DAOSquare Incubator is built based on the DAOSquare Incubator Protocol (Smart Contract). The DAOSquare Incubator Protocol is an on-chain venture capital protocol developed by DAOSquare, primarily serving various forms of venture capital, such as investment fund, investment club, investment community, etc. (of course, it can also be used in other fund management matters). We collectively refer to any form of venture capital organization built on the DAOSquare Incubator as Venture DAO. Any Venture DAO created on DAOSquare Incubator operates based on the DAOSquare Incubator Protocol layer. Any Venture DAO created on DAOSquare Incubator operates based on the DAOSquare Incubator Protocol layer.
Technology and Advantages
Openness
DAOSquare Incubator Protocol is an open protocol deployed and running on public chains (such as Ethereum) that anyone can use without permission. Any goRICE holder can participate in the control and management of the protocol through Governomy (DAOSquare Economics & Governance module).
Data Security
In traditional online private equity investment management tools and platforms, all data generated by users (investment institutions, investors, etc.) during the use of the product can technically be tampered with by the product providers (project team, developers) and related service providers (cloud services), thus posing potential data security risks.
DAOSquare Incubator Protocol is deployed and operated on public chains, where all user data on the DAOSquare Incubator Protocol generated and stored on the public chains, making it very difficult and extremely costly to tamper with them (understand how public chains work to grasp this point).
Asset Security
The main service area of DAOSquare Incubator is private investment, so asset security is particularly important. Technically, different architectures bring many differences between open protocols and centralized systems, the following points are particularly noticeable.
Trust vs Verifiable
In traditional private investment management, investors entrust managers to make investments and trades based on trust. Assets of investors are typically held by a third party or are not held in custody at all. If the trustee acts maliciously or goes bankrupt, it can result in the damage of the investor's assets. Additionally, internal controls of fund management companies and third-party custodians are often opaque, limiting the investor's control and monitoring of their own assets. These asset security risks exist naturally in products and services that operate on a trust-based model.
Whether a trust model is safe and healthy depends on people, or human nature, while the safety and health of an public chain protocol based on a verification model depend on the code, the control of code, the openness of code, the governance method of code and its openness.
Code | DAOSquare Incubator Protocol undergoes rigorous audits to ensure security. Each modification and upgrade also requires code audits before implementation. |
Control of the code | goRICE holders jointly have control over the DAOSquare Incubator Protocol code (through Governomy), and no privileged groups (such as the project team or developers) can control it independently of Governomy. |
Openness of code | DAOSquare Incubator Protocol is open source, with the code being transparent and available for inspection by anyone, who can also raise any potential risk issues (github). |
Governance method of code and its openness | The modification and upgrade of the DAOSquare Incubator Protocol are implemented through contract upgrade proposal in Governomy. All stakeholders (goRICE holders) have the right to participate in the submission and voting of this proposal. The governance process is open and transparent, and anyone can supervise and participate. |
Centralized Ledger vs Decentralized Ledger
The fund management on traditional private investment products and platforms are based on centralized ledgers. Technologically, the controllers of the centralized ledger (usually the providers of products and services and third-party custodians) can unilaterally control their ledger, which poses potential asset security risks.
In the DAOSquare Incubator, when investors participate in the Venture DAO, their asset operations (such as deposits) interact directly with the public chain (decentralized ledger) through the DAOSquare Incubator Protocol, rather than with the platform (Incubator). The platform and dev team cannot control its ledger.
Passive vs Active
In traditional private investment products and platforms, users are almost entirely passive regarding the operation, maintenance, and upgrades of the products and platforms. They cannot view and supervise these aspects, and once potential risks occur, they cannot protect their assets from damage in a timely manner. Bank bankruptcies are obvious examples.
The advantage of the DAOSquare Incubator Protocol as an open protocol is that users can achieve proactive asset security control through the following two points, thereby actively protecting the controllability and security of their own assets:
- Regulatory Transparency: Since the protocol is open and transparent, users can supervise its security at any time, thereby choosing to use or not use the protocol.
- Participation in Governance: Any user can have control over the DAOSquare Incubator Protocol through Governomy and protect their interests through participation in governance.
Transaction Security
DAOSquare Incubator Protocol helps both parties in an investment transaction achieve an executable investment agreement. This is a solution that applies a verification model to investment transactions. Its advantages are mainly reflected in token-based investments, where the terms and rules of the investment transaction are written into a smart contract (such as the investment amount, payback token price and quantity, vesting schedule, etc.). Once confirmed by both parties in the investment transaction, the program can execute the payment of the investment funds without the need for any third-party trusted entity (such as supervision or escrow execution), and automatically release the invested project's tokens (payback token) to the investor according to the vesting schedule. Additionally, once confirmed by both parties in the investment transaction, no one can tamper the terms and rules. Therefore, through executable investment agreements, DAOSquare Incubator Protocol can better ensure the transaction security for both parties in token-based investments.
Protocol Fee
The Protocol fee is the fee that users of DAOSquare Incubator pay to use the DAOSquare Incubator Protocol.
Who Pays Fee
The protocol fee is paid by the investment party, and the ultimate undertakers are the DAO investors. For Vintage DAO and Collective DAO, the protocol fee will be paid together by DAO’s fund pool, and the deposit balance of each investor will be reduced proportionally. As for Flex DAO, the protocol fee is paid directly by the investor.
Fee Standards
The protocol fee is a percentage of the total investment. For example, in an investment proposal of a Venture DAO, the investment amount to the Investee is 100,000 USDT. Assuming that the protocol fee is 1% and the sum of other fees is 4%, the total investment amount is 105,263 USDT [100000/(1-1%-4%)], the protocol fee is 1,052.63 USDT (105,263 x 1%). The protocol fee is in addition to the investment amount, that is, the protocol fee is beyond the investment amount.
Please refer to the Fee & Carry section for details.
Charging Time
A Protocol fee is paid to the DAOSquare Incubator Protocol only when the Venture DAO on DAOSquare Incubator makes successful investments.
Protocol fees are charged at the time the investment transaction is executed. DAOSquare Incubator will receive a protocol fee when the Investee receives the investment fund.
Protocol Modification And Upgrade
Modify And Upgrade Items
- Protocol fee percentage
- Protocol contract (e.g. new/removed features and modules)
How To Modify And Upgrade
DAOSquare Incubator Protocol decentralizes power to all stakeholders and anyone willing to participate in the governance of the DAOSquare Incubator through Governomy (DAOSquare Economics & Governance module). Governomy provides two types of proposals (Protocol Fee Scale, Incubator Protocol Update) to modify and upgrade the DAOSquare Incubator Protocol. For detailed information, please refer to the Governomy section.
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