Proposal in Progress
Hey guys I've been working closely with Dave and the team to explore opportunities to better align incentives between the company and DAO while also ensuring that the team's funding needs are met. Dave and I did an episode of People's Guild discussing this topic last night and it should be going live today. We'll also be hosting a DAOn Hall on Friday to answer questions and discuss this proposal with the community before it goes to an official vote.
Here's the current draft so that anyone who would like examine it or ask questions before it goes to a vote can do so:
SPS Governance Proposal - Contract Steem Monsters Corp for Ongoing Maintenance and Development
About
The purpose of this proposal is to explore whether the SPS DAO should enter into an agreement to hire Steem Monsters Corp for the ongoing maintenance and development of the Splinterlands game. This arrangement aims to ensure continued innovation and support for the ecosystem while providing the SPS DAO Foundation with full co-ownership of the Splinterlands intellectual property (IP). Initial discussions among stakeholders have shown interest in formalizing this partnership to drive long-term growth and sustainability.
Proposal
If this proposal passes, the SPS DAO will enter into the following agreement with Steem Monsters Corp:
The SPS DAO will pay $2m per year which is a flat daily rate of $5500 per day for a period of 2 years for ongoing maintenance and development services.
- The DAO Treasurers will make monthly payments in HBD then DEC.
- While unlikely, if necessary, the SPS DAO Project Manager will work with the SPS DAO Treasurers to determine which tokens are used for payment if the SPS DAO coffers have been depleted of DEC. This may include paying in other tokens, such as HIVE, Ethereum or could require burning SPS to create the DEC needed to pay Steem Monsters Corp.
- In cases where non-Splinterlands assets are used, Steem Monsters Corp will value those tokens at market value at the time of receipt.
- In cases where DEC tokens are used for payments, then the price will be determined on a daily basis. For convenience the DAO may prepay a large amount of DEC tokens, however the daily rate the DEC tokens convert to USDs will be based on the daily rate of DEC/USD for each day.
In return, Steem Monsters Corp will assign full co-ownership of the Splinterlands Intellectual Property to the SPS DAO Foundation. See full agreement here (link to separate agreement will be added after approved by legal)
Steem Monsters Corp will be responsible for developing:
- A new core set.
- A reward card set.
- A miniset.
- Continued development of land features.
- Multiple new game modes and features.
- Other items as requested by the DAO, such as promo cards, card skins, and additional features, subject to available development bandwidth.
Revenue sharing: The SPS DAO will receive 100% of all proceeds from sales within the game's ecosystem, excluding burns, until it has recovered its initial investment plus 20%. After that threshold is met, any additional sales proceeds will be split 50/50 between Steem Monsters Corp and the SPS DAO.
Notes
This proposal is designed to align incentives between the SPS DAO and Steem Monsters Corp, ensuring dedicated development resources while securing IP ownership for the DAO. Potential benefits include accelerated feature releases, enhanced player engagement, and long-term revenue potential. Risks may include dependency on Steem Monsters Corp's performance and market fluctuations affecting sales proceeds.
It's so hard to know what's real and what isn't around the April's Fools timing. Is there a dashboard or anything with an audit of the DAOs assets?
The benefit to this arrangement is that it might be easier for other parties to also develop for the game/ecosystem if the DAO owns all the IP and game assets.
There is a full audit of DAO assets that I do every month on the DAO's blog page. Not an April Fool joke lol.
https://peakd.com/spsdao/@sps.dao/sps-dao-treasury-report-31526
I think this is an interesting idea for anyone that wanted the DAO to own the code base or for anyone that wanted to encourage more community collaboration.
But I suppose I’m unclear on what “assigning full co-ownership” means? Usually “Assigning full” means 100% but then adding in that “co-“ makes it seem less clear.
(I guess we’ll have to wait for the legal document)
It would mean we both equally own the IP. In the event something happens with the company, we still own the IP. It can't be sold or taken from us and we don't remove their rights to use it either. We could in theory license it out if we wanted to do so.
I think the proposal is still a bit too vague. It mentions things like “new game modes” and “continued development of land features,” but it does not clearly define what that actually includes.
Right now, the team is usually paid for specific and tangible deliverables, such as developing a new set. That makes it much easier to understand what is being funded and what the team is accountable for.
With this proposal, that feels less clear to me. If the scope is not defined more precisely, then it seems like the DAO would be committing to paying $2 million per year without enough measurable accountability.
So my concern is: are we really paying $2 million for ongoing development, or are we mostly paying for IP co-ownership rights that, in practice, already depend on the existing team anyway? In other words, are we paying for real deliverables, or mainly for formalizing a co-dependency that already exists?
Maybe I am misunderstanding part of the proposal, but that is how it reads to me right now.
There are still clear and tangible deliverables related to repayment. The core set, miniset as well as other revenue streams that the company currently has, such as seasonal events and market fees, would all go to the SPS DAO until funds + 20% are returned. The more vague deliverables relates to new game mode and feature developments that should add utility for existing assets and SPS. They are left undefined intentionally. We've historically had a problem with the company saying something is coming and then people making reactionary purchases or assumptions about what they think it means or when they think it's coming and then being upset when things may take longer than expected.
In this instance, we have a clearly defined timeframe: 2 years.
We have a clearly defined expense: $4m if contract is completed to term.
We have clearly defined mechanisms to return that investment: Core + mini + other rev streams.
We also have forecasted sales data that shows the team averages above $2m a year in sales and Dave has spent the last several months aggressively cutting expenses to get cost down to roughly $2m a year.
We have a clearly defined incentive structure for the DAO: +20% return.
The rights to the IP is something I've been personally pushing for since we started the whole set funding and profit sharing model with Rebellion. I think it's important for the DAO to know that the rights to the IP cannot be taken away from us if the company were to close, sell or face any kind of forced liquidation. It's not that I expect that to happen, but why not protect ourselves and give ourselves more options?
After many discussions with Dave on this topic, my assessment is that he's being proactive and looking to ensure the company is well funded instead of making reactionary decisions like we've seen in the past. The company is not out of money and if the proposal were to fail, he'd probably just further cut spending which would slow development, but would ensure the company survives.
Myself and others that I've spoken too feel it would be in the best interest of the DAO and community for development to continue at its current pace.
Ultimately we're not decentralised while SteemMonsters INC owns the IP.
Will there be timelines and deadlines for the things Steem Monsters Corp will be responsible for developing and penalties if those deadlines aren't met?
For example, if this was already in place, what would be the consequence of land development coming to a halt, as it is now?
Will the DAO be setting out specifically what we want developed for our 2 mil and by when? How will that work?
I think in general we don't want to go into the direction of the DAO micromanaging every development. You can see very recently how that turned out on the Survival mode restart where we already had several contradictory proposals in the span of weeks. That would be incredibly unproductive from what I've seen.
Clearly defining everything that is being ideated on and that may be developed could lead us into the same trap that we had before where people are just constantly asking "wen thing" every week and some developments could be long term and may require six months to a year to deliver. I have a decent understanding personally of things the team is working on and Dave may be willing to share more specifics if need be. I think any lack of clarity there isn't meant to obscure as much as it is to manage expectations without clearly defining a firm timeline for people to hold over their heads. We have a 2 year window, these are the things we need done in that time frame.
If they don't deliver? The DAO can stop paying them. We've already had to do that with validator development. The team isn't getting handed $4m if the proposal passes, it's paid out over time on a per day basis.
What is clearly outlined is the major sales events (core set + miniset) and other ongoing revenue streams like seasonal sales events and market fees that the company generates. If things remain roughly consistent with how they have for the last 4 years the DAO should be set to recover investment + 20% before doing a revenue split with the company. That gives the company incentive to do more than just return our money as they want to be profitable while also giving them breathing room to develop new features without having to urgently push another core set release.
Is that 50/50 split after costs have been recouped for the duration of the same 2 years only?
Yes, after 2 years we could assess if a similar deal makes sense for the DAO and/or company moving forward. Either way we retain co-ownership of the IP if the proposal runs to completion.
So what this does is has the DAO keeps the company afloat for the next 2 years as the $2m/year which was recently shared that is the cost of the company's expenses to break even. And in turn the DAO gets shared rights/ownership of the game development code. The team gets a steady stream of recycled DEC if/once the DAO depletes it's HBD assets. And the continuation of this hypothetical idea of a flywheel will not be participated by the team once again...GOT IT! The benefit is the game will be here for at least another 2 years without having to hear about any runway problems. And in the contracted timeframe maybe the DAO can find or attract some outside developers for new game modes/features that the team generally wont have time to do. Unless there is legal reasons the DAO can't outsource the code unless the team allows for it sinces it's a 50/50 split in ownership? I'm not educated in legalities to know how that partnership would work...between the team/dao and dao/outside developers.
I've spent quite a bit of time in discussions and analyzing the financials with Dave. The DAO doesn't have to keep the company afloat for 2 years. I think the realistic situation is that if we don't want to do a deal like this that gives the more breathing room to develop new features without immediate return, they're likely to further cut expenses and have another core set release this fall.
Instead of waiting for the situation to get bad or trying to do these piecemeal proposals every time the company wants to sell something, we just looked at a way to formalize a plan for the next two years. I think it aligns incentives between the DAO and the company quite well while giving the DAO a good chance at profit and co-ownership of the IP.
It's up to the DAO whether or not we feel this is a good proposal and worthwhile risk.
So this is for a 2 year period where one set cycle will happen? What happens after it? A new proposal?
I think 2 years is WAY too long for a set cycle
I would also like to know how the repayment is covered? Is it measured in dec or usd or something else? Eg if most of that 2 years dec is well below peg as we are giving it out and then the short time the dao receives it it is close peg how does that work?
If it is measures in usd then I see that being very bad for the dao. As we would likely give out a lot more dec than we receive back in.
I would like more clarity on that and the expectations around the set cycle
Price would have to be determined as mentioned above for accounting purposes.
As far as 2 year cycles go, that's ultimately up to the DAO. The discussions I've had and comments I've read lead me to believe that the majority of people are not looking for another set of cards any time soon.
The proposal covers a 2 year period of development and includes a core set + miniset + other ongoing and developed revenue streams to return value to the DAO. The DAO would also get co-ownership of the IP.
That's only the spending half. I'm more interested in the details of reconciling on the daos end.
I'm very concerned if we move to a 2 year cycle. I'd love to see a poll to gauge the community if that's what they actually want.
Do we have a rough date for the new set? And if it is for 2 years will some of that time be leading up to the next set? Eg if it's approved in 2 weeks, and the next set isn't for another 6 months, then will the end of the cycle be 6 months short until the next set?
The same accounting applies on both ends.
When the next core set and what that cycle looks like is up to the DAO to decide. I've shared my thoughts, others may feel differently. I don't need things to happen the way I think they need to happen, we just need to do what's in the best interest of the DAO and the more important question than just "what's the cycle" is whether or not the community can absorb or has any desire to buy another card set right now. Just throwing one out doesn't mean it's going to sell. We could put one out every month or two if it worked like that.
We don't have a rough date and is part of the reason for structuring the proposal this way instead of them just making another "give us 1.2b DEC to make another set" type of proposal. Ensuring the company is stable and has time and resources to develop new features and game modes should lead to a better overall product while giving more time to develop the next core set and test out new gameplay mechanics.
I like this so far. Keen to see more on this co-ownership of IP.
Does this place responsibility for marketing onto the DAO?
Costs +20% then 50/50 split is best of both worlds.
Am I the only one who sees this as a major red flag? Maybe I havent looked into it enough but to me it looks like we/ the DAO is taking full risk, worst case the team will drain the DAO assets and the whole notion of "locked up in the DAO" we have heard for years comes crashing down.
I see no world in which we dont have a major DEC crash and all none splinterlands assets will be drained by the splinterlands team.
Respectfully please explain how you expect the flywheel to run in this model
The company already has roughly an equivalent amount of sales. We'd more or less be annualizing them and taking on the risk that they are unable to keep up with the past 4 year average sales. In return for that risk we get a 20% return + IP rights.
As far as crashing DEC, it's ultimately about input and output. We've now had 4 events funded by the DAO in DEC that returned more DEC than we put out. That is a net deflationary cycle. Obviously we'd all be way more happy if the team had infinite cash to burn and could just buy up any tokens they need, but that isn't the reality of the situation we find ourselves in.
I'm not going to tell you how you should feel about the situation, but I do think there's a strong upside potential for the DAO, especially considered everything will be settled at USD value (in and out) so if the price of DEC were to decline from what we paid them, they'd need to return more DEC to repay the balance. Of course there's risk in everything though.
I think the general principle of the proposal is solid.
Steem Monsters will not have to worry about being able to continue operations, the community should be getting less sale driven events and more actual development.
What I would be interested in is:
Overall interesting!
20% is what's being offered, I suppose the DAO could try to negotiate more favorable terms if it would like to do so. Keep in mind after 20% there's a 50/50 rev split so assuming we're repaid it would likely be more than 20% due to that.
HBD also has its own counterparty risk. Witnesses can change that interest rate at any time and keeping HBD at peg requires constant downward pressure on the HIVE price. Every HBD printed is debt against HIVE. There's also the fact that HBD is not as liquid as other stables and trying to get in and out of large positions can be problematic. It took us multiple days of buys to even accumulate 6 figures of HBD without losing more than 3-5% on slippage. Even if we could somehow buy $4m worth of HBD at cost right now, I think it would require at best several months to ever leave that position and we'd have to assume the risk the interest rate doesn't change or HBD doesn't depeg if HIVE price gets too low.
As far as the calculation, it's simplified. We provide 4m (over a 2 year period) and we are owed 4.8m (also over a 2 year period). There would be ongoing sales to return the funds and daily accounting to keep track of what is spent and returned.
Part of the problem the team has is tied to the nature of their sporadic sales and lack of diversified revenue streams, which are things currently being worked on. They may do a core set and pull in 1.5m in a month and then spend 9 months making another 500k. I sort of look at this as the DAO annualizing their income and assuming the risk that they may default if market conditions worsen and the community stops buying sets. That said, we'd be in trouble either way at that point whether we did this deal or not.
Thank you for your clear and detailed reply! That makes a lot if sense.
Co-ownership means source code available? Otherwise it doesn't make any sense spend 2 milions and if steemmonsters Corp dies we have lost everything
Code, art, website design is all IP.
Not exactly a spend if it's being returned, more of a loan or investment on the DAO's behalf, all of which have been favorable to us in the past (we've done some smaller version of this 4 times now). There is of course always the risk of default and it's up to the DAO if it wants to assume that risk. If I didn't think there was a very good reason for us to consider taking that risk I wouldn't be doing so.
Which brings me to a question to address your last statement:
I suppose the real question may be, "If Steem Monsters Corp dies right now what do we have?"
Which is not so easy to answer. There's too much unknown. It would depend on how the company died and how benevolent the owners wanted to be I suppose. It would also depend on how prepared they were for that ending and how much the DAO's future was considered. If there was a forced liquidation and the IP was taken by some new controlling entity and we had no rights to it, what is our course of action?
To me, getting the DAO rights to the IP should provide some level of security for all of us that if there was ever a worst case scenario, the company is gone and the DAO has only what's left in its coffers and what it can sell to maintain operations, I would think we'd at least want to have the ability and capability to keep the game online even if we had to do it ourselves. That is of course just my opinion on the matter, the DAO may not think it's a relevant concern. I try to look forward, hope for the best and prepare for the worst to the best of my ability.
What is "the DAO?" A legal entity in Panama? Who are the DAO's attorneys? How would the DAO assert rights over its intellectual properties? I am not sure the DAO has the legal ability to do anything.
What if the DAO was sued? Who pays the legal bills? Would Splinterlands attorneys handle the case on our behalf? And would they do this in 100% secret or in collaboration with the community manager who can decide what should or should not be known?
The company is the one currently exploring the legality of it with their lawyers and why there's a blank space to include a link to the agreement for everyone to read once it's approved. One of the main points that's being explored is if the DAO can own it outright or if it would need a legal entity to own it on its behalf. I'd rather it be directly owned by the DAO outright than any entity as any entity beyond the DAO is a point of failure. That said you've raised similar concerns that I did about whether or not the DAO as a truly decentralized organization would be able to enforce or assert any rights over an IP.
As far as some secret collaboration and controlling what's known... not really sure where that's coming from unless there's just some assumption I don't actually communicate things to you guys? I get plenty of crap for putting out too many proposals and asking the community to decide too many things that some people feel are a waste of time or should just be company decisions... so it's kind of the polar opposite opinion of what other people have told me, but I guess it is what it is. To me it's more important that the DAO is informed and able to vote on major decisions so that suggestion isn't reflective of my personal beliefs or approach to interacting with the DAO.
If the DAO feels I'm not trustworthy or acting in its best interest it is capable of replacing me with whoever it thinks would better do so.
This is a two party deal: the DAO and Splinterlands. You are receiving advice from the Splinterlands lawyers. Is the DAO receiving its own independent legal review of the contract or are we taking the corporations's lawyers advice and putting it to a vote? In other words, is the DAO as a legal entity entering into a two million dollar contract with no independent legal counsel. I would personally never do this. I feel this meets a textbook definition of negligence.
I am sorry if my question offended you. I do not mean to imply you are not communicating. I do imply that it is not clear if the corporation communicates with you or us. Legal matters are highly delicate. Most American companies avoid discussing legal matters in the public. "On the advice of attorneys, we do not comment on ongoing legal matter." Hopefully that clarified my intent. May I ask my question again?
What if the DAO was sued? Who pays the legal bills? Would the Splinterlands corporation keep the lawsuit secret from the DAO or would they inform the DAO? I mean this as a genuine question, not a sneaking way to attack you personally.
No offense taken... I'm not working with their lawyers. The only thing they are talking to their lawyers about (well as it pertains to this and that I'm aware of) is whether or not the DAO as a decentralized organization can actually own the IP. We're trying to figure that out so that it's not just "oh hey we gave the DAO a license" and it's unenforceable. The only alternative I really have if it doesn't work like that would be the Foundation could own the license, but that doesn't really work for decentralization in my opinion. I'm not talking to their lawyers at all.
In the past myself and the guys on the Foundation Council (@mattclarke @bjangles and @dwaynecunningham) engaged legal council in regards to exploring different jurisdictions for setting up a foundation to act on the DAO's behalf if the DAO wants it to do so, which so far has only been done once to enact a proposal the DAO voted for (the Ramp network integration). That really doesn't relate to this exactly and I'd rather avoid any unnecessary centralization risk.
The DAO could hire a lawyer to review the contract once it's been made available, which will need to be done before we vote on anything, if that's what the DAO wants. There's also at least a few lawyers that are part of the community that could perhaps review it for us. If you guys want to look into having a lawyer represent us and provide an opinion, we can do that. Price will very drastically based on region and skillset. If we're looking for lawyers familiar with blockchain case law in the U.S. that is going to for sure get expensive.
Yes, I think the DAO should have its own legal council with its own opinion on this matter if it considers itself an independent entity. If what we are planning for is independence if Steem Monsters goes sideways, we need to ensure those rights now and not hope they exist later.
Expert legal review is insurance. You are proposing to make a two million dollar commitment but are worried that understanding what we are purchasing will "get expensive." $50,000? That sounds like a lot to me. That would be 2.5% of the transaction price.
I would like to know more detail, cos this is a tad skimpy.
What is the current value of DAO assets?
What is the projected return per year to the DAO?
100% back plus 20% is good, but not stellar, so we need to see that the DAO is clearly becoming wealthier each year.
Which currency or currencies would the repayments be in?
Which currencies are worth holding? A basket of eight to ten seems wise.
DAO assets:
https://peakd.com/spsdao/@sps.dao/sps-dao-treasury-report-31526
There is no yearly repayment schedule, there's a total repayment amount which relates to one of the core problems that the company is working to address. They don't have steady/diversified revenue streams and those take time to build. The current way the company operates with set sales leads to sporadic large inflows of cash and then slow trickles over time.
The currencies would be in whatever they're taking in, they'd essentially be selling on our behalf if we're moving into a contractor type of relationship with them. If we need some basket of currencies that's up to the DAO to decide, but also has its own opportunity costs. Anything not sold in DEC or SPS is not going to do anything to offset the sell pressure of releasing DEC onto the market by paying the company with it.
Is it me or does that not answer my questions at all?
Overall, it sounds too undefined to take a meaningful view on so as it is now i am not able to support it.
I Think that the DAO should sent the Hive-token and BEE-Token first to splinterlands and only afterwards the DEC-token. I think the DAO should keep the DEC as long as there are token like HIVE and BEE in the wallet. With HIVE I mean the liquid HiVE not the HIVE-Poer, so if the DAO need HIVE-Power for ressource credits than the neccessary amount should be kept.
https://peakd.com/spsdao/@sps.dao/sps-dao-treasury-report-31526
The DAO has quite a bit of HBD and HIVE that's all referenced in the proposal. I think it would be prudent that we push for more DEC sinks as any may be released to offset sell pressure.
HBD and HIVE will last for roughly 55 days...
Than we should use them for the 55 days, than the BEE-Token and if HIVE, HBD and BEE are all gone we can use DEC (if there is no better idea).
In this proposal is written: "The DAO Treasurers will make monthly payments in HBD then DEC." - I cannot read anything about HIVE but maybe I have overseen something ?
I think really that HIVE should be used before DEC.
I also think that we should get rid of the BEE-Token before sending DEC.
Not sure I am a huge fan, though it is probably better than what we are doing now.
I would like to see the DOA have over 50% of both the company and the split after investment agreement met.
I would like to see a public audit of the company's expenses.
I would like the contract/agreement to set terms for a significant bonus to the company if the expenses stay below a certain threshold and the investment agreement is met (DAO paid back plus percentage).
My main concerns with this proposal are twofold. First, co-ownership of the IP is not the same as full control. If the DAO does not own the IP entirely, this may create future uncertainty and potential claims regarding scope, use, licensing, enforcement, and decision-making. For an arrangement of this size, the DAO should not accept a structure that leaves room for ambiguity on such a fundamental asset. In general, co-ownership of an immaterial asset is not the way to proceed. (legally technical POV)
Second, the payment mechanism is too weak from the DAO’s perspective. Funding the arrangement through DEC creates obvious sale pressure on the token and places the market burden on the community. In practice, this means the DAO may be weakening its own ecosystem token in order to finance the agreement, which is a serious structural concern, renewed once again. (Same as financing the company with xM DEC for a set as we did until now)
When it comes to the DAO owning or co-owning the IP, what exactly would the owner be? afaik, the dao can not legally own anything...?
I don't have almost any SPS left, so my vote doesn't really matter, but this is crazy. Many people have been wanting to stop or at least cut the DEC recycling that keeps happening, and this proposal will increase the DEC recycling that much more.
On top of that, there is a huge problem, and I am certain that even in the best-case scenario, the DAO will lose money. And why is that? Let's say the 120% is fully paid. But that's if we're looking in $ terms. Right now, DEC is almost at 50% peg. So if the DAO were to pay $5500 in DEC to the team today, it would pay almost 11M DEC. This would happen daily, so obviously, the payments would be made in days when it is at peg as well. However, the only times DEC has been at peg or really close have been a few days/weeks before and during the pre-sale of a core set. If we're assuming a 2-year cycle, that's about a month of DEC at peg, maybe 2 months if we're being generous. Sure, it doesn't jump from peg to 50% right away. But how long does it stay above 90% or even 80%? I'm pretty sure it stays below 70% more than 50% of the time.
Meanwhile, when do sales happen? Most of them happen during the pre-sale, where DEC is at peg. That's when the DAO will be receiving most of the money, but during those times, $5500 will be very close to 5.5M DEC. The end result will be the DAO having less DEC than what it paid.
Not to mention that this removes any risk for the company. Is there any other company that operates like this in the world? I'm selling all my stuff, but I want to keep it in DEC until the next set brings it to peg. At this point, I don't even know if that will happen if this proposal passes.