Community Treasury Fundraise to support Full Decentralization

[ira]

Tl;dr: A proposal will lay out plans to approve a community sale of $RLY with proceeds to fund the Community Treasury.

Hi folks,

I’d like to start a discussion about the long term vision of the Rally Network and how to get there. The plan is to design and execute a staged and gradual decentralization of the network, with the ultimate goal to achieve full decentralization, where the entirety of the Rally Network will be developed, operated and managed by the decentralized, empowered community. It’s a lofty goal, and one that many protocols have spent years trying to achieve. Rally is on the right track.

Where are we now?

When $RLY launched on Ethereum on October 15, governance tools and oversight were put in place to ensure that the network would be managed by the decentralized community. The network launched with Discord to enable the community to meet each other, interact and share ideas. This Discourse channel gives the community a way to introduce and dive deeper into issues and possible updates and changes. And, for those users holding $RLY through emissions and rewards, Snapshot provides a governance interface to seamlessly make proposals, review other community member proposals, and vote on them.

The Rally Genesis Team, comprised of members of the community and the original project team, acts in a ministerial and technical capacity, making proposals for review and discussion by the community, and executing on the decisions of the community.

It has always been the intent to have the community envision and execute on the potential of the Rally Network, and from the beginning, we’ve handed off the reins to the community to do so. There’s really no better team than the Rally community to steer Rally into the future.

What’s unique about Rally is that the network is not only the decentralized mainnet protocol and governance functions, but also the private sidechain, Rally.io. On Rally.io, the project team maintains an active role in working with creators, including getting their creator coin launched. While Rally.io is still some cycles away from decentralizing, the intention is that Rally.io becomes part of the toolkit for creators, but no longer the project of a centralized company.

What’s Next?

There are a lot of considerations on how to proceed with decentralization, and as we move forward, we’ll be doing so with transparency to the community, including through blog posts, Discord and here on Discourse.

As a starting point, we believe that the empowerment of the community goes beyond enabling the community to decide on and take action. Especially in these early stages, it’s also key to arm the community with the funds to execute on decisions that it makes.

How do we get there?

The Community Treasury was designed to power the development and realize the potential of the Rally Network. While the yield accumulated through the YDVs has been sufficient to fund the Community Treasury since launch until now, a larger pool in the treasury will enable the community to significantly scale the Rally Network and empower the community to effectuate even more development and engagement, including, for example, engaging developers to build the never-been-done-before ideas that the community comes up with.

The sky is the limit - and a bigger war chest can help to make it happen. With the imperative in the crypto space to move quickly, these funds will enable the Rally Network to meet the moment.

Proposal to Increase the Community Treasury

Traditionally, most projects have raised funds prior to token launch to fund the development efforts of their companies. Some projects (Maker, Balancer) have raised funds post-launch on behalf of the protocol or foundation, but still following the structure of working with established venture capital firms or institutional investors, in transactions including term sheets, long legal agreements, and a slew of attorneys negotiating the deals. The process can be expensive and time-consuming.

While there’s obviously value in tapping into the funds available by traditional financing routes, we in the Rally community are uniquely situated to consider a different path. The Rally community is a decentralized network, and therefore not subject to the same constraints and legal concerns that would apply to a company raising money for its own purposes.

What we envision is the following: conducting a community-approved sale of $RLY tokens, where the proceeds of such sale would be directed to the Community Treasury that is in itself governed by the community.

The structure of this token sale is designed to maximize control by, and direct benefits to, the Rally community: only the community can approve and effectuate it, and the community will have full control over the proceeds generated by it. Unlike a traditional financing that benefits a single party or entity, this $RLY fundraise will benefit the entire decentralized Rally community and empower the community to do more.

We’ve been talking to folks in the community and the industry about this design, and the response has been universally positive. The proposal will include the following:

• Approve the release of $RLY from the Community allocation to be sold in a token sale, the proceeds would be directed in its entirety to the Community Treasury. Open to discussion on how much should be allocated, and what percentage of the total Community allocation this will represent.

• Authorize the Rally Genesis Team to select a third party to execute the sale and token delivery process. This authorization will include appointment of the Rally Genesis Team to work with the selected party to determine appropriate terms and restrictions for the $RLY sold (e.g. lock-ups, staggered vesting or other terms that may be deemed in the best interests of the network) and reasonable fees to compensate such party.

Thoughts? Feedback? Looking forward to having a discussion.

[Grand]

I am so all for this to “empower the community to effectuate even more development and engagement.” Putting the community allocation to work with immediate effect in this manner seems like a no brainer! Greater CC utility is a high priority as we heard at the last community meeting from @mvellank and I can’t think of a better way than $$$ to accelerate the development of the tools we need to make this happen.

I imagine most of the community would approve of this idea in general, and of giving appropriate discretion to the Genesis team to execute on this with a third party.

To the question of how much $RLY the community is ready to allocate from the Treasury, I’d be partial to working backwards from the amount of interest we uncover from potential investors. Are they ready to take on 5%, 10%+. How much appetite is out there and at what price. Very hard to make an informed decision without any insights into the interest out there. Another way to approach it is a target amount for the raise itself. How much would we like to see in the treasury to remain sustainable through the time the genesis team is absorbed into the decentralized org?
If I was pressed to put an answer forward here, I’d vote for as much as 5%, but allow the community to thumbs up or down the negotiated deal terms without further amendments. This would preserve the community’s veto power/control while allowing the Genesis team+third party to complete negotiations efficiently and in good faith. If the community agrees to one of these deals, then we can agree that subsequent ones up to the %limit can be executed without further approvals.

My thinking here is that 1. Rally needs these funds in the short/immediate term to improve token utility for our creators and invest in scaling the network. As you mention, time is of the essence in developing crypto projects 2. If the community ever feels that the treasury is too flush or the community allocation needs some love, then we have a number of ways we can vote as a community to reallocate resources at that time.

Final thought - When crypto valuations pop like this, it is an ideal time to fundraise from other projects and individuals that are flush with capital. Get going!

Great post, look forward to other thoughts.

[coopahtroopa]

I love the notion of further funding the community treasury.

My personal opinion is that it is too early to conduct a secondary sale of $RLY, specifically when it is liquid on DEXs today.

If the intent is to do a private round and use that funding to top up the community treasury, I think that would be doable with effort. I’d voice that opening this token sale up to the public would be pretty tricky to accomplish and likely not worth the overhead at this time. Additionally, doing a secondary sale with private investors means these buyers would not be purchasing tokens off the open market. This comes at the cost of the existing tokenholders supporting the network as casual holders or as LPs.

If the community treasury runway merits a raise in the immediate short-term, I’d support this. If not, I’d suggest further focusing on adoption and ways to create more secondary market demand, rather than trying to build a deeper treasury today.

I’d also vocalize that at it’s current valuation of ~$962B, a third party vendor will be hard pressed to find a suitable group of backers (i.e. crypto funds) who are well aligned with the vision of web3 and can easily see the future upside of $RLY in the short-medium term at current prices.

I’m all for topping up the community treasury through a raise, but would be conscious of time allocation and resource consumption as $RLY still seems to be in a discovery phase rather than at a place where the existing creators on the platform really prove Rally’s success/product market fit.

[flynnjamm]

My thinking here is that 1. Rally needs these funds in the short/immediate term to improve token utility for our creators and invest in scaling the network. As you mention, time is of the essence in developing crypto projects 2. If the community ever feels that the treasury is too flush or the community allocation needs some love, then we have a number of ways we can vote as a community to reallocate resources at that time.

Would like to add what we think our budget should be for the Treasury. Ideally we start to separate the treasury out into multiple buckets, and have a separate governance structure for each bucket (some will be small decisions which needs less approvals like Bounties or Tipping, while some might be larger decisions and will need more decisionmaking like grants or investments. Would love it to be a bit more detailed so we can have a consensus on what the funds would be used for. The problem I see us running into is raising money into the treasury and creating unnecessary proposals just to spend it.

If the intent is to do a private round and use that funding to top up the community treasury, I think that would be doable with effort. I’d voice that opening this token sale up to the public would be pretty tricky to accomplish and likely not worth the overhead at this time. Additionally, doing a secondary sale with private investors means these buyers would not be purchasing tokens off the open market. This comes at the cost of the existing tokenholders supporting the network as casual holders or as LPs.

This is a great point that should be considered further. While we want to diversify the treasury, we have not seen sufficient demand for assets in the treasury and do not have a formal process yet in place to make decisions. We should also consider making Superfluid/Sablier a major part of vesting for these investors if they do not want to purchase on the secondary market.

[Grand]

@coopahtroopa

I’d also vocalize that at it’s current valuation of ~$962B , a third party vendor will be hard pressed to find a suitable group of backers (i.e. crypto funds) who are well aligned with the vision of web3 and can easily see the future upside of $RLY in the short-medium term at current prices.

Blockquote

At ~962M, you may be right, but I’d prefer to have the team put feelers out there so we can be certain, both for the level of interest and the cost. A large market purchase of RLY would incur some insane slippage at today’s liquidity depth, and seems certain to be disruptive to the network without providing any lockup guarantees. However, your point is well taken and without further insight into the resources that the genesis team has and is ready to deploy, it is hard to make a determination of how much we really need in the Community Treasury.

Perhaps we could explore having them purchase some amount on a private sale with lockup terms, and matching that amount with programmatic purchasing of RLY from Uni/Balancer over some duration that aligns with the lockup period of the private sale. Ex: Purchase $100k from Community allocation to support the Treasury and another 10k programmatically a month for 10 months from LPs.

Also really like the Treasury governance thoughts you highlight here @flynnjamm . Perhaps you or another project advisor or the genesis team could take the lead on laying out some framework?

[ira]

Thanks all for reading this topic, and special thanks to @Grand @coopahtroopa and @flynnjamm for the insights and comments. Some thoughts to summarize the discussion…

To proceed or not to proceed

The question was raised on whether this community fundraise is needed. Up until now, it’s not been the focus of the community to come up with ways to spend community treasury funds.

And that is exactly one of the reasons for this proposal: to raise awareness of and start real engagement by the community to operationalize the funds. The community treasury is a tool developed for the community, to be spent by the community for the benefit of the community and the entire Rally Network. It’s clear that Creators are looking to build digital businesses to realize real income from crypto, and Rally is uniquely positioned to make this a reality. There have been ongoing discussions with potential partners that include a $600M / year agency, tier 1 artists such as Kanye and JayZ, and the K-Pop management group for BTS, among others interested in learning more and getting involved in the Rally Network. These contacts originated from the connections of community members. With network-based and organic growth continuing to gain momentum, it’s a good time to think about the future of the Rally Network.

Armed with sufficient funds to engage and reward developers and fund new projects, as well as to engage agencies, service providers and partners, the future development of the Rally Network will be in the hands of the community to determine. And the use of the funds will be completely transparent and subject in each case to discussion, proposal, and community review and approval.

The intent here is to fundraise for the treasury while the climate is favorable to new projects driving real usage. Obviously the terms and details matter, but those will be presented back to the community for full approval before the fundraise moves forward - this initial proposal is to kickoff the process.

Resources to conduct a community fundraise

@coopahtroopa brought up a good point about resourcing. In the early stages of a project, it’s true that seeking or generating interest from backers can divert valuable time and resources if interest isn’t already out there. But in large part due to the current energy around social tokens and crypto projects, and, more specifically, interest in what the Rally Network is working to achieve with Creator economies and deep community engagement, $RLY has already received unsolicited interest from folks who want in - largely from institutional investors but also crypto native VCs and some traditional institutions and talent agencies as well. Because this process would be managed by a vetted third party to act as the community’s agent for this sale, existing interest would be directed to that party, and they can identify other backers who would be amenable to terms that are favorable to the community.

The key will be to identify the right terms. Comments have recommended lockups and other restrictions to any $RLY purchased through this community fundraise, and that’s definitely the intent. The intent of the Rally Network is to attract individuals interested in network building, governance, staking, and contributing to the long term success of the network as a whole.

Back to transparency: no terms would be accepted until the community reviewed and signed off. The intent will be to engage the third party who will work on behalf of the community, and before they proceed with the community fundraise, all terms will first be fully disclosed for approval.

How much $RLY to allocate for community fundraise

Thanks @Grand for the feedback here. This amount can be set both from the perspective of market interest, and also how much is needed to sustain the community. Obviously hard to determine either accurately, without the clarity of hindsight. But if the proposal for this fundraise passes, we’ll be able to confirm market interest pretty quickly from our sense of inbound interest to date. The issue for many communities is not generally how to spend funds, but rather where to get the funds from. In a case like this, where funds are likely available on terms favorable to the community, the community is in the position to succeed.

Based on initial thinking, we anticipate the following: target 500 million $RLY as the maximum allocation, with the intent to give a discount on the average price in the last 7-30 day trading period in return for 12 month to 24 month long lockups. Note this is the maximum tokens we are proposing, while the actual amount will depend on the market demand. Based on the current circulating supply of $RLY, 500 million $RLY represents ~8x the circulating supply, and 4.80% of the total Community token allocation. The total amount actually sold will, as mentioned above, be presented to the community for final approval.

Governance Structure built into Community Treasury itself

Loved @flynnjamm’s suggestion to separate the treasury into multiple buckets with a separate governance structure based on the nature of grants funded by each bucket. Once the community treasury is deeply funded, bigger projects like large grants and engagements will become possible. This earmarking of funds with details on spend will be instrumental to proper governance and transparency to the community of where funds would be committed. The more transparency the better, so the community can be truly aligned on how funds are allocated.

Agree with @Grand that a discussion should be started on how to further flesh out governance. With this focus on community treasury being the vehicle to empower future growth of Rally Network determined by the community, there’s no better time.

Process and timing for community fundraise

The current anticipated timeline is as follows (estimates only and subject to change):

• Community discussion on Discourse (ongoing)
• Rally Genesis Team to submit proposal to Snapshot (12/26)
• If the proposal is approved, Genesis Team to commence discussions to engage a third party agent on behalf of the community to effectuate the fundraise (week of 12/28)
• Selected agent to prepare terms, discuss and negotiate with potential backers, and prepare any necessary documentation (week of 1/4)
• Following finalization of terms and purchaser commitments, a new Snapshot proposal will be posted to request approval of final terms (week of 1/11)
• If proposal is approved, agent will work to close the transaction pursuant to the community approved terms (week of 1/18)

Thanks again for the engagement, discussion and feedback.