Development Foundation has decided that the IDO will be executed through an IDO-oriented deployment of Mesa. The IDO is scheduled for November 16, and is expected to finish November 30, 2020, lasting two weeks.
The IDO will follow a logit-shaped bonding curve divided into ten order periods of different price and quantity. The starting price will be $0.30, and the ceiling price will be $1.50, as denominated in USDC. In total, 24 million PRIME tokens will be offered. With this pricing scheme, Prime can expect to raise up to 23.25M USDC — from simulations, a minimum of 8M USDC is expected. The exact periods are illustrated below:
Any PRIME tokens that are not sold at the end of the IDO, as well as the offering’s proceeds, will be transferred to a Gnosis Safe multi-signature wallet, as delegated by the PrimeDAO in this proposal. The Safe is managed by members of the Prime Development Foundation. Note that the offering’s proceeds and/or PRIME can be requested at any time by PrimeDAO, and the Foundation is mandated to transfer them at the earliest convenience. This guardianship has been agreed upon as an extra security measure — while there is every technical reason to believe that DAOstack is a safe and reliable framework for Prime to use, it’s important at the early stages of the DAO’s development to take extra precautions, as we cannot expect that the full range of DAO social exploits has been discovered yet. Additionally, if Prime were to move away from DAOstack as its DAO framework of use, or split itself across multiple DAO instances on different frameworks, this guardianship permits more flexibility overall towards effective treasury management.
At the end of the IDO, an Ethereum mainnet version of Prime will be deployed, marking the beginning of its Growth phase (and coincidentally, the end of its Incubation phase). Mesa has been used for a handful of IDOs in the past, and the DXdao has written a punctual explainer on hosting an IDO on a Prime-specific deployment of Mesa. The main advantages are:
- Efficient price discovery:
The IDO will approximate a bonding curve for better price discovery during the offering. Think of a bonding curve as a curved line that the price of the token hugs: if a person buys the token, the price increases along the curved line. Please note that the PRIME IDO curve only permits buying, and cannot be sold into.
The offering is expected to last two weeks and is mimicking a logit-shaped bonding curve by setting ten order periods of different price and quantity. A logit curve is simple to understand: it goes up quickly at first, then evens out, and then quickly increases towards the end — you can see the visualization above! All of this being said, price discovery can go beyond the estimated IDO-maximum if participants bid arbitrarily high prices — meaning the amount raised is uncapped on a technical level.
2. Frontrunning mitigation and fair participation
Frontrunning is a common issue in IDOs. In frontrunning, technically skilled persons set up bots that try to game the offering and get the lowest possible price at the expense of the other participants. Mesa’s auction mechanism resists frontrunning and enables anyone to equally submit their bid.
3. Other miscellaneous user perks
There are a number of small user perks unique to Mesa. Any token available on Mesa can be used to participate in the IDO — so don’t feel obligated to exchange tokens prior to participating (do keep in mind though, as the offering clears in USDC, that Mesa will exchange tokens for USDC at the clearing price, and this can introduce slippage). Furthermore, users can post their orders in advance — so you won’t have to sleep at your computer to participate.
Common Questions and Answers:
Additional Q&A will be added to the Prime Gitbook as the IDO approaches.
Q. What is a Mesa batch?
A batch is a length of time on Mesa equal to approximately five minutes. Through the sale, 4032 batches are expected to pass.
Q. Can I cancel my order during a batch?
If you cancel an order during a running batch, the order will still be valid for that batch, and only be fully canceled for the subsequent batch. Don’t forget that orders need to have a balance in order to be considered for matching in a given batch.
Q. Is there a minimum purchase quantity?
The current minimum viable trade size is $2,500 USD worth of cryptocurrency. Orders of a size less than this will not be included in the batch.
Q. What happens if not all the PRIME is sold?
If there is leftover PRIME from the offering, it will be returned to the DAO.
Q. Was there a private offering? Will there be one?
There was not, and there will not be. A small seed was offered to facilitate the bootstrapping of the DAO, which was purchased by a single VC entity.
Q. Will there be geographic restrictions?
Yes. It’s expected that citizens or participants located in Cuba, Iran, Syria, North Korea, the Crimea region of Ukraine, the United States, Afghanistan, Ethiopia, Guyana, Iraq, Sudan, Venezuela or Yemen will not be permitted to participate. This list may adjust prior to the initiation of the offering.
Q. The token distribution in the originally published litepaper was slightly different — will this distribution change?
The distribution stated in this blog post is final and the official distribution going into the IDO.
Q. Will a vesting schedule and/or a breakdown of all token holders and early DAO partners be published?
No. While information such as the aggregate distribution schedule has been published in this blog post, the identification of individuals or groups receiving PRIME for their early, ongoing, and expected efforts in the Incubation and Growth stages will not be published. This is consistent with most regulations regarding personal data. This being said, there is nothing stopping individuals or organizations from publicly declaring their involvement and PRIME rewards.
Q. Will the IDO date change?
A change in the IDO date is not expected, but given that we are in 2020, anything is possible. We are not ruling out the possibility of alien invasion or a solar flare destroying the earth’s telecommunications systems. In all seriousness — the IDO is meant to be completed Q4, 2020, and all measures will be taken to ensure this is the case.
Q. Will more tokens be minted in the future beyond the 90m ceiling?
As PrimeDAO is a decentralized entity, it has the freedom to mint as many tokens as it pleases as it determines through its governance processes. This being said, Prime possesses a high number of tokens for rewarding its contributors and offering incentives. The “strong money meme,” where a maximum ceiling of tokens is established, is very important to most blockchain enthusiasts, and something that Prime should consider should it ever exhaust these budgets.
Q. Who are Prime’s core team members?
The DAO consists of multiple organizations that contribute in different ways. Some provide governance oversight and advisory, others are active builder collectives who are creating the first round of products and protocols for the DAO. These roles — even roles that have more of a leadership aura — are fluid and always open to change. With this understanding, there is no core PrimeDAO team as such.
Q. What are the first products Prime will release?
You can see a list of products, protocols, and projects underway on the PrimeDAO Gitbook. If one of these initiatives interests you, please join the PrimeDAO Discord and introduce yourself in one of the squads or product channels.
Refrain: Call For Contributors
Prime is a coordination engine for systemic DeFi advancement. While its first iteration revolves around its first product — its smart router, also known as a DEX or liquidity aggregator — its product horizon is near-endless. To this end, Prime is actively looking for individuals, builder squads, and DAOs who want to collaborate to move open finance forward in a safe and inclusive fashion.
👷🏻♀️ Technical and ecosystem builders who want to create proposals to Prime should join Discord and introduce themselves in #contribute. Perspective builders are invited to check out the product and squad channels as well.
🌳 Community supporters can support Prime by amplifying its online presence and sharing their respective skillsets in the #contribute channel — there’s lots to get done, and everyone can help!