Recently came across this governance proposal within the Merit Circle community, and found every aspect of it very interesting. Merit Circle: A New Era - Governance - Merit Circle I recommend you read the proposal, but if you skip it, i’ll attempt to cover it below.
Quick primer on both YGG and MC. Both of these are known as Gaming Guilds. Players join the guild, the guild loans these users the NFTs they need to play the game, and as a result, they typically share 30% of all crypto gained, back to the guild who supplied them with the NFTs. This creates a revenue stream for the players who get 70% and for the guild who gets 30%. The guilds also invest in other early stage games or other guilds as a diversification method.
YGG invested in MC at $0.03 seed price 1 year ago and in a few days YGG will be able to claim those tokens and the expectation is that YGG is going to sell those tokens on the open market when they do.
YGG is a direct competitor to MC.
YGG was expected to provide value for MC, hence, the ability to invest at seed
When compared to the other VC/groups who invested in the seed round of MC, YGG has next to nothing to show for it.
Governance wants to revoke and refund YGG for bringing zero value to MC
Here are the stumbling blocks I see at the moment
The MC DAO wants to refund YGG’s investment, but due to the SAFT (signed agreement) between YGG+MC, the DAO has zero power over this decision
The majority of the thought leaders within MC are backing this proposal (allegedly many of them are also private and public sale investors), if we were to compare to HiFi, it would be those with the Blue, Yellow and Orange discord names as the ones backing this refund proposal.
If MC does refund YGG’s investment, this would make other VCs, games, guilds and investors weary of doing business with MC in the future, because the community may have expected you to bring your A game and you brought your B game.
If MC doesnt refund YGG’s investment, this will breed discontentment within the community for being taken advantage of and as I see it, a rush to dump MC tokens because we are in a bear market and our biggest competitor YGG is about to get a huge amount of our tokens. It makes great financial sense if YGG could dump their investment and claim a 32x on their balance sheets. I would expect the moment a MC whale or two exits their position, ahead of YGG, that the price will just crater as everybody else follows with the expectation of intentionally harming YGG where it hurts, their investment.
So the thought experiment starts now. if HiFi was in MC’s position, how could we (the HiFi community) come up with a solution that’s fair to all and resolves this drama?
A deal is a deal; when they provided the seed money that was a contribution in itself. A chain (or guild) is only as strong as it’s weakest link and a commitment is a commitment, so gotta maintain the integrity of agreements. If the other side of the commitment (MC’s) was not being made on the other side, would have to look at the contract & whether there were metrics in place, to measure the expectation of a contribution by them. So, I suppose as it relates to Hifi, defining metrics and milestone dates or time frames would be valuable to avoid getting into similar situations. At the same time, we’ve seen obstacles with MakerDAO, relative to metrics? right!? So maybe the MakerDAO metrics actually did work as they were supposed to. Maybe the contract here with YGG actually did work(?); without metrics it’s difficult to gauge. Could just be the payer feeling like they expected more; it could be just characteristics of a bear market, hindsight being 20/20 — feeling rich when they made the deal, feeling poor now? I don’t know the specifics outside of what I’ve read here, so I’m just saying I don’t have a horse in the race one way or the other. I actually know absolutely nothing about gaming guilds, though I know people and emotions and ultimately a deals a deal; like they say we’re only as good as our word. and even if you don’t feel like the other side held up their commitment, and I know it’s a gray area, but it doesn’t give The person in first position an out to not hold themselves accountable to a standard, unless they truly feel that they are in the position to renegotiate and if they are, then so be it.
As far as I know, these types of SAFTs are always ambiguous when it comes to terms like “provide value” as that could be fulfilled via a tweet or two. There was no specific plan laid out for YGG to fulfill as part of the agreement that we know of.
There are some questions from the top of my mind.
What would you do to respect the agreement? What would be the improvements that you suggest to move forward?
How would you avoid that scenario?
How do you remove the ambiguity of the terms?
What would you do to respect the agreement?
What would be the improvements that you suggest to move forward? Any contract can be amended, and as such, an amendment is needed if decided so by the DAO.
How would you avoid that scenario? You cant. Many of the biggest supporters aka Whales from Merit Circle are in favor of this proposal. Its something that needs to be addressed, pretending it didnt happen or ignoring it, will cause resentment to fester, and nobody wants that.
How do you remove the ambiguity of the terms? See what the community comes up with and modify them as best as possible to make them fit within the constraints of the legal contract world.
But more importantly, before engaging in any of the above, would need to reach out to the other party and see what their thoughts on the matter are and if they have anything they can show as proof to the community as them being a positive actor. Maybe they will agree to a longer lockup period? Maybe they already imposed on themselves an increased vesting duration / lockup period.
Absolutely. Comparatively speaking, YGG has failed to live up to the expectation. However, from what I hear, because YGG invested in them, it added ‘legitimacy’ to MC, which brought in more investors… so it may not have had the post-token impact they wanted, but it certainly did on the pre-token side.