Governor of DAO: The Bull Case for BREE

CoinBreeder DAO (CBDAO) is situated as a sandbox for building and testing various governance protocols. While certainly a worthy niche, that summary doesn’t immediately explain the project’s true potential.

Below, I’ll lay out the context and provide reasoning for BREE’s best-case scenario, one that situates this decentralized autonomous organization (DAO) as the most profitable throughout the entire space.

The key components that make this scenario attainable are as follow:

• DAOs have serious issues
• They are willing to pay for help
• BREE is the one-stop, comprehensive solution to get this help

Before we get into this, I’ll introduce a bit more about CoinBreeder and BREE:

BREEding for Dummies

There are two main components of CoinBreeder: the sandbox and the DAO itself. CBDAO is built for maximum (sustainable) returns for those participating in governance of BREE as well as participants of other DAOs. Users can stake BREE and other governance tokens, like MKR and COMP, for passive BREE rewards.

Initially, the APY is fixed around 40% for BREE holders, and variable for other coins relative to the marketcap of the token. This rate is expected to decline overtime, and the BREE tokenomics suggest that the emissions rate in play is geared towards long-term sustainability instead of massive APY pump-and-dumps like other coins.

The other governance tokens that can be locked on BREE is more than a scheme for “yield farming” like other projects have employed. When users lock governance tokens, they are allocating weight in the protocols of these tokens to CBDAO. The more MKR/COMP/etc. that CoinBreeder manages, the more voting power the DAO can utilize, which translates to revenue going back into the DAO. Keep this in mind, it’ll play a larger role later.

There are additional quirks in the tokenomics that favor the price of BREE. Participation in CBDAO governance has a burn element to suppress the price, and a minimum of 500 BREE must be locked in order to stake.

While the CBDAO has a great setup and tokenomics, the impact of the sandbox is potentially the homerun component of the project.

As mentioned above, developers looking to build out their own DAOs can leverage the CBDAO sandbox to experiment with different variables and aspects that make up the governance protocol of their project.

Specifications for a DAOs governance include how votes are assigned (Can everyone vote? Token holders only? Elected representatives of holders? Or just large stakeholders?), attaching weight/trust/reputation to votes and participants, incentivizing participation, requirements for passing vote (approval % and participation/quorum requirement), and so on.

The CBDAO governance protocol is designed to harvest efficient and honest participation, and the sandbox is designed to export those same virtues to other DAOs.

Now, let’s get into why that’s such a big deal, going off of the three points above.

DAOs have Serious Issues

When you deconstruct the phrase “Decentralized Autonomous Organization”, you get a concept much more powerful than a meaningless hype phrase used to push prices.

In theory, the DAO should look like a company with some product or service available. Unlike a company, there is no manager or CEO. Instead, the DAO itself, the algorithm, oversees production. The algorithm is obeyed (and modified, when necessary) by participants- the token holders who participate in the governance of the organization. Andre Conje’s Yearn Finance, for example, compiles lending protocols to assign the YFI DAO’s funds to the highest interest rate investments.

In the future, DAOs could apply to more tangible industries beyond immediate DeFi applications. I’m personally bullish that DAOs will disrupt low efficiency industries, like Healthcare in the United States (autonomous insurance pools where participants buy into the pool with specifications that best fits their needs). Because the algorithm that runs the DAO has no upkeep costs, zero-marginal cost organizations could completely reshape our understanding of the modern economy (but that’s a discussion for a different post).

Right now, however, these radical possibilities aren’t playing out. Partially due to blind hype, and partially due to poor implementation, DAOs are experiencing participation issues. Many token holders aren’t interested in governance, or they aren’t properly incentivized to care enough to put in the work required to be a good participant.

For example, despite its massive success and price appreciation, YFI has ran into trouble. YFI supply was initially capped at just 30,000 tokens, which was then voted on to change to 30k new YFI per week. Many were uncomfortable with such an aggressive schedule, and multiple proposals to curb emissions (1 2) were submitted with widespread approval (70 and 80%, respectively). However, these proposals were both rejected because quorum wasn’t met: not enough holders cared to vote.

A DAO that doesn’t vote is, well, not great. Yearn isn’t the only one to run into issues, it’s a widespread problem. DAOs need participants or they will fail.

They’re Willing to Pay

Organizations aren’t blind to the apathy issue, and they’re willing to get help. DAOs have worked with one another, and new instances have leveraged the success and work of predecessors and paid handsomely for it.

The best example is DMMDao and DXdao. DXdao is an autonomous investment fund that builds and governs dapps on Ethereum. One of their products includes Mesa, a decentralized exchange that also supports several different crowdsale options.

DMMDao held their token sale on DXdao’s Mesa, and for help in the token sale and as a way to get additional help in their governance over time, they assigned DMG to DXdao. A lot of DMG: 3.75 million. At time of writing, that’s close to US$5 million and accounts for half of DXdao’s entire treasury. The market cap of DXD, which represents ownership of the treasury, is only roughly $5 million.

And in case you missed it, DXdao is an investment fund. It wasn’t designed to help out with governance of other DAOs, and it didn’t employ some master salesperson. $5 million worth of DMG were essentially thrown in the lap of DXdao.

Enter CoinBreeder: The Chainlink of DAO

We’ve established that DAOs have issues and they have the enthusiasm and coin to fix those issues. This is where CBDAO comes in as potentially the most influential and valuable DAO in the entire ecosystem.

The launch of CBDAO as an effective governance protocol with hands in other DAOs (remember, users will stake MKR and COMP, among other tokens) alongside an immediately useful sandbox for other DAOs to build and improve their own governance enters CoinBreeder into a unique position as an authority on DAO, a position currently held by noone. It suggests that, long term, the ultimate value in CBDAO is its role as the DAO Governor: the Mother DAO for all DAOs.

Beyond the sandbox, DAOs can allocate coins to CBDAO (just like DMMDao did with DXdao) as a means to bootstrap their own governance. This is an easy way to guarantee some honest participation from an entity comprised of an entire community of BREEders.

Rather than throwing coins at DXdao (which is a great project, but not designed for governance of other DAOs), these organizations have a surefire way to protect their governance early on and ensure participation out of the gate with an allocation to CBDAO. The more DAOs that take this approach, the more likely future DAOs will take a similar stance. Multiply $5 million worth of tokens by every new DAO, then compound the APY on those tokens as additional revenue.

In the same manner that Chainlink is the connection between independent dapps and blockchains, CBDAO is the universal link in the DAO ecosystem.

Remember, it’s a DAO, so BREE holders are the ones with claim to the potentially unorthodoxed revenue generated by CoinBreeder.

With that in mind, BREE currently carries a (diluted) market cap of about $18 million. In comparison: Maker sits at $630 million, Compound at $470 million, and Synthetix at $450 million.

If CBDAO establishes itself as the Governor of DAO, it’s true valuation eclipses each of these.