[Proposal - Akita] Sell 10% AKITA & Place 90% AKITA in 2-year Sablier Contract

[HelloShreyas]

Authored by @HelloShreyas, @ajbeal, and @AcceleratedCapital from Llama, which provides treasury management as a service to DAOs.

Summary

We propose that Gitcoin sell 10% of its AKITA balance and place 90% of its AKITA balance in a Sablier contract unlocked over 2 years.

• Sell 10% of AKITA balance

  • Sell 7% of AKITA balance via a market maker. This is 3.5 trillion AKITA worth $9m.
  • Sell 3% of AKITA balance via Gnosis Auctions. This is 1.5 trillion AKITA worth $4m.

• Allocate 90% of AKITA balance to Sablier contract unlocked over 2 years

  • 45% of AKITA balance will be unlocked to Gitcoin’s treasury over 2 years to fund quadratic rounds. This is 22.2 trillion AKITA worth $59m.
  • 45% of AKITA balance will be unlocked to AKITA’s treasury over 2 years fund AKITA development or public goods. This is 22.2 trillion AKITA worth $59m.

This proposal is inspired by Vitalik’s recommendation. We want this donation to fund important public goods and support the development of both Gitcoin and AKITA.

Note that dollar amounts stated are as of May 26, 2021.

Abstract

Gitcoin’s treasury currently has about $131m worth AKITA or 49 trillion AKITA tokens. This is about half of AKITA’s total circulating supply. This proposal provides practical next steps for how Gitcoin should deal with the AKITA donation.

AKITA’s total liquidity on Uniswap is $2.5m. AKITA is not listed on many exchanges, which makes a liquidation difficult. We have had conversations with teams from Wintermute (market maker) and Gnosis Auctions to evaluate a realistic amount we can sell. Despite this, given current market conditions, we might be able to sell less than what we plan or take longer to execute it.

The AKITA donation is substantial. We cannot decide everything now so have decided to take a piecemeal approach. We want to maximize the value of the donation to further Gitcoin’s goal of funding public goods. We also want to avoid causing significant harm to AKITA’s project. Based on these goals, we recommend placing 90% of the AKITA donation in a 2-year Sablier contract that helps fund critical development that the Gitcoin and AKITA communities independently deem valuable.

I. a) Sell 7% of AKITA Balance via Market Maker

We recommend selling 7% of the AKITA balance via a market maker. The market maker will sell AKITA via exchanges and attempt to get the best execution for Gitcoin. They will also try to sell tokens via OTC but OTC buyers are unlikely.

We recommend using Wintermute as the market maker. Wintermute has been effective with the sale of SHIB tokens donated by Vitalik to the CryptoRelief fund. They have sold $140m worth SHIB so far. Unlike SHIB, AKITA is not listed on many exchanges and is far more illiquid so we cannot expect similar outcomes.

Benefits

• Quick execution with an effective market maker
• Tried and tested method

Drawbacks

• Not trustless: we will have to transfer AKITA to market maker to execute the trade
• Market maker will charge a fee, whereas Gnosis Auctions is free

Implementation

• KYC for Gitcoin multisig wallet signers
• Enter into agreement with Wintermute to execute sale over 1 week
• Transfer AKITA to Wintermute
• Wintermute will sell AKITA via exchanges (and, possibly, OTC)
• Wintermute will transfer ETH/USDC/DAI/USDT from sale to Gitcoin treasury

I. b) Sell 3% of AKITA Balance via Gnosis Auctions

Gnosis batch auctions let you execute trades on-chain and trustlessly. Batch auctions enable matching of limit orders of buyers and sellers with the same clearing price for all participants. They are designed to reduce the risk of frontrunning, gas bidding wars, and lower the amount of extracted value from auctioneers and bidders. The largest auction executed so far is by Boson Protocol, which had >$50m of bids and ended up settling ~$26m.

Benefits:

• Fully on-chain and trustless
• Batch auctions help prevent getting front run or sandwiched
• Good precedent for the Gitcoin treasury; auctions are transparent and don’t privilege any particular players
• Gnosis does not charge a fee for batch auctions

Drawbacks:

• Can be a slower process than selling via market maker
• Execution could be worse than market maker

Implementation

• Set up Gnosis Auctions via Gnosis safe app by following these steps
• Enter parameters including but not limited to:
  • Token address we plan to auction
  • Token address we accept for bidding
  • Amount of tokens we plan to auction
  • Limit price we are willing to accept for tokens
• Finalize bid and receive ETH or stablecoins

Note that we have the option of KYC’ing bidders. However, this will make the process longer and reduce demand.

II. Place 90% of AKITA Balance in a 2-year Sablier Contract

We recommend placing 90% of the AKITA balance in a Sablier contract unlocked over 2 years. 45% of the total AKITA balance will accrue to the Gitcoin treasury over 2 years to fund quadratic rounds. 45% of the total AKITA balance will accrue to the AKITA treasury over 2 years to fund AKITA development. The Gitcoin and AKITA community will independently control how funds streamed to them are spent.

Why place this amount in a 2-year Sablier contract instead of selling it?

• Liquidity is thin and attempting to sell this balance will be difficult in current market conditions
• A sale does not maximize the amount of public goods that can be funded with this substantial donation
• A 2-year contract gives confidence to AKITA that the token won’t be sold at once

Why place this amount in a 2-year Sablier contract instead of burning it?

• 90% of the AKITA balance is a substantial amount that could be used to fund public goods; burning all of this could mean important projects miss out on funding
• Placing this amount in a 2-year Sablier contract helps Gitcoin and AKITA take more time to decide the best course of action and get the most value out of this donation
• 2 years is a long enough time horizon to help both Gitcoin and AKITA to think longer-term about funding development that matters

Drawbacks

• A substantial portion of AKITA’s token supply will be held in the Sablier contract
• There could be immediate benefits from a sale that Gitcoin isn’t realizing
• Although minimal, this might necessitate some coordination between Gitcoin and AKITA that both communities may or may not want

Conclusion

We recommend selling 10% of the AKITA balance and placing 90% of the AKITA balance in a 2-year Sablier contract. There is no perfect way to deal with the AKITA donation. However, given the goals of Gitcoin (funding public goods), the risks involved (reputational and headline risks), and current market conditions (low liquidity for the token), we believe this proposal is the best out of the possible options.

We would love to hear any feedback and questions! We plan to set up a Snapshot vote on this proposal later this week.

[wl790879704]

Discussion: What should the gitcoin community multisig do with the donated AKITA

[personofnointerest]

You won’t be extracting much value if its only locked for 2 years – that 45% at $59m won’t be the case when it comes round to it, especially in a bear market. Ironically, retail will probably dump on you by then and that’ll probably be catalysed by the immediate 10% sell. People will lose faith, Akita will lose value.

I see logic in the whole original ‘20 year’ suggestion – a marathon not a race.

[HelloShreyas]

2 crypto years is like 10+ normal world years! Things change so rapidly in crypto and there can be bull and bear market cycles even within two years. Given the crypto context, a 2 year schedule should give confidence to AKITA. Also, this amount will be streamed via a Sablier contract. So AKITA and Gitcoin will each receive about 11% of the AKITA token balance after 6 months. Both communities can use these amounts to fund public goods and development.

[trent]

I can’t find it in the documentation, but does Sablier take a % of each stream?

Edit: confirmed by Paul that it doesn’t!

[andyt]

I agree with this proposal. Interested to see what the results will be and how much $ from the market.

[HelloShreyas]

I can’t find it in the documentation, but does Sablier take a % of each stream?

No, Sablier is free!

[hihoo]

I agree with this proposal.

[paulrberg]

@trent

I can’t find it in the documentation, but does Sablier take a % of each stream?

No, we don’t. And we don’t have the power to turn on any fee. The protocol is completely free to use.

[remix]

出售10％AKITA并将90％AKITA放置在2年Sablier合同中

[James]

Hey all,

Just posting on behalf of _ in support of @HelloShreyas proposal. Currently there are ~4 proposals that have been posted regarding AKITA;

This proposal; outlining a short/medium/long term strategy for how the Gitcoin community can collaborate with the AKITA community as well as use some portion of tokens to continue to drive forward public goods funding.

Proposal from @castall proposing the Gitcoin community use AKITA as part of the next quadratic matching pool. Where ‘A smart contract for distributing Akita will be funded at the end of a round once the multisig owners approve of the contract’s particulars’. AKITA is distributed according to matching pool distributions.

Proposal from @relic to ‘burn everything that VB sent except for 5%. Leave 5% to stimulate progress between both communities’.

Proposal from @tjayrush proposing the Gitcoin community return the AKITA funds to their source (Vitaliks sending address).

There has also been a significant amount of discussion on @lefterisjp’s thread introducing the idea to the Gitcoin community.

This reply aims to summarize the majority of AKITA proposals from the Gitcoin community, we’re proposing a snapshot vote which will allow the community to compare the current four proposals and ultimately make a decision on what to do with the AKITA held by Gitcoin.

[castall]

@James

Proposal from @castall proposing the Gitcoin community use AKITA as part of the next quadratic matching pool. Where ‘A smart contract for distributing Akita will be funded at the end of a round once the multisig owners approve of the contract’s particulars’. AKITA is distributed according to matching pool distributions.

Just to clarify, I’m still trying to decide an appropriate length of time in which Akita could be used as matching funds. I’m not suggesting to blow it all in one round

@vbuterin

Put the coins into a Sablier contract that unlocks them over the course of some long period of time (eg. 20 years).

Vitalik threw out 20 years as a time frame. I’m thinking something shorter than that, but one that still feels long, like 5 years (i.e. 20 rounds). If you have feedback, please add to the post.

[fu58889]

将硬币放入Sablier合约中，该合约会在很长一段时间（例如20年）内将其解锁

[relic]

I like the idea of using the sablier contract to distribute, but we should do that with the 5% and still burn the 45%. This is the safest way back to normal and instills confidence back into the retail investor.

We will still have a lot of tokens coming to us while making sure that the AKITA community, who are the reason that this is possible, gets back to the original tokenomics of the project.

[Reader_kk]

in trading and investor wise, one of the highest possibility would be that the moment this proposal is approval and accepted, the price of Akita would crashed to near zero as investor pull out their funds. it’s like 1929 where people withdraw their money from banks as soon as they know the situation.

so instead of the few hundreds of millions dollars gitcoin would like to extract when they approach liquidating akita in any form. It is too easy for these meme token to crash. there are similar crash in other tokens when adverts information is released.

Any proposal to liquidate in any form, no matter the duration
current price: $0.000002106
crash price: $0.0000000002 (estimated)
worth at crash price: $2millions
presume gitcoin 50% liquidation take home value : $1million

relic proposal and price goes back to ath
back to ath price: $0.00003346
worth at ath price: $3,346,000,000 ($3.3billions)
relic proposal of burning 45% and keeping 5% : $3.3billions* 5% = $167millions

relic proposal and price goes back to midpoint
back to midpoint price: ($0.00003346 - 0.000002106)/2 + 0.000002106 = 0.000017783
worth at midpoint price: $1,778,300,000 ($1.7billions)
relic proposal of burning 45% and keeping 5% : $1.7billions* 5% = $88millions

[linda]

I mostly agree with the goal of this proposal. Thanks for putting it together!

• I don’t think it’s ideal to hurt the AKITA community by selling all of the tokens at once given how that will impact price. While we aren’t beholden to AKITA, the idea of negatively impacting a community doesn’t seem in line with the ethos of Gitcoin
• I like the idea of selling 10% of the balance using a reputable market maker (provided that Gitcoin multisig signers are comfortable with the KYC) and the rest with Gnosis Auctions
• I think it makes sense to use Sablier to stream the rest over a period of time (2 years sounds reasonable) but it’s not really clear to me why 45% of the total AKITA balance will accrue to the AKITA treasury since Gitcoin’s mission is to fund open source public goods, not specifically fund the AKITA community. Perhaps if 2 years is too short and selling the rest in 2 years would harm the AKITA community, the time period can be lengthened

[relic]

Without funding the AKITA community, you would effectively be liquidating the AKITA community to fund Gitcoin grants. The tokens that Vitalik “donated” to gitcoin, were assumed burned by our community (not an actual burn but more of a DE circulation). Those tokens were one half of our supply. What would happen if half of the GTC supply was “donated” to UNICEF and UNICEF decided that world health was more important to fund than “public goods”. Its a sticky situation.

If Gitcoin chooses to proceed in any way toward liquidation without including the AKITA community, then I don’t believe it will be possible to salvage the situation or reach a positive outcome for both parties.

The results would be Gitcoin liquidating the position for minimal value and the rest of the AKITA community following suit, this is not just including retail investors but exchanges as well. This type of mass liquidation event is of no help to anyone and would only result in one outcome.

The Gitcoin community would receive some funding from the initial liquidation, yet would also receive a ton of negative feedback/PR, and NO source of long term funding.

Where as, if we choose to work together on a solution beneficial to both parties, both communities could leverage each others respective “specialties”.

The term “complimentary opposites” comes to mind although in this context it means something a bit different.

Although Gitcoin and the AKITA communities started in much different fashions, I do not think our long term goals are dissimilar (We too want our community empowered through a decentralized internet) and I do whole heartedly believe that these communities can be mutually beneficial to each other short and long term.

Its a delicate situation, trying to extract value efficiently without causing any collateral damage in the process.

I stand by my point that we should take care of the place that this value accrued from in the first place, which is the AKITA community. Thus far we have proven that even without funding, or paid advertising, that building a decentralized community project IS possible.

[relic]

[relic]

This actually becomes the classic scenario that is zero-sum. Both entities control half of the supply, both entities have the power to nuke eachother, the only possible solution that doesnt result in nuking,is by cooperation. Funny to think that the fundamental problem with Ethereum at the blockchain level is the same ZERO sum game being played at the social level. Interesting.

[Edunwa18]

I support your proposal, originally the tokens sent to VB was taken as burnt…i think it’s against all good coincidence to dump it back against the Akita Community, I support burning, dumping is against the maxim of equity and natural justice