SIP-10: Reduce DATA holders’ allocation of Data Union spin-off tokens from 40% to 15%

Background

Another proposal, SIP-3 from May 2021, was approved to spin off the Data Union Framework product into a separate project called the Data Union DAO, aiming to launch its own token, UNION. As the Data Union Framework was initially built with Streamr funding, SIP-3 directed the spin-off to allocate 40% of UNION tokens to DATA token holders.

At the time, the crypto market was doing well and funding was more easily available. As of now, raising funding for new projects is extremely challenging and anything that seems “off” in the eyes of early backers may block progress.

We’ve been observing the Data Union DAO being pitched to crypto VCs. While they typically like the idea, they often have questions about the 40% allocation to DATA holders. The allocation seems to be too large, leaving too few tokens into the project treasury to incentivize growth.

Looking back at what was decided, the VC’s are probably right. There are not many examples of spin-offs or demergers in the crypto space, but there have been a few similar cases to reflect on in the Gnosis ecosystem:

• CowSwap is a spin-off from Gnosis. 10% of COW tokens were allocated to Gnosis.
• Safe is a spin-off from Gnosis. 15% of SAFE tokens were allocated to Gnosis.

While there aren’t enough data points to compile a statistic here, 10-15% of the token allocation seems to be an acceptable amount to ‘give back’ to the origin community.

Proposal

I propose that the DATA community settles for 15% of the tokens to be launched by the Data Union spin-off. The goal is to make the spin-off project more attractive to fund and to eliminate any concerns related to the allocation to DATA holders.

It should be noted, should the proposal be approved, that the Data Union spin-off would then have more tokens in its treasury as a result. The additional tokens could then potentially be allocated to early builders and early users. By participating in the Data Union ecosystem, Streamr community members can increase their chances of getting allocation through other means in addition to the 15% share.

The case against the proposal

• DATA holders will be allocated less tokens
• In the current market conditions, the spin-off may still struggle to raise funding despite this change

The case for the proposal

• The 40% allocation may be a blocker in fundraising
• It’s better to get 15% of something valuable than 40% of zero