PIP10-C: Buyback Proposal for a Smooth Transition

Proposals
1

As PathDAO transitions to the Virtual Protocol, we recognize that some of our current holders may not align with this new direction. To facilitate a smooth and equitable exit for these members, we are proposing a buyback model at a predetermined price.

Execution Details:

  1. Buyback Price: The buyback price is set at $0.0077, equating to a Fully Diluted Valuation of $7.7 million. This figure is derived from our current financial position:

    • Considering the illiquidity of our NFTs and tokens acquired during our Venture Capital phase, we exclude them from the buyback consideration. This adjustment leaves us with a liquid capital of $8 million.

    • Anticipating that core contributors will require approximately $3.0 million over the next 24 months to develop the protocol, we have allocated this amount accordingly.

    • Consequently, the remaining balance for the buyback fund is $5.0 million. Of the 100% token supply, ~65% of the tokens are allocated, with the remaining as unallocated in our ecosystem treasury. This brings the buyback Fully Diluted Valuation (FDV) to 7.7mn (5mn/65%).

  2. OTC Platform Transaction: We will engage a reputable Over-The-Counter (OTC) platform for this process. Token holders interested in this buyback can deposit their PATH tokens into a decentralized escrow service provided by the platform and receive USDC in return. This offer will be available for a two-week period, with the start date to be announced.

This buyback approach is designed to provide a fair and orderly exit for stakeholders who no longer share our vision, while also preparing a solid foundation for our new holder base as we embark on the exciting journey of transforming PathDAO into the Virtual Protocol. This strategic move is key to ensuring a seamless transition from a gaming-focused DAO to a broader, innovative protocol with a renewed focus.

Voting options:
A. Agree in full to the buyback proposal
B. Disagree that there should be a buyback proposal at all
C. Disagree on the pricing, a revised proposal should be crafted

1 Like
2

By TD [from Telegram]

Happy to see the team is finally allowing people an exit from the DAO. Its defintely long due and common in the space. So kudos for that.

This first draft of terms is insane though. Holding back all the nft value, all the other investments, and a shocking 3 million of additional dollars?? Youre also accelerating your own vesting? The whole point of vesting is to keep a team engaged and working hard for future benefit. Makes zero sense to do that.

Glad the conversation has started but geez who thought these were fair terms for people who have hung in through a brutal bear market and many mistakes by the path team

1 Like
3

  1. On the illiquidity side of NFTs and tokens, it’s detrimental to the DAO collective and the ecosystem of the assets if they are market sold. Many of these are high time frame investments. One example is like PhotoFinishLife that was entered in 2 years back with a $70k position. Now is a $700k position but it is still vesting.

  2. Accelerating the vesting of all participants when the circ cap is below treasury effectively gives us a major upside in the future with no downside. First of all, most participants are almost vested fully, with the longest vesting with a remaining of 1 year. That extra 1 year doesn’t change anything. The upside however is strong. When what we do gets picked up by crypto twitter, we have a super strong narrative where there’s no longer any inflation on the tokens. Circ mcap = FDV

4

Offering an exit to holders during such a significant transition makes a lot of sense. I applaud the team for doing so pro-actively.

However the price seems so incredibly unfair. We show a backing of $0.0325 on the dashboard and are offering less than 25% of that.

Adjustment for illiquid assets
Adjusting the $5.5m investment value to 0 is very aggressive.

  • Liquidity for good NFTs is pretty ok.
  • Based on the amount of PATH holders that want to make use of this buyback, it might not be required to sell any at this point in time.

Why should there be a discount in the first place. Every tokenholder owns a proportional share of the DAO right?

I hope that our accounting on these assets has been accurate all this time.

$3m for core contributors
Is there documentation available supporting this requirement? What our are current monthly expenditures? With such a huge transition where there is a rightful option for people to exit, it makes sense to build a more lean organisation going forward.

Tokens
Is there a more detailed breakdown available of the 65% number?

2 Likes
5

Agree, but yeah +1 to @Leeroy comments

6

gm @Leeroy thanks for your thought comments, here is my response:

  1. Why is the buyback price at a significant discount to the book value of the DAO treasury? The primary reason for not offering a buyback to $PATH holders at book value, but rather at a discount, is due to the purpose of the buyback. It is not aimed at dissolving the DAO, but rather at providing an equitable exit for those not aligning with the new vision, in the event of PathDAO migrating to a new protocol. If PIP-10A/B is approved and PathDAO transitions to Virtual Protocol, $PATH token holders wanting to exit will have two options:
  • Exiting via the free market. Currently, PATH trades below book value, but as we improve value-connect mechanisms and education, we anticipate the market value to align with our book value, offering liquidity for exits, albeit within an uncertain timeframe and liquidity scale.
  • Exiting via a DAO buyback. The objective here is to facilitate an exit for holders while being value accretive to the Virtual Protocol, maintaining a balance between the interests of two parties. Hence we proposed the stated buyback price as an optimal balance point, considering the interests of both stakeholder groups.
  1. Is there a detailed breakdown of the expenses of core contributors?
    Over the past two years, we have maintained annual expenses of 900k USD for a 20 FTE team:
  • 10 Technical
  • 6 Operations
  • 4 Investment Analysts.
    This equates to 45K USD all-in expenses per FTE, which is ~15% of other reputable DAOs like LIDO/MakerDAO. We are prudent with our spending but acknowledge the need to increase our budget for AI expertise as we shift toward AI technologies. Upon approval of the proposal, we will present a detailed expense breakdown for better transparency.
  1. What is the breakdown of the 65% token in circulation?
  • 10% for the liquidity pool
  • 10% as staking rewards
  • 15% for core contributors
  • 13% to private investors
  • 12% to the public
  • 5% to advisors
7

Thanks a lot for the explanations!

This sounds like one of the stakeholder groups (these stakeholder groups only exist as a result of the proposal) gets substantially better treatment then the other. All holders are equal, and this proposal would result in people not aligning with the AI pivot and changes in business model (e.g. increased spending) getting hurt significantly at the benefit of those who align. This doesn’t seem fair.

9

@Leeroy

In the event that this proposal is approved, it would indicate that the majority of $PATH token holders prefer to support the Virtual Protocol in the long run. I believe that making decisions based on consensus is by design of the DAO.

That said, if the proposal is approved, the minority will still have a choice: they can either exercise the buyback privilege or continue to hold their tokens until the market value aligns with the book value, which I believe will happen soon. This buyback scheme is an option, not a forced action for the minority.

10

Lets be honest about what this is. Its not an attempt to give an “equitable exit”. Its an attempt to take the PathDAO treasury that came from retail investors and reappropriate it into salaries and seed money for a completely new endeavor.

I’m going to remind everyone what cks, one of the last active retail community members, posted nearly a year ago before the last unsuccessful “pivot”.

image
image1556Ă—422 61.2 KB

The real proposal should be to dissolve this protocol, burn unvested team tokens, leave one person on board to manage and distribute the seeds as they vest, return a proper .033 to each holder, and then the team can go raise for this new AI idea on their own track record. Can we vote on this and will the insiders do the honorable thing and abstain? I’ll write up the proposal. Lets see what the community really wants because we all know .007 when we bought this tokens for .66 isnt “equitable”.

Also, please stop talking about the “protocol” like its some separate entity. All we have is a treasury, a couple failed ideas, and now a 1 month old litepaper. When you talk about the protocol you’re really talking about your own interests and those of other insiders.

2 Likes
11

Great, either:

A) You make a bunch of poor investments into nfts and seed deals which are down 80-90% (still marked at cost in the portfolio) and then you make the holders who don’t believe in you take the hit instead.

or

B) You believe the nfts and seeds are actually valuable, and instead of honoring the DAO ownership of the treasury, you say “jk, your tokens don’t govern the nfts and seeds unless you give us $3m to build this new thing”

Because taking 5% of the treasury (while losing millions of dollars) isn’t enough? You need to just take another $3m out of the valuation?

If you believed that you were going to be successful, wouldn’t you inherently not need to allocate extra budget?

Not only is this just straight up stealing from holders that don’t agree with you, but you make it seem like you know you are going to lose more money, so you need to secure a chunk ahead of time.

This is incorrect, there are many more protocol owned wallets with protocol owned tokens. Regardless of what they might be used for in the future, they are currently owned by the protocol, meaning they are owned by the holders.

There is an extra 200M+ PATH tokens owned by the protocol which are not owned by users or team members/VCs/vesting. To say that these tokens should be included is again just stealing from holders who don’t want to give you another $3m over the next 24 months.

If you want an “equitable exit” just honor the DAO and let people exit at their fair share of the current assets, book value, which if you are going to pivot the entire project while also allocating additional budget, you ought to do.

If you think you are going to succeed and build something valuable, you would be worth more than book value, and anyone leaving at book value would be beneficial to those who stay.

Telling holders that if they don’t agree with the protocol direction change, that they will receive less than half of their share of the treasury, is basically just coercion.

2 Likes
12

Maarten — Today at 4:42 AM
feels like stealing, why not offer an exit at 0.0325
Image

protoman — Today at 5:04 AM
many investments are illiquid as of right now, also they are not dissolving the dao, just offering an exit for people that dont agree with the future of the project

Elon.Kongz.Eth (Twinkle) — Today at 6:24 AM
Where did you see this is the buyback?
I would love to hear more on the marketing aspect and why this new token launch will be diff
Crossing AI and Gaming in the same sentence though could gain a lot of attention (as the team is already aware)

Irboz — Today at 6:55 AM
PIP10-C buyback price ?

Elon.Kongz.Eth (Twinkle) — Today at 6:55 AM
Ah guess I didn’t see that part, thanks

Pantsu — Today at 9:17 AM
Moving into building an AI x Metaverse Protocol is one thing, but why is the Buyback Proposal excluding so much of the Treasury? >.>
NFTs and Venture Capital Tokens should be included?
And why take 3 Million too? They already get pay n.n

13

Quite an important clarification needed here, seeing some of the comments:

The DAO still governs the treasury in the new protocol. There will still be a treasury management team whose full focus is to keep growing it through liquid investments (gaming and beyond).

The development of the new protocol uses the Venture Studio resources that we’ve built up over the past 1.5 years, within the 5% OPEX budget guardrails. From our current projections, this can still cover the dev work on the protocol layer, and the initial POC for flagship DApps. If this increases, budget overruns will have to be approved at the DAO level as well.

There will be requirements to fund new teams at the DApp layer, but each of those funding will have a proposal at the DAO level. The estimated budget takes into account these potential cost incurs that will be needed to increase the success likelihood of the protocol.

14

Amendment to voting options

A. Agree in full to the buyback proposal
B. Disagree that there should be a buyback proposal at all
C. Disagree on the pricing, a revised proposal should be crafted

15

0.0077 is fine. 80% more than our lows.

16

Team raised money for A. Now wants to build B bcs they think it will do better than A. That’s fair and pivoting to more successful business is to be respected. Issue is that this new thing should raise it’s funds from willing participants and not be funded by forcefully taking 75% of value from those who invested in A but don’t want to be a part of B.

$0.0077 number is absolute slap in the face of anyone who holds this token.
Taken directly from official website “Treasury value per circulating PATH supply $0.0325”
That’s not even 25% of value advertised.
I get that some of this value might be illiquid but marking everything to zero and taking it to new project at no cost is ridiculous.

@everythingempty

Nah. That’s governance abuse. It’s majority forcing minority to take 75% cut in value or fall in line and give team more funding to try new things. It’s majority telling minority that “if you don’t agree with us we will take 75% of your money”.
If you would want to make it more fair/not abusive then choice should be:

  • migrate to Virtual at 1 to 1 ratio and receive no USDC
  • migrate to Virtual at 1 to 0.75 ratio and receive 0.0077 USDC (25% of value)

That would be real choice…

1 Like
17

This is a good way to think about it. Even if the majority could be convinced to vote to rug the minority is it a valid vote or a governance attack?

Similar to if the team got together with a group of whales to say “hey lets vote to take 10 million out of the treasury and split amongst our own wallets”. That scenario is a very obvious governance attack. How is taking 3 million of a huge runway and all the supposedly illiquid stuff any different?

Every vested token is equal and should be treated that way.

2 Likes
18

another $3m to develop another “protocol”??? We need a much more elaborate breakdown of the expected costbase per year.

19

We are not voting on a budget for the protocol here. We will still keep the operations within the foundational OPEX budget (~20 man team atm). But in the case where we need extra budget for DApp funding etc, those will be new proposals and be voted upon in the future.

Explained in the TG already, but parking here for visibility

Honestly, if you’ve seen how we’ve operated since inception, we have been super prudent on OPEX, and also emission of Treasury tokens.

20

OPEX being low doesn’t matter if the OP is facilitating the loss of millions of dollars in value since inception.

The issue is that:

  • You are forwarding your vesting
  • Giving yourself more control of the new protocol
  • Potentially removing any safeguards/restrictions from the old protocol

WHILE:

  • Giving holders less than half of what they should have claim to, if they want to leave
  • Saying illiquid (significantly down) investments made by the TEAM will be at the expense of holders who choose to leave
  • NOT HONORING CURRENT GOVERNANCE AND PROPOSALS THAT HAVE PASSED
    “Realised $1.1Mn in profits from $RLB” but NO BUYBACKS FROM PIP-6

Why not just honor the governance in place and provide a buyback price somewhat close to what book value is? It doesn’t impede or stop ANY of the goals in parts A or B of the proposal

21

On the bolded part. I’ve responded before on this. We will execute PIP6B once we do some accounting to balance out other gains and losses. A lot of live/active trades right now, hence the team hasn’t done the accounting on the positions yet.

Also, voting is now live. There’s an option for a revision of this proposal, please participate on the snapshot at Snapshot by Dec 4th