Reputation in Growth

Xavierkuddus

12 min readNov 11, 2020

Governing the Engine for Sustainable Open Finance 🗳

PrimeDAO

Nov 2 · 7 min read

It is recommended that readers unfamiliar with Prime start with this introduction or Prime’s documentation. This blog assumes a prior understanding of the DAO, its mission, and its development stages.

PrimeDAO’s mission is to facilitate the wide adoption of Open Finance by coordinating and cultivating projects that promote safety, reliability, liquidity, and open access, while avoiding centralized appropriation of critical financial infrastructure through decentralized governance.

PrimeDAO is quickly approaching the transition to its Growth stage. At the conclusion of its Initial Decentralized Offering (IDO) on November 30th, its Mainnet instance will be deployed. This blog post details the process by which the DAO’s membership, largely made up of token holders, ambassadors, and contributors, are rewarded with Reputation or PRIME in exchange for their skin in the game, good governance, or contributions made.

xDAI Burner DAOs

With Prime’s introduction to the Ethereum mainnet, a potential schism emerges with the Reputation (REP) ledger of Prime on xDAI. Reputation-holding members on the Ethereum mainnet may not have the same REP quantity as the members on xDAI. Left to itself, this schism would grow and effectively create two separate governance assemblies that do not accurately mirror each other.

But, why not just use the mainnet version of Prime? Why do we need two DAO instances in the first place? The answer is clear: Ethereum’s oppressive gas prices make the cost of governance too high, and in some cases, impossible when the network is extremely congested. This corrupts the governance process, diminishing its legitimacy, and violates Prime’s commitment to diversity. How can we reasonably expect a diverse range of participants to govern, when voting is unaffordable?

The interim solution to this issue, as determined by the DAO through this proposal, is that Prime’s governed protocols and interfaces that exist on the Ethereum mainnet — such as primedao.eth — will be governed by a DAO, but this DAO will be a “vessel” of its xDAI counterpart. Through a social consensus, Reputation-holding members of the mainnet DAO agree to follow a single source of governance truth — Prime on xDAI. Prime’s members have agreed to do governance through a single, designated entity, and then apply passed policies to other parts of Prime’s cryptonetwork. Keep in mind that Prime’s xDAI/Mainnet DAOs may only be the beginning of a network of entities that are deployed across multiple chains. While entities on other chains may not be technically interoperable without heavy R&D, they can be socially interoperable, as long as policies enacted comply with the source of governance truth.

In order to accurately mirror the Reputation values of Prime on mainnet, every builder cycle, a new xDAI DAO will be deployed — a Burner DAO. Burner DAOs will be deployed by trusted stewards as determined by Prime. Deployment is easy, taking as little as fifteen minutes to complete using DAOstack’s xDAI DAO Creator. Burner DAOs at deployment will be made to match the Reputation of PrimeDAO on the Ethereum mainnet, similar to a snapshot mechanism.

While this solution is clunky, a handful of elegant solutions are being explored by different teams to unify Prime’s xDAI and mainnet instances. The DAOstack team, for instance, is exploring a DAO scaling solution similar to the solution pioneered by Snapshot and the Aragon framework. Nonetheless, PrimeDAO is open for proposals, and builders who want to create these scaling solutions — if you think you have the answer, submit a proposal!

Optimizing Attention: Monthly Proposal Cycles

Crowds that self-organize into effective cycles become true collaborative networks, instead of devolving into politicized mobs. Graphic taken from “Try Design Thinking + Scrum,” by Takeshi Yoshida. Original article, Lifecycle.

Admittedly, periodic Burner DAOs aren’t an elegant governance solution. But they do bring an unexpected benefit by introducing a cyclical rhythm to the governance of the DAO. Many projects today in blockchain find themselves encumbered by non-stop governance. A mistaken assumption tends to be made that as cryptocurrency markets function 24/7, governance should also function 24/7, regardless of how the human mind or collectives actually work.

In practice, groups of all scales go through governance cycles:

Nation-states schedule dedicated governance periods where democratically elected legislators convene.
Corporations have a general assembly of investors, who typically meet once per year to elect an executive committee called the Board of Directors.
Project teams go through sprints, where a plan is made, refined, executed, and reviewed, often in one-month cycles.

With this in mind, PrimeDAO has approved a given builder cycle, loosely analogous to sprints:

For the first week of the cycle, new proposals will be submitted to a recently deployed Burner DAO for ratification. It’s this week that the governance assembly participates in proposal curation, passing the most value-aligned proposals, and courteously declining the remainder.
Following this, the xDAI proposals, if passed, are submitted to the Mainnet DAO with rewards attached. Since a social consensus is being enforced, those voters who do not follow the social consensus should expect to have their mainnet Reputation slashed if they act counter to the source of governance truth.
In the last week of the cycle, contributors will share and review their work, presenting results and stating ongoing challenges that require further assistance. In parallel, contributors will present pre-proposals — proposals that have not yet been submitted to the DAO — to the public for open comment and review. Part of PrimeDAO’s Code of Conduct is self-accountability, and contributors are expected to maintain norms of transparency in this regard.
Deploy a new Burner DAO and repeat …

The main advantage of this rhythmic process is streamlining attention: if the collective is aligned in its virtuous, value-creating cycles, it can achieve optimal levels of efficiency, transparency, and co-accountability. Over time, the DAO should adapt these cycles to best represent its organic processes and rhythms that emerge. Structurally, we can even imagine more Burner DAOs beyond the general assembly of Prime’s mainnet Reputation holders — squads, campaigns, and joint ventures that have specific missions and initiatives assigned to them by the DAO. People have limited attention, and knowing what, when, and why they need to focus on certain things is extremely helpful in aligning and elevating a collaborative network like Prime!

PRIME and REP Rewards by Stakeholder Group

Now that we understand the proposal submission process in Growth, let’s move on to the reward mechanics by group:

PRIME token holders

Learn more about Prime tokenomics here.

PRIME token holders may earn PRIME or Reputation rewards from the DAO in two ways:

By staking PRIME into Prime’s first governed Smart Pool. One of the DAO’s first plugins will be the ability to govern Balancer Pools, alternatively referred to as Liquidity Pools (LP). LP’s are a type of automated market with a basket of tokens that have different weights. This first pool will weigh 80/20% PRIME/ETH. For this pool, Prime will experiment with co-farming, where liquidity providers receive PRIME token rewards in exchange for depositing liquidity to the pool. 500,000 PRIME will be allocated as rewards to the pool for co-farming in its first rewards cycle.
By locking their PRIME tokens for up to six months. 5,500 Reputation will be split between PRIME lockers, which will approximately double the Reputation of the DAO. The quantity of Reputation received is a function of the amount of PRIME locked multiplied by the length locked. The final amount is then distributed pro-rata based on the aggregate of all lockers. A final note: PrimeDAO has determined that any individual in the DAO should not possess more than 500 REP. With this in mind, any locks that result in higher than 500 REP will have their Reputation slashed by the DAO.

Ambassadors and Contributors

As you may recall from the tokenomics blog post, PrimeDAO has been governed and will continue to be governed by a network of ambassadors who bring expertise in DeFi or DAOs to the project, or as contributors directly offer services to Prime as builders. A matrix of rewards is available to them in order to align incentives across all interest groups.

Ambassadors receive their reward tokens from whatever remains of the 3.6m PRIME budget established in the Incubation stage for governance. This budget was established in PDP 001. From the proposal:

In the Incubation stage, Prime may issue a maximum of 3.6m PRIME as rewards, as determined by the litepaper. At the initialization of the Growth phase, these rewards will be foremost issued to Incubation contributors in vesting contracts, and the remainder of the unassigned PRIME will be distributed to its ecosystem governors [ambassadors] in vesting contracts in exchange for their good governance.

Contributors will receive their reward tokens from the contributor reward portion of the overall budget distribution, or 14.5M PRIME tokens.

Note that the following rewards matrices may stack REP accumulated as ambassadors or contributors with REP earned from locked PRIME, up to a maximum ceiling of 500 REP for a given individual, or 1000 REP for a given organization.

Rewards Matrix for Individuals

Rewards Matrix for Organizations

Refrain: Call For Contributors

The collaborative network that co-governs PrimeDAO

While PrimeDAO’s first iteration revolves around its first products — the Prime Aggregator and Prime LP Manager — its product horizon is near-endless for its formative builder collective. We need you to move Open Finance forward in a safe and inclusive fashion. To learn more about joining PrimeDAO, see this handy guide.