DAOrayaki Reserach |BitDAO: An Open Finance and Decentralized Tokenized Economy

13 min readSep 26, 2021

DAOrayaki DAO Research Grant：

Fund Address: 0xCd7da526f5C943126fa9E6f63b7774fA89E88d71

Voting Result：DAO Committee Yes

Grant Amount： 200 USD

Category: BitDAO, Treasury, Research and development, Fluidity, funds, DeFi products development, DeFi products incubation, Liquidity providing

Contributor：Jones, 黑白BQ@Daorayaki

Chinese Version:https://daorayaki.org/bitdao/

Brief Overview About BitDAO

BitDAO is one of the world’s largest DAOs supported by Peter Thiel, Founders Fund, Pantera, Dragonfly, and more. Bybit has pledged recurring contributions to the BitDAO treasury which at 2021 rates exceeds $1B per year with a vision of open finance and a decentralized tokenized economy through DeFI technology. For this reason, BitDAO is banking on the success of DeFi and will allocate massive financial and talent resources to support DeFi growth.

Background

DeFi technology allows for unstoppable and permissionless financial transactions on the blockchain, including trading, lending, and creation of synthetic assets. With no signup process, no middlemen approvals, no middleman execution, DeFi will fundamentally disrupt traditional finance and is likely to become a trillion dollar sector. Tokenization has broadened the scope of property rights, and enabled new economic models for DAOs, collectible NFTs, and gaming.

BitDAO positions itself as one of the largest DAOs in the world, and its vision is to open finance and a decentralized tokenized economy. It’s a collection of contributors. Overtime, community leaders will appear. BitDAO’s vision and mission will be promoted by token holders, contributors and community leaders.

To put it simply, DAO initiates proposals through blockchain and smart contracts to coordinate member actions and resources. Members can vote on proposals through voting. The more tokens they hold, the greater the voting power. Nowadays, DAO (Decentralized Autonomous Organization) has also become an important direction for many DeFi projects such as Maker.

“BitDAO is a DAO controlled by BIT token holders. It is not a company and has no management team or employees. Any individual, development team or R&D laboratory can propose upgrades, token transactions, and partnership proposals for BitDAO BIT token holders will vote to decide whether to approve or reject these proposals.” BitDAO officials said, and hope to support the development of the DeFi industry through the use of DAO, specifically working in three directions:

- Research and development — BitDAO partners will establish R&D centers, develop BitDAO core protocols (governance and fund management), develop BitDAO DeFi products, support DeFi partners, and provide incubation services for emerging DeFi projects.

- Fluidity — BitDAO will control one of the largest asset pools, which can be used to provide liquidity for partner agreements. BitDAO can guide new protocols, such as DEX, lending, and synthesis.

- Funds — BitDAO will support blockchain technology through grants (such as through Gitcoin) and support DeFi projects through token transactions.

The popularity of BitDAO is inseparable from the contribution of Bybit, the main derivatives exchange behind it. According to the announcement, Bybit promised to contribute 0.025% of its futures contract trading volume as income to BitDAo vault, and make regular donations. The official estimate given by BitDAo is that the annual revenue will exceed 1 billion US dollars. After inquiry, it was found that Bybit did make regular donations to BitDAo every day in accordance with its commitment, and the average daily donation amount was close to 4 million U.S. dollars as shown below:

The average daily contribution is US$4 million, which is about half of the income. Bybit funding BitDAo obviously has its own considerations. Previously, the UK Financial Supervisory Authority and the Ontario Securities Commission of Canada both prohibited Bybit from providing services to its citizens, and ByBit subsequently ceased services in the region. With the tightening of global supervision, crypto derivatives trading platforms are facing transformation: one is to follow the path of compliance and cater to the supervision; the second is to take the path of decentralization through DAO. Binance chose the former and Bybit chose the latter. From this perspective, BIT can also be regarded as Bybit’s “platform currency”.

Bybit’s impact on BitDAO

The value of BitDAO mainly comes from Bybit empowerment, so let’s take a look at the current status of Bybit first. As we all know, Bybit is a rising star in the derivatives track, second only to the three major exchanges, and surpasses second and third from time to time. Bybit’s own spot function is weak. Although the Huobi team is currently intensively developing, there is still a long way to go to catch up with other exchanges. BIT’s spot trading also needs to rely on other exchanges. On the other hand, Bybit is currently large in size and has received strict attention from regulatory agencies in various countries. Therefore, it pays special attention to compliance. Coupled with the requirement for the transparency of the “DAO”, expenditures need to be disclosed. Obviously, it is impossible to pull offers.

Growth

BitDAO looks to partner with projects through tokens swaps and co-development efforts and that is to increase the growth of the community:

- Swap — BitDAO aims to token swap and accumulate a collection of the top existing and emerging DeFi and crypto projects. Swaps will align their interests. BitDAO will be incentivized to support these partner projects to become category leaders. One priority is Spot and Derivatives DEXes.

- Build — BitDAO aims to build core products which enable BitDAO or other DAOs to function more effectively, these include:

- Governance suite — a set of on-chain and off-chain products and best practices.

- Treasury Management — ability for DAOs to deploy and monitor assets to earn yield or bootstrap products.

- Grant — BitDAO aims to provide grants to teams that produce research or products that are public goods for the crypto industry. One possibility is to match Gitcoin grants.

The benefit comes from the success of partners and the industry as a whole. With billions in assets and recurring contributions, BitDAO will continue to create partnerships, accumulate the best DeFi assets, and build useful products. The partners and products will then contribute to the BitDAO treasury, creating a compounding and accumulation dynamic.

Token distribution

- 30% BitDAO Treasury will be held by the treasury to promote ecosystem swaps.

- 5% will be provided as a reward to the initial partner at the start of the project.

- 60% Bybit will be allocated to Bybit to establish an R&D center to support BitDAO and support the growth of Bybit which, in turn, can help the growth of BitDAO’s fund library. Among them, 15% of the token supply can be used immediately, and the remaining 45% of the token supply can be used immediately. The supply of licenses will be locked for 1 year and will be gradually released within 2 years after the end of the lock-up period.

Token lock-up and release

According to the BIT token unlocking rules, 30% (3 billion) of the tokens are in circulation after the token goes online, including: 10% of the “BitDAO Vault”, 5% of the “Initial Partner Rewards” and 15% of Bybit Lock up funds. Based on the current price, its current circulating market value is about 4.8B US dollars, which is basically the same as XMR and FTT, and surpasses Pancake.

BitDAO economic model

Token BIT: governance token + platform token

Business model: develop defi products, incubate defi projects, and provide liquidity.

Source of income 1: 50% of Bybit’s profit (approximately US$4 million per day)

Source of income 2: BitDAO’s future business revenue.

Governance

BitDAO is owned and governed by BIT token holders, with the following actions executed only after a successful proposal and vote:

- token swaps with existing and emerging projects.

- treasury allocation into various strategies.

- liquidity support for partner projects.

- grants or milestone rewards to development teams and R&D centers (to build BitDAO products, or support partner products).

- grants to blockchain technology projects, education programs, or other blockchain public goods.

- updates to BitDAO core protocols (including governance and treasury management functions)

Principles

- BitDAO is not a company. It does not have a management team or employees.

- BitDAO is a collection of contributors. Contributors will hold BIT tokens and are motivated to make the project a success.

- Various individuals and teams will propose changes to the BitDAO protocol. It is up to BIT holders to vote to accept or reject these proposals.

- Holding BIT entitles you to submit and vote on proposals. It does not entitle you to impose your will upon other contributors.

- BitDAO will be an evolving project, and community leaders will emerge over time. Governance proposals and forum participation will affect the direction of the project.

- The vision and mission of BitDAO will be driven by token holders, contributors, and community leaders.

Initial Governance Policies

BitDAO aims to encourage contribution to the BitDAO project and not all issues need to go through formal governance proposals.

Requires formal BitDAO proposals:

- Transactions involving any BitDAO Treasury assets including grants, swaps, wrapping, and staking.

- Code updates to BitDAO core protocols, exceptions include security releases.

Does not require formal BitDAO proposals:

- Creating a BitDAO affiliated hackathon or event, where the contributor covers the expense.

- Creating a BtiDAO affiliated research & development entity to build products, where the contributor covers the expense.

Every BIT Counts

BitDAO is owned and governed by BIT token holders. It’s initial policy is for the actions to be executed only after a successful proposal and vote as mentioned above, which is at the same time changeable after discussions with the BitDAO community.

Phase 1

BitDAO will utilize the industry standard setup of Gnosis Safe, Gnosis Snapshot off-chain governance, and multi-sig administrators.

BitDAO Treasury (Gnosis Safe)

BitDAO will use Gnosis Safe to store treasury assets. Gnosis Safe is commonly used by crypto projects for multi-sig control over an Ethereum address.

- The main BitDAO treasury contract address is: https://etherscan.io/address/0x78605Df79524164911C144801f41e9811B7DB73D

Governance Module (Gnosis Snapshot)

Gnosis Snapshot is an off-chain vote aggregation platform. Snapshot supports off-chain governance for many industry leading blockchain and DeFi projects such as Balancer, Yearn Finance, SushiSwap, Uniswap, Bancor, The Graph, and Aave. We chose Snapshot as an off-chain vote aggregation platform to make governance simple and transparent for our users. It is a tried and true solution with a great user interface and user experience.

Snapshot-based governance, is commonly referred to as “soft” governance as the result of the vote is not automatically implemented — it requires a development and operations team to perform subsequent actions, and implementation of changes via a multi-sig.

- BitDAO Snapshot Space: https://snapshot.org/#/bitdao.eth

Governance Token (BIT)

BitDAO’s governance token, BIT, is an instance of Compound Finance’s governance token COMP. This has been selected instead of a standard ERC-20 token, as it supports 1) delegated voting, and 2) off-chain vote aggregation with the potential of moving to on-chain governance at a later phase.

- The BIT token contract address is: https://etherscan.io/address/0x1A4b46696b2bB4794Eb3D4c26f1c55F9170fa4C5

Other Governance Discussions

In the community Discord and Forum, there will be a separate channel to discuss ideas around grants, token swaps, protocol roadmap, and governance. Ideas that garner enough community support can be submitted for voting. A community member may draft a soft proposal for Snapshot that leads to an official community vote. Such proposals act as a “temperature test” or a poll, but do not guarantee implementation. The idea needs to be adopted by a development team, with finalized code audited and submitted, then deployed by the multi-sig administrators.

Delegated Voting

BIT holders cannot vote or create proposals until they delegate their voting rights to an address. Delegation can be given to one address at a time, including the holder’s own address.

Multi-Sig Administrators

In Phase 1, BitDAO treasury (Gnosis Safe) and Snapshot Space are administered by a multi-sig wallet. The initial setup is 3 of 5 signers whom have been nominated by the Bybit Team. Similar to other DeFi projects, we will look to community suggestions to distribute the signing keys more widely (for example 6 of 12 signers). Proposed changes to multi-sig signers or rules will be submitted via Snapshot proposal and voting process.

Proposal and Voting Parameters

Definitions Snapshot Strategy

Defines the vote weight of each token. BitDAO initial setting is 1 BIT = 1 vote weight, so each BIT has equal voting power. Future strategies may include: allocating vote weight to xBIT or BIT-ETH LP tokens to enable BIT holders who have staked, wrapped, or provided liquidity to retain voting power.

Proposal Threshold

“Proposal Threshold” is typically defined as the number of votes required to create a proposal. In BitDAO Snapshot Space this is done through a visual filter, to only display proposals from users who have at least the threshold number of BIT tokens delegated to their address.

Vote Duration

The length of time between voting start and voting end.

Vote Threshold

The minimum number vote weight (BIT tokens) required to vote on a proposal. If this minimum is not met, the vote is unsuccessful even if the majority of votes voted yes.

Phase 2

BitDAO will look to build a custom governance module, most likely referencing on-chain upgradable solutions such as Compound Governor Bravo.

BitDAO affiliated R&D centers are working on building a custom governance module for Phase 2. The objective is to enhance the power of BIT token holders, and support BitDAO future products and functionality. BitDAO welcomes the community feedback as they design the new governance module, especially in relation to tradeoffs: eg. gas fees, governance process efficiency, onchain/off-chain, security, user participation, etc.

Key requirements

- Upgradable (probably relying on proxy contract, and proxy patterns)

- Onchain proposal and voting

- Control BitDAO governance parameters (vote weight strategy, proposal threshold, voting threshold, vote duration)

- Control future BitDAO product parameters (fees, thresholds, etc.)

- Can be easily modified and utilized by other DAOs

Nice to have

- Delegate-to-many (instead of delegate-to-one)

- Can vote without delegating

- Delegate for X number of blocks (time lock)

- Separate delegation for proposal and voting

- Templates for common payloads (i.e. executable code for token swaps, grants, etc.)

To be considered

- No multi-sig backup or override

Team members

There is not that much information about BitDAO team members except for its tremendous early partners and the current Chief Operating Officer which is “Arby Leonian”.

Twitter Account: https://twitter.com/arbyleonian

BitDAO Early Partners

● Peter Thiel

● Founders Fund

● Pantera Capital

● Dragonfly Capital

● Alan Howard

● Bybit

● Spartan Group

● SushiSwap

● Kain Warwick (founder of Synthetix)

● Polygon

● Jump Capital

● Peak Capital

● Amber

● Cambium Grove Capital

● Coinhako

● Fenbushi Capital

● Tembusu Partners

● NGC Ventures

● LongHash Ventures

● alphanonce

● iAngels Blockchain

● Univalues Associates

● mgnr

● The London & Amsterdam Trust Company Limited

● PreAngel

● Fintelics

● Pythagoras Investments

● Wemade Tree

● Kenetic

● The Brooker Group

● Kronos

Summarize

From the above, we can understand that BitDAO is both a DAO organization and half of the Bybit project. Its token BIT is both a governance token and a platform currency of Bybit (half of Bybit’s proceeds are donated to BitDAO). BitDAO is Bybit’s transformation to decentralization through DAO. In any case, Bybit has embarked on an unprecedented path of platform currency release in the industry, and its future development may be explored by BitDAO itself.