TL;DR, In the new DXdao ecosystem, DXD will get its value from DXdao’s treasury, which will grow from product revenue and its investments into decentralized technologies.
In August 2022, DXdao launched the DXD Token Working Group to draft a sustainable, long-term model for DXD. The working group researched and compared multiple existing models, methods, and options and landed on the following three-pronged approach:
- Introduce four new tools in the DXD Monetary Policy Framework that will enable a fair and liquid market for DXD.
- Establish a DXD Monetary Policy Committee.
- Continue to fund product development and other initiatives that further DXdao’s core mission to enable community freedom.
To further simplify and answer the question, “Why is DXD valuable?”, the Working Group affirmed: DXD gets its value from DXdao’s treasury, which grows from product revenue and its investments into decentralized technologies.
What this means for your average DXD holder is direct alignment with DXdao’s activities and access to the underlying assets of the treasury. With these new financial tools, DXD holders are supported with access to unlimited liquidity and now have the option to either realize the returns on their earlier investments or see continued growth as they remain in support of the DAO. Choices, is what the new DXD token model means for your average DXD Holder.
One key short-term development is a commitment by DXdao to a DXD Floor Price Guarantee of 70% of DXdao’s Treasury NAV. This was executed through a recent $3.4m DXD Member Balancer transaction.
The DXD Bonding Curve was launched in May of 2020 by DXdao. The bonding curve was an effective fundraising tool but the mint/burn functions of the contract were never able to create a liquid market for DXD. In May 2021, DXdao launched the DXD Buyback program which purchased DXD off the open market using ETH from the general treasury as well as from the buyback reserve. The program bought over 15,000 DXD (30% of circulating supply), but it was never viewed as a sustainable long-term model for DXD value accrual.
Since the bonding curve launched, DXdao has built and managed several DeFi and governance products, diversified its treasury into $10m+ of stablecoins, and has a team of 20+ full-time contributors focused on building and growing the DXdao ecosystem. The DXD token is at the center of this ecosystem, but there has not been a formal link between the value that DXdao creates and the DXD token. This created uncertainty for DXD holders, especially as DXD has historically traded at a significant discount to book value.
Details of the New DXD Token Model
DXD Monetary Policy Framework
With the passage of the DXD Token Model proposal, four tools will be established under guidance from the DXD Monetary Policy Committee to be used by DXdao governance. These are:
- DXD Floor Price Guarantee — DXdao will commit to buying any amount of DXD on the open market priced at or under 70% of treasury NAV.
- Inverse bonds — Smart contracts where DXD can be deposited for a defined period of time in return for a certain percentage of DXdao treasury assets. When ready, DXdao has committed to issuing $2MM in inverse bonds.
- Allow DXD to be minted in exchange for assets deposited in the treasury, priced at full NAV. This will require an upgrade to the DXD token contract and will return the funds in the buyback reserve to the main treasury.
- Protocol-owned liquidity for DXD. DXdao has committed to provide at least $2MM in DXD/ETH liquidity.
DXD Monetary Policy Committee
Management of these tools requires close tracking of the DXD market as well as DXdao’s treasury. For that reason a DXD Monetary Policy Committee will be established to take on this task. The committee will consist of at least three individuals and also include full-time DXdao contributors. This work will be compensated in vested DXD to align members with the long term success of DXD. The committee will be tasked with:
- Providing quarterly reports on the general direction and outlook of DXD.
- Issuing monthly recommendations on inverse bond issuance and protocol-owned liquidity.
- Working with DXdao governance and treasury on managing redemptions.
Product development funding
DXdao’s mission is to enable community freedom. It was launched in 2019 as a radical experiment in decentralization. The DXD fundraiser was intended to raise funds for product development in line with this mission. The new token model represents a new social contract between REP & DXD holders. The DXD Token WG affirms DXdao’s commitment to building and funding decentralized products that enable community freedom by committing at least 6% of DXdao’s treasury to fund DXdao’s product & operations for a year.
This percentage can be changed at any time by governance and represents an overall budget suggestion for DXdao. It is neither a mandate to spend that amount, nor a maximum amount. This will serve to incentivize the community to grow the size of the treasury.
DXD Token Working Group History:
We have gathered together all the posts of the Working Group. The posts include relevant information such as slides, recordings, etc. as were needed for each meeting. We invite all those who were not in attendance and are interested, to review them by following the links to the relevant posts here:
About DXdao: DXdao is a decentralized collective that builds, owns, and governs DeFi and governance products. Reputation (REP) is voting power in DXdao, and DXD is the financial token with a claim on profit from DXdao products.
DXdao products include Omen (prediction markets), Carrot (programmable incentives), DXgov (governance framework), and Swapr (governance-enabled AMM). DXdao believes in governance and decentralization.