AIP-139: How should we use marketplace funds?

[zheerwagen]

Abstract |

Last month the ApeCoin DAO community approved AIP-98 for Snag Solutions to build an official marketplace for ApeCoin DAO - enabling the sale of Yuga NFTs with reduced marketplace fees. As part of that proposal we agreed to set aside .25% of each transaction in a community-held Gnosis multisig until a use of funds is voted on by the community.

The purpose of this AIP is to:

1. Propose to use the .25% as a funding source for AIP-124 - the ‘Thank APE’ proposal.
2. Summarize other top options for use of funds we’ve heard from the community, and clarify why we believe Thank APE is the optimal use of funds.
3. Collect community feedback to ensure our decision-making fully reflects the desires of our community.

Note: until a new AIP is voted on and implemented we’ll route all funds to the multi-sig as agreed, and can re-route from the multisig when the use of funds is agreed on in a follow-on proposal. This AIP will only go to a vote if AIP-124 passes.

Note #2: We received feedback from several community members in the ‘AIP Idea’ phase that it’s worth scoping how the DAO can be set up to accept funds so we have the option to route extra funds back to the DAO in the future. I split this out as a separate proposal since this piece will require budget + move on a slower timeline.

Motivation |

Last month there were several proposals for building an official marketplace for ApeCoin DAO. While only Snag Solutions was approved, it opened the question of how the DAO should use new revenue streams, since ApeCoin Foundation isn’t legally set up to receive revenue today.

In the interim, we proposed routing the new marketplace revenue stream to a multisig to ensure we’re driving value for the DAO via marketplace usage while giving us the space and time to determine use of funds in a separate proposal.

Sharing an overview of the options generated via community feedback re: uses of funding in our previous proposal:

1. Burn the funds

• Pros: Burning $APE increases the value of remaining $APE ~proportionately to the amount burned so all holders benefit. See the impact of EIP-1559.
• Cons: $APE is an important currency for The Otherside and the interoperable metaverse. Thus, this may have potential future negative consequences. Additionally, this may increase the risk that $APE is viewed as a security.

2. Route funds directly to charity

• Pros: the proceeds go to a good cause, voted by the community, and ApeCoin gets a publicity boost.
• Cons: Holders + our community doesn’t have the option to receive any benefit from this themselves.

3. Ask Cartan Group to scope and execute the set up of a new legal structure that can accept and choose how to deploy funds. Separate proposal on this here.

• Pros: Directly provides value back to the DAO.
• Cons: The DAO was set up to disperse funds and disband after serving its purpose. Additionally, there is some increase in risk $APE is viewed as a security.

4. Point funds to Horizen Labs staking contract

• Pros: all stakers receive $APE proportionally similar to burning.
• Cons: implementation path is unclear but having exploratory convo with Horizen Labs. Also potentially risky legally and rewards those with large stakes already.

After weighing all options, we propose using marketplace funding to incentivize DAO participation that will drive long term value for holders and for the ApeCoin DAO community. These behaviors could include: voting in SnapShot, engaging in Discourse, building value-creating infrastructure, listing or buying NFTs on the marketplace, and much more.

1. Pros: Assuming AIP-124 passes, we will have the infrastructure to incentivize contributions to our DAO that create the most value for our community. We can then work with the Thank APE Advisory Board (OG Apes) to continuously optimize value creation over time.
2. Cons: Some of our largest holders may not want to participate and this proposal doesn’t drive direct economic value via token price. Instead, it rewards inputs that lead to long-term value accrual.

We are excited about the approach of AIP-124 for the following reasons:

1. It aligns value-creating marketplace behaviors with value-creating DAO behaviors. As people use our marketplace, it will doubly support the DAO: by encouraging more contributions and by rewarding the community members who contribute value!
2. It exemplifies the intended power of the ApeCoin ecosystem: different initiatives working together to create potentially exponentially more value for ApeCoin than they can alone!

Based on feedback we’ll also file a separate AIP to scope setting up the DAO to accept revenue in the case there’s excess revenue in the future that can be better used elsewhere.

(Recommended reading: AIP-124)

About Us |

@Zheerwagen is CEO of Snag Solutions and a BAYC, MAYC, and ApeCoin DAO member. I am drafting this proposal as a member of the ApeCoin community: I believe an optimal use of any funds we generate for the community would be to give back contributing members of our community as part of ThankAped during their 6-month pilot!

If other community members believe a different use of funds will drive more DAO value I encourage you to provide feedback via comment so we can incorporate. If there’s a clear community preference for another use of funds I’m happy to adjust the proposal.

Snag Solutions creates white label marketplaces to help NFT creators take control of the buying experience and reduce fees for holders. They were recently approved to build an official NFT marketplace for ApeCoin DAO and work with Goblintown, Crypto Chicks, and others.

ThriveCoin makes it easy for DAO communities to auto-reward and auto-recognize their community members for the value-creating contributions they make across platforms. They’ve proposed to help ApeCoin DAO drive engagement in AIP-124 and already work with large organizations like Bankless DAO.

Incentivization decisions will be driven largely by the ApeCoin OGs who have volunteered for the Thank APE advisory counsel above.

Rationale |

The goal in setting aside .25% of every transaction is to ensure ApeCoin marketplace usage benefits the DAO. But because any behavior from a small group of individuals that directly increases token value could cause $APE to be viewed as a security we must tread lightly.

We prefer the approach of AIP-124 because:

1. It directly invests proceeds into the ApeCoin community - rewarding community members who create value for the DAO.
2. It enables us to reward contributions that will drive long-term value for our ApeCoin community including marketplace usage.

Specifications |

We propose to route the full .25% in proceeds to the Thank APE funding account (managed by the Advisory Board of OG Apes) as a natural funding source for community rewards. If Thank APE isn’t renewed we’ll route funds back to the Gnosis multi-sig until a new use of funds is voted on.

The table below gives a sense of potential contribution in $$ based on total Yuga sales and the % of sales made on the ApeCoin marketplace.

Thank APE will reward ApeCoin community members who list, buy, or use other ApeCoin marketplace features. This is an addition to the other platforms where ApeCoin DAO members communicate:

• Discourse
• Snapshot
• Twitter
• ApeCoin Marketplace
• more…

(The below section is pulled directly from the Thrive AIP):

We recommend using the ThriveCoin technology to:

Auto-validate ApeCoin DAO contributions:

• Auto-validation of activities across all relevant platforms (e.g. Twitter, Discourse, Snapshot, etc)
• Granular control over specifically what activity to reward
• Platform-specific quality control filters to greatly reduce fraud risk

Auto-thank ApeCoin DAO contributions on-chain:

• Auto-validated contributions are automatically recorded on the Mumbai network, Polygon chain
• All contribution details are logged in an IPFS file (blockchain storage) referenced in the on-chain record

Auto-reward ApeCoin DAO contributions with APE and charitable contributions:

• At the conclusion of “Seasons”, contributors will receive APE as rewards for their contributions.
• If their APE earned is above a certain threshold (likely average gas fees) they can keep their reward OR donate their reward to charity.
• If their APE earned is below that threshold, their rewards will automatically be allocated to a charity.

Timeline & Steps To Implement |

1. Thank APE vote approved, and Thank Ape system confirmed secure prior to launch.
2. Funds pointed to ‘Thank APE’ wallet and utilized when they launched in November. If funds have accrue to the multisig prior to a vote we’ll send those as well.

Overall Cost |

N/A - we’ll use the marketplace funding source

In addition to cost not being a factor, we believe this proposal will create enormous value for the DAO and for all of our community members.

[Halina.eth]

Thanks for breaking down our options in this post @zheerwagen!

@zheerwagen

What’s your feedback on the proposed approach? If you prefer another option, why?

Between options 1-5, I’m very wary of 1, 3, and 4 due to the mentioned risk of being viewed as a security and/or legal risks, especially given the context of the recent activity between the SEC and Yuga Labs, Bored Ape, and ApeCoin.

I’m greatly in favor of option 5 (AIP-124/Thank Ape) as incentivizing participation & contribution is key to a healthy & thriving DAO! Option 2 (charity) is a great alternative.

@zheerwagen

Is there anything we’re missing, or anything you can suggest to improve the proposal?

Based on the % sales through ApeCoin Marketplace & Total Yuga NFT Sales Volume chart, it seems like in the highest contribution scenario the option chosen could receive as much as $25,000,000 in USD.

As a thought experiment, were this scenario to occur:

• would the entire amount go to the chosen option (say AIP-124) to be distributed immediately? The $25M hypothetical would seem like an excessive amount, given the ask for AIP-124 was about $1.2M for a period of 6 months.
  • Would there be a cap on how much would be distributed immediately vs. kept in reserve, and what processes would be in place to determine this?
• Could this in theory allow us to choose 2 options, say if the USD contribution exceeds $5,000,000 in a certain timeframe $5M would go towards AIP-124 while the rest could go towards charity?

Looking forward to hearing your thoughts on this, congrats again on the passing of AIP-98!!

-Halina.eth

[Mantis]

1. I’m in agreement that funds are best used to incentivize participation and build on AIP-124.

2. Assuming sales reach something like $25M, has anyone thought of creating a perpetual treasury by running principal through the soon-to-be-here staking protocol and giving out yield as rewards rather than the principal? This has a few advantages:

a. Locks $APE, stabilizes token value
b. Creates a perpetual rewards pool
c. Protects DAO from losses/sunk funding while bot mitigation strategy is worked out (good point here in the other proposal Halina)

• Mantis

[Amplify]

Thank you @zheerwagen for your proposal! It’s so cool to see multiple AIP’s building off of each other and complimenting the whole ecosystem, great job!!

I would love to see AIP-124 pass and subsequently this AIP route funding towards that initiative, but like @Halina.eth mentioned I am wondering if we are able to split the funds between multiple initiatives. It might be possible to fund all of these initiatives, minus the burn. I don’t agree with token burning as a means of value creation. I would much rather us focus on increasing demand vs. decreasing supply.

Personally, I think it’s worth exploring Option 3 shown below:

@zheerwagen

3. Ask Cartan Group to scope and execute the set up of a new legal structure that can accept and choose how to deploy funds.

This has been mentioned by the Cartan Group in previous office hours and I think it’s definitely worth asking them to do the exploration work necessary. They don’t need to set up the structure right now, but it would be very nice to have an outline and scope of what’s possible in the future if we want to pursue that further.

@zheerwagen

Cons: Some of our largest holders may not want to participate and this proposal doesn’t drive direct economic value via token price. Instead, it rewards inputs that lead to long-term value accrual.

I personally don’t see this as a con at all. Long term value accrual and rewarding builders and doers in this community will in turn drive economic value via token price, but I see what you’re saying.

Overall I support routing funds to AIP-124 Thank Ape. I am curious about having multiple initiatives funded with this revenue though. I know we can always propose an AIP in 3 months after this one passes to add another initiative or re-route funds if needed.

[zheerwagen]

Hey Halina! Thank you as always for the feedback, and for the general support of funding AIP-124.

Digging in a bit on your second question, yes, we can split the funds, but…

1. The way this is structured the Thank Ape Community board is already in control of how much funding to push to any given behavior or initiative. My personal preference would be to ensure we have the right folks on that board so we can adjust as we learn. On a personal note I think you’d be an awesome candidate for expansion if interested!
2. To your first point, the board can also choose to keep excess funds in reserve as we calibrate to determine optimal uses of funding.

Hope this helps, and very open to a formal ‘cap’ if it makes the proposal more digestible for the community.

[zheerwagen]

Hey @Mantis - thanks for this, to be honest I hadn’t thought of this and really like the idea. I’m having an early convo with Horizen Labs later this week and can try to understand feasibility then.

This could be a great way to help us organically grow the treasury that can then be utilized for this type of initiative. CC: @thrivegiraffe

[zheerwagen]

Thank you @Amplify - really appreciate the feedback!

To me the key takeaway is that even while we push forward with AIP-124 as a use of funds it’s important we bring the DAO along and scope/develop the ability to capture revenue.

For the v2 draft how would you feel if we:

1. Kept the proposal as is for now re: use of funds
2. Add a second ask to the proposal (likely with a small budget) to request Cartan group scopes the ability to accept funds and comes back to the DAO with a recommendation on feasibility, risk, and cost

If this sounds right I can try to figure out the rough cost needed to take this on and try to work it into the proposal so we have the option in the future.

[thrivegiraffe]

Thanks for sharing this proposal, Zach. I’m a huge fan of Snag Solutions and - if the community desires - I’m excited for Thank APE to collaborate with you to create even more opportunities for community members to be rewarded for contributions to our ApeCoin DAO.

Two quick notes:

1. Zach and I have talked at length about this proposal. Thank APE is behind it - and behind whatever variation of it the community desires. If our own AIP passes, we can support it!

2. I believe the future of ApeCoin DAO is connected to our ability, as a community, to work together well. I love that this proposal is an example of collaboration in action: two separate initiatives working together to create even more value for the community. I believe it can be the first of many such collaborations for ApeCoin DAO!

3. I am excited to see where this goes!

• Daniel

[Amplify]

Thank you!! I think this is definitely worth exploring, but I am hesitant to ask you to include it because I feel like it takes a fairly simple AIP and makes it semi-contentious around liability issues.

I’m just not 100% sure we’re ready to open that can of worms, but I trust your judgement and I would vote for it if it went to snapshot.

[Halina.eth]

Thanks for the response Zach. Would love to explore working more closely with Thank Ape, whether that be as a board member or as a member of the ApeComms team!

Your point makes sense, glad we explored this! I trust your judgement when it comes to whether to implement a formal cap as part of the proposal, looking forward to seeing it come through

[Escape]

Hi @zheerwagen,

Are you content with the feedback received, or do you wish to extend community discussion for a further 7 days?

If we do not hear from you within 24 hours after your topic closes, your topic will be moved straight to the AIP Draft process.

We look forward to hearing from you.

-Escape

[zheerwagen]

Hi @Escape, yes, I’m happy with the feedback received. Based on feedback and conversations I’d like to move into drafts with this proposal with just a few minor changes, but will also likely add a separate proposal on scoping DAO ability to accept funding that can move forward on its own timeline.

[Escape]

Thank you @zheerwagen for your ideas and the ApeCoin DAO community for the thoughtful discussions. A moderator will get in touch with the author to draft the AIP in the appropriate template. Once the AIP is drafted and meets all the DAO-approved guidelines, the proposal will be posted on Snapshot for live official voting at: Snapshot

Follow this Topic as further updates will be posted here in the comments. @zheerwagen please see your messages for the next steps.

-Escape

[Pearson]

Hi ApeCoin DAO Community,

@zheerwagen has completed editing their AIP Idea to be their AIP Draft.

Follow this Topic as further updates will be posted here in the comments.

Kind Regards,

-Pearson

[Halina.eth]

Excited to see this come up for vote! This sets a great precedent for DAO-funded initiatives becoming self-sustaining, and demonstrates a playbook for other projects to do something similar

[Mantis]

Even if the DAO starts being able to accept profit, initiatives like this should continue to proliferate to efficiently make use of that extra cash.

[adventurousape]

Thanks so much for your proposal. I really like this idea!

I think @Halina.eth had a great idea about splitting the funds between multiple initiatives. I also love your initiative to scope out if the DAO should accept funds. I worry that as time goes on, there will be more and more projects that could bring in income, but will just set up a wallet that will just sit there until the DAO decides what to do with profits. There is no one responsible for tracking it all.

Regarding splitting the funds, what if a portion could go towards a bug bounty program?

[Vulkan]

Sorry I’m so late to post on this! Agree having the tokens burnt would definitely increase the risk of being viewed as a security and is something we should avoid.

Utilizing the funds to incentivize engagement and participation is interesting, as is the Bug Bounty idea @adventurousape brought up. The best thing about AIP-134 in my opinion was how it opened our eyes to the benefits of a bug Bounty for multiple projects going forward.