A tactical reduction in the supply of total SPOOL tokens.
Proposal Option 1
Burn 60 million SPOOL tokens from the treasury, reducing total supply to 150 million SPOOL.
The current total SPOOL supply is 210,000,000 of which there currently remain ~127,000,000 SPOOL tokens are in the treasury, as yet unallocated. When the initial token economics were designed, the project had planned to utilize these tokens to incentivize liquidity deposits; however, thanks largely to early and sustained success, 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.
A tactical reduction of the treasury supply, via burning of tokens, would allow the FDV of Spool to more accurately reflect the current state of the project. Open market participants and potential partners have begun to view the full valuation of a project as the true mark of value and an important indicator of potential upside: having a massive supply overhang of tokens that are a) deeply illiquid and b) would likely be introduced to the market at a zero basis is cause for justifiable concern for future investors and/or partners. In removing a portion of the unused and unallocated supply, Spool would better reflect its massive remaining upside while appearing more favorable to potential partners, investors, and community members, while negatively impacting none of the existing DAO members and contributors.
It should be noted that this is an amended version of a previous (and live) proposal to reduce the SPOOL supply, presented by the team a couple days ago. The key changes to that proposal and the one outlined above are the removal of the Builder and preDAO tokens from the supply burn. The rationale for doing so is based on the following:
Precedent: although limited, 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). This not only gives Spool a framework for how other organizations have handled supply burns but also suggests that breaking the mold would set a new precedent.
Ethics: burning tokens granted to the team (in exchange for work) or sold to investors (in exchange for foundational capital) 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 team or 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.
Centralization Concerns: there should naturally be concerns of increased centralization risk, as the burning tokens from the treasury will increase the relative ownership percentage of all SPOOL holders (both liquid and illiquid). However, if tokens to be burned 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.
With “Yes” you vote to burn 60 million SPOOL tokens and with “No” you vote to not burn any tokens.
(I will defer to the team/mods for an appropriate timeline here)