CIP 129 - Grant to Build a Harberger Tax NFT Marketplace

Proposal: Provide a Grant for a Startup to create a Harberger Tax NFT/Token Marketplace

Amount: $250,000 USDC, spread out over 3 progress milestones (see below)

To Who: @MemeBrains & @TheBossDragon

Intended outcome:

  1. Resolve 3 of the primary pain points affecting the DAO and Gated Access Community ecosystem as a whole
  2. Replenish the CityDAO treasury
  3. Save developer costs from other CityDAO projects which need a Harberger Tax model as well

Prologue:

Hello CityDAO!

This is my first proposal ever since proposing the CityDAO Podcast almost a year ago. Working with, supporting and advocating for CityDAO has been one of the most fulfilling experiences I’ve received in the Crypto world. This proposal takes things to a whole new level.

In 2018 I sold my last company in part because I felt the unshakable calling to plunge down the Bitcoin rabbit hole. Opportunities like this come once in a lifetime so I decided to go all-in and it’s been one of the most fulfilling decisions of my entire life. This journey led me to discover CityDAO and the principles of the Network State where I felt an equally strong calling to become involved. I believe that what Bitcoin is doing for global economics, the Network State is doing for global politics.

But everywhere I look, DAOs, NFT communities and nearly every single Gated Access Community I’ve come across run into the same 3 problems: Squatters, Flippers & Depleting Treasury.

Squatters hold those community keys (NFTs, Tokens etc) but do not participate. This artificially inflates the price of those community keys/NFTs in the open market -such as on Opensea- while simultaneously lowering productivity for everyone involved. Squatters are usually well intended however the inactivity hurts the community.

Flippers hold those community keys for future resale purposes and also do not participate, further inflating the community key prices and lowering community productivity. Flippers are also usually well intended however the hoarding and inflated floor pricing it creats hurts the community too.

Depleting Treasury is like a ticking time bomb. Every startups nightmare…limited Runway threatens the end of any capital intensive initiative.

Through CityDAO I’ve discovered the principles of Harberger Taxes. At least 2 CityDAO projects that I know of have mentioned a desire to implement Harberger Taxes in their projects, yet no fully functional solution currently exists in the market to click the proverbial ‘on switch’ to try it out. Tweets and articles by notable people and thought leaders also demonstrate interest in bringing this idea to market.

Within the principles of Harberger Taxes, I along with many others I’ve spoken with see the seeds to solving all 3 of these major industry pain points with one single solution.

This proposal is to find out in an indisputable way if a Harberger Tax Marketplace for Gated Access Community Keys and Digital Land Ownership will indeed help change the world of online communities for the better, as we think it will.

Project Team:

Eric Gilbert-Williams - CEO

Eric is a lifelong entrepreneur across multiple industries. He bootstrapped his last company to a team size of 50+ people and several million in ARR then sold it in 2018. He has also been involved in event production, angel investing and startup consulting. He is the host of the CityDAO podcast, an active DAO enthusiast + contributor and is also the host of a Philanthropically motivated Mental Health Podcast. Eric brings experience in organizational leadership, stakeholder relationship building, B2B + B2C sales, team trainings and public speaking.

Bhargav Patel - CTO

Bhargav is a serial entrepreneur in the technology space. In 2011, he founded Performance IQ, a data analytics and gamification software company for boutique fitness clubs. He grew the company to 3000+ locations & 20M+ users, prior to getting acquired by Battery Ventures in 2018. Since then, he has been involved with multiple ventures in retail, manufacturing, software & web3 space. He is an avid crypto investor, an early CityDAO citizen, and brings a ton of web3 development experience in smart contracts, NFTs & Defi protocols.

Budget: $250,000 USDC over 3 milestones (see below)

Summary: Launch a Harberger Tax Marketplace & Protocol for CityDAO and other gated access communities to create, distribute, manage, buy/sell and replenish their treasuries from.

Pitch Deck PDF with Project Overview here: Harberger Tax NFT Protocol & Marketplace.pdf - Google Drive

Pitch Deck Video Walkthrough here: CIP-129 Grant to Build a Harberger Tax NFT Marketplace - YouTube

Use of Funds:

  1. Launch on mainnet & gain sufficient market traction to raise a $2M+ Seed round from Angels/VCs in 2023/24
  2. Core team wages & contractor payments
  3. Software & server costs

Benefits to CityDAO:

  1. Royalties for Treasury Replenishment:
    a) As a separate agreement from the Grant, the venture proposed above would engage with CityDAO in an Incubation and Marketing agreement. The agreement would state that should the venture succeed in generating revenues then the CityDAO Treasury would be provided with a 1% royalty from those top line revenues to a maximum of $1,000,000 USD or equivalent.
    b) In exchange for giving this royalty to CityDAO, the venture will be formally supported by CityDAO for testing, marketing, feedback, discussions early distribution and be the ventures first live customer, establishing a true win-win environment for both parties.

  2. Saved Costs:
    Other CityDAO projects which require a functioning Harberger Tax NFT protocol and marketplace would be able to leverage from this technology and no longer be required to develop it from scratch. This would save development costs on other CityDAO projects and initiatives.

  3. Momentum for Treasury Replenishment initiatives:
    This would be the first active project within the CityDAO ecosystem to have an agreement in place geared towards treasury replenishment. This would hopefully inspire others to create projects and agreements which would also replenish the CityDAO treasury.

Timeline and Deliverables:

To demonstrate our commitment and determination for this project, we have broken the project down into multiple milestones. Upon approval of this proposal, $250,000 USDC will be transferred to escrow. Upon completion of each milestone, funds will be unlocked from escrow to the project.

Milestone 1

Budget: $1

Deliverables:

  • Project Discovery & Networking
  • Branding / Creatives
  • Flow Charts
  • UI/UX Designs

Milestone 2

Budget: $49,999

Deliverables:

  • MVP live on ETH/Polygon Testnet
  • Alpha Testing & Feedback Gathering
  • Generate interest from other communities

Milestone 3

Budget: $200,000

Deliverables:

  • Audited smart contracts by a third party
  • Live and operational product launch on ETH/Polygon Mainnet
  • Commencement of a 1% Royalty on top line marketplace revenue back to CityDAO

Challenges & Questions:

  1. Will it work?
    It’s clear that between the Radical Markets book, the RadicalxChange foundation, tweets by Vitalik, Balaji and within other discussion forms, there is a sincere curiosity and belief by influential parties that a Harberger Tax model could revolutionize property ownership, memberships, NFTs and gated access communities everywhere. We can debate the theory until the cows come home…but there’s only one way to actually find out. This project aims to find out.

  2. That’s not enough money to scale
    Correct, it’s not. But with this pre-seed funding and a live MVP, we will be able to confidently approach a Seed round in 2023 aiming for the $2mil - $5mil range with the appropriate Angel Investors & VCs. The Seed round will provide the hires needed to bring this product to market and gain the initial traction required to then approach a Series A round in the $20mil - $30mil range for market scalability.

  3. That’s too much money!
    Please read #2 above.

  4. I think Harberger Taxes will fail.
    Please read #1 above.

  5. Why not do this inside CityDAO as a CityDAO fully owned project?
    a) CityDAO does not have enough money to do this as a broad market solution in a long-term scalable way. It would simply be too risky for the treasury and bootstrapping this would require too much commitment from DAO members, distract from core CityDAO initiatives and severely limit this initiative’s chances of success.
    b) This is a startup venture concept which is intended to live and grow on its own. Although connected to the same root system as CityDAO overall and connected with multipl CityDAO projects, this is an offspring of CityDAO, not part of the main/original tree.
    c) Lastly, legal liability is mitigated when this project is separated from the CityDAO LLC and visa versa.

  6. How does this replenish the CityDAO Treasury?
    Please read ‘Benefits to CityDAO’ above.

  7. Let’s debate, discuss and theorize about this for a year++ before deciding
    Not an option for us. We have a window of opportunity here that will not remain open long. Either we do this or we don’t.

  8. The Mob.
    Look, our intentions here are to do something good, not only CityDAO, but for the market as a whole, and simultaneously help our entrepreneurial career. We really don’t want this to turn into something unpleasant for anyone involved. We are hoping CityDAO can rally around this project as a very positive thing.

  9. I have more questions plz
    We will be hosting a daily AMA on this Proposal at 2pm PST on Thursday and Friday November 9th and 10th and daily from Monday November 14th until Friday November 18th. Come join and ask all your questions!

  10. Is this Legal?
    Everything within this proposal will be first passed through CityDAO legal council and any required changes will be made accordingly before finalized.

Legal Notice & Disclaimer: The entirety of the above proposal and any and all of its details, including but not limited to pitch deck and related details must be reviewed by and modified by CityDAO legal council and/or other legal council related to the venture or any of its stakeholders.

24 Likes

I think this is a well thought out proposal. My issue with harbinger taxes is, frankly, political. I don’t think that people will tolerate it on their primary residences or even their businesses given how much we romantacize the ‘family farm,’ and how much we support it with subsidies. That being said, I don’t think those more philosophical issues will be detrimental to a voluntary and limited system such as this and it has my full throated support.

3 Likes

There’s definitely a number of details in the theoretical world that need to be explored, that’s what this proposal aims to lead in a concrete indisputable way. Uber, Airbnb, Coinbase and any other groundbreaking, industry changing concept has to go through exact same processes every single time. If they all sat back and said it’s too hard or as too many challenges or what will the market say then nothing would ever get built.

That’s why in this proposal/pitch deck I talk a lot about focussing on NFT communities and DAOs as the primary target. It’s an easier testing ground that permits quicker traction building and early market adaption.

The fact that CityDAO has current active projects which would also need the details of this proposal to function is simply a bonus benefit which saves the community money on development costs in the long run I see it as a very clear win-win for everyone involved in a mitigated way with a strong risk to reward ratio

More to your point though, there’s also a pile of cool customizations that are intended to be done to mitigate legitimate legal concerns and issues, like grace periods, exemptions, protection triggers etc. So whatever legal challenges pop up can be accommodated for in the platform variables and customizations.

When a community launches on this platform, they will be able to pick from a drop down menu the size of tax, grace periods -if any-, exemptions again if any, etc that are required for their specific community. NFT art could for example have zero customizations, physical land could perhaps have many.

I like the initiative and conceptual side of things. Moving into a uncharted space is usually where the advantage lies. There has been some discussion of creating a more “for profit” wing of City DAO that will naturally have way less red tape. I’ve spoken with @Fugyeah about this (with some other ideas as well). But, since you have both the business experience and CityDAO credibility with the podcast…not only is this a solid effort but maybe a great way to get things rolling in the new wing of CityDAO. I’ll keep going over materials, but I like it.

1 Like

Thanks for the support :pray:

I too would like to see this hopefully inspire others to factor in the replenishment of the CityDAO treasury into their thought processes on future projects proposals as well.

It would be awesome to see a wave of cool projects related to CityDAO / Network State principles pop up, succeed and contribute back to the CityDAO Treasury in a growth flywheel :wheel: :mechanical_arm:

This would be a cool experiment I would love to see play out. There are some downsides I can think of, though I have an idea where you could actually mitigate them (will DM you). The big upside thought is I think it is really common for people to buy NFTs and really engage with a DAO for a while. Then they lose track of it, or just do other things but hold onto the NFT even thought it really doesn’t make sense and would be much better in some one else’s hands.

There are some experiments where this is a thing. Just a quote from a webpage, but it is proven

  1. Post-purchase rationalisation

After we buy something that’s not right, we convince ourselves it is right. link

I think this happens with NFTS, you think you will really like CityDAO (or insert other DAO), but you don’t, then hold on to the NFT, thinking it will be worth it someday, it will be a good investment if you just hold onto it ect. A big upside to forcing turnover. If you have to realize the cost of holding or “settling”, then you will sell. With a cost to holding you will stop convincing yourself the purchase was good. Turnover of NFTs would be a great thing for many DAOs.

1 Like

@MemeBrains I think this is a great proposal and I support it wholeheartedly but for one key issue… I’d like to see the royalty rate increase drastically. I think putting a cap on it is the right move, but there’s no reason your venture should start making significant profit before CityDAO gets its money back. For example, in the film world, development money (the riskiest by far) is generally recouped at 150%, out of gross proceeds, before anyone else gets a dime. I would not suggest something so drastic here, especially since you’re offering a 400% return to CityDAO, but I’d like to see something like 10% of gross proceeds or 50% of net profits accrue to CityDAO for the first $250k, after which the rate can halve until CityDAO reaches its cap of $1m.

1 Like

Exactly! This is what we aim to see if we can resolve :slight_smile:

That actually seems pretty fair to me :+1: I agree to increasing that royalty rate on the version that goes to snapshot voting

I think the 50% of net profits could potentially take to long for CityDAO to recoup from cuz even though we anticipate revenue, it’s not clear how long it may take for that revenue to convert into profit, especially since we’re intending a market wide scaled model that would theoretically have on-going overhead increases with staff hiring etc etc, increasing the top line royalty from 1% to 10% seems I think the faster way for CityDAO treasury to be replenished

1 Like

Amazing, thank you. Also in favor of halving that rate once CityDAO has recouped its $250k.

1 Like

Ya that makes sense too, win-win on both sides from what I can see :slight_smile:

Thanks for your constructive comments :heart:

Just a peanut gallery comment, this whole convo brings up something I find quite important. @gugz I (for one) really appreciate you leading the charge here for CityDAO so to speak.

In business a negotiation takes place between authorized representatives of each business entity. The end result is intended to be an arms length transaction where both sides are receiving some benefit for the bargain, but at the end of the day, something freely and knowingly agreed to.

At CityDAO, we recently have started to see an influx of proposals where people are requesting money to be offloaded outside of the CityDAO ecosystem, for their own startups and projects, often times in association with other contributors who are not part of the long-standing and/or active CityDAO community. It is amazing that we have started to see some project focus arising from the depths of these market conditions, however, these projects are intended by their leaders to be totally separate unrelated entities, legally and operationally.

To my business brain this means that to arrive at a proper “deal” - a negotiation should be taking place between these entities and CityDAO.

But instead of an arms-length “deal”, the community is simply faced with a yes/no (where no sounds like a failure for CityDAO to the voters given the paucity of active projects and lack of participation) and in turn, no one ever “reps” CityDAO for its side of the bargain (again - shout out to @gugz for jumping in the trenches here). I would argue it has become the norm to look to CityDAO as a piggy bank with no real strings, where money can be obtained and the project leaders “don’t even have to work with CityDAO or its community of contributors at all” and in turn receive total discretion to use money contributed by the people being excluded. The “benefits” to the CityDAO community are often amorphous and hopeful at best.

I think CIP129 is a cool proposal, and sorry Eric to drop this here, but I have long felt that this dynamic needed to be mentioned at the very least.

We recently talked about using these forum posts and mandating the inclusion of any comment that received a certain number of “likes” - sort of like a CityDAO negotiation by consensus - but the projects have rushed to proceed in advance of any governance updates and so we are where we are as a community. I just wonder if its the right direction.

So to be clear, again, I am not against any project per se. I believe all of the projects and proposals have some level of promise - I just am not sure any of them should be “external” - including, to be certain the ones I have been directly asked to work on myself.

1 Like

Yeah, really interesting point you bring up here. IMO this particular proposal / resulting entity is the most separated from CityDAO than any proposal thus far (even t0wn, although a separate entity, will have “founded by CityDAO” branding and include CityDAO in a major way in its consortium of DAOs).

It might be appropriate to form a small committee and to get a little more granular about the terms. Of course Eric and Bhargav don’t have to agree to those conversations, but if they did it could set a good precedent for how funding outside ventures should work going forward.

I thought this was accounted for in the 10% royalty / $1million back to the Treasury, or maybe I’m misunderstanding your meaning?

Ya I see what you mean. Part of this -from what I can see anyways- is that CityDAO seems to be slow over the last several months to put out and finish a project, meanwhile burning a lot of overhead. Continuing at the current pace inside the DAO seems to be a risky path, but empowering key teams to carry through on an initiative seems like it could possibly balance things

That’s what I’ve proposed in this CIP :slight_smile:, this is my attempt at a win-win for the community, the DAO treasury, the ecosystem, and ensuring my commitment to the initiative

Not quite accurate… @gugz suggested something great and I was happy to incorporate it, this CIP is posted on forum for community feedback, input, suggestions and decision making :heart:

Please don’t put me in the same bucket as other people or projects in the past. I was not a part of those problematic projects or discussions and it’s pretty clear I’ve considered CityDAOs treasury replenishment in this proposal. Most grants do not have a 4x consideration back to the treasury. A grant is a grant, but what I’ve proposed is to aim to put $1mil BACK into the treasury.

I think the CityDAO initiative as a whole is perhaps hopeful at best, but we’re inspired enough to see it come to life that we’re all here contributing :mechanical_arm: CityDAO isn’t some 20yr established, growing organization right here right now, it’s in its infancy and is looking for a WIN to put it back on peoples radar in the market overall. It’s my opinion that this CIP-129 has among the highest chance of success that most other CIPs put forth so far, and can accomplish it in a relatively short amount of time too.

That’s ok man, imho everyones perspective and voice matters a lot in the DAO so I appreciate the thought you’ve put into this!

Wait til u see the live product :slight_smile: cool is imo an understatement lol

1 Like

I had intended on working very closely with CityDAO throughout the development and launch of this product. I thought I had made that clear in the CIP but maybe I could have elaborated further. a ‘founded by CityDAO’ easy among the easiest and least impactful things that @TheBossDragon and I can do in this regard :slight_smile:

For example:

  • first of all is the royalty for treasury replenishment, no other project has presented anything whatsoever to replenish the treasury, nevermind by up to $1million
  • Working hand-in-hand with each CityDAO project that’s leveraging from a Harberger tax model to save the DAO on those costs
  • ‘founded by CityDAO’ is easy to add
  • Incorporating CityDAO branding in public facing marketing work and website
  • Pointing people to the DAO from the platform
  • Honorary 1st issue of the Harberger Tax protocol NFTs
  • And whatever else pops up that’s reasonable. I’m both a DAO member and a startup founder. I have to switch hats back and forth, and my intention is to remain in integrity on with both.

Wouldn’t that centralize the DAO and put liability on committee members?

I’m all for ensuring a transparent and proper decision making, and thus far I’ve followed all the known processes the DAO set in place for CIPs, which I thought were set in place to ensure a decentralized decision making process

1 Like

My disadvantage is not good at English but I can understand and support you during this time Clipto Lindsay only bad news, hope your proposal will advance the blockchain industry.

Market is not doing well and seems to be like this for a while. Always saying that this is the time we got to work more and more when everyone left the space. The ones working during bear market will win at bull market.

CityDAO needs income in order to survive and continue to its path at web3. As long as a proposal includes an income, idea related to web3 and a business plan, i’m in !

2 Likes

I’m torn on this one. I agree with the sentiment of DAOvolution/gugz. which is that this proposal isn’t directly achieving the goal of citizen time, or building a city. Its sort of peripheral to the core mission, and seems like it would be a great Gitcoin grant application.

On the other hand, I’m really concerned with the continued depletion of the treasury, so I like that this will bring revenue. I also believe that part of CityDAO’s mission should be to build the tools that crypto cities / network cities will need to use to govern and live, and this does achieve that goal.

So I support this proposal, but would also offer some suggestions in the CityDAO in 2023 request for comment thread on how to adjust governance.

4 Likes

Thank you! We’ll be doing our best to make this happen and be a success for everyone involved :mechanical_arm:

Thanks for the support @Nick123, I just replied to your comments in the CityDAO in 2023 request for coment thread. Let’s continue that particular convo there and on Discord, I support you with that thought train