Redemption is the act of withdrawing funds from a fund pool. DAOSquare Incubator provides a functional component of redemption for the Venture DAO in the Vintage and Collective modes so that the Venture DAO provides a refund channel for the funds withdrawn from the fund pool for the running funds. In the process of project investment in the Flex mode Venture DAO, investors can flexibly choose investment to participate according to the project, without the need to remit to the fund pool in advance for collective decision-making. Therefore, the Flex mode Venture DAO does not need Redemption component.
Redemption In Vintage DAO
The Vintage mode of Venture DAO is run as a limited-period fund. A fund will go through four stages: fundraising period, investment period, redemption period (if any), and refund period. Among them, the redemption period is an optional function. DAO can set up a redemption period when establishing a new fund so that fund investors can redeem their deposit balance in the current fund within the agreed time. When an investor’s balance is 0, he/she will completely lose investor status in the fund. See the 
Fund Life Cycle for a detailed introduction to the fund life cycle. The following is an introduction to the redemption component, for a fund that have turned on the redemption component:
Function | Investors in a fund of the Vintage DAO are allowed to redeem some or all of their funds during the Fund Term if the fund has set up redemption periods. |
Purpose | Provide investors with a flexible way to exit the fund pool of DAO. |
Who Can Redeem | Investor in a fund of Vintage DAO. |
Redemption Timing | Each redemption period of the fund. |
Redemption Fee | The percentage of the redemption fee depends on the redemption fee setting. Since redemption will cause instability of the fund pool and inconvenience to the fund manager, Governors can ask for redemption fees to make certain compensation. |
Redemption Amount | The final redemption amount received by the investor is equal to the requested redemption amount less the redemption fee. |
Redemption Fee Receiver | It is the address at which the redemption fee is received. It is set up in the Fund Establishment proposal. (typically, this address represents the fund management team, the Governor's group). |
How Redemption Works In Vintage DAO
In Vintage DAO, Redemption Settings are composed of four parameters: Redemption Interval, Redemption Period, Redemption Fee, and redemption Fee Receiver.
Parameters | Description |
Redemption Interval | How often are redemptions allowed to open. |
Redemption Period | How long each redemption lasts. |
Redemption Fee % | The percentage of the requested redemption amount to be paid to the DAO Governor group for each redemption action. |
Redemption Fee Receiver | The address of the account receiving the redemption fee. |
The first Redemption Period is calculated from the Redemption Interval days minus the Redemption period. If the start date of a Redemption period is shorter than the Redemption Interval before the end of the fund Term, there will be no next redemption period. When the fund Term ends, there will be a refund period.
There is an example to show how these parameters apply to the redemption operation. Assume that the (partial) Settings of a Phase I fund in a Vintage DAO are as follows:
Parameters | Value |
Fund Term | 365 days (365 X24 hours) |
Redemption Interval | 30 days (30x24 hours) |
Redemption Period | 3 days (3 X 24 hours) |
Redemption Fee % | 1% |
Redemption Fee Receiver | 0x06BC456535EC14669C1b116D339226FAbA08B429 |
The Fund will have a total of 12 redemption periods and the schedule is as follows:
Assuming that we click the Execute after fundraising at 0 am on the 1st day.
Redemption Period Start Time | Redemption Period End time | |
1st Redemption Period | Day 28, 0 am | Day 30, 24pm |
2nd Redemption Period | Day 58, 0 am | Day 60, Day 24pm |
3rd Redemption Period | Day 88, 0 am | Day 90, Day 24pm |
4th Redemption Period | Day 118, 0 am | Day 120, Day 24pm |
5th Redemption Period | Day 148, 0 am | Day 150, Day 24pm |
6th Redemption Period | Day 178, 0 am | Day 180, Day 24pm |
7th Redemption Period | Day 208, 0 am | Day 210, Day 24pm |
8th Redemption Period | Day 238, 0 am | Day 240, Day 24pm |
9th Redemption Period | Day 268, 0 am | Day 270, Day 24pm |
10th Redemption Period | Day 298, 0 am | Day 300, Day 24pm |
11th Redemption Period | Day 328, 0 am | Day 330, Day 24pm |
12th Redemption Period | Day 358, 0 am | Day 360, Day 24pm |
In this example, redemption is allowed every 30 days, and the redemption period is 3 days. The first redemption period starts at 00:00 on the 28th day and lasts for 3 days. The second redemption period is 00:00 on the 58th day and lasts for 3 days. And so on. Because the Term of the fund is 365 days. The 366th day enters the refund period until the end of the refund period.
In this fund, the Redemption Fee is set at 1%. If a investor Jack applies to redeem 10,000 USDT during the redemption period, then the redemption fee will be equal to 100 USDT (the requested redemption amount is 10,000 USDT x 1%). When the Redemption is successful, Jack’s wallet address will receive 9,900 USDT, 100 USDT redemption fee will be sent to the Redemption Fee Receiver's address: 0 x06bc456535ec14669c1b116d339226faba08b429.
Redemption In Collective DAO
The Collective mode of Venture DAOs runs on an open-ended fund model. Unlike Vintage DAO, Redemption is a must-have component in Collective DAO, which means that each Collective DAO must provide a redemption function and cannot be closed. Check out the How It Works for a detailed explanation of how the Venture DAO works in the Collective model. The following is a basic introduction of Redemption in the Collective DAO:
Function | Allows members of the Collective DAO to redeem some or all of their funds while the DAO is running. |
Purpose | Provide investors with flexible access to exit the collective capital pool. |
Who Can Redeem | Members in Collective DAOs |
Redemption Timing | • Non-investment process (the DAO currently has no investment proposals in progress) : Redeemable at any time.
• During the investment process (the DAO currently has an investment proposal in progress) : Redemption is only open during the Grace Period of the proposal.
Definition of an Investment proposal in progress: from the successful submission of the investment proposal until the final Execution of the investment proposal. |
Redemption Fee | A percentage of the redemption amount requested, depending on the redemption fee setting for the DAO. Since redemption would destabilize the pool and inconvenience other members, DAOs could require a compensatory redemption fee. |
Redemption Fee Receiver | All DAO members that remain after the redemption completed (Redemption Fee will be distributed according to deposit % post redemption). |
How Redemption Works In Collective DAO
In the Collective DAO, the Redemption setting consists of only one parameter: Redemption Fee %.
Parameters | Description |
Redemption Fee % | As a percentage of the requested redemption amount for each redemption action. |
Redemption Fee applies to redemptions in both the investment period and the non-investment period. If this parameter is set to 0, there is no additional cost for redemption. Here's an introduction to the two redemption scenarios in Collective DAO:
During Non-Investment Period
If the DAO does not have an investment proposal in progress, DAO members can make a redemption action at any time. For details about redemption operations, see the How To Redemption section.
During Investment Period
In the Collective DAO, an Investment proposal passes through the following stages and states: Queue, Voting Period, Grace Period, Execution, and Closed (Success/Fail). If the DAO has a current investment proposal in progress, DAO members may only make redemption actions during the Grace Period. For details about redemption operations, see the How To Redemption section. Check out the Investment section to learn how Collective DAO's investments work.