A humble vision for $MNDE and marinade DAO

Intox · December 30, 2021, 6:24pm

Hello there.

Most DEFI protocols are very far from having a proper DAO. Marinade is something really new and cool, and I believe that successfully implementing a DAO with a governance token in such a protocol could have a real positive impulse on the ecosystem. I don’t mean the Solana ecosystem, I mean the whole crypto ecosystem.

Having said that, let’s see, for a start, if we can agree on the following:

A bi-monthly poll with 3 options written by some admin is NOT a DAO
A forum is NOT a DAO
A big community with a central leader is NOT a DAO

DAOs are about decentralizing decision, and are in their current form very far from their ideal. However, step by step, we are building something better than traditional organizations. Here’s my humble proposal for Marinade, hoping that you’ll be up for the challenge of building the next step in the stairs leading to true DAOs.

The objectives

This proposal aims to solve 3 problems at once:

$MNDE has no real use case (yet)
Treasury is idle funds
$MNDE holders don’t have any decision power on Marinade plans (at least, linked to their token holding)

The root idea

Here’s a little drawing that might explain it better than what’s below:

It’s a very simple idea, yet it will require some work to execute. Marinade is generating revenue through its msol-sol pool, and is distributing a MNDE token with a max cap of 1B tokens. Once the marinade team stacked a sufficient fund to execute on the next move (let’s say, pay all salaries for 2 years, for instance), it will re-route all the revenues into a new pool containing a few solid assets to be determined (msol/dai/usdc for instance).

The second part of the plan is to build a smart contract to let $MNDE holders use their tokens to control a share of this pool and decide how it is invested, because we don’t like idling money. There will be several strategies made available by the community (you know, liquidity farming, lending, covered calls, leveraged covered calls, whatever), but the final operation is basically put a % of the treasury into a vault.

Needless to say that thoses projects should be based on solid DEFI ecosystems, and validated by a large part of the DAO. No degen stuff in here, we’re playing the real game.

From the generated revenues of the selected strategy, the $MNDE holder will get 2 things:

A reward part (holder gains) for beeing a holder and managing a share of Marinade’s Treasury (helping its diversification in a way).
A investment part, that won’t get into the holder pocket directly. Instead, he/she will decide in which marinade project (proposed by the DAO) the revenues will be invested.
I don’t know what the % of each part should be at this point. Maybe 50/50. Maybe 80/20. TBD.

Since there is a billion $MNDE max cap, each $MNDE will ultimately give access to 0.0000001% of the treasury. Once this pool reached 1B USDC, each $MNDE is indirectly collateralized by 1 USDC. Note that the collateralization won’t give the value to the $MNDE token, it still a token in which the market will build hopium, but it sort of gives an absolute bottom to the MNDE token, which is destined to be raised in time.

To get the rewards, the holder must unstake its $MNDE, and at this point, the smart contract will calculate how much he made with the % of the folio he controlled. If the investment made by the holder is bad and lost money, the holder will be slashed a part of its MNDE to compensate for the loss. Any $MNDE token held by the treasury after that should be sold on the market, it’s not something that makes sense to hold IN the Marinade Treasury.

With sufficient distribution of the $MNDE tokens, its more than certain that each project will have a specific monthly budget that the team can rely on. Moreover, there can be an “engagement” from the holder to respect the project needs/roadmap (for instance, a project can require 1 year of locked staking but will give additional rewards to investors).

Note that a crucial part of this plan is that Marinade DAO will not spend the treasury directly, but only spend the REVENUES of the treasury, so

We garanty that Marinade is a long-term player
Each $MNDE is indirectly collateralized by the Treasury pool which should be growing over time.
We garantie that the Treasury is managed in a responsible and decentralized way, is invested and diversified
In case of quick need, the initial core team of marinade can sell $MNDE tokens to get quick funding (or access a % of the treasury in exchange for burning some $MNDE tokens), but there should probably be more rules for that.
$MNDE holders are Marinade long-term players since most of the value will come from Marinade increasing its revenues

This is still a very raw idea. Let me hear what you think about that.

Cerba · January 2, 2022, 1:20pm

Hello Intox and first of all, thank you for coming here and explaining your suggestion.

The fact that you believe Marinade may be fit to be one the first DAO to truly build the next step of decentralization is very pleasing to read. I would agree that current DAOs often ressemble to a “lead team” offering polls and/or suggestions to a community that can only choose between fixed options. I would also agree that it is not what a DAO truly is (or at least what it could be).

Regarding the proposal you’re offering, I find it extremely interesting and worth diving in.

We all know that Marinade’s parameters won’t be a big governance topic, at least not regularly. The real governance that MNDE has to offer is a governance on Marinade’s funds, how they get used and what Marinade can build next.
Creating a totally decentralized way of impacting those choices, directly through your MNDE holdings is a perspective I find really, really promising.

For now, I don’t think Marinade is using revenues generated by its treasury but mostly the funds of the treasury itself. How would the transition to your model be done? I’m also thinking, will the expected returns for a small MNDE holder be sufficient to make them interested in investing time to choose a strategy and hold/lock MNDE?

My only fear is that I don’t think a full transition to such a model is possible right now, with the current state of Marinade treasury. I believe if we were to lock our treasury in strategies and rely on their interests, Marinade would financially endanger itself.
As you said, we would need to slowly move towards this model an maybe start with a small allocation. Letting some time for the treasury to grow and also for distributing more MNDE.

With time and with a treasury building stronger, it would be possible for Marinade to only subside on the revenues generated by its treasury and for MNDE holders to see a direct return on their investment choices through their staked and locked MNDE.

In your proposal, we can see that this model could be used to finance and sponsor Marinade products directly. I love this idea and it would mean that we reached the true definition of a DAO where MNDE holders directly act on (and profit from) the projects being developped by Marinade.

But I believe this can only be done once this model has been battle-tested and proved functional. Maybe a first implementation of this idea could be done on a separate treasury (the MNDE holder treasury) with full returns/losses on the strategies used belonging to MNDE holders. This treasury would be filled with X% of Marinade revenue’s (and maybe other revenues but let’s stay simple).

Based on this experience, we could see and evaluate if it’s possible to integrate this last step where a part of the revenues come back to Marinade future projects, and if it would be sufficient to move to a fully invested treasury where Marinade only spends/distribute what it earns in interests each month.

I would love to hear other opinions on this possibility of implementing such a model for MNDE holders and treasury control because I find the perspective very appealing. So please find and bring up any flaw you can imagine to challenge this idea

Intox · January 2, 2022, 3:30pm

Hi Cerba, thank you for replying. Let me bring some answers to your concerns.

Yes, of course this is the first step of any DAO. As long as this is needed, Marinade’s focus should be to build and enforce revenue streams, and redirect a part of that to the team. But at some point, Marinade should be able to setup a “long term fund”. This proposition is to define a long-term vision, not a 3-month plan.

Let’s not forget that the crypto ecosystem can provide long-term interests close to 10% APY. If you put 10M USDC in a 10% APY vault, that’s 1M USDC available to spend for the next year. Or rather in this plan, that’s like 500k$ for the project funding and 500k$ for the $MNDE holders managing the treasury (if you choose the 50/50 approach). I’m also aware that this APY will probably go down over the years, but if the long-term fund is fed with a significant part of Marinade revenues as well, it should still be a increasing revenue over the years.

My suggestion here would be: let Marinade finance stack a 2years+ treasury, then switch to the long-term fund.

Well, I’ll answer this with the 50/50 strategy (50% of yielded interest to the $MNDE holder, 50% to invest on a Marinade project), but keep in mind that this calculation can work for any ratio.

Basically, there is a tipping point where it might become financially interesting to hold $MNDE. It depends on 2 factors:

current market value of $MNDE
amount available in the treasury
The calculation is very simple: If $1 of $MNDE gives me access to more than $2 of treasury (AND I trust Marinade), then I can yield more money by investing on $MNDE.

When $MNDE will be fully distributed and staked, here’s are some examples of calculations (but keep in mind that it’s far for beeing fully distributed and 100% staked):

If $MNDE is at 1$ and the treasury is at 100M USDC, 1 $MNDE give access to 0.1 USDC of treasury. Not worth it.
if $MNDE is at 0.01$ and the treasury is at 25M USDC, 1 $MNDE give access to 0.025 USDC, which mean I can have higher yield on my money by investing on $MNDE. Time to stake.

$MNDE is still way overvalued right now since it has no use case (IMHO), and I bet the 2nd scenario is much closer than the first one right now. But still, in this scenario, Marinade should be able to save up 25M USDC to get it running and give a base value to the $MNDE token. Nevertheless, this would allow Marinade to secure close to 1.25M USDC of funding for its projects every year. That’s a few full-time devs.

Let me put that to perspective. Marinade has right now 7.7M sol staked, at 6.67% APY. That’s 515k sol yielded for it’s users, every year (or 90M USDC at current valuation). Without expecting a Sol price action in the next years (WE ALL ARE EXPECTING IT !), 25M USDC doesn’t seem that hard to raise over a few years.

Also, Marinade has 35% of $MNDE allocation in the treasury and thoses tokens have nothing to do here. IMHO thoses should be exchanged with tokens of other protocols, that have a value that isn’t linked to Marinade, or even sold from time to time on the open markets. If not possible, the simple fact that theses token won’t be staked in the DAO will reduce by 35% the treasury amount to reach to make the $MNDE token an interesting investment (25M → 16M in the second example).

To sum it up, let’s keep our cool here. I don’t suggest a hard switch, but a long-term objective to a sustainable and decentralized treasury model. Of couse we sshould stack up the revenues from Marinade at some point to prepare the transition, but, mainly, I believe the good use of the 35% of all $MNDE tokens will play a key role here, so let’s think together about how we could play that card correctly.