attested by the ongoing governance discussion
– about a fresh token deal between Lido Finance and Dragonfly –
Token deal – yes, talking about a crypto-token (that is different than a crypto-currency). The difference is that crypto-token has not its own blockchain, while crypto-currency has one (on which it is issued).
Credit for this article goes to https://decrypt.co/
Difference from a start up: chasing down funds on classic start up is pursued by a handful of persons, be them the founders, a professional M&A agent or alike. Within DAOs, the deals are made transparent to the rest of community.
Who is the “community”?
Community refers, in this case, to anyone who holds a governance token in the respective DAO.
A specific DAO deal case analyzed
Lido Finance is a staking service (staking is a way of earning rewards for holding certain crypto assets – this definition is extracted from this source -> coinbase.com).
Lido is currently seeking a longer runway by selling off 2% of the total supply of its native token LDO.
If the product is good and gaining traction but not quite strong enough to stand on its own; and if sustainability is not the goal, then continued, upward growth is another good reason.
One could imagine, in the crypto-currencies space organisations are born and they issue their own crypto- asset (be it crypto-currency or crypto-token), so Lido Finance makes no exception. Therefore, LDO is supposed to be sold in exchange for stablecoins (a stablecoin is a type of crypto-currency whose value is tied to an outside asset, such as the U.S. dollar or gold – this definition is extracted from this source -> coindesk.com).
Why selling LDO token?
It sound similar to traditional finance: a company selling from its own shares to obtain cash.
Basically, obtaining non-volatile (crypto) assets amid the ongoing bear market would allow for this endeavor (this is a start up, right?) to continue be financed for roughly two more years of operation.
This is where community enter into their role:
June 3: a broader proposal was the first (from a Lido developer) who suggested “to sell 10,000 ETH of Treasury funds to DAI” (DAI is a stablecoin). ETH is Ether, the native crypto-currency of Ethereum blockchain.
The definition of “Treasury” term: a treasury system is a community controlled and decentralised collaborative decision-making mechanism for sustainable funding of the blockchain development and maintenance; during each treasury period, project proposals are submitted, discussed, and voted for; and top- ranked projects are funded from the treasury (source: https://www.lancaster.ac.uk/staff/zhangb2/treasury.pdf)
Later on: to sell LDO tokens (from community discussions)
July 27: the proposal was again refined:
Reacting to this, the community commented. So, because the proposal indicated that the “acquired tokens will be unlocked” (meaning that as soon as the holdings were purchased, most likely by Dragonfly, they could be sold at will) the community said the followings:
Reading through each step from June 3 until July 27 provides a really interesting case study into crypto governance.