Hi everyone, thank you for the comments, will reply in steps to each of you.
@leuts.eth
Agree in principle with your comment - fully aware that we might be too inside the weeds to see it’s complex. As we work alongside with initiatives like reviewing the Token Terminal and Defillama dashboards, and getting COW reviewed in some Token transparency dashboards, we’ll complement that with extra documentation on how the business model works.
Collapsing these into a single process will have substantively equivalent impact on token supply while greatly improving onchain traceability and the value accrual story. The simplification would just mean burning directly the tokens that are being bought back as part of one simple easy to follow flow, instead of having 2 flows that present and future token holders shall get familiar with and follow.
I understand the simplicity there, my after thought is:
- The current buyback safe is structured in order to be able to quickly fund solver payouts. Under your proposed approach, in a week of high revenue / high rewards, there might not be sufficient COW to incentivise solvers. That would require a change in mandate so that the Managed Treasury:
a) Either takes control of a bigger chunk of the COW held in the DAO Safe and has a mandate to top up solver operations; or,
b) Sells other assets / buys COW to cover the gap (against the longer term runway mandate).
Hence why the parallel burn form the DAO safe being in my view the most attractive option in terms of cashflow management / operations.
Assuming solvers are happy with the mandatory redirection of 20% of rewards to the bond, we think this has some merit. We do wonder if this creates a backpressure that at some point will lead to solver exits.
This is being discussed in a solver-related CIP here, so I’ll refer us to that forum to discuss this matter which has been having active engagement by solvers.
Because at the end of the day, token’s real value comes down to profits made by the protocol.
In theory, yes - but that’s not what we’ve seen in the market. CoW DAO is today considerably more profitable and in a more robust position than in 2024, and market price is completely disconnected from fundamentals. Price is a function of demand and supply, and there’s a narrative part on top of fundamentals.
I also don’t agree with your view in several ways.
- You mention CoW being a security token. To our understanding, and from an EU and US perspective, based on legal council, COW token is not, to the current knowledge of the team, a security token.
- The current development mandate (under CIP-79) is focused on growth initiatives. We firmly believe that there are growth areas and building in the market downturn will allow the DAO to capture a higher revenue threshold in a tailwind / bull market. That’s why the team is dedicating a lot of resources on user acquisition, product development (Solana, Atomic bundles, cross chain) and service level improvement (to allow better integrations to be served).
- Cost savings are always on our mind, and we are consistently being cost conservative (as the community has been with the fact that we historically underspent CIP amounts and rolled them forward). On the AI front, this is something we are integrating in our flows and seeing benefits of.
Overall, the last 2-3 quarters have been key on improving the DAO’s P&L structure, moving to profitability, expanding to new networks, capturing key partners. We need to continue executing on this vision and ensure CoW keeps moves to this vision of being THE settlement layer.
@casadar
A dividend / equity like mechanism would most likely make COW a security, which would mean several regulatory requirements and could lead to exclusion from demand from key markets like US, Europe, and even a risk of delist in some exchanges.
The goals of this discussion, together with Aragon’s study is precisely to advance a framework that can be “automatically” kicked off when the DAO reaches the “hurdle point” of 10mil FCF.
I appreciate all comments and will be interested in further discussion. I think a simple framework incorporating some points of this post and Aragon’s proposal to be prepared as a future CIP.