Warrants for long term growth of SPV
We’ve made our best attempts to align incentives of early contributors to the growth of the Kepler galaxy. We really do hope the pre-sale was a testimony to our vision of making this a truly community-driven DAO where the maximum say comes from the most pivotal stakeholders, which up until this point have been early backers and liquidity providers of the bootstrapping treasury capital.
If you straightaway want to jump into tokenomics of the warrants (cKEEPERs), refer to the appendix.
What’s the deal?
It’s been our conscious effort until now to not raise external capital but put in our sweat and that of community evangelists without any compensation.
Any successful venture needs two things as table-stakes to get off the ground — initial capital and talent, both of which need incentive and upside to keep wired in for the long run. This is our stardust.
But how do we ignite this initially accumulated stardust to create more value for the galaxy? By incentivizing the right stakeholders through something we call cKEEPERs, which are nothing fancy, just a non-expiratory security (a warrant) that can be purchased from the DAO at a pre-determined exercise price (kind of like a premium paid for purchasing the warrant). The payoff, of course, would be dependent upon the market price of the KEEPER at the time of exercising the warrant.
How would cKEEPERs be used to get an upside?
Simply put, everybody holding a cKEEPER has the right without obligation to burn their cKEEPER at the exercise price for an equivalent number of KEEPERs.
The payoff would be positive when the market price of KEEPER > exercise price of cKEEPER. This ensures that everyone holding the warrants would be incentivized to keep up the market sentiment of the project.
There is a universal objective that we need to meet as a community — which is the sustainable growth of the treasury. What will indicate that? Not just growth in the supply of tokens but also the price of those tokens. This is made possible by a vesting schedule that depends upon the total supply of tokens and the non-expiratory nature of the warrant designed to maximize (or at least control) the size of the payoff.
But this misses one crucial thing. All of us are familiar with diminishing marginal utility of capital which I would go as far as to say is a universal axiom in the world of how we interact with money. Once the returns from a ballooning treasury and supply of KEEPERs is sufficiently high, the expected value of payoffs decrease. So how did we solve this?
Accelerated vesting schedule with a supply-dependent cliff
That might sound like a lot of useless words for something very simple in design. But stay with me.
The more the supply grows beyond a cliff, the more percentage incentive you accumulate on the way. So, your payoffs actually grow exponentially. Compared to linear vesting, you have more upside as we go along — win win for all of us.
But this only happens for the team, investors, advisers and project partners. There are other stakeholders from within the community who will be critical for the success of this venture who we would need to compensate. For these stakeholders, there is, the supply cap would be determined by the community through voting. But that is in future — this is something the community will have the power to decide because, like we said earlier, you the member of the community are the capital holders, gatekeepers and consumers.
We welcome ideas from every one of you to make this incentivization scheme more aligned, more inclusive and more distributive in future as we grow.
Without getting into the nuances of calculations here, at the touch down, which happens when ~0.53bn KEEPERs are in supply, a max of 14.18% would stand fully vested for the team, investors and advisers. At the cliff, which is at 243k KEEPERs, a max of 4.16% would stand to get vested by this set of stakeholders.
A total of 500mn KEEPERs would be minted distributed between the team, investors, advisers, the community and the fund management team.
Here is the breakdown:
- Team: ~107mn cKEEPERs, 3.39% to 6.73% of supply
- Investors: ~64mn cKEEPERs, 0.69% to 4.03% of the supply
- Advisors: ~54mn cKEEPERs, ~0.08% to 3.42% of the supply
Project partners would have a reserved pool of~30mn cKEEPERs with no supply cap (to be decided by the community). It is critical that we incentivize other protocols that we can synergistically grow with.
These are roughly 256mn cKEEPERs reserved for the stakeholders outside the community
The cliff here is 243k total KEEPER supply. This means that while there are <243k KEEPER tokens the supply, no cKEEPERs can be vested. We’ve done this to ensure nobody has any upside till the treasury is in a stable state.
Touchdown refers to the total KEEPER supply beyond which vesting will not accelerate.
The community is allocated a total of ~224mn cKEEPERs which are split across functions like marketing, operations, strategy (governance/policy), content/PR, technology and data science, legal etc. but do not have a supply-based vesting schedule. These will be given to members of the community that step in for critical resource filling with their activities in the above-stated functions (list not exhaustive).
The third category of members that are eligible for cKEEPERs would be members of the fund management team responsible for the operations of Kepler’s SPV.
The fund management team is at the core of making this kind of a project that requires sector and function expertise a success for everybody involved. While there are many community members with prolific experience, we do understand that we might have to induct experts who will execute functions on behalf of the community to make the most upside from the investments that are funded by the treasury capital.
An additional 20mn warrants would be reserved for this team consisting of the following pods (list not exhaustive):
- Sourcing and scouting
- Research, analysis and due diligence
- Project sponsorship
This takes the total number of warrants to ~500mn. How the distribution of the allocations within each team and cap for each member will work is something we’re currently working on, but I hope this provides a clean contour of what each one of you stands to gain by being an active member of this project.
The road ahead
A lot of what was discussed here will executed with time and with the power of the growing community. There are no promises that these warrants would be distributed, there is only assurance and a conjoint desire that we have as much an opportunity as possible to align more stakeholders with the help of these tools.
The timelines, roles, responsibilities and a lot more will rest in your hands as we go along. So, for now, all we can say is thank you for being a part of our vibrant galaxy and we wish for you to join us in making the truly decentralized model of community investing.
Lightyears of love