Draft SDIP-35: A new token model for community growth

A new token model for community growth

When SquiggleDAO launched in 2021, our vision was to create a vibrant community that collected and celebrated what we believed would be a very important piece of art history.

Over the last year and a half, we’ve seen validation our thesis around the Chromie Squiggle. Collectors in Web3 and beyond have realised the importance of on-chain generative art and they see the Chromie Squiggle as the seminal collection. Holders are holding, collectors are collecting.

Over that time, the Core Team supported a community, launched revenue generating products, and acquired the 4th largest Squiggle Collection. But at the end of the day, we’re utilizing limited Treasury assets. If we’re going to collect 1000 Squiggles and be at the centre of Squiggle culture, we’re going to need a lot more resources and creativity to get there!

At the heart of this community is our token. It facilitates governance, provides access and rewards contribution. It is through our token that our creativity and effort align. But a community token needs to do a lot more than that. It needs to be a manifestation of our vision; a token that members are proud to own and make them feel connected to each other.

An ERC-20 simply cannot accomplish that, so we are proposing that the DAO convert to an NFT as its primary token.

What exactly does this accomplish?

First, and foremost, we want membership in our community to mean something. We’re on an adventure together, and creating social bonds between community members allows our efforts to have more impact. Ownership in a collectible unlocks this capability because collecting is one of the oldest social behaviours that we have. We’ve seen this work really well with other communities such as PROOF, Kraushouse and believe it will be the future standard for all digital communities.

Second, it means that our token will become liquid. This has been a challenge since the beginning, because providing liquidity on an ERC-20 is very expensive and the investment in capital needed doesn’t accrue any value back to the DAO. New business models become available for the DAO to operate safely in existing legal frameworks. And with liquidity, we can onboard new members to our community.

We propose converting the SQUIG token to an NFT with the following parameters:

  1. Swap to an NFT membership card at a 1000 SQUIG to 1 NFT ratio
  2. This NFT would be a PROOF-style membership card and include 7.5% royalty, paid to the DAOs treasury
  3. Depreciate the SQUIG ERC-20 as our governance token
  4. Migrate existing SQUIG token rights to the NFT

NFT Token Design

Challenge #1: Handling non-1,000 increments in token ownership?

  • The team proposes that eligible wallets with 50-999 SQUIG be airdropped a one-time amount bringing the balance of that wallet to 1000. The goal here is to be more inclusive with NFT membership. Many of these wallets represent early contributors and we feel that it is important to include them. A snapshot of wallets was taken on October 18th at 13:00 UTC and will be used to determine eligibility and amount for this part of the proposal.

  • Wallets with excess amounts (eg. 1100 SQUIG = 1NFT + 100 SQUIG) will be able to utilize AMMs or OTC trades to acquire or divest from those amounts. The DAO cannot participate in these transactions, but we will assist members as much as possible so that the transition is safe and easy.

  • The ERC-20 to NFT conversion experience will remain active for a long period of time (years), ensuring that nobody misses the upgrade

Challenge #2: Locked or vested SQUIG tokens

  • Tokens that are locked or pre-allocated will be able to use the upgrade experience when they become available

Challenge #3: Liquidity for the NFT

Using an NFT is actually the best approach for providing needed liquidity to the DAOs token, because it doesn’t cost the DAO anything to support. Trading will be available on OpenSea as soon as the token is registered.

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Saving space for FAQ during the discusison process here:

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Can you elaborate on this?
Will the team be remunerated in membership NFTs (95 issued per month) instead of $SQUIG if this is passed?

Hey Brian,

One way to think about this swap is that the only thing changing is the token format and total supply.

10M SQUIG → 10,000 NFT cards. All voting rights, compensation, etc. are preserved in this transition. So if someone was receiving 1000 SQUIG per month, they’d receive 1 NFT per month.

Not sure where you’re getting the 95 per month, but our current budget is ~23,000 SQUIG per month which would be 23 NFTs per month

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Supportive of this. I think moving to an NFT will be better overall.

I am interested in expanding the coordination of people who have more than 1000 SQUIG but not enough to redeem another NFT.

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Yep, I think obviously it’s impossible for there to be a one-size-fits-all but the current proposal to bring more smallholders into the family feels like the most inclusive approach.

Obviously there’s a bit of a logistical challenge in getting everyone to the right round number but from the looks of the current AMM pools, it does seem like there’s enough liquidity to enable this.

Ultimately we must remember that the goal of this is to solve the liquidity issue, so even if there’s a little friction in getting there, it will be worth it.

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The topup path seems to be the most inclusive method of cleanly getting those more minor holders in without giving many of the arb bots sitting on 1-2 tokens a way to gauge it immediately. There is plenty of squig in the uniswap pool if anyone wants to buy up to the next 1000 mark from their current holdings (I see 28k squig available)
I actually do not see a reason for the squig > nft swap app to ever go offline, if there’s always a path towards swapping your squig for the NFT then any holders who may not be aware have forever to take action. Once governance rights are given to the NFTs and taken from the ERC-20 they won’t have any use other then swapping, which will ensure it disappears gradually over time without anyone missing out.

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Moving from an ERC-20 to an ERC-721 makes a lot of sense. It solves the liquidity issue (by having liquidity on the NFT marketplaces, without the DAO having to use resources for it, i.e. establishing a Liquidity Pool). Also it will generate revenue for the DAO from both primary and secondary sales moving us towards the path of sustainability. Finally, it opens a lot of opportunities (we might be working on some!).

A token based model has increasingly more limitations in this space and moving to an NFT membership model, creates many opportunities for the DAO. This does solve the liquidity issue and it opens up the DAO for new members to flow into the DAO without the friction created by a token based model.

I definitely appreciate the thought put in for SQUIG holders who have 50-999. All of what was discussed in the town hall sounds very reasonable. I’m in favor of the top off idea on that respect. Ultimately the move to an NFT makes a very compelling membership prospect.

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awesome - i really like the move from erc20s to NFTs. Makes a lot of sense!

Another challenge I think we should begin to consider is securing the DAO against Sybil attacks. As one could imagine, there’s a non-zero chance someone accumulates a disproportionally large voting share of the DAO.

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