[SEP #2] Community Initiative To Unpause Token Contract (Enabling Transferability)

  • Title: Community Initiative To Unpause Token Contract (Enabling Transferability)
  • Author: Daniel, Co-founder @ Decentra
  • Created: 2022-09-28

Abstract

This is a proposal to call the unpause method of the token contract (using the SafeSnap module), which would result in the SAFE token becoming transferable. Unvested tokens would still remain in the vesting contract, and thus would not become transferable.

Proposal details

Purpose and Background

If we go with the definition of Adam Levi, Co-founder @ DAOStack, a token needs to hold two distinct properties to be actually called a token:

  • A token cannot be taken away from its owner.
  • The owner can transfer the token to anyone else, without requesting permission.

While the first point is satisfied with the current design, the same is not true for the second. Since SAFE does not have the two properties mentioned above, we cannot consider it a token (yet) per the definition of Adam Levi.

I’m not sure if I completely agree with him on this definition, but I do think that those two properties are fundamentally important to a token that is intended to govern a DAO.

While non-transferability has its advantages (e.g., the governance process is more resilient against malicious vote-buying at all participation rates), it also has some disadvantages:

  • Without transferability enabled, those who want to participate in governance, but don’t have any tokens allocated to them, can’t acquire tokens (=voting power), nor can they bring in proposals on Snapshot themselves, which requires at least 20K SAFE. That basically makes this DAO a static, closed organisation as of now, without any new participants being able to come in.
  • It limits the scope of activities to be made by SafeDAO (it won’t attract contributors who want to be paid in a liquid token, no feasible way to conduct OTC trades, etc.)

Effects and Impact Analysis

Having a transferable token also makes it tradeable, this is inevitable. In an adverse market environment such as the one we’re currently finding ourselves in, this might lead to a suppressed valuation compared to what it could have been a year ago.

However, I’m not sure if that’s actually something we should care about, as price fluctuations are simply part of how a market-based economy works. I don’t think SafeDAO should structure its roadmap around how to maximize token value. The current macro environment is outside our sphere of influence, and honestly I believe that a “hockey-stick” price chart is more favorable than a down-only chart with the peak being the token launch, resulting in disillusioned market participants as we’ve seen in the past with tokens like DYDX, PSP and countless others.

It is beyond SafeDAO’s control if and how individuals/institutions choose to price SAFE. Therefore, we should not let the adverse market environment influence our decision on whether to make this token transferable or not.

Alternative Solutions

  • We could keep the token non-transferable indefinitely, this would be a radical experiment in DAO governance.

As mentioned above, the advantage here is obviously the increased resilience against malicious vote-buying. The big down side is the fact, that the ownership structure, voting power held by individuals and institutions, would remain static. I reject this on this basis that I’d rather have (new) players who genuinely want to participate in governing SafeDAO accumulate tokens and thus increasing their voting power, than maintaining the status quo indefinitely. And with a high voter turnout, there would also be sufficient resilience against malicious vote buying - even with a transferable token.

  • We could wait until SafeDAO has matured to enable transferability of the SAFE token.

This is the alternative solution that appeals to me almost as much as the immediate unpausing of the token contract. Simply because this would give us time to think about what SafeDAO wants to accomplish and how to structure everything (there’s for example the “Outcomes-based resource allocation (‘OBRA’)” model proposed by @pet3rpan-1kx which could be interesting to adopt).

However, despite all of this, I believe we should not wait until SafeDAO has matured (although that would not be a disaster either). We should start attracting contributors now, for which a liquid token is necessary and we should not voluntarily limit the scope of our activities, which is a result of this non-transferability.

And what if SafeDAO can never mature without having a transferable, liquid token to attract contributors, etc. in the first place? I can’t give a definitive answer to this, but this is a realistic scenario in my opinion that should not be overlooked.

Technical Implementation

To make the token transferable no significant additional code is required, however the owner of the token has to call the unpause method of the token contract. This can be accomplished without an intermediary or gatekeeper by ensuring that the “unpause()” function is called by the SafeSnap module. Once the token contract is unpaused (and therefore the token is transferable), it is not possible to pause the token contract again (e.g. once transferable forever transferable).

(Thanks to @Arseny for his suggestion regarding the use of the SafeSnap module)

Source: safe-token/token.md at 6a1a4a99a7f3166b525cbd5469eaf0aea1c88e54 · safe-global/safe-token · GitHub

Copyright

Copyright and related rights waived via CC0.

43 Likes

I’m for the proposal of enabling transferability

8 Likes

@Daniel, I think you’ve laid out some valid logic there.

  1. I would completely disagree with. As radical as it may be, I don’t think the DAO would benefit from it. + This forum would have new posts every week requesting transferability taking away from other needs of the DAO.

  2. Waiting till the DAO has “matured” is also challenging. There would need to be some KPI’s for the definition of matured to be met. To be honest, there are 100’s of DAO’s out there and I would say there are only a handful that are mature. It tooks years to get there and it’s still not perfect.

My suggestion would be to wait until the claims window has passed and all users have had the opportunity to claim their $SAFE tokens. This also allows for fair listing/secondary market process. It prevents the rush on claiming tokens to dump (like with OP airdrop there were website crashes and early exitors could dump). This process also gives the $SAFE DAO to seed liquidity (if wanted) into the secondary market and interested exchanges. This time also allows for users to see if they want to contribute to the SAFE DAO or if they don’t see value in it.

6 Likes

Thank you for your proposal @Daniel.

I agree fully that unpausing the contract will be good for the Safe ecosystem and may also:

  • Encourage more people to interact with the Safe Protocol;
  • Allow for price discovery of the SAFE token asset;
  • Imbues the $SAFE asset with value based on supply/demand dynamics;
  • Enables the SafeDAO treasury to use its native asset for ecosystem growth;
  • Allows people the ability to transfer control of the token between wallets.
13 Likes

Let them free. Need to gobble more up!

2 Likes

Transfer need to be opened as soon as possible, the value of token that can only be used for voting is very limited, and many token incentive/donation programs and safe distribution for DAO members can only done after the transfer opened.

5 Likes

Great summary on token unlocking. I agree that it is necessary to enable transferability but timing needs to be considered.

Unlock too soon and users not interesting in governance will dump, unlock too late and the momentum from launch would be gone.

i think we should hold off on unlocking until after the claim period ends and the dao collects unclaimed tokens. also revaluate the dao at that time and go from there.

10 Likes

Totally support this initiative and also great observations from @Melodic_Platypus.
I’m part of other DAOs and it is the norm that most people come on board just to get airdropped tokens and leave immediately, but it is also true that these are the people that are not willing to contribute to the ecosystem. At the same time, it is important also to create momentum like ENS did.

3 Likes

Agree with you, but I don’t think safeDAO needs to wait three months to unpause transfer.
I think the premise of many proposals is that tokens are transferable, otherwise almost all proposals would not be able to proceed.

  1. For those who want to sell airdrop for profit, no matter safeDAO decides to enable transferability now or three months later, they will sell tokens ASAP , extending the pause time will not change this situation.
    People who only care about selling tokens for profit will never actively participate in DAO governance, regardless of whether the tokens are available to transfer or not.

  2. An important point, as daniel said, if the circulation of tokens is not opened, then the participation structure of DAO will be fixed and become a dictatorship of a fixed group of people.
    As far as I know, more than 99% of users can only receive less than 10,000 $SAFE, far below the minimum requirement of 20000 $SAFE to initiate a proposal.
    This means that almost all users are not eligible to initiate proposals, and only safe team or a small number of guardians are eligible to initiate proposals. This is not decentralized and cannot even be called a DAO.

  3. Safe is a product that can run stably for a very long time, and does not require frequent adjustments to the product that require DAO voting.
    So, I think the main use of safe tokens is used as ecosystem incentives, by distributing safe rewards to encourage the work of contributors and developers, just like the incentive programs of optimism. (Optimism Ecosystem Fund)
    Safe is also contract account, and it is an infrastructure in account abstraction. In my opinion, the next step safeDAO should do is to encourage third-party social recovery module projects to develop on the basis of safe, and to provide safe token incentives for such projects. This is a measure that is truly conducive to the development of the safe ecosystem.
    On this basis, the transferability of the token needs to be available as soon as possible.
    Because only after unpause transfer, the relevant incentive proposals can enter the voting, otherwise the DAO governance will become meaningless (Only meaningless proposals can be voted on).

13 Likes

Please assign a #SEP number and pass it as a SEP (which makes it more than a proposal)

Please review this SEP template and follow

I think your draft aligned with a SEP already and all that is needed is to add a SEP number and that should be #SEP2

I know you are holding more that 20,000 $SAFE necessary to take this to snapshot level, so, please pass it as a SEP and after 6 days, $SAFE holders decides on snapshot

11 Likes

I think we should unpause the token at the beginning of next year after the airdrop claim period is over.

In my mind, this is a good middle ground where we have a curated set of token holders to govern the Safe during the important and maybe chaotic launch period.

At the same time, for price-aware holders, it gives the market some time for price discovery, etc., before the initial unlock of the backers (that bought tokens for 1.25$ a piece).

1 Like

The way you phrase it is perhaps a bit too harsh. Many other DAOs have very high thresholds for initiating proposals, which is an important protective mechanism. After all, if there was a constant stream of spammy proposals, one could argue that participation would gradually decrease and an attack vector would open up.

Ironically, that probably becomes a bigger problem after a secondary market is created and malicious actors could accumulate tokens there. Though, it’s still like a very remote chance that this happens, especially given the fact that there probably won’t be enough tokens available on the secondary market to change the ownership structure in a way that could threaten governance. Quorum is currently at 10M SAFE, which is in my opinion a sufficiently high threshold.

And I also don’t agree with that SafeDAO in its current form is “not decentralized and cannot even be called a DAO” – I think SafeDAO is already sufficiently decentralized, but that doesn’t mean that there is not still a lot of room for improvement in this decentralization spectrum.

But apart from that, you have addressed an important point, which I also mentioned: without transferabiltiy there is no dynamic in the ownership structure, there is no possibility to welcome new DAO participants here (that have voting power).

1 Like

I agree with you.I think we can make innovative moves in token distribution

2 Likes

Yes, my wording may be too harsh, I just think that token transfers can change the fixed DAO participation structure, which is a basic requirement, and I don’t think it’s the most important thing.
I think the token launch of any project should have only 3 purposes

  1. Promote the development of the project.
  2. Reward supporters.
  3. Decentralize product ownership.

Taking Safe as an example, I think because its product is quite stable, it does not need to make frequent changes, it is the infrastructure.

So I think there is nothing in safe itself that needs DAO voting, because the product will not change frequently, and most of them are small problems. If these small problems require DAO voting, it will only lead to inefficiency. (that’s what I call meaningless votes)

However, as infrastructure, there are many products that can be developed on the basis of safe. If SAFE tokens are used for these products as incentives, it can promote the development of the safe ecosystem. In the end, all safe users and developers will benefit. This is meaningful. So I think the transfer has to start first, and then start talking about the incentive programs.

The main reason why I recommend not to start transfers after 3 months is that I think if the tokens cannot be circulated within these 3 months, then any incentive plan/proposal cannot be carried out during this time.

I can expect that most of the proposals that come up are boring (hardly have any effect, don’t even need to have DAO vote, which is a waste of time), which will lead to DAO inefficiency and kill the members’ interest in participating.

4 Likes

I know of few that hasn’t even bother to claim the token and that’s because it’s not yet trading. This means no matter what is done, someone who is not interested in SAFE Governance which is presently the only use case of the paused token won’t feel concerned.

Btw, it’s important to note that everyone who is lucky to get involved in the SAFE governance at this very beginning by being eligible for the $SAFE airdrop are claiming only half of what they’re eligible for while other half is vested for over 4 years. They are going no where for the next 4 years.

Some selling simply means some interested parties who came late to the party and miss out on the Airdrop and/or early users who will be willing to increase their voting power are getting chance of bagging more tokens.

No opinion can be perfect on public like this and it for this reason we agree on voting proposals out.

@daniel Please pass this to #SEP and let the concerned parties ($SAFE holders) decides.

SEPs will last a minimum of 6 days
Proposals on Snapshot will last 7 days

Literally, $SAFE is not getting listed but just transferrable until about 1 month from launch date (yesterday)

@daniel kindly do the needful or risk suing someone for plagiarism :smirk:

6 Likes

@CaptainTee I’ll wait a bit for further community feedback, and then either tonight or tomorrow morning move the proposal into the SEP category.

I think, as far as I can tell here, that the community is split between the immedediate unpausing of the token contract or waiting until the 27th of December when the claim period ends.

So I think that we should have - if it is compatible with the guidelines - 3 different answer options for the Snapshot proposal:

  • Immediate unpausing
  • Unpausing after claim period
  • Make no changes

If “Make no changes” has more than 50% of the votes this will be accepted and for the time being no unpausing will happen (until maybe another proposal will be submitted at some point). In case neither “Immediate unpausing” nor “Unpausing after claim period” reach 50% independently, but both together have more than 50%, the option out of those two that could gather more votes will be taken.

10 Likes

I very much agree with the community initiative of canceling the suspension of token contracts (enabling transferability). Because each user has 50% of the tokens locked up for four years, and they will have nowhere to go in those four years, so the tokens can be circulated and ready for listing. Now the market needs a hot spot. I think safe is the token that ignites this hot spot.

2 Likes

Yes, no matter when others sell tokens, more people are optimistic about safe, so they are more willing to hold tokens. It would be better if they could pledge safe to mine!

While this is an important discussion to have, some reasons that speak against rushing this proposal:

  • SEP#1 has not passed yet: Only after the participation agreement is ratified DAO participants have legal clarity and personal liability of DAO participants as well as other protected parties is reduced. Passing any bigger proposals before this happens is premature and causes unnecessary uncertainty on the liability side.

  • Claims are still happening: Just around 15-20% of SAFE has been claimed, with new claims happening pretty much every minute. It seems to me that a bigger decision such as this one should at least wait until the claims have calmed down a bit, making sure everyone can delegate their voting power in time for this proposal to get to vote.

  • Hear more opinions: I think there are legitimate reasons not to enable transferability for the Safe Token. In general I would wait at least some time to hear different voices, alternative proposals etc.

  • Community alignment on goals/mission of SafeDAO: Current Safe allocations have been set up based on past usage and ecosystem contribution. Upon enabling transferability, the structure will change. It might make sense to first align on the goals and mission of SafeDAO by means of an SEP with the initial SAFE community before inviting the broader public in.

Also, very important to consider:

  • There is already indirect ways to transfer the token: The token is actually not fully non-transferable. Because the token owner, which is this Safe account, can transfer SAFE. By giving an ERC-20 approval from an external account to this Safe, it would even be possible to transfer SAFE not directly held by that Safe. So this means there would be options to continue doing distributions or in other ways transfer SAFE using SEPs.
22 Likes

I agree, and I commit to not put this proposal on Snapshot before SEP #1 is passed (or rejected). The earliest date in this case would be Oct 12 (assuming that SEP #1 goes to Snapshot on Oct 5 and the voting period is 7 days). However, I remain convinced that we should hold a vote on this no later than at the end of October, simply because this would lead to the transferable or non-transferable nature of the token (depending on the outcome of the Snapshot vote) basing its legitimacy on a community vote and not a previous decision of the team.

There’s nothing wrong with that either, and I think by Oct 12 there will have been some meaningful progress on that front.

I’d also love to hear some more Safe Guardians (and other community members) coming forward. I hope to have made it clear with my draft proposal that this is in fact a * draft * and that I would be happy to hear dissenting viewpoints as well.

I think radical openness should be one of the guiding values of SafeDAO, and I’m trying my best to embrace it in everything I’m doing.

I was only partially aware of this before, and when thinking about it, it weakens the argument in favor of unpausing the token contract somewhat. However, I’m not quite sure if that moves the needle enough for me to support maintaining the non-transferable nature of the token.

4 Likes