Investing in People While Building DAOs (Safe Apps/Projects)

#Introduction (Looking to Start a Discussion)

@MrAnderson and I had some discussions about the topic below. I’ve summarized the discussion and tried my best to layout our thinking the best I can. Please take a look and let’s discuss.

#Investing in the entire Network

Safe projects need workers and most workers need liquidatable funds to live on. Investors want to see projects succeed. The projects can’t succeed without developers and other key people filling key positions within the project.

Current developers with years of experience and life commitments are probably not able to jump ship from their low risk, well paying jobs. Entrepreneurial risk takers might lack the experience but be willing to take the plunge. Some new folks need learning experience. I propose we would be doing well if we are investing in all these types of folks working on these newly hatched, fragile projects.

In order to entice current full-time developers as well as new developers into these more risky endeavors this framework might give them the option of a guaranteed income for a specific amount of time while they work for a group of investors instead of receiving their income from their corporate day jobs or somewhere else.

This document lays out an ecosystem of how this might be done and how the pieces might work together. This ecosystem is NOT meant to be restrictive. People can choose to change lots of different variables of how they want to run specific things and the framework should still work and perhaps be better because of experimentation. The framework described brings many different interdependent pieces together rather than forcing codependency.

#Definitions of Terms

DAO or Project: Distributed Autonomous Organization or a project that might one day become a Distributed Autonomous Organization.

Funds: Easy liquidatable coins or tokens (ie bitcoin, maidsafecoins, etc).

Tokens (in the context of this doc): Can be used to represent ownership shares (project/DAO tokens) or a proof of a contract (worker tokens).

Worker: Anyone who might contribute to a project for payment. In the context of this doc they would receive DAO tokens for payment of work done.

#Funding Future DAOs (Distributed Autonomous Organizations)

DAO tokens are essentially meant to be ownership shares in the DAO. This is pretty close to the way a publically held company is today except the level of influence is direct. DAO tokens are used to influence the operations of the DAO itself. If the DAO is ever profitable the holders of the DAO tokens could receive dividends. The value of the DAO tokens is up to the market at any given point in time.

The ecosystem starts with a crowd sale by a DAO where it sells a portion (say 10%) of its tokens (ie ownership shares). These initial funds are held in a pool that the DAO owners can use for startup expenses. These funds might be used to hire a full-time manager/developer and if the funds are enough, perhaps more full-time developer(s) for the project. The DAO would be left with the remaining DAO tokens to pay for more development work and other positions of necessity. If the crowdsale happened similarly to the example, the only way to have more ownership in the DAO, beyond the 10% initially sold tokens, is to invest in individual workers (see below) that could potentially work on features for the DAO (through bounties, short term contracts, or as full time hires etc).

#Funding the Workers

Each person has their own value, their own resume of talents and abilities, their own commitment levels. He or she could hire themselves out (crowd sale their own personal tokens for liquidatable tokens) to investors for a specific time period. During that timeframe the developer would earn DAO tokens (ownership shares) for work done on the DAO. x% of those earned project tokens would be passed to their investors for an agreed upon period of time. y% would be kept by the worker to keep them invested in the different projects. After the time is over the worker’s tokens might expire or perhaps a new “contract” could be negotiated (another crowd sale) if they required liquidatable assets to live on and the investors still felt they were receiving a good return.

Each worker could set their own funding goal based on their experience and abilities to commit, the types of projects they would be willing to work on, how much say the community would have on which projects they worked on, the percent the developer would keep for themselves and how much they would pass back to investors. Given all this data, the community could decide if they are worth the risk or not. For example a worker might say “I’m willing to quit my day job and work for you investors if you fund me for a year for $120K”. People would look at his resume and accomplishments and see what project(s) the worker is planning to work on and decide if their potential return (The DAO ownership tokens the worker might earn) would be worth their investment.

#Benefits

##Shared/Distributed Risk

We can make it so no one person has to take all the risk or even the majority of risk if we are smart about it. Projects will fail. If they do and we have invested in workers we can have the worker move to another project. If workers fail, we were one of hopefully hundreds of investors so our loss is limited.

##Shared/Distributed Reward

Every member of the ecosystem becomes a partial owner of the DAO. Every member’s goals should be similarly aligned to see the project (and many projects) succeed. Workers are not tied to one project either, so the experience they gain for one project is applicable to the next and investors are really investing in the entire Safe Network when they invest in a worker.

##Liquidatable Tokens

As more and more people believe in the projects, the market will exist for the project tokens. This will allow developers to work for only the tokens themselves and liquidate them as needed. There will be a time when they no longer need the investors to help them along the way. Perhaps they like having the upfront funds to live on and the investors still want to continue the relationship. There is nothing stopping any of the parties from continuing their relationships or perhaps renegotiating contracts.

Eventually/Hopefully the DAO would be making income and distributing it to the current owners. Some of those owners are developers and they can live off those payments. The DAO owners might even vote to use that income to pay for new features or distribute and allow each owner to invest individually for more stake. Each DAO would be free to do what they collectively decide to do.

#Project Token Exhaustion

What happens when DAO project tokens run out before income is being produced or the DAO decides to invest for more growth without any tokens remaining?

If development is still needed the DAO might vote to create more tokens. This could be thought of as another round of funding. If growth would cost a lot of capital they actually might vote to sell some more project tokens. New tokens would always mean more dilution of ownership. A good thing about this might be that the dilution is gradual if used to pay contributors. The ownership wouldn’t be diluted until the development is paid for. DAOs could even decide that these new coins wouldn’t pay out dividends in the same way as the original tokens. Again this strategy allows each DAO to decide what is right for itself.

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It sounds great in principle but “investors” usually invest in something that can generate profit.
Which means there ought to be a plan of some sort, maybe a concept or prototype that shows path to revenue.

To fund a bunch of people while they work on something that is very far away in time (and space) is extremely risky, so it can hardly be called investing. It’s more like speculative donation. I don’t know of a single crypto project that made any profit (in some cases the resulting coin bubble eclipsed the amount “invested”, but that’s not a profit).

And my second objection is if the stuff being worked on is open source, then you can pretty much say goodbye to your “investment” as no one has made it work (see above; again, excluding Ponzi-like coin bubbles).
I like the concept but it’d have to have some property, tangible or intangible, that token owners hold. Which means it’d have to be registered, or at least some contracts would have to exist, in the real world where one can enforce them.

I don’t mind to engage in speculative donations aka crypto investments, but as we all know such amounts are tiny and can’t sustain anything but casual part time activity.

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Thanks for your feedback…

I want to eventually prove this or something like this out. So one day I’d love to say to everyone it’s no longer theory… But that is a while off.

Totally agree with this. Anyone who is looking to have something funded better have a pretty well thought out business model and plan of attack to eventually get to revenue or at least get their investors to revenue. I would say each and every project or DAO better have this well thought out in advance OR be ready for some strong ridicule.

One thing you mentioned is:

I can think of quite a few companies who host OSS and make a profit with it. This forum software (Discourse) is in fact open source and yet we and many other folks pay to have it hosted and supported. There are others as well. I think the key to any kind of OSS hosting is convenience. Is it more convenient for me to pay a group of folks to support it or use my time and energy keeping a version up and running on my own infrastructure?

I can understand why you might say this. Let’s use Maidsafe as the example though. I don’t believe people donated to Maidsafe (David). There was a pretty decent business model shown and I think people believed in the vision and saw the opportunity to maybe make some return. I keep buying maidsafecoins every week because of this very reason. It was very far away for those in the crowd sale (couple years out) and even farther for the original investors. Perhaps they were being nice to David and perhaps some of them were thinking of it as a donation. I don’t really know. I know they will receive quite a return on their “investment” if things come to fruition though.

This is good stuff. Could smart contracts be enough? I know the concepts of smart contracts are in their infancy, but I’m wondering if these would suffice for people to engage. I know I’m speaking in generalities right now. I believe that once they are “easy” to use people will start using them, and frameworks like I’m describing will be an awesome place to consume them.

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if u don’t want risk go get a CD or some insurance product that pays out 5% a year.

With negative interest rates the new normal and with an understanding that fiat is a ponzi scheme, those products might turn into pretty high risk ventures pretty soon :slight_smile:

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Well Discourse is open source and it’s great, but the company owns the IP (yes, it is licensed under GPL so it’s free to use, but it’s theirs, the same applies to MaidSafe Inc.).

Note that in case of Factom, MAID, ETH (names and details aren’t that important) what you as “investor” own is basically just “fuel” to use the s/w. You don’t own the IP, shares in the company behind it, etc.
So when/if Civilized Human Discourse LLC makes a profit, you as a person who bought some tokens that entitle you to 12 months of use of hosted Discourse can’t benefit from that at all (except to the extent that by not going bust they may be able to actually deliver on their promise…)

I invested in MAID fully knowing that I won’t “own” anything except the right to buy some space on the network (and related services). That’s fine. I want it to exist.
But I don’t confuse that with investing:

  • I knew that I’ll never get my money back (if I use the tokens for what they’re meant to be used)
  • I knew I’ll never own anything that’s developed with that money
  • I knew I won’t have any right to impact how the organization/project is managed

I also sunk some money in other coins, primarily because I want to help fund development of certain apps. But it’s not much different from donating to the Tor Project.

They could be, if you could enforce them. The governments naturally won’t help with that unless you pay tax (and comply with all the ludicrous legislation they have).
There’s no way to enforce smart contracts in the real world. If you put up a fully covered performance bond, then it doesn’t make sense to crowdsource because in order to “guarantee” you won’t run away with 100 BTC you raised you’d have to deposit 100 BTC with some trusted 3rd party overseeer/arbiter. If you deposit less than that, that’s fine, but of course what really happens is people raise 130 and deposit 30 of that, so actually they don’t have any real skin in the game - they only deliberately give up the possibility of stealing the last 30 BTC of the amount they’ve raised.

Well, I don’t want to risk, so I donate.

I would like to ask what exactly does one own when he buys into one of these projects?
What exactly do you own when you invest in these token-based projects?
Is buying a dozen Windows 10 licenses an investment?

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Excellent @chadrickm and @MrAnderson.

Very well thought out and presented. I hope you guys will both be putting some projects forward because I’m very impressed by both of you, and love the things you have been working towards.

I hope this model and the other trail blazing projects already building for SAFEnetwork will inspire and give others the confidence to try and make their own ideas a reality.

I’ve been excited many times over the last two years waiting for this stage and I will soon spontaneously combust.

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I have always liked the idea of purchasing or investing in “fuel”. It’s a commodity that is required to run things. Those that have the foresight of seeing the benefit of the things ran will stock up on the fuel to use and potentially sell at a later date when the demand is much greater. All the projects you mention run on their own fuel. I’ll be thinking on this more… thanks

Good points (except the last one if you are talking the dream of DAOs).

Also good points…

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The plans are being worked on. Details being refined and input being factored in constantly. Thanks for your support over the years sir and it shouldn’t be too long (Wait, scratch that! If I’ve learned anything from the team it’s under promise and over deliver. It will take as long as it takes and perhaps longer. I hate estimates ;)) before we have all the ducks in a row.

@janitor Buying tokens that may have future value is investing.

Consider futures contracts. Price goes down… oops, money lost. Price goes up… profit on investment.

It is a different kind of investment to buying shares in a corporation, but it is still investing - though very high risk for obvious reasons.

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I know what you mean.
I’d liken buying those to hoarding or saving.
But if you guys consider that investment, fine by me. My own definition is a bit narrower.

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“A cocktail for putting dents in the universe” @dhh https://m.signalvnoise.com/a-cocktail-for-putting-dents-in-the-universe-41121186cb6b

Ignorance is a powerful catalyst for “unrealistic” dreams and ambitions. If you don’t know how hard something is going to be, you’re less likely to be discouraged. If you don’t know it can’t be done, you just might do it.

Probably the best article I’ve read this week. Ready to put a dent in the universe?

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I think if you aim at so called “professionals” that your wasting your money and maybe even time. A budget of $120k, that’s $10K per month to get 1 person working on your project. Not long ago as a test, I asked Trygigster.com to make me a twitter, with pay per character that you type and they said they could do it for just $10K, with a whole team at their disposal. To me this is a clear sign, that we should not look for codeGod’s, but just ordinary coders who can get the job done. I’m pro low budget, because it narrows down your options to f@#$$@ up big time, with other people their money. A low budget also makes you focus on what’s really important.

If you’ve been in the cryptosphere for a while, you know not to just invest in everything. Example Swarm a Kickstarter powered by bitcoin. I invested in this project, but things got pretty messed up. I got a minimum of 3 different swarm tokens, they raised over $1 Million, gave a lousy party with some really questionable projects and now the whole project is abandoned.


What I’m saying if people don’t got a business model or an idea of how to make money for the people who invest in their project…

@chadrickm maybe I said this before, but it might help to take a look at colony.io to get an impression of what might help you shape your ideas.

BTW what I also like very much of another bitcoin powered crowdfunding site (sorry I can’t find it right now (just lazy to search)), was that they would hold the funds and after a coding milestone is reached, they would release funds for that milestone. This some might argue is also a great way to get somebody coding, instead of paying up a lot without even knowing if they are suited for the job.

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Yes, your point has merit and is the status quo. Why would I pay my local farmer 4x the cost for a tomato when I can go to Walmart and get a tomato raised by a enslaved worker in Mexico for a fraction of the cost? Is there value in having individuals with no concern for current fiat stresses and living the life we currently dream of? Is it okay for a network that takes out the need for a third-party/middleman, require that it be built by 3rd-party companies that are able to decrease costs by leveraging work off of enslaved workers? I see the direction of investing in individuals as one of many successful/sustainable paths to moving talent away from building another Walmart website to a farm they own (can’t be taken away) and feel the pride of realizing their true value. The beauty IMO of a decentralized work force is all the equations that produce work can be included. The idea of the network/community hiring its developers is a complimentary one that I think is the most sustainable/scalable concept for a future SAFE world.

We could live and breath our passions on a daily basis. We (@19eddyjohn75 included) could take away the wasted time and money spent on a system that enslaves us and diminishes our creative satisfaction.

I really appreciate your comments though @19eddyjohn75 because these are the exact concerns I want to address when I apply for the job of working for the network. The more questions and concerns the better!

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and @chadrickm this might also be an interesting read for you gents

It seems like the mayor exchanges are embracing DAO tokens. This is also another feature that SAFEX could add in the future, for SD powered DAO tokens.

Also worth reading maybe:

BTW what I’m saying above, I’m not in any way trying to attack you bro’s, it’s just an example that we can all learn from. Big money doesn’t always guarantee success, if the people involved don’t got a clear idea and don’t try to cut cost wherever they can.

I’m all for whoever is trying to built something on the SAFE Network. :stuck_out_tongue:

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I think it’s strange that the exchanges of choice are two centralized exchanges; I thoroughly appreciate that if you host a ‘dao’; those coins should go right onto an exchange that isn’t going to own shareholders’ coins.

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Greetings,

iam not a technical expert, programmer and so on but iam a mini investor because i see a big possibility to change
the world with this technology. Ten years ago i used software like Emule, bit torrent and so on and in most cases it was illegal, a real shame. The potential was high but the companies can t see the potential in that technology (besides some it companys for software\update distribution). Now it`s time for a reborn and revolution of the financial system.

For that ownership must be possible, no ones invest without the chance to own something or make a profit.
I want to buy shares of applications in development and productiv state, to sell it when it goes big or earn safecoins when it makes profit (with advertising for example). The Developer have 100% of his shares at the beginning and must sell some to get ressources at the beginning - if he find some investors its all fine - if not he have to buy safecoins by him self. The way to earn continuously is to sell the app, advertising, inapp sell and so on. There is no need to develop mainly for the safenetwork, you can also develop a windows software and distribute it with the safenetwork. You have to download and pay it in the safenetwork.
The safenetwork will get fees for all of that. (per transaction, download and so on)

Dont make it to complicated - make a copy from the good things in the financial system without banks, different currencies and states.
Fond-System (dispensed shares), shares\stocks, futures a good things…

Possible safenetwork apps:
something like Steam (distribute games)
something like Netflix (distribute filmes)
something like Facebook (social network)
something like SAP or Oracle (financial databases and applications)
something like Webhosters or E-Mail provider
something like Azure AD from Microsoft

Eventually an online game if there a local client and a database over safenetwork.

Sry for my english and eventually it`s not a good input to the discussion but i dont want to see a good idea goes bad again.

Great idea.

Only thing is developers should have to put up their own money first, and they’ll be funded up to that $ amount, with the developers’ funds as the risk mitigation.

They build out the first portion, show it publicly to all investors, and another investment round opens at a higher valuation where older investors have a chance to evalutae and liquidate if they like.

Doing it slowly like this mitigates a lot of the risk of the developers running off with money.

If they have to put up $25,000 before investors put in $25,000. They’re getting paid by investors to build it, and will get their own money back eventually, but there is not much risk for investors.

After showing their progress, another round opens, possibly at a higher valuation.

This is nice but I predict it won’t work like this and we’ll have another dotcom-magnitude bubble of crypto-investments.

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This podcast is an interview with Christoph Jentzsch, Christoph is a theoretical physicist and high performance computing expert who is intimately familiar with the DAO that will contract with Slock.it. They are the canary in the mine. Watching TheDao closely will help in the creation of a SafeDao. A key component of a successful DAO will be the relationship between the curators (liaisons of the DAO) and the contractors (real world asset producers). It seems that a strong reputation system and separate auditing system will also be key.

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Here is a design I was playing with for the DaoHub slightly modified for Safe. Anyone can do with it what they like. It is a visual play of the greek letters Delta Alpha Omega with safecoin at the center.

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