Proposal 1: Migration Plans

Summary

This proposal gets SMOL v1 holders’ approval for a v2 migration. If this proposal is approved, the team will carry out the migration plan on behalf of the community by:

• Deploying SMOL v2 and giving token admin privileges to Smol DAO
• Deploying the DAO smart contract and front end
• Seeding initial liquidity and transferring the LP token to the DAO

This proposal also creates an ecosystem fund for SMOL v2 to support growth of the project, starting with a bonds program to seed liquidity on L1.
The Smolverse team will not be the maintainer of the SMOL v2 contract. Any changes to the token plan described here have to be enacted through onchain governance, using the OpenZeppelin standard.

Implementation

We will go through the technical details of the migration and why we decided to implement it this way.

• Smol v1 will convert to Smol v2 at a ratio of 1666:1. The reason for this is that many holders suggested reducing the supply from the current 1 trillion.
• Users mint v2 by bridging their v1 token to L1. The bridge transaction will burn the v1 token and mint v2 on the other side. The conversion has no cut-off date for participation but is one-way for safety reasons.
• Smol v2 will have a new supply of 1 billion. 60% of the v2 supply will be distributed to v1 holders.

This DAO proposal greenlights the minting of the remaining 40% and distributing to the correct parties, discussed later.

The first and most important use of the ecofund is using 5% of the SMOL v2 supply to issue short-term SMOL bonds in exchange for SMOL-ETH LP tokens. We are approving bonds now prior to v2 for a very important reason: we need to create new tokens for liquidity migration, and it would not make sense to have people burn their v1 tokens for v2 not knowing if liquidity will be available.

The DAO wallet and SMOL token contract will be governed by the community, with the team only retaining the power to veto malicious proposals.

SMOL Allocation

The 40% SMOL will be split between Smolverse programs and then the DAO itself. By Smolverse programs:

• Half will be set aside for Smolverse contributor allocations, starting with Smolworld but also for future teams.
• The other half will be set aside for long-term development.

If SMOL gets listed on centralized exchanges, the Smolverse team will work with a market maker to establish a framework like TreasureDAO’s program with Flowdesk (divesting MAGIC at low enough volume not to create market impact).

The goal here is two-fold:

1. To keep building things that drive value to the community through SMOL and NFT utility. We want to have the same incentive structure as the community.
2. It’s better for contributors to get skin in the game as a project using a liquid ERC20 than ERC721s like Smol Brains.

The DAO itself will receive 20% of the total supply. This proposal would also greenlight the first ecofund allocations:

• 5.43% of total SMOL v2 supply going towards bonds
• 5% of total SMOL v2 supply going towards future CEX listings and market making. This allocation would be put in a multisig-controlled wallet. It may never even be used if these opportunities do not arise or are not needed. Governance can also claw it back.
• 1% goodwill airdrop to Smol community contributors who have kept us going for the past three years, many of whom barely own SMOL or Smol Brains. These include 33 community artists and a Good Samaritan smart contract auditor who has been offering his services to Smolverse and Treasure pro bono since the 2022 exploit. The amount each individual will receive will be insignificant regarding the total market impact, but it will be meaningful for them as individuals. Let’s put skin in the game for key community members.
• This leaves 9% of the total SMOL v2 supply for future community projects. We think this is a good amount. It encourages the DAO to become self-sustainable and start earning SMOL instead of spending it. Moreover, profligacy would likely have a recoverable market impact and allow SMOL to survive as a pure memecoin.

Bonds Program

The Smolcoin genesis LP token was burnt, meaning the ETH cannot be migrated to a new chain. The best method of bootstrapping liquidity in our opinion is Olympus DAO’s bonds program. If this proposal passes, the team will deploy the v2 SMOL contract with 54,347,826.09 tokens minted for the bonds program.

We will create a short-term bonds market for SMOL in exchange for SMOL-ETH LP tokens. Then, after the bonds sell out, we will add more liquidity to the SMOL-ETH pool on L1 (assuming passage of proposal 2) and transfer the LP token to the DAO treasury. The Olympus market takes a fee on bonds, but the Smolverse team will do its part at no fee.

Bonds markets have a lot of benefits. They make it easier for holders looking to take a larger position. The community will fully own the liquidity and won’t have to worry about LP incentives. All in all, we think this is the simplest solution for the Smols and will create the bonds and v2 token contract as soon as the proposal passes.

Relationship with Proposal 2

If this proposal passes and proposal 2 fails, then the community has authorized the token migration overall but wants liquidity on a separate chain. In this case, the community needs to submit another proposal specifying on which chain to seed liquidity. Smol contributors will wait to deploy the v2 token until proposal 2 or something like it passes.