(🏦, 🏦) BankDAO: The Wealth Paper
0x6802
March 26th, 2022

Introduction

We are a community of bankers, entrepreneurs, fintechies, web3 enthusiasts, and athletes, committed to building a more empowering, inclusive, and diverse financial system.

Historically, banks have not been committed to serving everyday people by providing affordable banking services that empower people’s life and work. Too much emphasis has been put on protecting traditional revenue streams, and not enough on servicing the customer.

It is our vision to reorientate the banking system to focus on value creation rather than profit maximization. BankDAO represents a new system, WeFI: A community-driven and community-conscious financial system.

The idea is therefore to start a DAO and launch a token to utilize the benefits of web3 tools to level the playing field, creating a bank that gives back to its members.

Our mission is to build a community-owned bank that contributes revenues to the community while educating them about finance and investment.

What is a DAO?

DAO stands for Decentralized Autonomous Organization: DAO’s are internet native communities with no centralized leadership. A DAO and its treasury are collectively owned, operated, and managed by its members. Members earn tokens for participating within the community providing the right to governance, voting on matters such as treasury allocation and community initiatives.

Essentially, think of a DAO as a group of people uniting under a common purpose with a shared bank account, (treasury) all democratically voting on how to best allocate the shared funds to achieve the ultimate purpose.

Why build a bank as a DAO?

Traditionally banks have viewed customers simply as a means to revenue. Their single aim has been to optimize their system to maximize profit. This approach has been great for business, but the customer has suffered. We simply believe that consumers should capture more of the value that they create. If our hard-earned money helps the banks, then the banks should be helping us. We believe that a DAO structure allows us to create such a system, a system aligned with both the social and economic interests of our members. Creating a bank as a DAO tackles the root problem, which is a simple misalignment of interest, essentially allowing us to shift the focus of the system from profit to purpose.

Tokenomics Overview

BankDAO Tokenomics Diagram
BankDAO Tokenomics Diagram

The following sections will walk through the details of how the $WEALTH token can be used to support the ecosystem, attract members, create and retain value (fullscreen version of the diagram).

BankDAO Treasury

Mission: Fund initiatives, long-term sustaining of the BankDAO ecosystem.

$WEALTH token involvement: 50% of genesis supply & distribution of allocated tokens.

Breakdown:

  • The Treasury collects profits from BankDAO products in USDC and potentially other tokens.
  • Holdings can be diversified to create a long-term sustainable funding foundation (a good summary can be found here).
    • Benefits: de-risk treasury, easier budgeting (less volatility), and better payment for contributors
    • How?: hold stablecoins, sell $WEALTH when applicable, partner with other DAOs, borrow against $WEALTH
  • In a fully decentralized BankDAO, the community will have voting power over the treasury. This gives $WEALTH utility. For more on a pathway to decentralization see Concepts worth exploring.
  • The Treasury should have a mechanism to use USDC received for $WEALTH for buybacks. This creates demand for the token and the choice to either burn or invest back into community programs. The former reduces supply, the latter would ideally end up in membership accounts or have a slow supply feed into the market (members selling excess $WEALTH). This activity should be balanced with the above-mentioned treasury diversification. A good summary on buyback & burn or buyback & make can be found here.
  • Community Programs can be funded in $WEALTH or other tokens (i.e., USDC).

BankDAO Community

Mission: Engage users, increase financial literacy.

WEALTH token involvement: Incentivise participation & learn to earn.

Breakdown:

  • Propose/request grants from the treasury to create educational content or run community engagement programs.
  • Receive grants upon community/treasury approval.
  • Grants can be distributed to various programs such as ambassadors (marketing and partnering), builders (part-time developers), seeders (part-time educators).
  • Guilds and grant-funded initiatives create content that can be used for education or community engagement.
  • Guilds source paid part-time contributors from the community. Payment can be in $WEALTH and is requested via grants.
  • Seeders or teachers create and teach educational content and are either full-time paid guild members or part-time contributors.
  • In a fully decentralized BankDAO, the community will have voting power over community-related matters. This gives $WEALTH utility.

There are 4 types of contributors:

  1. Learners: receive tokens for attending community events, completing curriculum, and joining support groups.
  2. Performers: earn tokens for achieving financial goals, winning financial challenges, and ‘good practice’ usage of the platform (I.e setting up direct deposit, connecting wallet, event participation streaks, etc).
  3. Connectors: Connectors refer both members and contributors to the network. Anyone is eligible to become a connector.
  4. Grant Programs: receive tokens for doing work for the network in three categories: Ambassador Grants, Builder Grants, and Seeder Grants. The contributors are mainly part-time contributors and are paid via grants in WEALTH.

The tokens earned for contribution will be distributed in $WEALTH. This will allow recruiting members, onboarding them into the ecosystem, and introducing membership tiers.

Membership Tiers:

Mission: Retain members, active community.

WEALTH token involvement: Incentivise participation - learn to earn, discount model

Breakdown:

  • Membership is based on $WEALTH holdings and will unlock more benefits the more tokens are held.
  • Members will be required to hold their tokens in their wallet to prove their membership status.
  • Vote boosting applies to the regular vote and amplifies the voting power by a defined percentage (see Governance for details on voting).
  • Bonus reward rate will give $WEALTH holders additional yield on top of the regular yield paid out.
  • Fee discounts will reduce fees on credit/debit card payments and DeFi investments.

The following tiers are planned:

Membership Tiers
Membership Tiers

Working Guilds of the DAO:

Mission: Run DAO / company operations, open to part-time contributors

WEALTH token involvement: Incentivise part-time contributors

Breakdown:

  • Guilds are small working groups centered around a specific expertise and aim. They are modular in nature. Guilds can either interoperate or work independently of each other, attaching and detaching based on the guild’s needs like legos.
  • Guilds are responsible for developing code, managing the treasury, and running operations.
  • Guilds will mainly consist of full-time employees with the BankDAO corporation (paid in fiat) and payment will come from the BankDAO corporation.
  • Part-time contributors can join guilds in web3 fashion and can earn $WEALTH via grants, allowing BankDAO to utilize $WEALTH to raise time. Alternatively, guilds might have a budget to allocate to part-time contributors.
  • Leadership ≠ Hierarchy: Guild representatives will act as facilitators within their group, helping maintain the group’s aim, however every voice within a guild is heard equally.

The following guilds exist:

Guilds of BankDAO
Guilds of BankDAO

Revenue Streams

The BankDAO Ecosystem will generate revenue from the following streams:

  • Interchange Fees: BankDAO will offer users a debit card, and future credit card products. Interchange refers to a fee that a merchant must pay with every credit and debit card transaction. BankDAO will capture ~1% on a per transaction basis. Revenue captured in fiat will be converted to USDC and contributed to the community treasury.
  • Net Interest Margin: BankDAO will also offer a DeFI rewards account rewarding members at a rate up to 7% based on membership tier. Net Interest Margin refers to measure of the difference between rewards paid and rewards received. This difference captured will be contributed to the community treasury in USDC.
  • Future Revenue Streams: Future revenue streams may include fiat and DeFi lending products, transaction fees on the marketplace, and treasury diversification including: holding yield generating stablecoins, investments, and token swaps.

Value Flow

The $WEALTH token has utility through the following properties:

  • Raising Time: The $WEALTH token can be used to raise time from contributors. Rewarding them for the time spent contributing and creating content.
  • Ownership: Members are incentivized to learn, become financially literate and advertise BankDAO through the membership concept of holding tokens.
  • Coordination: $WEALTH token holders will have a strong incentive - via holding tokens - to align their efforts towards achieving the goal of BankDAO.
  • Governance: $WEALTH token holders in combination with membership tiers, will give access (and boost) to voting in treasury and community-related matters.
  • Community Status: Human psyche loves status and membership tiers are thus a powerful tool to reward members for collecting and holding a certain amount of tokens. The special perks for higher ranked members could be further fleshed out with NFT profile pictures and other priority/special treatment.

Value within the BankDAO community is likely to flow in the following way. The diagram below shows BankDAO inflow in green and outflow in red (full screen version here).

Value Flow Diagram
Value Flow Diagram

A few further observations on value flow:

  1. Membership could lead to interesting dynamics in which members will bring in others to join the community, start saving, learning, and potentially even contributing by teaching or other means.
  2. Membership will therefore act as a sink for token supply. It is crucial to not only focus on new members but also on retaining long-term members to ensure token supply stays locked within member holdings. A long-term incentive model might be useful (e.g., delayed reward payouts - payout or increase yield the following year).
  3. The treasury will receive 50% of the genesis supply and by that will be responsible for distributing these tokens. The distribution should be aligned with the growth of the user base to not oversupply the market with $WEALTH and build trust within the community that wealth has value (here is a rough Calculation under the vesting tab).
  4. The web3 ecosystem and specifically DAOs have thrived from a new style of work environment. No job application required, just showing up and doing the work has become an important part of many DAOs. BankDAO should utilize this willingness of the web3 community to contribute for their own advantage (i.e., sourcing good talent). The token enables raising time and the web3 / DAO work environment ensures high-quality work is delivered.
  5. The Treasury and its policies have a strong influence on token supply and demand. It should be considered buying back $WEALTH to fund initiatives and/or to burn $WEALTH with excess profits as a reward mechanism for token holders (see value capture section below).

Value capture

The value that flows is related to how the value is captured using the $WEALTH token. The following initiatives capture value and make the token itself valuable.

  • Value of the DAO / project: The project has value as it educates a community of financially illiterate and might lead to a network effect. If this passionate / niche community manages to attract more members the project itself will become more valuable.
    • This is about getting the flywheel going.
    • More passionate members will create better educational content.
    • Better investment services, higher yield.
    • Attract more talent to manage money.
    • Increase the revenue of the whole BankDAO system.
  • Expected value of the DAO / project: The future of such a DAO could evolve to a large network and established brand where financially illiterate people join to get onboarded and learn.
    • Joining to seek membership - holding tokens.
    • Producing more content.
    • Deploying more capital.
    • Unknown innovations to follow - for a member, holding tokens in a smart community, incentivized by the token is like buying a call option on the community.
  • Ownership: Principal-agent. Turning members into owners/stakeholders will create strong marketing effects and will create a lot of value/align incentives for users. Users who hold tokens will have decision power over community and treasury making it worth holding tokens. This gives value to the token.
  • Stake for access to value / fee on value / reduced fee for holders: Holding tokens is valuable as it unlocks certain membership benefits and discounts.

Governance

Governance has control over treasury and community engagements. The $WEALTH token will be used to vote on proposals handed in by the community. Here are a few ideas and best practices of how other DAOs run governance:

  • Snapshot is one of the most popular on-chain voting tools, used in many DAOs. It offers a variety of voting mechanisms (see here).
    • The voting mechanisms include voting types that factor in the amount of tokens held. Implementing such an approach would make the voting boost proposed under ‘Membership Tiers’ obsolete since token holding would reflect a natural boost.
  • There is some criticism of token-based voting - mainly addressed by Vitalik in this article. The main argument is that with token-based voting, voting can be bought. Alternatives, however, don't seem easily available, that’s why, for the time being, token-based voting is likely the best option at hand. An interesting model is run by Curve finance, where a specific voting token needs to be staked, with voting power increasing over the duration of staking (read about it here).
  • Best practices for governance typically are seasonal budgets, project or guild grant proposals, and voting after debating them.
    • Seasonal budgets: are a concept similar to quarters. Budgets are requested/approved on a quarterly basis.
    • In order to request a budget a proposal needs to highlight the details of the request and the required funding. The proposal is typically open for everyone to debate and review. In some cases (i.e. Cosmos) proposers need to deposit a certain amount of tokens in order to submit a proposal.
    • Once reviewed the proposal is transferred to snapshot, where token holders have a certain timeframe to vote. Depending on the outcome the proposal will be funded.
  • More complicated governance models like the one Aave has implemented (details here) can be set up and could support features like proposal vetoes (called guardians in Aave’s case).
Token Allocation
Token Allocation
  • The distribution of tokens needs to be coupled to the growth of the community.
    • Releasing too many tokens upfront will potentially flood the market and reduce trust in the value of the $WEALTH token.
    • Locking up too many tokens will limit the trust in the membership system as it will lock up too much value for individuals.
  • The calculation below gives a rough idea of what size community would lock up how many tokens.
Token Distribution
Token Distribution

Cobie, an influential writer on web3, spends a fair bit of time on vesting / unlocks. This article explains very well why unlocks are important and what type of vesting is common. Based on a common 1 year lockup for team, advisors and investors and a 2 year linear unlock, the BankDAO vesting could look as follows:

BankDAO Unlock Schedule
BankDAO Unlock Schedule

The consideration here is how quickly money needs to be raised and how well the project is funded. The current model would introduce a stable number of tokens for the first year, giving the community sufficient $WEALTH to kick off engagements but also not flood the market with tokens while the community still grows. There are some considerations on how the number of tokens matches user growth in the vesting tab of Calculation.

Concepts worth exploring

  1. Vesting and emissions schedule (see Distribution and vesting).
  2. Most popular distribution approaches and trends among protocols (read about it here).
  3. Platform-based emission such as what convex does. The release of new tokens is tied to the growth/locking of tokens in their platform and BankDAO could think of a mechanism to emit tokens based on members.
  4. The pathway towards decentralization. Many projects start centralized and then migrate/hand over more and more responsibilities to the community. Shapeshift is a popular example of how a protocol once centralized is moving towards decentralization (read about it here).

Vision

The ethos of BankDao is our collective ingenuity. This is a power-sum game -- this is about people coming together pooling our knowledge, information, and experience to build a better world for tomorrow.

If we succeed…

No. When we succeed…

The world will fundamentally be a better place. Imagine a bank generating billions of dollars of revenue capitalizing people, programs, and communities that need it most. That is the world we need. A world focused on humans first and foremost, rather than profit. We can do well by doing good… and we will do well by doing good.

Are you ready to change the world?

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