For the TLDR, please find a Visual Roadmap at the end of the post!
Updates
08/08
In response to community feedback, we have made several updates to the CIP:
- Floating Budget – We originally proposed a $500k for Art and $250k for Land. We will be switching to a floating budget for art and land, aiming to spend equal amounts on each.
- Big Parcel Funding – We are adding a new Contingency: funding the Big Parcel!. To enter into serious negotiations, the Big Parcel team will require proof-of-funds. If this becomes the case, we will be working alongside Big Parcel to explore a merger of the Projects.
- Scott joins the Team – @scottfits has agreed to join the team as the Independent Overseer and to focus on PR and Marketing!
- Commitment to International Citizens – Our International Community is vital to CityDAO, and we want highlight that commitment – along with the artists detailed below, we will be considering the Turkish artist Refik Anadol, Japanese artist Takashi Murakami, and Chinese artist Ai Weiwei!
- Commissioned Artwork – We will be giving priority to collaborating with artists on works commissioned specifically for CityDAO!
Introduction
We propose realizing CityDAO’s original vision: the development of an actual IRL city with community governance in the spirit of Web3. At first glance this may seem like an impossibly expensive and complex undertaking – it can, in fact, be accomplished with relative ease by a small team and $1M USD. Rather than developing all aspects of the modern city, we will focus on a singular foundation: the development of positive-sum feedback loops that catalyze organic economic growth.
These feedback loops are modeled on the first principles of city formation and draw from historical precedents such as the development of Marfa, Texas in the second half of the 20th century. We are inspired by the ideas of Glen Weyl and will use Partial Common Ownership, Quadratic Voting, and Gitcoin’s Quadratic Funding model. These systems provide the incentives necessary to create an equilibrium between cooperation and competition that will maximize the productive, fair and efficient allocation of capital and resources. Ultimately, we are creating the foundation of CityDAO’s future: an economic engine, situated in the real world, for Teams and Citizens to experiment, collaborate, compete, develop their ideas, and build.
This proposal is divided into four parts: the logic or why underpinning the feedback loops, what exactly these feedback loops entail, how we will go about building them, and frequent concerns that have been brought up.
Why: First Principles
In thinking about city development, we asked ourselves: what do all cities share in common? How do cities form? Do these formations share common traits? It was clear when examining these questions that three timeless and universal principles underpin all human settlements. Below we illustrate these principles alongside a historical example of the principle within the context of ski towns development in Colorado.
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Humans build settlements in response to stationary, intrinsic properties of the land on which they are built. These properties are initially natural and subsequently artificial as settlement compounds (“network effects”). The Rocky Mountains, with their snowy faces and gold underneath, have existed as stationary, natural properties of Colorado for the last 70 million years[1]. It was not until Colorado’s settlement by gold miners in the mid-1800s was skiing introduced. Originally a means of transportation and co-opted from Scandinavians, it enabled miners to more easily pass through high snow. As mining waned in the late 1800s and Colorado was granted statehood, skiing transitioned to a form of recreation, providing socialization, recreation, and entertainment to the growing population[2].
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Humans create stationary value for themselves by mixing their time, attention and labor with these natural properties. The act of value creation fundamentally changes a given property such that it affects how other humans derive value from the same property, a feedback loop. Demand led to specific innovations that made skiing easier and cheaper, such as Monarch Mountain pioneering the use of a 500-foot tow rope attached to an old gear box and powered by a car engine in 1939 to pull skiers to the top of the mountain. Subsequent innovations improved safety while lowering the time, equipment cost, and skill required to ski, increasing the sport’s accessibility to more people including newcomers for whom the barriers to entry would have previously been prohibitively high. Collectively these innovations increased demand for the sport which resulted in increased rates of tourism and settlement within Colorado, leading to further innovation, a continuous feedback loop.
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This feedback loop can create positive-sum economic growth. As more people visited Colorado’s ski slopes, supporting small businesses (e.g. the slope operator, but also equipment stores, local restaurants and hotels) earned more money, increasing their communities’ tax revenue. These tax revenues were subsequently re-invested in the communities, in the forms of improved infrastructure (e.g. roads), education (e.g. more teachers to support the growing workforce’s families), and social services, lowering the cost of doing business for existing businesses (e.g. improving their margins via improved economies of scale and lowered labor costs) and enabling new businesses to form (e.g. real estate development for the increased number of workers required to operate the ski slopes). These investments improved the investment-worthiness of second home ownership for HNWI, increasing the tax base for a given community. This growth cycle is self-enforcing and positive-sum, growing economic activity until the point at which the marginal cost of growth becomes greater than the marginal value created for the community.
What: Our Approach
- We will first acquire a parcel of land that has low market value. Ideal candidates:
- +100 acre lots in the United States with a mild climate
- contain existent structure(s)
- 2hr proximity to an international airport
- access to infrastructure for the provision of electricity, sewage, and water
- cheap adjacent parcels[3]
We will also consider municipal factors such as average land values nearby, supply of low-wage labor, and distance to airports and other high-speed transportation.
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We will increase the land’s value by developing upon it an open-air museum and supporting tourism infrastructure. We will purchase and install world-class sculptures that have demonstrated market and cultural value, such as those by Adam Parker Smith, James Turrell, and Richard Serra. We will follow the successful examples set out by Prada Marfa, Storm King, and Saudi Arabia’s Valley of the Arts in which remote, barren land – far from urban, cultural centers – have been developed into tourist destinations with 50-100k annual visitors. We will partner with Jupe to provide MVP (Minimum Viable Product, to be replaced and upgraded in the future) habitation and supporting infrastructure (e.g. bathrooms, a cafe) that enable tourists to spend more time on the land. Our intention is to attract high net-worth individuals (the primarily collectors and appreciators of high end art) to the land for a beautiful and spiritual experience filled with art, mediation, and nature, removed from the stresses of the world and filled with inspiration.
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All unallocated land (not used by the museum & supporting infrastructure) will be made available for lease to CityDAO’s Teams and Citizens via Partial Common Ownership. The benefits to CityDAO projects are fourfold:
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Projects will have access to a pre-existing customer supply of High Net-Worth tourists who are already visiting the land to experience world-class art. This makes it much easier for projects such as Embassies, Retreats, and Festivals to unlock immediate revenue and rapidly achieve financial sustainability.
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Projects do not need to acquire their own land and set up basic infrastructure (e.g. access to water), lowering their setup costs and unlocking entirely new ideas and business models that would otherwise be cost prohibitive.
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Partial Common Ownership creates a forcing function for Projects to think sustainably and earn revenue in order to pay PCO’s Harberger Tax. Projects can take over each other’s leases which maximizes the Parcel’s allocative efficiency and Harberger Tax revenue while preventing rent-seeking by inefficient Projects, the benefits of which are expanded upon below.
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Although the land will be based within the United States (in order to ensure that CityDAO legally and unambiguously owns the land and artwork), Teams and Citizens can develop their projects on the land, irrespective of their country of citizenship, experience, size (individual or teams), fostering a truly diverse meritocracy.
- Revenue from the Jupes and Partial Common Ownership’s Harberger Tax will enter into an Economic Growth Fund. The fund will be used to incentivize outside investment and the development of real estate, small businesses, and public goods infrastructure on the parcel by teams from outside of CityDAO. These teams will also be able to lease land via Partial Common Ownership, contributing directly to the Economic Growth Fund. Traditionally, the cost to develop remote land (i.e. the type of land we’re going to purchase, because its the cheapest) is expensive because of its remoteness from existing infrastructure and does not benefit from economies of scale to amortize this cost. To overcome this issue, known generally as the “Last Mile Problem”, we will use the Quadratic Funding strategy pioneered by Gitcoin and provide matching grants on each dollar of capital invested in the land by non-CityDAO projects. These matching funds will subsidize, incentivize and prioritize the infrastructure necessary for healthy growth, for example developing waste treatment solutions prior to additional habitation units. “Healthy growth” is a function of two factors: a) maximizing the allocative efficiency of the investment capital, ensuring projects that value proposed infrastructure the most (because they benefit the most) generate the greatest amount of Harberger Tax revenue for the Economic Growth Fund, while b) minimizing the externalities of any given infrastructure or concentration of infrastructure by dominant project. We will measure and balance these conflicting factors using collective intelligence: lease-holding Projects will vote on the deployment of funds using Quadratic Voting. Funds not used for matching will be used to purchase adjacent parcels of land ensuring that the City can scale in a sustainable fashion.
Positive-Sum Feedback Loops
By developing on this Parcel, CityDAO Projects will be provided a platform for growth (access to existent tourism), a forcing function to be maximally efficient (a competitive market of ideas via Partial Common Ownership), and infrastructure to scale (via Economic Growth Fund investments, Quadratic Voting, and Quadratic Funding). To elaborate, Partial Common Ownership will force teams to compete against each other to maximize ROI of their respective land lest they a) lose the land to another team willing to pay more, or b) pay their lease fees without deriving sufficient value. This competition will improve the efficiency of DAO-wide operations while producing a positive-sum growth feedback loop. Teams that do well will pay higher lease fees which translate into increased investment by CD outsiders, lowering last-mile costs for the provision of and increasing demand for the goods and services of CD Projects (via increased supply of tourists due to lowered costs). These economies of scale unlock a flywheel of growth for both CityDAO and the parcel itself and will usher in the true Web3 City.
How
Team
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Will Holley – Will is the CTO and Founder of 721 Labs and Duchamps.io, and co-founder of the Partial Common Ownership RadicalxChange chapter. He previously worked with Sotheby’s and Christie’s to build Monte Carlo simulations of the global art market. He is a collector of fine art, manages a fine art investment fund, and is a partner of a fine art gallery located in Chelsea, NYC.
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Josh Rosenberg – Corporate attorney turned Web3 evangelist and DAO maxi, Josh found god in the highlands of Wyoming after years as an angry inner-city lawyer in Chicago. Josh has worked on over 100 significant transitions totaling over $500m in volume and brings a great deal of valuable legal and real estate experience to the table.
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Independent Overseer – One Citizen will act as an independent overseer in order to make sure DAO funds are not misused. If you are interested in the role, please comment as such. This will be voted on in Snapshot as part of this CIP.
Independent Overseer
If you are interested in the Independent Overseer role, please comment and we will add your candidacy, along with any provided qualifications, to this list.
- Lyons [proposed by Will]
- Tradesman
Budget
- $500k for Art
- Purchasing 1-3 fine artworks that have proven cultural and market value is of the utmost importance. Art without this significance is a liability rather than an asset.
- By choosing art for the museum that has demonstrated cultural prestige, the museum’s prestige grows by association.
- $250k for Land.
- Acquisition of a new parcel of land
- Infrastructure to support Jupes
- $150k for Misc. Expenses (e.g. real estate agent fees, licenses, and taxes)
- $100k for Team Comp.
- The funding will be allocated 47.5% to Josh, 47.5% to Will, and 5% to Independent Overseer in order to compensate each team member for their time. Josh and Will each will be working full time – 35 hrs per week for approximately 3 months on the project (approximately 455 hours at ~$100/hr).
- Total: $1M
Operational Steps
If the CIP passes, we will:
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Establish a mutli-sig with Josh R., and Will H., and the Independent Overseer.
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Transfer the $1M from CityDAO’s multi-sig to the CIP100 mutli-sig
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Josh R. will create a special purpose vehicle that will own the land and artwork and be wholly owned by CityDAO. Once this has been formed, Josh will pursue certification for the SPV as a B Corp or a Non-Profit in order to demonstrate to the world our commitment to experimentation around public goods funding.
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Will H. will source, negotiate and acquire the artwork using his connections within the art world and his experience as a fine art collector & investor.
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Josh R. will source, negotiate and acquire the land and manage the installation of the artwork. Josh will also lead the partnership with Jupe and the development of supporting tourist infrastructure.
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We will collectively draft and publish a subsequent CIP outlining the process for teams to develop their projects on the land. This CIP will expand the CIP100 mutli-sig to include more members of the community and ensure more voices are considered.
Contingencies
- Acquire land but cannot acquire art
- Land is transferred to another team
- Acquire art but cannot acquire land
- Team up with another CIP
- Liquidate the art
- Hold the art as an investment
- Donate the art to a museum as a tax write-off
- General Project Dissolution (e.g. team fallout)
- The artwork and land are already owned by CityDAO and revert to its management
- The funds in the CIP-100 multi-sig revert back to the main CityDAO mutli-sig.
Long-Term Investment Requirements and Financial Sustainability
- Requires no ongoing funding after the $1M from CityDAO
- Self-sustaining via the Economic Growth Fund
- Taxes, licenses, etc. are paid for out of the Economic Growth Fund
Frequent Concerns
$1M is a lot of money. $500k for art (2x the land price) and $100k for comp seems excessive?
Expensive art, cheap land, and healthy comp is a feature, not a bug. In order to ensure that our artwork has both cultural and market value, we need to purchase something with proven demand – it cannot be cheap. Moreover, we are purchasing an appreciating asset, and the more valuable the artwork is today, the more valuable it will be tomorrow. We are exclusively considering artists who have already surpassed the $1m mark within their secondary market, a sign of confidence that our work will appreciate and we can sell it for equal or greater than our purchase price if worse comes to worse. Regarding team compensation, you are paying the opportunity cost of our full attention and we ultimately believe that the Team ought to be paid for the care, diligence, commitment, intelligence, and work ethic that you expect of us. As such, we believe that $100k is actually a discount relative to the value we will be creating for the community and this discount is explicitly reflected in the $100k being much less than our hourly rates for the same number of hours.
Can’t we do this without buying art?
We need to purchase something that has intrinsic value - a “talisman” - that will attract people to the land and generate economic activity, taking the land from 0 to 1 (in the words of Peter Thiel) We aim to do so in as risk free a manner as possible, and fine art has a proven track record that Will is intimately familiar with. We will acquire work from artists such as Adam Parker Smith, James Turrell, and Richard Serra.
What about using the Big Parcel land?
We believe that this project initially requires focused, centralized coordination between the core team and only after it has been properly set up should be decentralized. This runs counter to the thinking around Big Parcel and we aim to respect and not complicate their goals and process.
Quadratic Voting is confusing. Can’t we use regular voting?
Quadratic Voting and Quadratic Funding will be the most efficient way to allocate investment capital in a decentralized manner, as shown theoretically by Glenn Weyl and Vitalik and demonstrated practically by Gitcoin. We are excited to extend and promote these mechanisms into the real world. We believe that we will set an example for others to follow.
Why not focus on crypto art?
The crypto art markets are immature compared to the fine art market, which transacts $64B annually across the globe and counts amongst its ranks some of the most influential and richest people in the world. Will is intimately familiar with the workings of the fine art market, which are timeless and universal in comparison to the crypto art markets. As such, in order to de-risk the project as much as possible, we intend to focus on HNW art appreciators, collectors, and investors as the initial tourists.
What impact will this have on CityDAO?
We believe that CityDAO’s foundation and incentives can be improved using PCO, QV and QF within a greenfield plot of land. We plan on setting up these mechanisms to function effectively prior to decentralizing our multi-sig and inviting CityDAO projects to develop on the land. All the while, the land and art will be owned, legally, by CityDAO and will provide tremendous value to the community. We believe that this will propel CityDAO into the future.