Staking rewards-restructuring | Ecosystem Funding Mechanism (EFM)

MIPs
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Proposal for sustainable funding mechanism and community empowerment in blockchain adoption

In the crypto and business sector, sustainable funding mechanisms are essential for fostering innovation, supporting development, and ensuring the long-term success of the whole ecosystem. Initial funding is vital for projects to establish themselves and progress towards profitability. However, on MultiversX, accessing adequate funding has proven challenging, impeding the growth trajectory of many projects and decreasing the attractiveness of the protocol for new builders due to higher difficulties. This funding barrier has hampered development efforts and hindered the realization of potential new projects.

Recognizing the need for equitable distribution of resources and community involvement, this proposal advocates for the implementation of a decentralized autonomous organization (DAO) system to allocate funds generated from staking rewards towards supporting projects that contribute to the growth and advancement of the MultiversX blockchain ecosystem.

Objectives:

  1. Establish a Sustainable Funding Mechanism: Implement a DAO system to allocate funds generated from validator rewards towards supporting blockchain projects.
  2. Foster community empowerment and involvement: Empower the community to participate in the decision-making process regarding project funding, thereby promoting transparency, inclusivity, and accountability.
  3. Stimulate Innovation and Growth: Provide financial support to projects that demonstrate potential for innovation and positive impact on MultiversX adoption, thereby fostering growth and attracting new builders.

Proposal Details:

  1. Decrease Rewards Allocation: Decrease the rewards allocated to validators and users, redirecting a portion of these tokens towards the DAO fund. Percentage to be discussed.
  2. Implement DAO Governance: Establish a decentralized governance structure wherein community members have the opportunity to propose, vote on, and prioritize projects for funding based on predefined criteria and milestones. This should come with some strict rules to avoid possible manipulation and community reckless decisions.
  3. Accountability mechanisms: Introduce mechanisms such as milestone-based funding and team veto to ensure responsible allocation of funds and mitigate risks associated with project execution.
  4. Promote transparency and communication: Enhance transparency by providing regular updates on the status of funded projects, facilitating open communication channels, and encouraging community feedback and engagement.

Expected outcomes:

  1. By leveraging the DAO system, ensure a sustainable funding mechanism that supports ongoing development and innovation within the blockchain ecosystem, increasing MultiversX adoption and attractiveness for external new builders.

  2. Community engagement: Foster a sense of ownership and engagement among community members by empowering them to actively participate in the decision-making process regarding project funding.

  3. Accelerated Growth: Stimulate innovation, attract new builders, and accelerate the growth of the blockchain ecosystem by providing financial support to promising projects.

Community will have all the interest to conscientious vote cause:

  • Bad decision = useless sell pressure
  • Good decision = increased mid-long term buying pressure on EGLD due to increased adoption

Conclusion:

By implementing a DAO-based funding mechanism, we can align incentives, promote accountability, and harness the collective wisdom of the community to support projects that contribute to the long-term success and sustainability of the blockchain ecosystem. This proposal represents a proactive step towards building a more builders attractive blockchain infrastructure; potentially increasing adoption for the benefit of all stakeholders.

Extra valid additional proposal from BL0CKRUNNER:
Other than taking fees from staking rewards we could also think of redirecting the 30% SC fee to this DAO system. Fees generated atm are not enough to be relevant for singular builders, but if aggregated would be enough to fund some new projects.

5 Likes
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Love it! Great idea! :heart_eyes:

2 Likes
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I really like it!

A small % could go a long way possibly.

As mentioned on Twitter, even redirecting 2% of total daily yield could help raise 400-500 EGLD a week I believe towards a DAO controlled treasury. While only lowering average APR in pools by 0.14%.

5% possibly raising 1200-1400 EGLD/week while lowering APR 1/3rd a point.

My numbers may be off so please correct me if so.

At 5% that could be around 5k EGLD a month which could have a great impact on the dev space and bringing people in I imagine.

Curious to hear more thoughts.

1 Like
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I also see a future where fees will have multiple purposes (marketing, funding projects/research, education, etc).
We already have a very basic form of multi-purpose fees (*please correct me, if Iā€™m wrong):
ā— 10% to the block producer
ā— 90% to be distributed, from which:
ā—‹ 10% to the Protocol Sustainability
ā—‹ 90% to validators/delegators
(+ 30% of the SC fees to the SC owners)

At the same time I donā€™t think the community is ready yet to handle this kind of funds in an effective and efficient way. Itā€™s just a feeling, so I might be wrong.
Weā€™ve only had 1 governance vote so far, Staking Phase 4 isnā€™t even live yet (to see the effects) and DAOs still seem (at least to me) in an experimental phase on MvX.

I think the discussions on fees distribution restructuring will make more sense when weā€™ll be closer to the post-inflation phase.

Just my two MEX :man_shrugging:

Oh, and btw, by ā€˜feesā€™ I mean fees + inflation :point_up_2:

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Yep, 5% should at current value generate around 3mln$ per year in incentives/grants for projects.

10% would be 6mln, and we can expect EGLD to grow.

Basically it could start a loop:

  • Projects number increase cause of incentives
  • Some successful ones are made
  • They increase adoption and txs on chain ā†’ more fees
  • Part of those redirected to new growth

At this stage with inflation, I think itā€™s a good idea.

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Iā€™ve thought about it too.

Worried cause users may vote for useless NFT projects and not for those adding more value to the chain. On that I think KOLs and active people in the community (that usually know better the chainā€™s dynamics) could do a great work in ā€œinfluencingā€ the community into correct choices.

Also, I suggested some influence from the foundation with a veto power and the power to filter projects being listed on this DAO as proposals based on some specific critieria weā€™d have to set, so reducing the amount of low-quality projects.

Not fully decentralized, but I think itā€™s a good compromise.

1 Like
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Maybe the community will be more interested if weā€™re talking about some airdrops from the projects that receive funding this way? You will be interested to vote for the best project, that will really bring value?!

1 Like
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Could be a way.

Maybe airdropped to those contributing on this project as a criteria to receive the airdrop. And then proportional, based on some other criteria from userā€™s activity

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Creating a fund for developers and new projects managed by a DAO is not a bad idea.
Although the stakeholders, voters of that DAO have to be carefully chosen.

The selection of projects and funds for them is hard, insanely hard.