FF Treasury Diversification Proposal

Carlos

TL;DR

This proposal seeks to increase Forefront DAO Treasury diversification by exchanging $FF tokens for stablecoins. This process will be conducted in two phases: first an exchange to strategic partners, then to Forefront contributors.

Motivation

Forefront treasury is currently composed of FF tokens (72% of total supply of FF) and a small allocation of ETH and ROBOT tokens accrued via NFT and Merch sales. Because 99% of the treasury is denominated by $FF, it remains highly unsustainable for the long-run development of the community.

Furthermore:

All operations and community incentives currently are funded via $FF from the treasury or by selling $FF on the open market;
$FF market is highly illiquid and volatile;
The treasury does not have a sustainable or stable asset in the event of a bear market;
The treasury lacks a productive asset to allow further diversification and growth.

As the Forefront DAO looks to expand its operations and onboard full time contributors, a diversified and sustainable treasury has become apparent. De-risking the treasury with more liquid and stable assets will allow us to fund operations and programs via USDC instead of $FF tokens or exchanging $FF in the highly volatile open market which further alleviates the selling pressure on $FF.

Specifications

We propose exchanging ~ 14% (or 1,000,000) of the $FF held in the DAO Treasury to strategic investors and community members for $1M USDC at a fully diluted network valuation (FDNV) of $10M.

Considering the volatility of the market, low liquidity, and infancy, this proposed evaluation is derived from the total network value including Forefront product.

Of the total allocated amount, 80% of the total raised amount will be allocated to strategic partners, while 20% will be reserved for whitelisted contributors / community members.

All proceeds of this strategic round will go directly to the DAO Treasury.

Strategic Partners

The strategic round is looking to bring a group of high value investors, angels and contributors to Forefront, many of which have been active in our mission, including Pet3r Pan (1kx network), Yoni (Own.fund collective), Andy Chen (DeFi Collective), Jenil (Coinvise), Brett Shear (Palm Tree Crew), Jacob Hornes (Zora), Patrick Rivera (Mirror) and Trevor McFedries (Brud). Final list will be confirmed and updated on snapshot at the time of the voting.

800,000 FF tokens or 80% of the proposed raised amount will be allocated to these strategic partners, in exchange of 800,000 USDC.

$FF tokens acquired via this round will be subject to a 12 month cliff, plus an additional 12 month linear monthly unlock after the cliff.

Forefront contributors will finalize the final allocation amount and exchange details, as well as deploy an escrow contract to ensure and enforce the vesting agreement.

Community Round

A max allocation of 200k $FF of the 1M $FF (20%) will be reserved for the community, prioritizing FF contributors as defined by Season One guidelines.

Forefront contributors will produce a list of all qualified members, according to the following criteria and process:

Favorable deal will be given to all existing contributors;
Following an initial commitment confirmation from contributors, a temporary public interest registration will be made available to all members; Preference will be given to members based on:
1) Past contributions to Forefront;
2) Sourcecred contribution graph;
3) Backers of FF NFT or Merch drop;
Community allocation is capped at $10K (min $5K) per participant;
If by the end of the community commitment round the allocated amount of 200,000FF is not fully filled, the remaining allocation will be rolled over to strategic investors.

Conclusion

We are planning a Community Hangout with select strategic investors in the near future, prior to the proposal vote. After hearing feedback from the community and iterating as necessary, the proposal will go to a Snapshot vote for a formal decision.

Update: On Friday 13th, we hosted a live conversation with Pet3r Pan from 1KX (potential lead investor) and other contributors to discuss the proposal scope, implications and answer community questions (including those on this forum), a recording of the call will be available on our discord #historian channel.

Next Steps

A Formal proposal will be posted on snapshot for community voting.

MFHAN-W

Carlos i support this

frogmonkee

I'm a lurker, but I am in favor of this. It's a common step for DAOs to take and diversification is necessary to continue bootstrapping. Best of luck!

Mhairi-UMA

Hey,

I'm Mhairi from UMA protocol, one of our community heard that you were looking into treasury diversification and I wondered if you were aware of UMA's Range Tokens and Success Tokens.

The Range Token operates like a zero coupon bond while it is in range, but outside of the range it operates like a token. It means that a treasury can borrow against their native token in anticipation of the price rising, and only have to sell their token if the price has risen substantially, while protecting investors from moderate downside risk.

The Success Token is a token with an embedded call option, so rather than offering a discount to strategic investors upfront, you can offer them a future discount if they add sufficient value to the protcol and the strike price is met.

They are a bit more sophisticated than a traditional token sale, but they allow defi treasuries to raise funds in a defi native manner, by leveraging the blockchain and relying on cryptoeconomic incentives to secure the contract rather than the traditional legal system.

There is a brief overview of the token types here
Let me know if you would be interested in exploring further.

CPTNskeletor

Mhairi-UMA Thanks for the sales pitch. Luckily the focus of this proposal is to allow for Community discussion and feedback. If you could please refrain from unnecessary schilling and add to the conversation that would be great.

Carlos

Mhairi-UMA We considered UMA Range tokens earlier in the exploration phase but due to FF market being highly illiquid and volatile this option proved to be less viable at this stage of the project. We will continue to monitor and provide feedback to our community as we learn more.

familyman

I am generally in favor of a strategic raise. I see the value in bringing in partners. But the deal should be market = Investors should pay a standard token premium + lockup. There are comps we can use for both

Carlos

familyman The deal was based on fully diluted network valuation prior to the recent illiquid token price increase (last 3/4 days), at that time it was a 50% premium on a 30day TWAP, still the case today. FF token Market is super illiquid and not the best criteria to base the deal terms, thus FDNV (token network + product ecosystem).

tian7eth

I am just curious how will these strategic partners help the community to grow in the future besides investment. We don't only need treasury diversification but also the community support. Such as onboarding more talent contributors, developing, marketing etc. I'd like to hear what these investors can provide. Investment is simple and you just put some money. Building a community is hard and you have to put money, time and energy.

CPTNskeletor

tian7eth these are great points. I can only speak to Peter Pan and Patrick Rivera, both of these people have community at the forefront of whatever they do. Peter Pan has help build Meta-Cartel and all of the community DAOs that have spun out of it.

Mirror is about as community focused as it gets, especially with its unique NFT sales and royalty splits. I am personally super excited to see these names listed as strategic partners due to the amazing reputation they have built in the space. Many examples from the projects/partners listed have been used to create the onboarding process of Forefront Season 1.

These partners are essentially like having Micheal Jordan fund your basketball team! Super excited to see what is to come and to use this momentum to propel Forefront and its members forward!

ClaytonUMA

Just wanted to add to Mhairi's post above - The benefit of using UMA is being able to create these deals in an entirely defi-native way. Why are you going to use judge-judy legal contracts to sell DeFi tokens? You can use UMA to create tokenized, trustless terms.

And once you're tokenizing terms, you can come up with things to @tian7eth's point: you can design other terms and payout conditions so they have better aligned incentives (these are KPI Options but I don't want to throw too many things at ya'll.)

As an added benefit: We have a few investors who are interested in investing in DAOs using these specific mechanisms, so would look at your sale. We are also keen to be loud about anyone who participates, so we'd have some good co-marketing to do together. We can offer free support on creating a proposal, as well. And we don't charge for this, we're just looking for opportunities to demonstrate the flexibility of our protocol.

CPTNskeletor

ClaytonUMA thanks for the product schill. I think it’s safe to assume the goal here is to get community feedback instead of a sales pitch.

ClaytonUMA

CPTNskeletor Noted - You're right.

Mhairi-UMA

CPTNskeletor Hey, sorry, I really didnt mean to shill.

We just have financial contracts that can be used for different forms of treasury diversification without the need for trad legal structures. A few other protocols have found that usefl and I wanted to make you aware.

Good luck with your investment round. 😃

milanshrestha

I'm a noob and please disregard my ignorance.

I believe in raising funds through strategic partnerships with teams and communities who share FF values and visions. I'm aware of only two strategic investors listed on the proposals - Pet3r Pan (1kx network) and Patrick Rivera (Mirror). Both of them are doing great and commendable works in this space - building communities and expanding the reach for everyone who wants to get involved.

I am very new to FF community and do not have much contributions yet. But, if I had a say; I'd support this raise and support the vision and roadmap established by the FF leaders.

Andy

Hey Forefront Community,

It’s been a pleasure to work with Carlos and the wider Forefront team to contribute towards some of the initial liquidity incentives and initiatives. To further fuel the development of Forefront, I’d like to share the inspiration behind the DeFi Collective support in the "Strategic Partners" section and why we've chosen to participate in the round.

The DeFi collective consists of members from major leading protocols in DeFi. Our main goal with this investment is to strategically support the Forefront community in strategizing and advising on the financial aspect of the community (incentives, staking, governance and income/revenue for the protocol).

The collective consists of strong talent in both engineering and business development verticals;
Andy CF: Synthetix core contributor, lead DAO and governance architect
Jackson Chan: OG Synthetix core contributor, inflation schedule and tokenomics.
Kevin Lu: Band Protocol lead and first business hire, grew total value secured by Band Oracles from $0-$10B+ (peaked at $17B) and global expansion.

We are honoured to be eligible to participate in this round and provide continued strategic support for the future of Forefront and the future of social token communities. 😃

- Andy CF

familyman

@Carlos Liquidity is not a relevant consideration at this stage of company. C-corps have zero liquidity at the early stage. $FF having liquidity is merely a +.
There also seems to be a number of questions that have not yet been addressed. I noticed you're already advancing this proposal to snapshot. If that's the case then this forum post was merely a formality and I'm a bit disappointed by the lack of community-mindedness and first principled thinking. We only heard from Pet3r Pan. We have not heard from other investors. We don't have a good understand of the uses of capital. We don't have a good understanding of what non-capital asks there are of investors. Why are we rushing this process?

Carlos

familyman Looking forward to answer some of these questions during our Tea Time community call this tuesday, but also having an open discussion on the current proposal structure, network valuation and vesting structure. Our goal is to make this process transparent and open to the broader community - Forefront is and will always be community driven, without the community it would't be where it is today, and certainly there will no tomorrow!

Grendel

Excellent proposal, treasury diversification is fundamental and being able to manage it without turbulence on the market is clearly optimal.
The path taken is the one that all the DAOs will tackle, even using other tools, such as those mentioned by UMA.

One of the most interesting aspects linked to treasury diversification is to provide for an exchange of stock of tokens between DAOs, so as to cement collaborations, lead to strong synergies and be less fragile towards the moods of the market.
The end result could lead to strong coordination between DAO treasuries thus creating a broad anti-speculative shield that would greatly strengthen the ecosystem.

jenil

Excited to support FF as they're building a tokenized community. In addition to helping with smart contracts and setting up their newsletter, I'd love to advise with strategy & potential potential projects they work in the future alongside our team at Coinvise.

yoni9091

we (own.fund) are excited to explore further how our members can help ff sharpen the product offering and monetization to the different social tokens issuers and to hopefully help increase the guilds size and its quality .