Introduction

This chapter will provide a detailed introduction to DAOSquare's governance and economics module.

Purpose of Design

DAOSquare Incubator's ‘Governance and Economics’ module aims to allocate ownership and governance rights of DAOSquare Incubator to relevant business participants based on the product value provided by DAOSquare Incubator, and also provides financial compensation to the system maintainers of the entire DAOSquare Incubator, thereby encouraging more users to use DAOSquare Incubator and become participants, encouraging more system maintainers to ensure system security, and provide more promotive suggestions and measures for DAOSquare Incubator to advancing the development of DAOSquare Incubator.

Why Governomy

DAOSquare Incubator is an on-chain infrastructure and open marketplace focused on Venture DAO (Onchain Ventures). With the advantages of blockchain, people can easily and securely set up and invest in Venture DAOs worldwide.

DAOSquare Incubator is a commercial product with a profit need. So in addition to building useful products, economics is a key concern, and governance should also focus on economics. At the same time, the integration of economy and governance is particularly prominent in the field of Crypto and is also a basic principle. It is not only the key to whether a product, community, and ecosystem are healthy and sustainable, but even it determines the lifeblood of products, communities, and ecosystems. On the other hand, economics can also be a driver of governance. Proper economic strategies can help achieve governance. So at DAOSquare Incubator, we designed governance and the economy in one module and called it Governomy.

It should be noted that the economics is not a simple incentive, just like the national economy, it is systematic, including how products, communities, and systems profit from the business, how to distribute profits, how to formulate economic strategies, and other matters to promote their business development, to ensure the stability of the structure of products, communities, and ecosystems.

Governomy is the brain of the DAOSquare Incubator. By aggregating the wisdom of community members, Governomy maintains and optimizes DAOSquare Incubator's protocol code, financial revenue and expenditure, economic strategy, and operational strategy in the form of collective decision-making.

Design Philosophy

1	Minimize human control and maximize autonomous.
2	Less governance is better governance.
3	Only executable actions are governed.
4	Execution actions are controlled only by verifiable on-chain programs, on-chain programs are controlled only by mechanisms, and mechanisms are controlled only by community governance (community defined as goRICE holders).
5	The community has 100% ownership and control power. There are no privileged groups (founders, developers, project teams, council, etc.) with privileged voting rights, Treasury control, or contract control.
6	Help real users and direct stakeholders of the product become owners and governors.
7	Governance is driven by the need for greater personal interest.
8	The way to achieve greater individual interests is to maximize collective interests and the balance of players.
9	The purpose of incentives is not to stimulate active data (like DAU) but to provide constructive feedback on business. Product adoption depends on product value, not incentives.

Structure

In simple terms, DAOSquare Incubator generates income through the Venture DAO investment, that is, the protocol fee (left in the following picture, DAOSquare Incubator), Governomy regulates and allocates these benefits to the Compensation Pool, Treasury, Buyback & burn Pool through economic parameters (middle in the following picture, Governomy) and distribute RICE rewards to the Venture DAOs of DAOSquare Incubator. DAOSquare Incubator users (participants in the Venture DAO) receive RICE rewards for contributing protocol fees through investment, and RICE investors in the secondary Market receive RICE through purchase (right in the following picture, Sec Market). These RICE holders can become goRICE holders through locking RICE, thus having absolute control over DAOSquare Incubator and Governomy, such as adjusting economic and governance parameters, proposing operational strategic, upgrading contracts, etc.

DAOSquare Incubator Governomy - Architecture

Last modified by Typto ⋅ 4 months ago

Workflow

The following picture shows the workflow of Governomy.

DAOSquare Incubator Governomy - Workflow

Last modified by Typto ⋅ 4 months ago

Basic Workflow

DAOSquare Incubator users contribute protocol fees when using DAOSquare Incubator to invest.
Protocol fees are allocated to the Treasury, Compensation Pool, and Buyback & Burn Pool.

a. GoRICE holders use Treasury funds through collective decision-making (Proposal).

b. GoRICE holders can claim compensation from the Compensation Pool.

c. Buyback & Burn Pool funds are used to buy back and burn RICE.

Calculate the number of RICE rewards for DAOSquare Incubator users according to the number of buybacks. Moreover, RICE is extracted from the RICE Reward Pool and transferred to the RICE Claim Pool for DAOSquare Incubator users to claim RICE rewards.
DAOSquare Incubator users and secondary market RICE investors become goRCIE holders by locking RICE and then obtaining the ownership and governance rights in DAOSquare Incubator.
goRICE holders adjust Governomy parameters, DAOSquare Incubator parameters, and upgrade contracts to maximize personal benefits.

Check the introduction of the following units (actor, object, action, adjuster) for specific details in the workflow.

Key Participents

Participent	Description
RICE reward receivers in DAOSquare Incubator	A Venture DAO includes Investors, Governors, Scouts, and other roles. The object of RICE reward are the Venture DAOs, and the distribution to various roles is determined by the DAO. Such participants are defined as those users who ultimately receive a RICE award.
RICE investors in the second market	Someone who buys and holds RICE from the secondary market.
goRICE holders	The goRICE holder is the owner and governor of the DAOSquare Incubator. A person can become a goRICE holder by locking RICE.

Key Objects

Objects	Description
Venture DAO	Organizations that use DAOSquare Incubator products for venture capital. They enjoy product services from DAOSquare Incubator while contributing protocol fees to DAOSquare Incubator (protocol fee generators).
Treasury	The community vault, which provides financial support for the development of the DAOSquare Incubator, is controlled by the goRICE holders. The source of funding is the protocol fee allocation and the initial RICE allocation.
Buyback & Burn Pool	A pool of funds used to buy back and burn RICE. The source of funds is the allocation of protocol fees.
Compensation Pool	A pool of compensation funds for contributors (goRICE holders) who ensure the safe operation of the DAOSquare Incubator. The source of funds is the allocation of protocol fees.
RICE Reward Weight Counter	Record the protocol fee contribution of each Venture DAO in the DAOSquare Incubator and calculate the respective RICE reward weights at the end of a Distribution Cycle. See the Distribution Cycle section for an introduction to the Distribution Cycle.
RICE Reward Pool	A reserve pool that provides rewards for Venture DAOs in the DAOSquare Incubator. The total supply of the RICE Reward Pool is 35,000,000 (35% of the total RICE issue). When the balance of RICE in the RICE Reward Pool is `= 0`, Buyback & Burn Pool will be adjusted to send RICE into the RICE Claim Pool to continue the RICE rewards. NOTE: There is a special situation, if the RICE balance in the RICE Reward Pool > 0 but < the current RICE reward amount, a portion of the RICE in the Buyback Pool will be transferred to the RICE Claim Pool to make up the difference. If the RICE balance in the RICE Reward Pool + the amount of RICE in the Buyback Pool < the current RICE reward amount, then the actual current RICE reward amount = the RICE balance in the RICE Reward Pool + the amount of RICE in the Buyback Pool.
RICE Claim Pool	The pool for Venture DAOs in DAOSquare Incubator to claim their RICE rewards.
RICE Locker	RICE holders can lock RICE through this module to get goRICE. For details about the mechanism, see the following description.

Key Actions

Actions	Description
Invest	Invest through Venture DAOs in DAOSquare Incubator.
Convert	Used to convert multi-currency Protocol fees into a single currency for subsequent distribution.
Buyback & Burn	Used to buyback and burn RICE, while triggering a transfer of RICE rewards to venture DAOs in DAOSquare Incubator (see the RICE Rewards Supplement section for details).
Claim	To enable goRICE holders to claim compensation from the Compensation Pool.

Key Parameter Adjusters

Adjusters	Description
Protocol Fee Scale Adjuster	Adjust the percentage of Protocol fee collected, As % of the total investment. The Protocol fee is generated from each successful investment in DAOSquare Incubator. See the Fee & Carry section of the product documentation for details.
Token List Adjuster	The Token List determines which tokens (protocol fees) can be converted into a single Distribution Token for subsequent distribution. Protocol fees in the Token List will be converted, and protocol fees not in the Token List will go directly to Treasury. Token List Adjuster is used to add currency to the Token List or remove currency from the Token List.
Distribution Token Adjuster	Adjust the target currency of the protocol fee conversion in the Convert action, namely the Distribution Token. Distribution Token can only be selected from the Token List.
Protocol Fee Distribution Adjuster	Adjust the Distribution Token allocation ratio in the Treasury, Buyback & Burn Pool, and Compensation Pool.
RICE Burn Scale Adjuster	Adjust the burn % of buybacked RICE. When the RICE balance in the RICE Reward Pool is `> 0`, the burning ratio is 100%, and the adjuster is unavailable. The adjuster is activated when the balance of RICE in the RICE Reward Pool `= 0`.
Buyback & Burn Trigger Reward Adjuster	Adjust the trigger reward for the Buyback & Burn action (any goRICE holder can act).
RICE Release Scale Adjuster	Adjust the percentage of RICE awards to incubators. The percentage is calculated based on the amount of RICE buyback. The RICE Release Scale can be `> 100%`. When the RICE balance in the RICE Reward Pool is `> 0`, the adjuster is unavailable.

Additional Note for Protocol Fee

Items	Description
Timing of charging protocol fee	Protocol fees are charged only when Venture DAOs in DAOSquare Incubator completes an investment transaction.
Calculation of protocol fee	Total investment x % protocol fee. Total investment = project investment amount + Protocol Fee + Management fee + Scout Fee. See the product documentation Fee & Carry for details.
Who pay protocol fee	The investors participating in the investment shall pay the protocol fee according to the percentage of the investment of each investor. The protocol Fee is in addition to the project investment amount (see the Fee & Carry section of the product documentation for details).

Additional Note for Rice Reward

Items	Description
Timing of RICE reward	Run based on Distribution Cycle. Only the rewards of the previous Distribution Cycle can be processed and claimed within the current Distribution Cycle. See the Distribution Cycle section for an introduction to the Distribution Cycle.
Calculation of RICE reward	When the RICE balance in the RICE Reward Pool is > 0, the formula for calculating the number of RICE rewards in a Distribution Cycle is: Buyback Amount x RICE Release Scale %. When the RICE balance in the RICE Reward Pool = 0, the formula for calculating the number of RICE rewards in a Distribution Cycle is: Buyback Amount x (1 - RICE Burn Scale %).
Who can claim RICE reward	Venture DAOs whose protocol fees were contributed in the last Distribution Cycle, and their contributed protocol fee currency is in the Token List. It is important to note that rewards are given to Venture DAOs, not specific members directly. The allocation of members depends on the respective rules of the Venture DAOs.

Distribution Cycle

We use a Distribution Cycle design to simplify the calculation and distribution of RICE rewards to incubator. Simply put, RICE rewards generated in one Distribution Cycle need to be processed and distributed in the next cycle. Here's an example:

Assuming the Distribution Cycle #1 generates 100,000 USDT protocol fees, the Buyback & Burn Pool is allocated 20,000 USDT (20%) and the RICE Release Scale is 200%. When the Buyback & Burn function is activated at the start of Distribution Cycle #2, the goRICE holders can trigger it to complete the buyback of Distribution Cycle #1.

At the same time, the amount of RICE reward will be calculated according to the formula: Buyback Amount x RICE Release Scale %, that is, 20,000 x 200% = 40,000 RICE.

At the same time the Buyback transaction is executed, 40,000 RICE will be transferred from the RICE Reward Pool to the RICE Claim Pool. Eligible contributors in the Distribution Cycle #1 can claim the RICE reward before the end of the Distribution Cycle #2.

A few things to note:

The later the Buyback is executed, the less time the protocol fee contributor will have to claim the RICE reward.
The Buyback & Burn execution of a Distribution Cycle is valid until the end of the next Distribution Cycle. If overdue, funds in the Buyback & Burn Pool will accumulate to the next Cycle. This also means that the RICE reward in that Cycle is cleared and the reward beneficiary in the next Cycle receives an additional distribution.
If the RICE reward in the RICE Claim Pool is not claimed in one Distribution Cycle, it will be accumulated to the next Cycle, the claim weight of the original reward beneficiary will be cleared, and the reward beneficiary in the next Cycle will get additional distribution.

RICE Locker

Venture DAO participants who receive RICE rewards, as well as RICE investors in the secondary market, can lock RICE to be goRICE holders through RICE Locker to gain ownership of DAOSquare Incubator and the corresponding economic and governance rights.

RICE Locker offers four Lock duration options: 3 months, 6 months, 9 months, 12 months. The exchange rate for goRICE varies according to the duration, as following formula:

goRICE\;=\;\frac{RICE\;\times LockTime}{12\;Months}

locktime is denominated in months. The maximum lock duration is 12 months and the minimum is 3 months. Example:

Lock Duration	goRICE	RICE Lock	goRICE Receive
3 Months	25%	10,000	2,500
6 Months	50%	10,000	5,000
9 Months	75%	10,000	7,500
12 Months	100%	10,000	10,000

It is worth noting:

Non-transferable. goRICE holders cannot transfer goRICE in their wallet to any other address.
Linear decay with time. For example, if you lock 10,000 RICE for 12 months, you get 10,000 goRICE. The 10,000 goRICE will decay linearly over the next 12 months, and at the end of 12 months, the goRICE balance in your wallet will decline to zero.

Rights of goRICE holders

Rights

Claim compensation from the Compensation Pool.

Execute Buyback & Burn transactions in Governomy to earn trigger rewards.

Modify all Adjuster parameters (by proposing and participating in the Adjuster category proposal in Governomy).

Change the Protocol Fee % (by proposing and participating in the DAOSquare Incubator Protocol Fee Adjustment proposal).

Upgrade the DAOSquare Incubator Protocol contract (by proposing and participating in the DAOSquare Incubator Protocol upgrade proposal).

Upgrade the Governomy contract (by proposing and participating in the Governomy Contract upgrade proposal).

Treasury finances and invests (by proposing and participating in Swap proposals).

Development strategy execution, such as product development, Marketing, BD, Operation, service expenditures, events, investments, etc. (by proposing and participating in Expense proposals).

Governance

Governance Coverage

The governance of DAOSquare Incubator consists of three parts: DAOSquare Incubator, Governomy, and Treasury.

Item	Category	Part	Description
Protocol Fee Scale Adjustment	Parameter adjustment	DAOSquare Incubator	See the Key Parameter adjustor section.
Incubator Protocol Update	Contract update	DAOSquare Incubator	Upgrade the Incubator Protocol contract. The new version of the contract runs parallel to the old version, and the Venture DAO in the incubator can choose whether to update or not.
Token List Adjustment	Parameter adjustment	Governomy	See the Key Parameter adjustor section.
Distribution Token Adjustment	Parameter adjustment	Governomy	See the Key Parameter adjustor section. This proposal will take effect in the next Distribution Cycle after it is approved.
Protocol Fee Distribution Adjustment	Parameter adjustment	Governomy	See the Key Parameter adjustor section.
RICE Burn Scale Adjustment	Parameter adjustment	Governomy	See the Key Parameter adjustor section.
Buyback & Burn Trigger Reward Adjustment	Parameter adjustment	Governomy	See the Key Parameter adjustor section.
RICE Release Scale Adjustment	Parameter adjustment	Governomy	See the Key Parameter adjustor section.
Voting Mechanism Adjustment	Parameter adjustment	Governomy	Adjust the voting mechanism.
Proposer Threshold	Parameter adjustment	Governomy	Adjust the minimum number of goRICE holdings required to submit a proposal.
Governomy Contract Update	Contract update	Governomy	Upgrade Governomy smart contracts.
Expense	Transfer	Treasury	Fiscal expenditures
Swap	Transfer	Treasury	Converts a Token in Treasury to another currency. For example, convert 100 ETH to USDT. It should be noted that to reduce the risk of attack, the target currency of conversion can only be a currency in the Token List.

Proposal and Vote

In Governomy, all the items of governance are proposed in the form of proposals and decided by voting. The voting results are all executable. For example, if a proposal is passed to modify the protocol fee from 1.5% to 2%, The Protocol fee % parameter of the DAOSquare Incubator Protocol will be modified to 2% without any manual modification (such as developer modification).

Governomy uses the same voting system as DAOSquare Incubator. See the Voting System section of the product documentation for a detailed description of this system. Here are the parameters of the Governomy voting system:

Parameter	Option	Description
Voting Asset	ERC20 (goRICE)	Only the ERC20 option is available.
Contract Address	goRICE contract address	The Token address is fixed to the goRICE address and cannot be changed.
Weight Algorithm	- Quantity - log2 - 1 vote 1 voter	You can choose from three algorithms.
Support	YES / (YES + NO) > x%	Only one support % algorithm is provided.
Quorum	(YES + NO) / Total > x%	Only one Quorum% algorithm is provided.
Voting Period	- Hours - Days - Weeks	Value + time unit = Voting duration, for example, 25 Hours, 3 Days, or 1 week.

The above parameters can be modified through the Voting Mechanism proposal.

Eligibility Restrictions	Description
Who has the right to submit proposals	goRICE holders holding a minimum of 5,000 goRICE have the right to submit any proposal in the governance coverage.
Who has the right to vote on the proposal	goRICE holders who hold any number of goRICE have the right to vote on any proposal.

Key Proposal Constraints

When Buyback & Burn Pool Balance > 0, the Distribution Token Adjustment proposal is NOT available.
When the RICE Reward Pool Balance is > 0, the RICE Burn Scale Adjustment proposal is NOT available.
When the RICE Reward Pool Balance = 0, the RICE Release Scale Adjustment proposal is NOT available.

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Understanding Governomy