Letter to Early Investors and Founders

(This isn’t a tech/network upgrade but I didn’t see a more appropriate section to post - hope this one is ok)

Dear Rally Community and Investors,

My name is Mason, some of you may know me as part of team Allie Coin, or from my role on the Creator Advisory Council. In addition, I work with many creators/developers on the Rally platform, and help educate many who are interested in joining as well.

In this post I’d like to argue why it is in the early investors and founders best interest to commit to a new unlock schedule. I believe the best path forward is to limit early investors and founders’ unlock schedule to 30% of the total unlocked rally which is inline with their intended share of the economy. Not only is this more fair to the creators onboarding their audience to this ecosystem, it is a show of faith that will give creators the confidence to stick with or join the platform. The lifeblood of this ecosystem is its creators, and the long term success of Rally will be dependent on its ability to attract creators and keep them here over other ecosystems.

Rally’s core ethos is decentralization, self-sovereignty, and a new token-economic model that is supposed to lessen creators’ dependence on any social media platform. At the same time, they carved a large share of 30% of the total supply of Rally tokens to early investors and founders. This was a reasonable tradeoff as it allowed the platform to scale, attract talent, and attract creators in a way it wouldn’t have otherwise been able to. When this capital was raised, a distribution schedule was set for these early contributors to unlock their share of the project. To me there are three main purposes to unlocking tokens:

  • Eligibility to participate in governance
  • Realize gains through selling
  • Utilize tokens through incentivized participation (In both Rally and external offerings)

If an unlocked token is not used in any of the above ways, then for all intents and purposes, I would argue the token is still effectively locked.

Let’s first compare the overall Rally economy to an individual creator’s economy. In an almost unanimous vote, the Rally community decided it was best to limit a creator’s ownership over their own economy to 50% via unlocks in a snapshot proposal. (Snapshot)

The Rally community then further appended the vesting schedule to unlock coins only up to 30% of the creator’s economy. Some insightful rationale to this decision can be found by the founder of Rally, Kevin Chou, on the Rally forums:

“Second, while this isn’t exactly comparably, the OGs in blockchain economics are worth studying. Satoshi Nakamoto owns 5% of BTC. Vitalik even less of ETH. The thinking here is that if a creator owned more than 50%, it wouldn’t be a community-based economy; it’d look and function more like equity. At the same time, the creator is in a very different position of catalyzing their community so more than 5% is certainly warranted. I think the percentages outlined here still enables a creator to have the biggest voice in their token community, but they’d still need some fans to side with them in governance, which I think is a healthy dynamic.”

An important add on to Kevin’s statement here is why more than 5% is warranted. Creators, as the founders of their micro-economies, need all three pillars of unlocked coins:

  • Governance (Ability to vote on their own proposals)
  • Realizing gains (Ability to sell)
  • Participating in incentives (Creator Activity Rewards)

Like creators, the founding team and early investors also deserve to have a fair share of the three pillars as they relate to the Rally economy, but them having too much share is equally problematic.

I think the majority of the Rally community echoes Kevin’s sentiment in their desire for the Rally economy to be a community-based economy and not to function similarly to equity. On October 21st, the early investors and founders unlocked one fourth of their total allocation as per the originally set vesting agreement, an amount of 1,106,250,000 Rally tokens. In contrast to the previous circulating supply of around 300M Rally tokens, the early investor and team share of the current Rally economy represents a ~76.29% ownership, more than double their intended share of the final economy.

The decision to sell off such a large portion of the economy left the Rally platform in a state where it operates somewhere between a decentralized ecosystem and a centralized start-up. The centralized start-up side has taken an overwhelmingly majority stake in the circulating supply of Rally tokens, and based on the current release schedule this problem is likely to only get worse in the short term. The CAR, which is supposed to make up 50% of the fully diluted supply, is currently paying out 10 to 11M per month while the founder unlocks will continue to be around 100M per month, an almost 10:1 relationship.

I believe it is problematic to the long term health of the platform for the early investors and founders to have access to so much more of their total supply during these early years than the total system, and the problem is three-fold.

  • Inequitable say in governance of the platform
  • Inequitable access to short term profit taking
  • Inequitable access to rally incentive programs that could lead to them taking additional token supply from creators who are supposed to be the biggest benefactors of CAR

In order to better uphold our community ethos, I believe the early investors and team should reconsider their unlock schedule. My suggestion is that the early investors and founders send back this recent unlock (or at least some portion) and we limit future unlocks in the same way we limit creator unlocks, such that the early founder and investors never unlock more than 30% of the total unlocked coins. Not only is this in line with the percentage they were intended to have, but it treats them equally to the creators of the platform, who are first and foremost the priority in Rally’s mission statement. I believe this would be a welcome show of faith to the creators about the long term sustainability of what they are building.

The pushback I have received so far has mainly revolved around not wanting to retroactively change terms that were set forth for the investors that took major risk in the early days of the platform. Please understand, all creators are taking equal risk in their careers by encouraging their audiences to join this ecosystem. We must ask ourselves the hard questions. Are we creating a system that is better for creators than the systems we are trying to replace? Is our current model truly placing decentralization at its core? Will creators on Rally have less reliability on a single platform than they did before they joined? If creators coins are directly tied to the price movement of the Rally token, they deserve to have at least half the economy in terms of unlocks, and certainly more than 25%. Let’s be creative and work together to right this ship and get us back on track to being the best creator economy platform with the ethos of decentralization and building creator independence at our core.

All the best,

Mason

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Thanks for taking the time to gather feedback from so many of us while writing this. I would like to respectfully and humbly repeat that I am very grateful to have the privilege of being in this community. Our team at $PLAY has been working hard to build value in the Rally platform while building our own economy. Our hope is to encompass many other creators in what we’re doing, and our team has grown rapidly. As a member of the Developer’s Council, we also want to distribute RLY in grants for others to build on the platform. Knowing that all of that hard work we and others may do can lose its financial value in an instant adds significant risk to building on Rally. I’m not sure of any other way to look at it, so naturally I’m in support of any initiative which brings parties to the table to discuss risk abatement we can use to firm up the foundation. There is an imbalance here, agreements notwithstanding, that should be addressed.

Followup… would it make sense for some of the investors to come “meet” some of the community?

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Dave!

Thank you for weighing in. I want to echo this sentiment in that I’m also grateful to be a part of this ecosystem. I would like to continue building in this ecosystem for many years to come. I think we align on this front because of that mutual goal. I would also be open to a dialogue with the early investors through a “meet”.

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Thank you for the detailed and researched response…
I believe as a community that is pushing the limits while also being early adopters I believe it’s important to review everything as we go as this world and space is changing. Not to mention since I launched my coin in March the team and entire community has been transformed so I’m in support of bringing things to a discussion so not only do we know where everyone stands but we have a good collect grasp on expectations and risk vs reward.

I believe everyone I’ve interacted with her at Rally is in it to raise each other up and I believe this is a perfect example of just that! Community is the future of business and as a community, we must come together to do whats best for the collective whole.

Thanks again for this!

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Thank you for this. Having not really been familiar with this issue before, and now absorbing it, I applaud you for this well thought-out response. 100% this needs to be addressed. Happy to join in with any other creators to try to even the scales as the platform evolves so it can reach its full potential.

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Full support from me and everyone at team $VCA.
I am confident the founders and seed investors have the best intentions for the platform. therefore I hope they will see reason in this request, as I don’t believe it was intentional to put such a large cut of the supply in the hands of such a small group of people. not that they don’t deserve it, rather it’s simply not healthy for a platform with decentralised/DAO ambitions to have such a centralised control over the circulating supply. I trust the founders/seeders won’t do anything rash. that said, I’d prefer a trustless situation over my faith in people I don’t personally know, if that makes sense.

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Thank you for this important and well researched letter Mason. You have full support from $WAO. This 100% needs to be addressed, since Rally is a creator-community based platform and for creators to shift their entire economies to this platform, we need to fully trust it.

We’re here for any discussions or support as well. Lots of love

Love this thoughtful note. I have started sharing with relevant parties, and I know others on the initial team have too. FWIW, I’m 100% supportive and will personally commit to supporting a new unlock schedule because I’m committed to the long term of this community and the creator economy.

There are roughly 100 investors, vendors and employees that have tokens that make up the token group Mason is addressing. When we first started this journey in July 2018, the overall blockchain ecosystem was nascent. We couldn’t get the tech working. We tried again with a sidechain approach and made some progress. The crypto markets crashed and we lost talent we needed. Then COVID hit and we were running out of money, so we made the hard decision to do layoffs but still honor those we laid off with tokens, as well as raise a bit more money to get through the rough times. We structured vendor relationships to get paid in tokens instead of cash to get through the lean times. All this is simply background for our community as we try to navigate the road ahead.

@Masongos hits the nail on the head that the original design for token emissions was to get to 50% community and 50% investors/team by this point in time. And specifically, that meant ~1B tokens between CAR and developer/creator/partner grants. As we got going, we couldn’t onboard creators and their fan communities fast enough nor develop the ecosystem fast enough to distribute tokens in a way that would be productive for the ecosystem without flooding the market with unproductive tokens.

So what do we do? I don’t know the answer, but I see at least two fronts to tackle this imbalance:

  1. How do we productively unlock the treasury faster? Currently we have ~200 creators driving ~50M RLY tokens on the sidechain. To close the gap to get to another 700M RLY productively distributed, we need another 2,800 creators. 700M RLY is a very large budget to get 2,800 creators onboard. How can we as a community, alongside Rally and Unite and SuperLayer and the DAO get more productive usage onboard faster?

  2. Legally and practically, how do we get 100 parties to each make the decision to voluntarily lock up longer? For many investors, employees and vendors, the holding period has already been about 3.5 years (July 2018). I’m not suggesting this is the only way, but it’s what’s coming to mind first – and I recognize that I’m part of this group, so I hesitate even proposing this and will certainly not vote myself on this. But what if we came up with a staking program that forced longer term commitment for the 1,1B tokens unlocked? What if the budget was X% of that, and whomever opted in would have to lock their tokens into a smart contract for another year? What if we take that same budget, and create 3 staking pools for 1 more year, 2 more years, and 3 more years? This staking program would of course be open to anyone. The downside of this program is that it puts more tokens into the group we’re trying to productively dilute! The fallback here is Mason’s original idea, which is that we ask 100 parties nicely to voluntarily lock 70% of their tokens but I fear that unless there’s a program, there’ll be little response to this.

I don’t think what I’ve proposed is the answer per se, but I hope to spur conversation and ideas here for everyone to consider and refine.

Kevin

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Some suggestions below. Want to chime in bc I’ve been watching things unfold and agree with @Masongos post. Full disclosure: I’m not in either camp (not a Creator nor Early Investor/ Team member, I simply invested in $RLY tokens last year and have been liquidity mining in the incentivized pools). I have also been running infrastructure and middleware on Ethereum + Polygon, and also participate heavily in Terra and Cosmos blockchain ecosystem governance.

Problems:

  • Fully agree that Rally in its current stage of development feels more Web 2.5, not Web 3.0 compared to other projects in the space.
  • Fully agree that >76% is WAYYY too much control for the Team/ Early Investors, and this ecosystem needs to rectify this or its ngmi, is just reproducing bad Web 2.0 outcomes for Creators.
  • The infrastructure and middleware layer for Rally is not built out at this point – other Web 3 blockchains are permissionless (meaning: any developer can use the open source software and data the blockchain runs on to build middleware, tools and applications). Rally is not open/ permissionless or decentralized and it is a blocker for growth.

Solutions:

  • Spend $RLY tokens on the developer grants it will take to build out the infrastructure/ middleware layer to make Rally open & permissionless. It will take significant funds to do this – which will help lower the % of the network that the Team/Early Investors own.
  • Open the governance process up so that its not just the Rally Team choosing their own partner apps. This is how blockchain ecosystems grow exponentially. One idea would be to implement quadratic voting where Creators votes are weighed more heavily than Team/Investor votes in choosing projects to fund.

Development Suggestions:

  • Open up the developer API. Right now the Rally team is gatekeeping this and as a developer, I can’t just come along and build something useful without asking Rally Team for permission. At this stage in Rally’s lifecycle, this is not aligned with a Web 3 ethos and is stunting growth.
  • The FAQ says the Rally sidechain is “open-source” and “decentralized”, but it doesn’t really seem that way. Open-source the blockchain software, and open up the “mining” aka “validation” (processing transactions) to the community if it’s not already – the fact that I can’t even tell much about the sidechain mechanics by reading the FAQ or any dev docs is super problematic and atypical in the Web 3 space. Use $RLY tokens to incentivize.
  • Invest in public RPCs to make chain data more available (Polygon has multiple RPCs that are independent of Team’s control)
  • Invest in a proper public blockchain explorer – or two (like https://etherscan.io). I have mentioned this in the past but the need seems quite urgent at this point, as it is the cornerstone of open/permissionless innovation – true decentralization.
  • Partner with Web 3 data projects like The Graph to make it easier for developers to build applications on top of the Rally sidechain.
  • Incentivize/ fund useful applications thru grants that are open to community vote.

Thanks for the well formed note lauren. I deeply appreciate the thoughtfulness and engagement with our liquidity mining program.

Since we launched RLY Network a year ago, there’s been a lot of progress on L2s and alternative L1s that make your suggestions well warranted. But first, some background.

We didn’t talk much about the Rally sidechain tech, which is built on Forte’s blockchain infrastructure, mostly because Forte wasn’t public yet. Forte has since announced some more about what they’re working on, a Cosmos partnership in addition to their Ethereum work, and will be announcing a number of blockchain partnerships. Because we built Rally.io on Forte’s sidechain, we’re largely dependent on them to undertake the work you’re talking about. It’s been our top priority request for Forte to release a proper block explorer and a number of other points you’ve suggested.

Unfortunately, we don’t control what Forte does. But we do control our own future, which is why we created the RLY Network Association to create a multi-chain architecture for the RLY network protocol. The RLY Association has taken the protocol we’ve built on Forte, rebuilt several pieces to put the smart contracts on an L1 directly, and SuperLayer’s first product will be released on top of this technology. This L1 is one of the top L1s, and we hope to announce the deal we’ve been working on soon. SuperLayer’s first product should go into alpha late this year or early next year, so we’re excited to show off all the building we’ve been doing quietly very soon.

With this L1 and our protocol level contracts on it, we’ll usher in a whole new era for the RLY Network. The whitepaper we’re working on dives into this work, and the Association plans to launch their own website soon with more information forthcoming there.

All of that is to say that incentivizing developers to build with us is a top priority, but requires some foundational work first. Currently, we have several web2 companies building with Rally, which is a big benefit of the custodial and sidechain architecture that Rally is using. For Creators and their fan communities, the additional benefits of this approach are:

  • Feeless transactions
  • Custodial onboarding, versus having to go figure out how to use a 3rd party web3 wallet first to begin supporting and interacting with creators (a drawback even with other L2s)
  • Fast finality and high transaction throughput relative to Ethereum main net

The drawbacks are exactly what you’ve laid out. When we started out a year ago, there were no L2s nor production-level L1s that could be alternatives so I think we made a reasonable set of tradeoffs to get to market. But today, at the tail end of 2021, we are quickly moving to get the RLY Network on another L1 directly and working with Forte on a roll-up centric technology for the sidechain and the Ethereum main net to connect. But it’ll take time, and not something that necessarily solves the problem Mason laid out where creators and their fan communities can have the ownership level necessary to offset the supply overhang.

I’ve connected with several investors and founders. We’re discussing various options, but everyone has been supportive of the long term of Rally and the Network so far. I hope to update this thread as I get more conversations completed. Thanks all.

Kevin

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Thanks for your response. Looking forward to the infrastructure updates, my curiosity is definitely piqued.

At the end of the day, the creators will decide what is best for them and i’m in total support of that. I hope Rally can provide them with levers to capture the value they create, both in their own token micro-economies but also at the network level, which could be even more rewarding.

RLY Community - $RLY Community - We hear the community feedback, and are publicly committed to supporting Rally and the $RLY Network. We believe that creators and communities should own this network - that’s why we designed the token supply to be 70% owned by the community over time. As of Oct 15, 2021 the initial design was to have the community already own half of the network and increase from there towards 70%. However, due to a lower $RLY emissions rate than anticipated, the balance between community tokens and investors/team has been thrown off.

Original token release schedule in image below and posted publicly here since last year -

We are all long-term believers in the $RLY Network and have put out a call to our early investors and team members to sign up for a new 6 month voluntary lock-up on $RLY holdings. Note that this excludes any tokens that may have been sold between October 15th and November 17th that were released in accordance with volume restrictions.

We are asking for formal signatures from early investors and employees that sign up for this pledge. Co-founders Kevin Chou, Mahesh Vellanki, Michael Li, Weiwei Geng and Kent Wakeford will all be part of this pledge, as will employees Shel P, Jeremy T, and Phil H. Additionally, early investors and original board members a16z Crypto, Conductive Ventures, Battery Ventures, and Canaan Partners will all participate as well. These additional investors and community members are publicly committed also:

  • The House Fund
  • Altos Ventures
  • Mirae Asset
  • WndrCo
  • Abstract Ventures
  • Mantis Group
  • Artisan Management
  • J. J. Jacobs Enterprises
  • Shark Diver Trust
  • Dennis F
  • Chester N
  • Larry C
  • Charles H
  • John B
  • David P
  • Steven C
  • Dennis F
  • Steven F
  • Douglas N
  • Nas
  • Mike J
  • Deepak K
  • Dave A

I anticipate others will join too in the weeks to come, as I continue my outreach.

This pledge should affect approximately 3.5B tokens and will help with the current imbalance originally flagged in the community. That said, it’s up to us collectively as the $RLY community to figure out how to productively unlock $RLY emissions faster. Of the 15B total supply, 50% is allocated towards network rewards which will be expanding with the growth of Unite, Rally.io and upcoming SuperLayer projects, and there is another 3B tokens allocated primarily for developers, creator/brand/community partnerships, and advisors/collaborators. We have some ideas that we’ll discuss with the community in coming weeks on how to use $RLY more aggressively to incentivize user growth and new product development, so please stay tuned for that.

I hope the above demonstrates the long-term focus and commitment from the Rally founders and early investors. Let’s work together to make the $RLY Network a massive success :fireworks: :rocket:

Kevin

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And more commitments from:

  • Translink Capital, Stephen Chou
  • 1confirmation
  • David Lee
  • Joe K
  • David A
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Thanks, Kevin! Great work. Glad so many people have been so receptive!

@KevinChou My interpretation is that some investors rejected the offer. Could you share details why they didn’t wanted to do it. Names are not necessary :slight_smile:

I actually have not had someone tell me no, but there are many smaller firms that I just haven’t heard back from. And there’s plenty of investors where the person has either moved on or their email doesn’t work anymore. And in one case, the investment firm has gone out of business!

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Kevin,

Thank you so much for the wonderful responses thus far to this post. I think I speak for the majority of the community when I say that you are a wonderful founder, and we appreciate how much you continue to do for this community. We are lucky to have you in the lead (even if you’ve stepped out of the way a little bit). This is exactly the kind of response we needed from the early team to have conviction in the platform long term as the best place to build. That said, much work still to be done.

You have a great point in that relocking is only one side of the equation. We absolutely must start putting RLY to work on the other side of the equation at rapid pace to spur development. I love the Network Growth Challenge as a means to ignite the community. I have a lot of thoughts regarding different ways to get to work but will need some time to put them all together. I’ll continue my thoughts on the new forum thread.

Another great point that has been brought up in here is that of web2 vs web3. I also feel as though Rally is closer to web 2.5 than web3 in its current form. I very much look forward to updates regarding other L1s and how we can better tie the overall Rally ecosystem into the greater crypto ecosystem in the future. I’ve said it many times, and will continue to do so, it is imperative our creators are not locked into the Rally sidechain if they are to flourish amongst the best social token ecosystems. There are too many tools to be rebuilt for the sidechain for us to silo ourselves off and build everything from scratch. However, I still believe Rally is the best launchpad for social tokens I’ve seen, and is only a few more connections/improvements away from being the best in all categories.

Thank you again to everyone to responded and contributed to this thread. Rally is a great community already and I’m excited to see it reach more of its potential.

Best,
Mason

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Top priority is solving the L1 issue. This is a confluence of challenges and trade-offs and I’m curious what this community thinks about one key technical challenge for new crypto users.

One key assumption we made for the technology implementation is that new-to-crypto users would want to simply create a login and password versus being directed to set up a web3 wallet first. How important does everyone view this? If we decided to go straight to a web3 wallet all across the network, a lot of challenges would be much simpler.

Separately, we have multiple teams working on the core tech infrastructure, compliance, economics and various applications. SuperLayer is building our first product on Solana. DFS and the Association have built the next generation of the RLY TBC architecture for L1s starting with Solana. This will go live next month.

Rally.io, led by its own management team, I know is very focused on this topic for existing creators. We’ll be sharing all the tech we are building with Rally to go to Solana as well, or they can decide a different L1 or L2 is better for the existing community.

I think collectively, we’ll solve the L1 issue next year. I think it can be done in the first half if we accept appropriate trade-offs.

Happy Thanksgiving all,

Kevin

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I tend to agree with the assumption. We have found it to be a much easier introduction to crypto for first time users to simply create a login (it was even better when they could link twitch - which is now legacy). However, if the trade off is that we can’t offer them a web 3 wallet at all, then I think the negatives outweigh the positives. I don’t know the difficulty in supplying both options simultaneously so it is tough for me to give advice as to the best path forward, but I think it is imperative long run that creator coins can be used in a web 3 fashion.

Thank you for sharing some insights in to the work being done for other L1s, I’m always happy to see more of that info being shared with the community!

@Masongos - as @KevinChou mentioned, compatibility with L1s and / or L2s is a core area of focus for Rally.io and we are actively discussing the tradeoffs for fan experience while also being able to capitalize on all of the benefits of being on an L1 ecosystem. We’ll definitely be reaching out to creators to discuss the potential paths forward and receive feedback.

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