Situation
On May 4, the Bankless DAO launched $BANK, a token designed to help facilitate coordination within the DAO and support its activities. At launch, $BANK was explicitly described as a “valueless token that simply represents participation in the bankless community.”
In the weeks post-launch the community has begun to think more expansively about $BANK, by asking the question: Is $BANK money? As outlined by @frogmonkee in his post, “Is $BANK Money?”:
- Community members have begun to utilize $BANK as a medium of exchange by using it to fund bounties, making plans for the asset to be used to pay individuals and teams for providing services to the DAO, and sending $BANK tips to other community members
- Because $BANK is being used to pay community members and other commerce-related activities it is becoming a unit of account
- However, $BANK is not yet a store of value because there is no “value” associated with the asset (for example holders cannot earn revenues from DAO activities by holding or staking $BANK).
Clearly $BANK is taking a central role in the Bankless DAO community. But because it is not a store of value it cannot be reliably utilized as an asset that will be readily accepted by external partners, community members and others as a means of payment, or for commerce.
Today, after consultation with community members in the #tokenomics Discord channel, I’m presenting the “Transmuting $BANK into a Store of Value” initiative.
The purpose of this effort is to rapidly achieve community consensus on a model that will help $BANK be viewed/used as a store of value — and increase in value over time. This will help the DAO gain the significant economic power required to achieve its mission.
There are two questions associated with this initiative that the community should consider:
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Should a percentage of revenue generated by the DAO (when the DAO begins generating revenue, no matter how small) be utilized to increase the inherent value of the $BANK token?
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If the answer to question 1 is “yes”, what should be the strategy? (See below for two options).
Two Tokenomics Models: Staking or Buy, Burn and Hold
During initial discussions in the #tokenomics Discord channel, community members have been focused on two potential models for injecting additional value into the $BANK token (table below, click to enlarge).
Key Issues Raised in Conversations to Date
There has already been robust discussion on the #tokenomics Discord channel about this topic. Questions and conversations have been centered around the following topics. I present commonly discussed questions/issues and provide my responses below.
1. Is it too early to begin thinking about diverting a portion of the DAO’s Treasury toward increasing $BANK’s value given that the DAO has no significant revenues?
My Response: It’s never too early to make a decision about whether to utilize a portion of the DAO’s Treasury to support/boost $BANK’s inherent value. Doing so will ensure that conversations moving forward about DAO revenue utilization and allocation account for the fact that the community wants to utilize some of the DAO’s resources to support $BANK’s inherent value proposition and bolster its market valuation.
2. Do we need to have the DAO’s governance structure figured out before we make a decision about utilizing the DAO’s resources in this way?
My Response: Governance discussions are focused on how to support/reward/encourage DAO activities. Many of these proposals align around rewarding contributors or providing teams with $BANK. Ensuring that $BANK’s value is supported and bolstered by the DAO will make the token more valuable for contributors and participants and help the DAO achieve/support its mission.
3. Does it have to be staking OR Buy, Burn and Hold? What about both?
My Response: Yes, this is something I think the DAO should consider. @Eagle argued for this strategy in the Discord. I think his points are valid.
4. Governance tokens such as UNI appreciate in value and token holders do not receive earnings and tokens are not burned/bought. Why would investors/speculators/members not purchase $BANK for the opportunity to control an organization that could one day have billions in its Treasury? Also, people purchase non dividend-paying stocks of high-performing companies? Why wouldn’t they do the same with $BANK?
My Response: This is a good question. However, I would argue that buyers of tokens such as UNI and Compound are anticipating that one day there could be a distribution of rewards from the protocol to holders, or a buy and burn mechanic could be implemented. Crypto is most successful when economic incentives are aligned. Meaning protocols harness individuals’ needs and wants (generally the potential of direct economic benefit, e.g., receiving mined tokens, earning token rewards, yield, etc.) to drive collective behavior. Best to accept and harness rather than deny this reality.
Also, putting a plan in place early to deliver value/bolster the value of the $BANK token provides this unique DAO with a powerful means of driving its mission as it gains significant economic power becasue it made a clear commitment to enhancing and boosting the token’s value, which will drive others to utilize the token as a store of value.
This post can be viewed as a further refinement of the conversation here, led by @Icedcool (Profile - Icedcool - Bankless DAO) (Tokenomics of Bankless DAO), where a consensus is building that $BANK is a financial asset and a governance token.
Polls and Next Steps
To gather a signal on how the community feels about the potential strategy of explicitly bolstering and boosting the value of $BANK utilizing the DAO’s revenues, I have put together two polls (below).
Once we have a sense of how the community would like to proceed, and if community sentiment favors leveraging a portion of the DAO’s revenues in this way, I will put together a proposal on this subject that will then be utilized to inform Snapshot vote on this issue. I look forward to the conversation.
- Yes, Utilize a Percentage of the DAO’s Revenues to Bolster the Value of $BANK
- No, Do Not Utilize a Percentage of the DAO’s Revenues to Bolster the Value of $BANK
0 voters
The below poll is for individuals who voted “yes” above.
- Use a Portion of the DAO’s Revenues to Buy and Burn $BANK (A Portion of Purchased $BANK Would be Retained by the DAO)
- Create a Rewards Program Where $BANK Stakers Receive Token Rewards from DAO Revenue
- I Support Both Strategies
- I Support a Different Strategy (Please Describe in the Comments)
0 voters