SIP-9: Create a project treasury for post-roadmap expenses from the 100M DATA allocated in SIP-6

Background

In the SIP-6 proposal, passed in May 2021, a supply of 100M DATA tokens was approved to be minted to raise further funding for the Streamr project to cover post-roadmap expenses. The initial project funding will last at least until late 2023, beyond the Tatum milestone, and is held safely in fiat. Arranging the post-roadmap funding is not particularly urgent but the plan needs to be revisited due to changed market conditions.

According to the SIP-6 decision, the tokens were to be sold to crypto VCs at a maximum of -20% discount from market rates, in exchange for a 12-24 month lockup period. At the time of the proposal, DATA price was around $0.10-$0.15, meaning that this supply of tokens had the potential to raise around $8M-12M (factoring in the discount), should the price level stay stable. The idea was also to generate stable yields for the project by depositing the raised funds into DeFi pools, yielding around 10-15% at the time for stablecoin pools.

Clearly this was an opportunistic proposal based on assumptions that did not hold beyond the favourable market conditions at the time:

• The market price of DATA has since then crashed along with the rest of the crypto market
• The stablecoin DeFi pools now yield 0-3% instead of 10-15%

The market, as it is now, is very different. As a result, none of the 100M DATA has been minted yet, and it’s not particularly attractive to lock in the current prices or give any discounts to the already depressed market price.

The project expenses are currently around $3.0-3.5M per year. Post-Tatum, as all the main tech building blocks will have been built, spending on development and maintenance can be decreased, while the spending allocated to growth efforts and ecosystem development can be increased. In all cases, the spending must be adjusted to the available project funding.

Proposal

I propose that the 100M DATA (already approved to be minted) will be used to seed a project treasury which can (only) be spent over time on project expenses from late 2023 onwards (once the initial funding runs out), instead of raising funding in advance and locking in the currently prevailing low rates.

In practice:

• The tokens can be spent over time to pay project contributors or entities that host those contributors
• The tokens can be sold over time to maintain a stablecoin/fiat buffer in advance of upcoming stablecoin/fiat expenses

As a result, the tokens will gradually float to open and efficient markets little by little through project contributors that have earned them by working on the project, not all-at-once via VCs seeking to speculate on the token. This way, the tokens are sold gradually over time, with negligible market impact.

As the downside, it’s not possible to predict how long that supply of 100M DATA will last, as it will depend on market conditions in late 2023 and beyond. In our view, it doesn’t make sense to try and draft a long-term plan instead right now. The current market conditions offer limited visibility, price levels are unattractive for fundraising, and the project still has a major milestone to reach.

I propose this course of action as a bridge/medium-term funding plan to get the project safely into 2024, and then see where the project and the whole crypto space are at the time. I expect that a further decision should be made in 2024. By that time, the current turmoil will hopefully have passed and the DATA community will be able to make longer-term decisions in more stable market conditions. In addition, post-Tatum milestone, there is an opportunity to cover maintenance and growth costs from protocol fees.

The case against the proposal

• This proposal doesn’t solve the long-term funding needs of the project
• By spending tokens on expenses instead of selling them to VCs, the project won’t get additional validation and support of such VCs
• If the crypto market further depreciates by late 2023, the supply won’t last very long

The case for the proposal

• This gets the project well into 2024 and potentially way beyond if the markets recover
• With the current market turmoil, a medium-term decision feels like a better strategy than trying to predict the future or lock in the current rates
• Releasing tokens to the market gradually and at a rate equalling project expenses (or slower, as some recipients will keep them) avoids negative impact on the markets
• This proposal doesn’t introduce new inflation; a 100M DATA supply increase has already been approved earlier by token holders in SIP-6, and this proposal just recycles that