Proposal to reduce the total SPOOL token supply and create long-term incentives for core contributors

Summary :bookmark_tabs:

Reduce the supply of total SPOOL tokens and create team incentives.

Proposal Option 1 :mailbox:

Burn 60,4 million SPOOL tokens from the treasury, 14 million builders tokens, and 5.6 million preDAO tokens, reducing total supply to 130 million SPOOL.

Motivation :fire:

The current total SPOOL supply is 210,000,000 of which 42,000,000 are allocated to builders and 16,800,000 are allocated to the preDAO that started off the SPOOL DAO as founding contributors back in 2020.

Currently, ~127,000,000 SPOOL tokens are in the treasury, as yet unallocated. Initially, Spool was supposed to release these tokens as liquidity incentives, but emissions ratios have dropped twice since, resulting in the current reserves being able to sustain emissions for many decades to come.

Aside from selling the tokens, there is currently no use for such a large amount of tokens. Since the price of SPOOL is well below the LBP price, and the runway with current spending is secured until 2026 and beyond, there is no need for these tokens to be liquidated in order to support OpEx.

Builder and preDAO tokens have to be re-adjusted as well to maintain the initial ratios of supply owned.

Proposal Option 2 :mailbox:

Same as in Option 1 but retain 10 million SPOOL treasury tokens from the token burn (burn 50,4m instead of 60,4m) to incentivize core team members with vested SPOOL tokens in the future, making the new total supply 140 million SPOOL.

Motivation :fire:

Thanks to its successful LBP, Spool DAO secured funds to incentivize new team members with good salaries, however, token allocations are missing for new hires to align incentives with regard to protocol success. Additionally, the motivation to bring the best for Spool DAO for every contributor is even more incentivised if the salaries include SPOOL token proportions.

Vote Options :ballot_box:

With “Option 1” you vote to implement only Option 1 and burn 80 million SPOOL tokens, with “Option 2” you vote to implement Option 2 (including Option 1), burning 70 million SPOOL tokens and retaining 10 million for future team incentives, and with “None” you vote to not burn any tokens and to not create new incentives.

Timeline :clock130:

Submission period: 2023-05-08T22:00:00Z2023-05-12T10:00:00Z
Proposed voting period: 2023-05-11T22:00:00Z2023-05-17T10:00:00Z

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Cannot wait to vote… I would go for option 2. I like the idea to incentivize new hires.

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Agree with Option 2. Still benefits us SPOOLers but allows us to recruit and incentivise new team members to grow Spool.

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Both proposals are highly accretive from a value perspective to token holders. I would encourage holders to certainly vote for the burn.

Wrt. holdback of 10mm tokens. Ultimately, the industry is predicated and upside and I am a firm believer that alignment of interest comes through appropriately vested token incentives for the team. With that in mind, I like the idea of providing new core members with token incentives so personally happy to go with option 2.


Some thoughts on the proposal and a counteproposal:

(Candidly, as a member of 4RC I am an investor in the preDAO but the thoughts below are my own)

First off, thanks to the team for the thought that went into the analysis behind this proposal. It’s refreshing to see the proactivity on managing FDV and the optics surrounding it. While I am in support of the ultimate objective, as a rational actor and investor I have to address the concern that tokens we were sold could be burned involuntarily. Below I will outline reasons for my concerns and suggest a counter proposal where we simply burn tokens from the treasury (as is industry standard for the uncommon practice of burning tokens).

My understanding is that burning of the team and investors tokens alongside those of the treasury is intended to ensure that the project does not become further centralized, which is a valid concern. However, if these tokens were not expected to have been distributed for many decades, then they are, in effect as far as ownership and control are concerned, already functionally removed from the supply and simply burning them would mean all things would remain the same, ceteris paribus.

On a more qualitative level, this feels ethically somewhat thorny as investors are the only participants here that are having tokens that were purchased burned. As far as I am aware, this has never happened before and sets a dangerous precedent that, absent a written contract, tokens bought from a DAO are subject to repatriation or seizure, even in cases without cause or malfeasance on the investors’ part. Put simply, it could be perceived as unethical and unsettling for a DAO to sell someone tokens and then take them away - and we wonder whether this precedent might dissuade prospective future investors/partners considering a strategic purchase from the treasury with a lockup. This is the optics risk that must be weighed against that of FDV:Market Cap Ratio.

So I would like to outline a counterproposal: simply burning the treasury tokens. I am certain this will be amenable to the team as their equity is not being eradicated as well as other investors that get to retain their purchased tokens. Given that those treasury tokens would not have been distributed as staking or liquidity rewards for many years, concerns and optics around centralization should be alleviated. There is some precedent for simply burning tokens from the treasury or reserves as several recent, successful proposals have done just that (Merit Circle, Klaytn, Floki Inu)

The hope here is that this serves as grounds for a productive discussion and encourages others to share their thoughts and feedback and we look forward to seeing - and continuing to participate in - a healthy and productive Spool DAO in the near and distant futures.

At the very least, as this is quite close to the end of the original discussion period, I would like to ask that we postpone the beginning of the vote by a couple days in order to provide sufficient time to weigh the merit of including this in the proposed changes.

Thanks all!