BIP-35 v2: Have Cake and Eat It Too: OTCing with Treasury $BOTTO

choobie

0.0 Summary

This is a follow up to the original BIP-35 regarding adding more liquid funds to Botto’s treasury through swapping $BOTTO for $USDC / $ETH. This modified version adds context to existing rationale for the advantages of pursuing an OTC of treasury $BOTTO, addresses alternatives, and presents parameters that would guide the team in its execution of a potential swap. Discussion of the original BIP-35 also brought forward a number of issues that, while outside of the scope of this particular decision, this BIP aims to clarify how the team intends to move forward on as they were raised as relevant context for this decision.

Here’s a TL;DR of what is proposed:

Tasking the core team with swapping ≈30% of Treasury $BOTTO (max. 8M $BOTTO), with strategic partners in order to secure runway and onboard partners that can accelerate development and execution on Botto’s roadmap.
Guidelines for the team would be to guarantee a minimum 1-year lockup and maximum of 5M Treasury $BOTTO to a single partner in each OTC swap. OTC partner will expect a discount for lockup, which can vary 10-20% depending on the length. The core team would be given discretion to negotiate up to a maximum discount of 20% based on the strategic advantages a partner can bring to the table for Botto.
The swap would be limited to OTCing $BOTTO for $ETH or $USDC.
Tan Dao Limited functions as an escrow for all investments on behalf of the DAO and OTCing parties
This BIP does not cover a decision on:
Specific roadmap priorities
Budgeting and spending decisions for how treasury funds would be spent outside of the swap
Active treasury management strategies post-swap, such as ratios of $ETH vs. stables vs. $BOTTO, loans against ETH, or yield generating schemes. These topics merit their own BIP and discussion.

1.0 Rationale

The initial rationale posted for BIP-35 provides foundational insight into the ‘why’ of this BIP:

thomahawk69 As a "startup” in the crypto industry - three things are critical to the survival of a DAO:

Product Market Fit - having a product that continues to attract new participants and engage with existing Bottonians will allow the DAO to generate a solid source of recurring revenue (ie. weekly auctions on SuperRare)
Expense allocation - it’s just a fancy word for budgeting and making sure money is spent wisely based on expected returns. BIP-25 is a good example.
Capital preservation - lastly the DAO should have an emergency “stash” that can allow the DAO to operate with a margin of safety when things go awry. In an unlikely scenario where the DAO generates no primary sales for weeks, and the $BOTTO value plummets - having additional funds outside of Botto’s native token will be beneficial. Essentially having basic treasury management that diversifies some risks away and help extend the runway of the DAO.

These three things are not the be all and end all criteria, but are important levers that can help balance the DAO if one of them falls out of sync.

Currently, the Treasury uses only $BOTTO or ETH to fund all operating costs, with ETH being converted to USDC to pay for one contributor. As the DAO seeks to scale the breadth and depth of different activations and activities, building a reserve of USDC (or wBTC or more ETH) that can be deployed to pay for real-world operating expenses has become increasingly more important.

As much as we Bottonians love the DAO, $BOTTO is still a relatively illiquid asset that cannot be sold or distributed at scale without being subject to slippage and putting downward pressure on its price. Diversifying a portion of the Treasury into either USDC/ETH/wBTC will make Botto more sustainable.

In addition, there is no established authorization for swapping existing assets like ETH or $BOTTO to other tokens (or fiat) specifically for Treasury management purposes. (Note: currently the DAO can and does swap tokens to USDC for committed expenses, e.g. contractors, operators, vendors, etc.) Establishing this authority to DAO Core Team Members (“Operators”) is extremely critical given the current challenging macro-environment and persistent volatility of alt-coins that will impact the Treasury directly.

There are multiple points to consider to extend our line of thinking for this BIP and to help answer the question of “why now”. Much of this has already been discussed, but is expanded on below.

1.1 Treasury: Inflows, Outflows, and Runway

With team vesting ending in October, there would be an increase in expected treasury outflows should the DAO decide that the team continues to work on Botto. Irrespective of who works on Botto, treasury outflows would increase. Alluding to a second scenario, when we consider the idea of expanding bandwidth, like we did on a recently piloted core contributor’s programme to further decentralize Botto and move some dependency away from the core team, these outflows would further increase.

Below is a rough view of inflows and outflows from the treasury. Note that this does not include the team vesting, which ends in October. If the DAO decides for the core team to continue working on the project, that will mean an increase of approximately $40k USD more costs per month.

*Note that these values aren’t 100% precise (ETH closing, denominations in different currencies, outflows occurring at different times), but they are pretty close and give a solid and fair indication of inflow/outflow.

Average cost excl. rewards prior to contributors program (Lifetime): $37,993
Average cost excl. rewards (Dec ‘22 - May ‘23): $31,412
Contributors program added average cost of: $11,485
End of vesting would add current salaries of: ~$40,000/mo
Average revenue (Dec ‘22 - May ‘23): $100,500

Average monthly burn rate after vesting ends*:
(Average revenue/2) - average costs with salaries
(100,500/2) - 71,412 = -$21,162/mo
Pessimistic case: $71K/mo

*Taking averages from the 6 months ranging Dec ‘22 - May ‘23 and assuming ETH price is stable, weekly mint price is stable, and we continue to have occasional large sales events like what we saw with the Genesis OTC’s in January and Pipes sales in February.

Here is a view of the treasury holdings:

*Value of $BOTTO in treasury is estimated based on current market price of 26,608,004 $BOTTO. Of course selling a large portion of $BOTTO on market would be dilutive and likely lower this price. We do settle some costs in $BOTTO, but it should be considered fairly illiquid and the amount shown taken to illustrate a relative value in treasury holdings in considering an OTC.

1.1.1 Runway Estimation

Using the calculated average burn above, we’re looking at ≈35 months of runway. We aren’t considering $BOTTO or our Uniswap LP shares as part of our runway estimation here, and the runway estimations assume that costs are settled in USDC/ETH moving forward, not $BOTTO. That is very healthy and leaves ample opportunity for the market to pick back up and Botto along with it, but as mentioned above makes a number of positive assumptions.

That estimate can change with different tweaks of the assumptions. A couple examples:

Distribute only 25% of Pipes-like sales as rewards as we did in Feb ‘23: ₆₀ months of runway
Assume we don’t have Pipes-like sales events, and 50% of revenue distributed: ₂₀ months of runway
The price of ETH can also change, or we could decide to change the overall rewards distribution.

Overall, our view is that our current trajectory is good and there are opportunities in both Botto’s artistic development and the broader market that can bring Botto into long-term sustainability. However, there are many uncertainties and we can do more to increase Botto’s chances of creating catalysts and taking it to the next level as an artist. Further, there are a number of upgrades and developments we can invest in that would further decentralize and automate Botto, ultimately leading to lower costs. All of this comes together to bring Botto into perpetual sustainability as a globally recognized artist.

We are sharing below a broad view of the road ahead that we believe gives reason to add funds that not only extend our runway, but also add to the team, infra, and decentralized contributions around Botto such that we are able to proactively generate bigger chances for Botto to reach new levels as a successful artist.

Securing greater runway right now is sensible so that we as a DAO can 1) pursue items on the roadmap with a financial cushion, 2) continue to make use of the talent available within the DAO, 3) expand on our bandwidth based on all three areas of the roadmap below and 4) secure strategic partners who can help us achieve our overarching goals.

1.2 Roadmap

At a high level, we see two major goals on the roadmap:

Help Botto create new art projects that are cultural catalysts and continue its growth and impact as an artist
Build out the decentralized infrastructure of the DAO in a way that expands Botto’s ecosystem of collective meaning making and overall decentralized automation of the artist that underpins a sustainable and effective operation.

These two overarching goals are both interrelated and interdependent, shaping three major areas of the roadmap the DAO should continue pursuing: Art & Sales, Tech, and Community.

1.2.1 Art & Sales

These are essentially everywhere Botto reaches the outside world. Beyond Botto’s weekly 1/1s and periods, there are artist collaborations, special edition drops, exhibitions, sales events, and more to all execute on such that Botto makes an impact on culture wherever it goes. Think Christie’s, Meme Cards, Blossoming Cadaver Prints, etc. An important piece on top of this is working diligently on helping Botto evolve into new mediums and major installations that manifest new expressions of Botto’s concept and themes and further evangelize the crowd.

We have a full calendar here, and an awesome pipeline of inbound. However, we think we can not only raise the bar on executing on these opportunities, but also proactively push the envelope of what Botto is able to achieve without relying on inbound. This means both expanding our bandwidth as a DAO to deliver on what we already have coming in, as well as raising our ambitions and adding significant partners who can help Botto explode beyond the world of crypto art. We are still just playing in a relatively small niche, and Botto has a ton of potential to generate conversations well outside of web3.

1.2.2 Tech

While much of Art & Sales is concepting and producing, it is also a technology undertaking. We can all see how fast the pace of development is in AI and crypto. Opportunities ranging from a decentralized AI stack (e.g. zero-knowledge proofs) to new mediums like animation and music are all possibilities, and Botto is in a position to continue pioneering in the intersection of AI x Crypto.

Furthermore, delivering this all in an accessible UX is a way Botto can continue to reach a wider and wider audience with the utmost credibility. We see many ways we can more fully decentralize and automate Botto’s infrastructure. However, maintaining and improving the current stack is a large part of our bandwidth. To take things further, we would be building novel infrastructure. This is not only an important part of Botto’s sustainability (i.e. keeping up with the times), but it is also a part of the art in terms of Botto achieving greater autonomy and decentralization. Tech also underpins the collective meaning making and contributions of the community, and combines with the 3rd pillar: community.

1.2.3 Community

Botto is in-part a project of collective meaning making. Further enabling decentralized contributions is core to Botto’s future and expanding its cultural footprint. There is a large range of ways people can contribute, such as biz dev, analytics, events, BIPs, archiving, and interpreting and creating from what Botto outputs. We have a growing collective intelligence here to tap into; incentivizing and elevating collective intelligence will add even greater depth to Botto’s outputs.

Engaging the community beyond voting is an area that we’re lacking in at the moment. It’s a mix of providing the infrastructure for decentralization contributions (e.g. Data API), providing information for people to make informed contributions, and generally growing a culture of participation. The initial response to the BIP is in part symptomatic of not prioritizing basic communication on key operating information. We need to do a better job of first communicating and making information available that empowers people to contribute autonomously, as well as creating more infrastructure to enable those contributions.

1.2.4 Developing the Roadmap

Overall, this is a high level overview of the areas we would like to focus on for Botto, but it should be enough to make it evident that a full-time core team of 5 needs to expand. Hyperlinked are some slides we’ve put together that further outlines some of our thinking on the roadmap. Turning that into a more detailed roadmap becomes a lot easier with a secured runway so we can plan a proactive execution and bring on strong talent.

An important note here is that we see these investments paying off not only in stronger revenue from successful art projects, but a stronger protocol from increased confidence, and ultimately less centralized heft as we build out infrastructure for greater decentralization and automation.

Finally, we do not intend to present this roadmap as a foregone conclusion, but to illustrate a minimum of what we can look to build with a healthier runway. Deciding roadmap specificities and priorities alongside budgeting are important yet different discussions that should be worked on collectively, and we urge for these to take place separately after BIP-35 in the form of other improvement proposals.

2.0 Responding to Issues Raised

2.1 Diversification, Fundraising, and other Nomenclature

The first iteration of BIP-35 seemed to have caused some misalignment in understanding, some even thinking it had to do with daytrading (not the case!). We hope the above rationale brings clarity to what are the aims of this improvement proposal, irrespective of semantics i.e. fundraising versus diversification.

2.2 Selling an Undervalued token

We agree that the token is undervalued. However, we hold our position about this being a critical moment to act. We could absolutely hang tight, keep growing, and wait/hope for the token to go up again, but that prevents us from being able to proactively move on the roadmap above. Botto was cutting edge when it went online in Oct 2021. It still is pioneering totally novel territory. But we should not rest on our laurels. There is incredible new tech to work with, and we need to continue activating our collective intelligence. The weekly mints are Botto’s core work, but building a world class artistic career takes consistent reinvestment and new evolutions. We are growing and expanding, and we could hit future catalysts on our current trajectory. But by not leaning into Botto’s development now we are leaving significant opportunities on the table to build on in this bear market. Some of the bigger projects for Botto take many months to develop, and waiting for the market to go up, for $BOTTO to go up along with it, then to sell then to start investing is keeping us from making big moves now while there is relatively little distraction in the market. The higher token may come from catalysts we don’t expect like ChatGPT, but those are rare and totally out of our control. It can also come from us creating those catalysts with Botto. The bear is unfortunately a time of low token prices, but it is also the best time to build and secure top partners, such that when the bull market returns Botto is well established and is THE artist people want to collect and even be a part of.

2.3 Ongoing Ability to Swap

We have to admit we were unprepared to OTC into the run-up at the beginning of the year. We don’t think this is a reason to not OTC now given the opportunity cost. It would put us in a position to make an even stronger bull case, and be prepared as a core team and DAO to make other strategic swaps when it does rise again.

The freedom to OTC up to 30% of treasury $BOTTO with strategic partners while maintaining a minimum of 51% of treasury denominated in $BOTTO was a way of giving us the freedom only to sell again after an initial OTC when the token is up and not when it is down.

We believe this should be covered in a subsequent BIP that covers active treasury management, so have removed this and simplified the BIP-35 to a basic cap of 8M $BOTTO in treasury.

2.4 Reporting and Governance

Communicating costs and inflows/outflows absolutely requires improvement on our end. This was a major theme in the discussions around the original BIP and in hindsight we should have prioritized preparing more background context of costs and roadmap to present alongside the first iteration of the BIP. Moving forward, we are exploring a structure to report costs on a monthly basis directly in Discord to keep everyone informed, as well as a way to have a two-way discussion on the roadmap and priorities at regular intervals. In the meantime, a summary of the most recent 6 month period can provide enough context for the BIP:

Costs include all OpEx (Hardware, Software, Events, Marketing & PR, General Expenses) including core contributors, excluding core team salaries. A lot can be discerned from the table alone - we’re doing well, but additional treasury outflows are something to be mindful of.

On governance more broadly, full decentralization is a long process. Even as we go through a basic proposal process for all major decisions, there is still a lot of dependence and trust on the core team (we tend to write most BIPs ourselves and execute on them once the overall DAO approves). Further defining the governance structure and practices that make sense for BottoDAO will be inherently a part of the hiring and budgeting decision that is coming up around the end of vesting. However, we would caution against diving head first into a heavy constitution building process to define every possible detail and scenario as that would likely lock us into our current way of operating with a heavy reliance on the core team.

Defining a constitution and governance practices should be downstream from determining how we want the DAO to look long term in terms of decentralized and automated operations. Iteratively building out decentralized contributions with accountability measures we think is a good way to build this. This is not to say we shouldn’t have more guidelines than we do now, but rather overcorrecting into too many rules can overburden and stretch the operation too thin. We appreciate the trust we have had from the DAO, and believe we should do more to keep it in terms of reporting, sharing information, and aligned guidelines. We don’t take for granted that trusting a core team with few established guidelines is not good for long term sustainability. Working together to define what works and formalizing that over time is a necessary but long process, and we see this as being an important activity to work into the roadmap within the Community pillar.

For future reference, here are the topics suggested that we recommend addressing after the OTC (in no particular order):

CEX listing
Treasury management committee and reporting
P&L management, diversification management
Governance constitution (e.g. voting on our own compensation)
Budgeting and hiring decisions
Roadmap and priorities
Legal wrapper, jurisdictions and resulting duties of compliance
Balance of Stables vs. ETH
Further tactics around survival vs. growth, major art projects for revenue
Liquidity in Uni-V3 and addressing LP subsidies
Offering VP accrual for 1/1s, stacking vp accrual for pipes
Swap ETH rewards for $BOTTO, reduce rewards %

2.5 OTC & Deal Structures

Allowing the team to facilitate these transactions on behalf of the DAO offers a number of advantages, namely assuring confidential discussions with interested parties. If an interested group were to expect all discussions to be public and negotiated with the DAO as a whole, they may never reach out in the first place and/or shy away from moving forward. As an art project DAO with a liquid token, Botto is a unique case for these groups to consider. They require successive discussions not only for them to understand us, but also for us to ensure we are getting a committed and aligned partner. Putting these discussions fully in the open adds reputational risk for the parties that limits their openness in discussions, as well as a risk of a deal being front-run. Aligned partners, such as art institutions, may not be the most flexible and understanding of our circumstances and so creating an environment for discrete and open negotiation gives us the best chance of landing unique partners that can add a lot of value.

We can say that we’ve gotten a great deal of inbound from very well known groups, and have done some of our own outbound as well to gauge interest from others we think would be particularly strategic for the DAO. As we all want to limit the size of this OTC, we would be aiming to limit the OTC to just a few very key strategic partners, 1-3. This has been an opportunity to fully explain the Botto concept to all of these potential partners, and even if they don’t become part of the OTC they have the liquid token available to them.

To help ensure trust, guardrails should be specified to ensure alignment between the core team and the rest of the community before setting out to negotiate on the DAO’s behalf. We would set these at:

Minimum Lockup Period
This has always been a given to us and would be at least 1 year.

Narrowed Partner Types
Any party the DAO would OTC with should be strategic. We see these as VCs with aligned theses to Botto’s mission and major art world partners who can bring to bear meaningful influence in accelerating Botto’s roadmap execution. Even with a minimum lock up of 1-year, we would be seeking partners with time horizons well beyond that. If the team was not confident in the parties available to OTC, it would not sell just to sell. We see this as both adding to the DAO’s runway while also securing partners who will be far more engaged than a typical passive governor buying on market.

We are defining a strategic partner as first and foremost a group with a very strong reputation whose OTC with the treasury would provide a valuable signal to the market of our credibility. That would be a name brand with recognized leadership and a pioneering thesis in a category related to at least one of our 3 main strategic pillars of Art, Tech, and Community and that can help us move the needle in those.

For Art, we are looking for a group that is especially focused on the future of contemporary art and sees internet/crypto art as inherent to that. For Tech, this would be a partner working on decentralized infrastructures, ideally at the intersection of AI x Crypto, and have a strong perspective on the best protocols to incorporate as we forge new territory. For Community, we are looking for groups whose thesis incorporates collective ownership and governance, and are deeply aware of the nature of progressive decentralization.

In all cases, these groups should bring experience and knowledge of leading solutions, access to talent that can be brought in to help execute, an understanding of the nature of this being an art project, a multi-year time horizon, and a willingness to elevate Botto to the flagship position at the intersections of AI x Crypto x Art.

Price and Discounts Offered
Typical discounts for a 1 year lockup range from 10-20%, and we would negotiate up to a maximum 20% discount based on strategic strength of the counterparty. The price would be based off of a TWAP of a week to a month at the time of an agreement being settled.

Maximum OTC swap to a Single Party
Each OTC limited to a maximum of 5M Treasury $BOTTO to a single partner.

Tactics for non-guaranteed consideration
These are tactics suggested we will look to use to improve on the above terms but won’t guarantee. We aren’t limiting ourselves to these, but offer a good example of ways we can improve terms.

Warrants for future purchases
Guaranteed market buy
Delegated/deferred governance and/or access to rewards
Collateralizing the vesting Botto
Offering fragments (would require another BIP)
Using a portion of team tokens to help fill desired check sizes of strategic partners beyond what the treasury can accommodate

2.6 Other Tactics suggested we won't pursue (with reasoning)

Reduce max OTC: We think the reasoning for size is evident in the runway and roadmap offered.
OTC Committee: This introduces another complex process: (Who else to add? How do they get elected? What is that process like? How are they vetted? What do they contribute?) The team is relatively well known by the DAO and we hope the information and parameters we’ve added have won enough confidence to move forward.
Reducing Liquidity to increase market price sensitivity for OTC partners: We think this is bad faith behavior on the part of the DAO
Staggered OTCs: While we can stagger the 8M $BOTTO OTC, we don’t want to do it preemptively and reduce flexibility in case an incredible partner comes our way.

3.0 Specifications

The specifications of this BIP are as follows:

Authorize the core team to swap up to ≈30% of Treasury $BOTTO (max. 8M $BOTTO) for either USDC/ETH with strategic partners in order to secure runway and onboard partners that can accelerate development and execution on Botto’s roadmap.
The OTC is limited to converting into USDC or ETH
Authorize Botto Operators the ability to negotiate with suitable partners (VCs, art groups, etc.) for an OTC token swap (private swap/direct placement), including the ability to offer reasonable discounts for bulk purchases of $BOTTO with a minimum lock up of 1 year, maximum discount of 20%, and maximum of 5M Treasury $BOTTO to a single partner in each OTC swap.

4.0 Budget

N/A

5.0 Disadvantages

Opportunity cost to parting ways with $BOTTO too early

dencryptus

Ben All stablecoins add some risk while losing the upside of ETH. My understanding - please correct if wrong - is that most of Botto’s costs are (and will likely) remain crypto-denominated. As such, they will naturally rise in USD terms if/when the crypto prices rise

Afaiu, most of the costs are fiat denominated (from salaries, to pay for the team's living, to Botto's operating infrastructure). Nothing is paid in Eth apart from rewards. Eth is relatively stable, but holding on to it for the (eventual) upside is Eth speculation, which is not our main activity. Thus, theoretically, Eth volatility should be a risk to be handled more than a profit opportunity. But don't get me wrong, I see your point and would do some of that speculative activity for the time being. I would say the min. fiat in treasury should be the equivalent to 1y of runway; the max. could depend on the market: maybe 75% Eth bear markets, maybe 25% in Bull markets (respecting always the runway criteria)

choobie Guidelines for the team would be to guarantee a minimum 1-year lockup

This is a minimum, but can be harmful depending on the quantity and the vesting/period. The partner/investor must understand the project is a long run shot, and a bare minimum of 3y should be considered. Also I would unlock the amount progressively, over a period of time, which brings flexibility for them, and some certainty for us (we can see how they proceed and adjust over time).

I'm missing data for the runway (like a break down of costs, a break down of revenue to run a few hypotheses) and perhaps a simple model to play with a few sensitivities. I'm sure you already have one (Hudsonsims made a great job with the Retro spreadsheets), so if it does exist, why is that not shared openly?. I could also build it myself if the break downs are provided. Some inputs were scattered in discord but not here, which hinders one's ability to understand the bigger picture.

choobie full decentralization is a long process

What's the meaning of this? I'm sure you have something in mind, Choobie, which can be more or less realistic. Any company today is decentralized and centralized in different aspects. What's the meaning of decentralization here? Are we mixing decentralization and permissionlessness?

choobie Typical discounts for a 1 year lockup range from 10-20%. We cannot guarantee a particular discount

What would be $botto's fair price if sales where up to an average of 10/15Eth per week? Food for thought. There is an estimate we can come up with, and it should be used to negotiate the best price. Another relevant consideration: will the buyers receive Eth rewards (ie will they vote or not)? I think the mental frame of "x discount" sets us/you in an unfavorable negotiation position.

Will keep posting more comments over the next few days.

choobie

Ben My only concern is that the BIP opens the door for selling BOTTO without specifying what will be acquired in return. ETH and USDC are treated interchangeably, while they are not in practice as I commented on the last proposal. I think this is a key question that doesn’t make sense to defer to a separate BIP (unless this separate BIP is handled first).

Likely OTC settlements would be in stables as the $BOTTO would be priced in USD terms so it simplifies things during the gap of time between the agreement finalizing and the exchange going through.

Ben All stablecoins add some risk while losing the upside of ETH.

This is a complex decision. For example, what about the downside of ETH, how does ETH affect forecasting or simply planning ahead, and what about our current ETH accrual mechanisms. $BOTTO in the treasury could also be considered a proxy to ETH exposure. Irrespective of how the treasury balances its assets, deciding upon this is not mission critical for this BIP. Get "it" in the treasury first and then open up the discussion, post a BIP directly, etc.

dencryptus Afaiu, most of the costs are fiat denominated (from salaries, to pay for the team's living, to Botto's operating infrastructure). Nothing is paid in Eth apart from rewards. Eth is relatively stable, but holding on to it for the (eventual) upside is Eth speculation, which is not our main activity.

Yes, this is for the most part correct, with current contributors (not core team) being paid in ETH, USDC, and/or $BOTTO.

Re. lockups and vesting:

dencryptus This is a minimum, but can be harmful depending on the quantity and the vesting/period. The partner/investor must understand the project is a long run shot, and a bare minimum of 3y should be considered.

Yes, any partner/investor would understand Botto's time horizon. Sometimes, vesting length is justified with incremental increases in discount (longer vesting, longer discount). Happy to hear your justification for a 3 year vesting minimum. We've specified the guardrail in the BIP as 1 year to ensure a baseline trust while giving us room to negotiate. I'd also like to at this point reiterate what was written in the modified BIP:

choobie If an interested group were to expect all discussions to be public and negotiated with the DAO as a whole, they may never reach out in the first place and/or shy away from moving forward.

Based on our inbound, this was actually one of the first question marks raised in conversation with every party quite clearly stating disinterest in publicly negotiating. This is why guardrails are used in the BIP, to provide an indication of our line of thought and objectives and to ensure trust that we are moving in good faith on behalf of the DAO, while also giving us room to maneuver with unknown aspects or opportunities that arise.

dencryptus Also I would unlock the amount progressively, over a period of time, which brings flexibility for them, and some certainty for us (we can see how they proceed and adjust over time).

Regarding specificities to deal structure etc, while my preceding point above applies, I'd like to stress that doesn't mean we're not listening. There are a number of approaches to negotiate around, such as access to the governance power of the tokens in voting and BIPs while locked up or only vested over time, not just the freedom to sell. Floating ideas or considerations we need to make regarding deal structure is more than welcome and is something we're paying attention to. This BIP has specified what we're looking to accomplish (and more broadly, how and with who).

dencryptus I'm missing data for the runway (like a break down of costs, a break down of revenue to run a few hypotheses) and perhaps a simple model to play with a few sensitivities.

I think we mentioned this in the announcement - there's a sheet that @thomahawk69 was conjuring up, we're looking to share that. Don't have an ETA but should be hopefully EOD

Re. full decentralization

dencryptus What's the meaning of this?

We’re using this in a very broad sense to mean Botto being sustainable without any core team risk. To me, this refers to the process of distributing control, decision-making, and operational processes away from the core team to the wider community of the DAO members. It involves us, as a DAO, building out structures and systems that enable our community to actively participate in various aspects of the DAO's activities, building on top of and with Botto through the DAO’s permissions rather than effectively through the core team, and, on a long enough timeline, possibly even going far enough to make Botto permissionlessly forkable. Decentralization looks different for different protocols and the DAO needs to define it for itself as a concept over time such that it is best supported rather than hindered by its decentralized structure.

To make this more tangible, consider tasks and processes that we should look to distribute. First and foremost we're talking about knowledge - how do we enable actors with enough knowledge to fulfill roles and functions on behalf of the DAO? Then, how do we ensure that tasks and processes are distributed from within, rather than falling on the lap of the core team? Relatedly, this BIP has also already opened up various discussion points: for one, building out committees was suggested for treasury management - I’m making specific reference to setting up subgroups within the DAO.

There’s also a basic technical infrastructure aspect here, such as a fully decentralized AI stack for Botto. Zero knowledge proofs offer a way of providing stronger credibility to Botto’s claims of autonomy by verifying its computation and data inputs are what the protocol says they are, without opening up Botto’s blackbox of prompts that might make it easy to steal Botto’s style. In some aspects of Botto’s stack, the technology is not mature enough to fully decentralize or automate in a safe way. Even if they are online, there are no clear best practices for implementation and we would need to figure that out. All of this adds more time.

Ultimately this boils down to governance mechanisms and the delegation thereof to groups (within scope and reason), enabling community contributions as a whole, building out more open communication channels in terms of knowledge dissemination and knowledge sharing, and finally this is about the decentralization of operations with enabling infrastructure.

narok Firstly, I would prefer to see these ideas proposed through governance, specifying what we aim to achieve and providing estimates of costs and efforts. If we, as the DAO, agree to proceed, then we should be actively seeking financing through OTC swaps.

The decision to secure a runway before going piecemeal on plans and developments is intentional. This approach not only enables us to attract and commit to strong talent who can aid in the development of those plans but also do it in a way that facilitates a more transparent and collaborative process of development with our broader community - which is what we all want. Also, securing highly aligned strategic partners who are in tune with our general roadmap can significantly elevate and expand our plans through their networks and expertise. We are sharing a spreadsheet shortly to allow people to play with different scenarios of runway, and can also provide some rough estimates of additional costs the roadmap would entail to help better illustrate the need.

narok From the post, it's apparent that our runway spans 2-3 years, indicating that operationally we are in a sound position. (I am grateful for the suggestion of monthly reports brought up by @choobie.)

narok It is critical for Botto to establish a solid governance structure in order to succeed. I see many individuals with insightful contributions on both Discord and the forum, so I have no doubt that we can do it, but only with transparency and clear codification of rules.

We absolutely agree that laying the right groundwork for the DAO's governance structure is crucial for Botto's success. However, let's take a moment to consider the current tradeoffs we face in this scenario.

Detailed planning requires resources, and too many checks and balances at this early stage could overload bandwidth. This is not to say that we're against developing more direct and effective governance, but there's a nuanced 'chicken and egg' problem here where we disagree about the sequence of events that this BIP would enact. We do think a proportionate next step after this would be to clarify areas within governance to improve upon (many great suggestions already) and a timeline of critical BIPs on decision making processes (i.e. period automation and moving away from BIPs for each new Period, hiring core team end of vest, roadmap priorities/budget and further team expansion). A prerequisite to that is getting a treasury manager and reporting in place, plus some freelance help with execution on exhibitions and marketing to free us up to properly attend to this process.

The sentiment shared by some of us is that forward movement on an OTC should cease until extensive governance structures are in place and/or parameters codified. We believe this underestimates the costs and complexities associated with establishing any such system. It’s a huge endeavor that we should all partake in - iteratively. A questioning of priorities also arises here. The complexities, if not intricacies of building out governance structures consume a significant amount of our bandwidth. This will stall Botto’s cultural and artistic expansion, which we see as the top priority. I reiterate, there are 5 of us on the core team with 3 being developers. Conversely, the proposed OTC allows us to expand the team in the short term while keeping healthy runway, and using this expanded bandwidth to develop governance and operational strategies in parallel.

The process of expanding the team in the short term would also include making decisions about priorities, budgets, and accountability mechanisms. However, we need to avoid committing to strong talent without sufficient runway as it injects unnecessary uncertainty into our planning process. Similarly, opting for a smaller OTC to cover short-term team expansion, followed by a planning phase, then perhaps another OTC phase, would introduce time and market uncertainty that might impede our progress.

Finally, we understand the desire to see a stable trajectory based on the current burn rate of the existing team. Again, it’s important to emphasize the team's current limited bandwidth. The lack of regular reporting isn't due to a lack of desire, but a reflection of the constant balancing of priorities we face daily - from maintaining platform operations, to exhibitions, events, collaborations, marketing, and so forth.

Ben

Thanks Choobie for putting this together, looks better to me.

My only concern is that the BIP opens the door for selling BOTTO without specifying what will be acquired in return. ETH and USDC are treated interchangeably, while they are not in practice as I commented on the last proposal. I think this is a key question that doesn’t make sense to defer to a separate BIP (unless this separate BIP is handled first).

All stablecoins add some risk while losing the upside of ETH. My understanding - please correct if wrong - is that most of Botto’s costs are (and will likely) remain crypto-denominated. As such, they will naturally rise in USD terms if/when the crypto prices rise (and guessing most here believe it’s a when not an if). So converting to stables does not necessarily put the treasury in a stronger position medium to long term.

I would support one of the following:

specify a max proportion of treasury in stables either by total % or relative to fiat-denominated operating costs
specify that any stables acquired via OTC sales must be converted to ETH upon receipt, minus those required to cover fiat-denominated operating costs
another BIP passed first that specifies the above

Ben

dencryptus Afaiu, most of the costs are fiat denominated (from salaries, to pay for the team's living, to Botto's operating infrastructure).

Would be great to get more clarity/specifics on this. Basically, I see a (likely) scenario where ETH goes up in the medium to long run and we are competing for talent against other DAO treasuries that are fully or almost fully crypto-denominated. The other thing to keep in mind is that stablecoins are not riskless assets strictly equivalent to USD in terms of risk profile (and this is putting aside inflation risk).

Basically as I see it, BOTTO has upside but lacks liquidity. Stables have liquidity but lack upside. ETH has both. Its volatility risk depends on the degree to which our costs are fiat denominated.

dencryptus could depend on the market: maybe 75% Eth bear markets, maybe 25% in Bull markets (respecting always the runway criteria)

Looks nice on paper, but devilishly hard to time in practice.

dencryptus What would be $botto's fair price if sales where up to an average of 10/15Eth per week?

It's a good question. Personally, I see us going much higher when the market returns/Botto gains prominence.

vanto

dencryptus was chewing on this as well. If we think botto is undervalued plus holders can participate in voting and get rewards, whats the importance of offering discounts? Is this an otc way of doing business?
Should we have a max discount? Does discount grow with the amount of botto traded?
Or are there other ways of sweetening the deal?

dencryptus

quimp Hopefully I just saved the DAO $300k. Ka-Ching!

If those tokens end up carrying revenue generation, you would have taken those funds from the rest of the holders that met the rewards requirements. Ka-chout for current holders, I guess.

Btw the implications of this item remain unaddressed in the context of this BIP. An interesting input here was the 600 gwei returns per vp per week with an auction in the 2d period. This figure is considerably inflated -recall pipes and genesis fragments sales in secondary-. So I would go more for the 200 gwei (which would fall into the low end of your range). With 8M sold and generating revenue, those 200 will get diluted by the proportion of x/(x+8) where x is the amount of staked tokens pre-OTC (other vp-generating assets aside).

Related: will the partner have a say on the weekly art? Should it be an institution (vs. and individual), who will decide/vote on its behalf? Will they only vote in the LB ratably among the 10 pieces? How will this centralization affect voting decentralization? Will we reach a prior agreement on their voting behavior?

Ben Looks nice on paper, but devilishly hard to time in practice.

Agree, just throwing up an idea.

Ben It's a good question. Personally, I see us going much higher when the market returns/Botto gains prominence.

I wouldn't have to be just an opinion or ball-park. We could actually come up with a reasonably fair number if we understood a bit better the financials and how the stock and flows of voting points are going.

choobie Happy to hear your justification for a 3 year vesting minimum

Based on:
1) What was built over the last 2 years - things go relatively slow, we have only 1/2 developers (?), what else will be delivered in only 1 year?
2) Classic investment cycles - a vc(ish) investor will invest for >5 years, that's the time it takes to build something worth their investment. From another perspective: history shows that in 1y we won't be able to build anything or grow sufficiently to pay off the risk of their investment (add to that this is for Opex and we lack clear and approved roadmap). When the 1y comes to an end, what will they do? And if things go well, will they dump the token asap?
3) the interest of the dao: say you close the deal in Nov., say things don't move a lot, say we are in Aug. 2024, how will you beat the incentives against sell pressure?
4) If they do believe in the idea, accepting >3y will be a no-brainer; if they don't, does it pay off to have them onboard?

We are used to have large holders that were more like patrons rather than investors. The project survived because they held strong in the worst moment. I don't think we can afford the damocles sword of a 8M $botto sale in 1 year (just checked now, it would have a -52% impact today). The fud and the multiplicative process would be a big hit.

I would rather sell 15M+ $botto at a $0.10 with a 5y lock up. There you would be selling $botto and buying a call option to propel Botto into the future, as opposed to selling $botto for a bridge round to finance opex. Corolary: the lock-up is as or even more important than the price.

choobie here's a sheet that @thomahawk69 was conjuring up, we're looking to share that

This was great. Hoping to see more stuff like this in the future. With access to info, we will all be able to provide better insights.

choobie We’re using this in a very broad sense to mean Botto being sustainable without any core team risk. To me, this refers to the process of distributing control, decision-making, and operational processes away from the core team to the wider community of the DAO members

Sounds nice, but after 2y here I don't buy it. Here is my take:

The vast majority of members don't contribute in any meaningful way, it takes a lot of time and effort to have a tiny impact on things, some of which should be made simple and subject to excellent professional criteria. Most of the conversations are based on opinions, opinions on things we don't understand or haven't thought about, and that there are no incentives to have informed conversations. There is even a component of populism: we cheer ourselves for telling some stuff that sounds good (because lfg!), but we leave a narrow path to constructive criticism (I've felt this, which is exhausting; we have crowded out very insightful minds who 2y ago accurately foresaw some of the issues we are now facing, being this effect a real tragedy). The knowledge channels hardly exist: what was said yesterday soon gets lost, with only you and Simon doing willful but insufficient recaps from time to time in discord. Lots of insightful takes of the early days were ignored or got lost in discord. Calling things by their real name presents difficulties, and sometimes political haircut happen (I'm afraid). It increasingly seems to me that there are unexplicit power dynamics (maybe large holders that interact directly with the team, and not via the common channels). Meanwhile, the dao too often keeps running in hamster wheels until we are in a rush. Reaching some basic consensus that should be foundational seems an insurmountable challenge after 2y. The conversation in discord and in this forum on key matters is often poor for a variety of reasons, increasingly chaotic and, the signal-to-noise ratio is increasingly low.

You ask "how do we enable actors with enough knowledge to fulfill roles and functions on behalf of the DAO?"
What functions are critical and essential to begin with? Which should be "outsourced" in that way you describe? Why would an actor fulfill such a function, with the best possible diligence, given the status quo? Would he/she do it in exchange for money, power, status, perhaps some ego-filling...or maybe because he/she doesn't have anything better to do? Will we be selecting the best in such a competitive world? Whoever these people are, they will have to be held accountable before somebody, be it you or someone else, and there is no shortcut for that. "Sufficient" is not enough.

Cooperative Societies have existed for centuries. Giving a project the postfix of Dao and running a few smart contracts won't solve the intrinsic problems of this form of organization, issues that grow with scale (vs. living in a small town or a tight co-living, where everyone knows each other or somebody who knows every other one). Leadership and some hierarchy will always be necessary in the internet world for complexes processes, and there are many here. So I think core team risk will stay for many years inevitably, and the best way to mitigate it is to recognize it and plan for common contingencies.

All my support to enhance Botto and raise its autonomy, this should be our priority because is what make it sustainable and appealing to the world.

Running the project as DAO is a secondary experiment that imo is a burden in more than a way, because 1) the technology is more stagnant than we wished, 2) there is not playbook for daos, 3) we are not making substantial progress, and 4) we will only end up reinventing the wheel. Even those groups you mention will work under very human (not coded) rules. So in the years to come, the Dao will either end up operating more or less like any other successful human organization...or fail, at Botto's expense.

We need a Constitution/Estatute (with rules and processes for effective delegation), some legal wrapper, basic financial processes (the essential information/kpis must flow easily), a committee/board that assists the team on the essential matters (remunerated or not, but vetted rigorously and transparently), policies for contracting (procurement) professional services that will be required, protection for Botto's assets (and a few more...)

I lean towards disagreeing with you on the assertion that "securing funding should go first" (I think Simon said it this way in discord). In my experience in venture it the other way around, either in the eu or the us: we expected the entrepreneur to have a clear picture of the resources required to propel growth, based on projects (hires, investments etc), tentative milestones and a few basic but essential processes. The fact that funding has seemingly become so peremptory is not good news.

choobie While I appreciate this might have been mentioned in sincerity, it reads like a backhanded compliment

It is sincere, it's a compliment for the work done running operations. It's the opposite of a compliment for BIP-35. Unsure about what you are assuming with "green behavior", I meant that the BIP wasn't ready and mature to be presented for approval in 6 days.

choobie This seems almost contradictory to us being green but I appreciate the positive sentiment.

Decent is mediocre, not excellent. Decent is surviving. Decent is putting out fires, but failing to clean the mountain and to build firewalls. Decent is throwing spaghetti against the wall and hoping for the best. Decent won't make Botto sustainable in the long run. Will Botto be an internet SME business or an artist that rlly aims at leaving its artistic mark in the books? Both are legit, each will have to be built differently, and I would only willing to spend energy and attention on the second

It wasn't neither a backhanded compliment nor slippery rhetoric, it was exactly what I said: I got to know how you think and so stuff, you seem smart, your backgrounds seem seem right, new hires seem to be on or above that bar. The intellectual and operational horsepower seems to be there. But there were large gap holes in the last BIP, and thus, I'm sure that the main issue had to be that you lacked some experience in that area or did it in a rush.

Related: I remain worried about the relationship with EY because of a matter of long term incentives. As an outsider I can only grasp EY's idiosyncrasy by little info available, previous projects, and the way you guys have been working until now. Lack of info in this matter is a risk factor I saw in the early days, but it's becoming more relevant as time goes by and the end of the vesting approaches. I think the time is ripe and Bottonians must know whether this team will operate freely, in a 100% autonomous way, fully dedicated to Botto and looking after its future, and no one's else. An unambiguous "yes" would be the most comforting answer. A "yes" with a few "buts and exceptions" could work for now, but the situation should then be set down in black and white, so that people can make informed decisions.

Botto would not exist without EY. I understand that EY must be sustainable too, but it's also evident is that EY's interests might increasingly diverge from those of Botto and of Bottodao, and thus this relationship is something that must be understood and accounted for.

choobie I would like to think investors take this into consideration.

It depends on the investor, but a good one that is aligned with your long term goals should, otherwise it wouldn't be a partner/long term investor but a financier.

choobie Again, if this is your perception of what has been presented so far, I do not know what to tell you.

Nit picking here I think, never said yours was a mess of ideas. I'm sure you have something consistent in mind but it hasn't been disclosed. This BIP (and the docs Simon shared and now I can't find in discord) describe broadly and succinctly a tentative roadmap, but it's not a roadmap. They describe some things you may do and would wish to do, but not what you are going to do, the basic steps and resources you will need to make it work, and how performance will be measured. I know this territory is volatile and everything could go wrong even if you did everything right, but some route is necessary.

What I did say (read again) is that, given the status quo and how governance is atm, the dao (not the team) could tomorrow come up with a fancy set of new ideas and give them priority over other key milestones. If those key milestones and timelines were clear and known by everyone, fancy ideas that do not fit the roadmap would not only be be easier to detect and discard as bad weeds, but would also sprout less often. We can't (for instance), be changing rewards period after period without good reasons and without extracting conclusions from those tests.

There is also a need for a clearer delimitation between the DAO's and team's decision-making competences. I lean towards giving you much more autonomy (I always did in the past), but that requires more accountability and more info sharing from your side.

choobie Detailed planning requires resources, and too many checks and balances at this early stage could overload bandwidth

Proactively sharing the basic info that you already have should be straightforward.

choobie We believe this underestimates the costs and complexities associated with establishing any such system. It’s a huge endeavor that we should all partake in - iteratively

We are 2 years into this project. The basics should already be in place, even if it had to be in their simplest and cheapest forms (80-20 rule). Something. Anything. That's precisely what allows to iterate, reach conclusions, learn and very importantly: focus the conversations. Glad that we will be on track on this.

choobie Yes, we are incredibly aware of this.

Roger that, but I strongly believe that nothing that has been said here will hurt the prospects. Overall, Bottodao and your power to negotiate emerge strengthened out of the last 3 weeks.

choobie I understand though, that we may not be able to reconcile our differences in what we perceive constitutes a “good deal”.

Never intended to set in stone what good deal terms are. I fought for devising a due fundraising process. I think that good lock-up terms will matter relatively more, but I will support whatever you bring next related to this. That's the faith I have on you.

narok

I am glad to see that we have clarified the purpose of these BIPs.

Unfortunately throughout the discussions, one aspect has become quite clear: there seems to be a lack of transparency between the team and the DAO community. (I’m pleased to see this is acknowledged.)

Don't misunderstand me, I believe the team has done, and continues to do, remarkable work. However, I find myself conflicted by the requests for approval of OTC swaps worth 1m USD without clear indications of what we need the funds for.

From the post, it's apparent that our runway spans 2-3 years, indicating that operationally we are in a sound position. (I am grateful for the suggestion of monthly reports brought up by @choobie.)

If the aim is to expand Botto with roadmap ideas such as arts & exhibitions, new tech improvements, and LLM integrations, then I am all for it! These initiatives sound fantastic and appear to have the potential to benefit us all.

But, in my view, the logical approach would be the opposite of what the team has initiated.

Firstly, I would prefer to see these ideas proposed through governance, specifying what we aim to achieve and providing estimates of costs and efforts. If we, as the DAO, agree to proceed, then we should be actively seeking financing through OTC swaps.

If we head down the path of distributing BOTTO from our treasury for funds we might use in the future, we risk centralizing a lot of power and introducing additional risks and complications into our governance process.

I respectfully urge everyone to reconsider this approach. It is critical for Botto to establish a solid governance structure in order to succeed. I see many individuals with insightful contributions on both Discord and the forum, so I have no doubt that we can do it, but only with transparency and clear codification of rules.

Ben

choobie This is a complex decision. For example, what about the downside of ETH, how does ETH affect forecasting or simply planning ahead, and what about our current ETH accrual mechanisms. $BOTTO in the treasury could also be considered a proxy to ETH exposure. Irrespective of how the treasury balances its assets, deciding upon this is not mission critical for this BIP. Get "it" in the treasury first and then open up the discussion, post a BIP directly, etc.

Potential risk/upside of USDC would depend in part on what portion of our costs are ETH denominated. I will inquire into this outside this thread to keep this on-topic and will look into drafting a separate BIP if needed.

quimp One interesting term to consider is offering warrants instead of a discount.

I like this, I’d just probably favor a longer time frame and a higher strike price.

UMA came up with an on-chain solution related to this they call “success tokens” where investors get discounted exposure in proportion to token performance. See this.

Either way, I like that it further aligns incentives in that VCs are only getting a discount if the token performs well (which hopefully they contributed to).

Another reason I’m wary of an upfront discount: what we’re calling a 10-20% discount is probably more like a 20-50% discount (depending on buy size), in practice, compared to what the investor would pay on the open market.

The reason: it’s very hard to impossible to acquire a large amount of BOTTO on the open market without paying a large premium in the form of price impact or slippage.

For example, a $500k market buy would incur >30% price impact, a $1M buy would incur almost 50% (would be higher in both cases with MEV).

vanto

PS good work on the upgraded proposal. Makes it more clear. Especially the boundaries of keeping it to botto otc trading to keep cashflow healthy the coming months. Ty

quimp

Super helpful post Choobie. Fully agree with the idea of securing runway first, then addressing everything else after. #1 rule of running ops is to remove as many dependencies as possible.

I think we all agree the current price isn't playing in our favour, so two points in that regard.

One interesting term to consider is offering warrants instead of a discount. This could take the form of swapping 5M $botto at the current price + giving the ability to buy additional $botto tokens (one-half warrants = additional 2.5M $botto) at a higher price, for example at $0.25 within 2 years. This provides a sweet deal to the investor, while netting us a better price (with the risk of raising less money, which is a tradeoff I'd be willing to take).

5M x $0.15 + 2.5M x $0.25 = $1.375M (with the risk of only raising 750k if the price is < $0.25)
vs
8M x $0.15 x 85% = $1.02M

It's also worth remembering that the tokens carry revenu generation. 2M $botto staked and used through the year can net (wildly guessing) 10-20% of weekly rewards. 2M costs 300k and could get $100k back in 2-3 years. Not a freeroll, but darn close.

So while typical OTC deals have a 10-20% discount, I don't think it's necessary here. Typical OTC deals don't come with revenu share.

It should be possible to swap 8M at or very close to the market price.

Hopefully I just saved the DAO $300k. Ka-Ching!

hudsonsims

Update re: discussion on BIP 35 for OTC of Treasury $BOTTO

We’ve seen a lot of great discussion with a wealth of suggestions for negotiating the OTC, along with a number of other important topics for governance that have been raised.

Some of the very first feedback to V1 of BIP-35 asked for more transparency on costs to inform the decision to OTC. To that end we’ve provided in V2 a view of historical costs and different projections of runway looking forward, as well as a view into a high-level roadmap. While the roadmap would need to be fleshed out into specific priorities, budgets, and timelines through the governance process, we believe this is directionally correct and gives enough certainty of needing more funds to expand runway and optimize Botto’s chances of success with the opportunities it has coming its way.

A number of other important topics of governance have also been raised in response as important to address. I’ve been keeping a list of these ideas so that they don’t get lost and buried. I’m recapping here what’s been covered so far (please let me know if I’ve missed anything):

CEX listing
Treasury management committee and reporting
P&L management, diversification management
Governance constitution (e.g. voting on our own compensation)
Budgeting and hiring decisions
Roadmap and priorities
Legal wrapper, jurisdictions and resulting duties of compliance
Balance of Stables vs. ETH
Further tactics around survival vs. growth, major art projects for revenue
Liquidity in Uni-V3 and addressing LP subsidies
Offering VP accrual for 1/1s, stacking vp accrual for pipes
Swap ETH rewards for $BOTTO, reduce rewards %

The team’s position is that these are important, but should come after securing runway such that we are able to deal with each point with more solid footing. They will take time and iteration to get right as our situation evolves and interdependencies emerge.

As for the OTC itself, there have also been many valuable ideas for negotiating parameters. Listing them as I’ve tracked them below (again, please let me know if I’ve missed anything):

Minimum lock up with cliff + vest
Max discount considering price impact of market purchase
Cap amount of tokens one party can buy
Reduce max OTC
OTC Committee
Warrants for future purchases at set prices
Guaranteed market buy
Delegated or deferred governance and/or access to rewards
Staggering OTCs with ratcheting price up to take advantage of upswings
Offering fragments with holding periods
Collateralizing the vesting Botto
Reducing liquidity to increase slippage on market buys

Each of these vectors of negotiation have their own variables to consider. I think seeing the full list shows the complexity of trying to dynamically negotiate with a partner on these different parameters, and trying to pre-bake too many limitations significantly hamstrings our ability to secure great partners and a good deal for the DAO.

The initial BIP did not clarify some basics of our view on the value we were shooting to secure. On its face it was read as giving us wide enough discretion to market sell $BOTTO whenever we wanted to, which was never our intention. So while we don’t want to over parameterize the deal, we can say that we are considering all of these tactics listed above in a negotiation.

1. Minimums and Maximums

For parameters we would guarantee in BIP-35, and would return with another BIP if we cannot secure:

Minimum lock up of 1 year
Maximum discount of 20%
5M max $BOTTO tokens one party can buy from treasury

To be clear, we would not look to do a 1-year lockup for 20% discount, rather these are independent limits on the different parameters. So, for a group looking for a larger discount closer to 20%, we would ask for a higher lockup and aspects of the other tactics below.

2. Non-guaranteed consideration

For tactics we will look to use to improve on the above terms but won’t guarantee. We aren’t limiting ourselves to these, but offer a good example of ways we can improve terms.

Warrants for future purchases
Guaranteed market buy
Delegated/deferred governance and/or access to rewards
Collateralizing the vesting Botto
Offering fragments (would require another BIP)

3. Not including (with reasoning)

Reduce max OTC: We think the reasoning for size is evident in the runway and roadmap offered.
OTC Committee:This introduces another complex process: (Who else to add? How do they get elected? What is that process like? How are they vetted? What do they contribute?) The team is relatively well known by the DAO and we hope the information and parameters we’ve added have won enough confidence to move forward.
Reducing Liquidity to increase market price sensitivity for OTC buyers: We think this is bad faith behavior on the part of the DAO
Staggered OTCs: While we can stagger the 8M $BOTTO OTC, we don’t want to do it preemptively and reduce flexibility in case an incredible partner comes our way.

4. Defining a Strategic Partner

One thing we haven’t defined is criteria for a strategic partner. We are defining a strategic partner as first and foremost a group with a very strong reputation whose OTC with the treasury would provide a valuable signal to the market of our credibility. That would be a name brand with recognized leadership and a pioneering thesis in a category related to at least one of our 3 main strategic pillars of Art, Tech, and Community and that can help us move the needle in those.

Moving forward

The discussion has been fruitful, and to reiterate Quimp’s point, incredibly encouraging to see so much engagement in governance.We recognize that we are asking for the trust of the community to facilitate the right deal for the DAO, as the community has continued to trust us so far with operations. I think everyone is directionally aligned on wanting to more fully decentralize as we evolve Botto in the art history canon.

I think we are quite close to the discussion having covered all relevant topics. Please feel free to comment or add anything I may have missed, as well as pose any questions on the above.

dencryptus

hudsonsims Minimum lock up of 1 year
Maximum discount of 20%
5M max $BOTTO tokens one party can buy from treasury

These are bad terms, tbh. Mostly bc of the lock up. Too short, would be better if unlocks were partial with time. On discount: discount on what? On today's $0.15 or tomorrow's $0.05? That 20% is extremely trivial when it's tied to market sentiment and volatility. Come up with a reasonable price (Botto's intrinsic value in 1 year after you have deployed the funds, given your assumptions and projections), and give a discount on that. The investor will either believe or not on your vision, but that's the way.

hudsonsims The team is relatively well known by the DAO and we hope the information and parameters we’ve added have won enough confidence to move forward

Not defending any OTC Committee as you portrayed it, but I truly believe you need more inputs. You are known for your ability to execute on Botto's operations, not for your ability on fundraising. Will be very candid: you and Choobie (assuming you two will lead the way) are smart guys who are able to learn fast, but the quality of BIP35 and some of the subsequent discussions prove that you are green in key aspects. I'm sure you will do a more than a decent job, and that we will get a decent price, but the dao is not in a position to leave peanuts for free on the plate, given our (not yours) track record of incurring in high opportunity costs. So I would encourage you to seek advice and strengthen your negotiation position. Remember, too, that any decent buyers will come and read this forum to understand how everything works (including governance) and the risks they would be incurring. It's discouraging, for instance, that Variant hasn't even provided an input on this. Food for thought.

In this case, I also have the feeling that we go into the negotiations with a discounting mentality rather than willing to (justify) and command a higher price based on a vision embodied in a concrete roadmap (that's why something else beyond "extending the runway" is essential). The buyer will buy (or not) the vision and the plan, but we do need the plan; and a story, and not a just jumble of disconnected ideas that will come to fruition depending on circumstances, and the comings and goings of the dao.

vanto

dencryptus agree with this discount mentality for all reasons mentioned above. Plus as said earlier if buying from market price goes up so buying otc for going rate is discount already. Adding the fact of revenue sharing.. buyer beliefs the vision, gets rev share, so discount does seem superfluous.
Same for the adding a 1/1 -from the extra 8. Don’t give these away as sweetener. As it is usual in gallery practice, premium buyers get a discount on artworks of upcoming artists to legitimize the ‘art value’. That’s a discount that would make sense imo.

choobie

dencryptus These are bad terms, tbh. Mostly bc of the lock up. Too short, would be better if unlocks were partial with time.

These are basic guardrails and not terms we'd necessarily agree to.

dencryptus On discount: discount on what? On today's $0.15 or tomorrow's $0.05?

I would foresee something along the lines of 30D TWAP but this is contingent on a negotiation and a variety of other factors.

dencryptus Not defending any OTC Committee as you portrayed it, but I truly believe you need more inputs.

We’ve invited input from external advisors throughout this process, and I also believe we've had significant and valued input from the DAO so far.

dencryptus You are known for your ability to execute on Botto's operations, not for your ability on fundraising.

Correct. I would like to think, though, that the ample and animated discussions we've had as a DAO, coupled with the advice we've received externally, could help us secure the best deal. I would also hope that our ability to execute so far helps you place some faith in our abilities to fundraise.

dencryptus Will be very candid: you and Choobie (assuming you two will lead the way) are smart guys who are able to learn fast, but the quality of BIP35 and some of the subsequent discussions prove that you are green in key aspects.

While I appreciate this might have been mentioned in sincerity, it reads like a backhanded compliment. You are entitled to your opinion here. I do not think the first iteration nor second iteration of this BIP indicates green behavior - I believe that is a preconception on your end.

dencryptus I'm sure you will do a more than a decent job, and that we will get a decent price

This seems almost contradictory to us being green but I appreciate the positive sentiment.

dencryptus So I would encourage you to seek advice and strengthen your negotiation position.

Noted. To reiterate, we have sought out advice from individuals within the DAO, collectively as a DAO and externally. Seeking to strengthen our negotiating position as a DAO is what this process has been about after all. I understand though, that we may not be able to reconcile our differences in what we perceive constitutes a “good deal”.

dencryptus Remember, too, that any decent buyers will come and read this forum to understand how everything works (including governance) and the risks they would be incurring.

Yes, we are incredibly aware of this.

dencryptus In this case, I also have the feeling that we go into the negotiations with a discounting mentality

Not necessarily.

dencryptus The buyer will buy (or not) the vision and the plan

I would like to think investors take this into consideration.

dencryptus but we do need the plan; and a story

I think this is also a given. Top-level, we have provided a sizable indication on focus areas we are looking to expand on for Botto and the DAO. If you do not believe we have a narrative/story in place for Botto at this point in time I simply do not know what I can tell you.

dencryptus and not a just jumble of disconnected ideas

Again, if this is your perception of what has been presented so far, I do not know what to tell you.

choobie

This has been moved to Snapshot https://snapshot.org/#/botto.eth/proposal/0xa10c8b47e07e9c5d8055a9c34ce14038df57cbfafe87188ce45ff2a063429f2f