diff --git a/applications/consumer-token-type-i.md b/applications/consumer-token-type-i.md new file mode 100644 index 00000000000..5074fd84de4 --- /dev/null +++ b/applications/consumer-token-type-i.md @@ -0,0 +1,235 @@ +# Consumer Token Design: Type-I + +- **Team Name:** Mark Van de Vyver [PhD(Dist)](https://www.resources.uwa.edu.au/award-verification-service/?familyName=Vyver&familyNamePartialEnabled=Y&givenNames=Mark) + +- **Payment Address:** In the case of fiat payment, please share your bank account privately with via your contact email (see below) and enter the date when you shared the information with us (e.g. Fiat 24.12.1971, 11:59) here. Otherwise, provide the BTC, Ethereum (USDC/DAI) or Polkadot/Kusama (USDT) payment address. Please also specify the currency. (e.g. 0x8920... (DAI)) +- **[Level](https://github.com/w3f/Grants-Program/tree/master#level_slider-levels):** 3 + +## Project Overview :page_facing_up: + +***I emphasize an intent not to relinquish control by way of disclosure*** + +To fund the preparation and submission to the SEC of a initial consumer token design (Type-I). Requesting a no-action letter permitting the offer and sale of such tokens/coins in a manner and under circumstances suitable for use in a permissioned blockchain, without registration under Section 5 of the Securities Act and Section 12(g) of the Exchange Act. The no-action letter request will be the first of three (possibly four) incremental submissions, culminating in a token design suited to operating a blockchain in a decentrailized/permissionless configuration. These later designs are the subject of subsequent grant funding rounds. The ultimate goal is to create a compliant token design that (**initially**) is licensed to and utilized by blockchain networks such as Polkadot, Kusama and their network/ecosystem projects (purchasers of parachains, coretime, and the like), hereafter Dotsama. In the intermediate state, operate under a model where the licensor (the grantee) seeks SEC approval for a token design, which is then available to be licensed to a licensee (e.g. Polkadot, Astar, etc.) for public issuance and sale. Offer a fixed and variable cost subscription model for the licensee. Subsequent token designs will attempt to: 1) obtain SEC approval that relaxes the licensing requirement, 2) make subscriptions optional (at the cost of sub-optimal efficiency/performance). + +### NOTE + +***Declining to award this grant project (rejecting the PR) will not prevent the Dotsama ecosystem members from licensing the initial and subsequent token designs. However, such licenses will only be available to the Dotsama ecosystem twenty (20) years after the date the first decentralized token design is licensed (timelines adopted from Polkadot patent). Currently, it is expected there will be three (3) incremental token designs that culminate in a token design suitable for use in a permissionless/decentralized network. Dotsama members can apply for licences before the twentieth year, provided they fully withdraw from and cease all activity in the Dotsama ecosystem, and do not participate in any non-compliant network/ecosystem, for the duration of their license.*** + +### Overview + +- **Tagline:** Developing a consumer (non-security/investment instrument) token design compliant with SEC regulations to facilitate blockchain network operations without securities registration requirements. +- **Description:** This project aims to fund the development and submission of a token design to the SEC, seeking a no-action letter that would allow the offer and sale of such tokens/coins without the need for registration under Section 5 of the Securities Act and Section 12(g) of the Exchange Act. The project will proceed through four (4) milestones: initial development and presentation, SEC application letter development and submission, SEC interaction and iteration, obtaining the final no-action letter, establishing Implementation Fora and onboarding Implementation Fora members. The ultimate goal is to create a compliant token design that can be utilized by blockchain networks such as the Dotsama ecosystem. +- **Integration with Substrate / Polkadot / Kusama:** The project is linked to the Dotsama ecosystem as it seeks to create a token design that Dotsama projects will be eligible to license. The initial Type-I token design is suited to permissioned use cases. By achieving SEC compliance, the project will enable permissioned Dotsama vendors to offer and sell tokens to the public without the regulatory burden of registration, thereby enhancing the network's ability to expand and operate within existing legal frameworks. This integration will ensure that the Dotsama ecosystem can grow and attract a broader user base, leveraging the compliant token design for various blockchain applications. +- **Team's Interest in the Project:** I am deeply committed to advancing blockchain technology, ensuring its regulatory compliance and that it is used to **undermine designs and practices that seek to exploit network effects to establish cartels, oligopolies and monopolies**. By developing a token design that meets SEC requirements, I aim to bridge the gap between innovative blockchain solutions and regulatory frameworks. This project reflects a mission to foster secure, legal, and widespread adoption of blockchain technology. My expertise positions me uniquely to undertake this groundbreaking project, and is motivated by the potential to set a precedent for compliant blockchain operations. + +### Project Details + +#### Mockups/Designs of UI Components + +This project focuses on developing a token design, regulatory approval application and regulatory compliant implementation. The development phase of the token design will necessitate integration with blockchain network protocols. UI components are out of scope. + +#### Data Models / API Specifications + +The core functionality revolves around legal and regulatory compliance and then technical API development. +Consequently, the development phase of the token design will necessitate integration with blockchain network protocols, detailed implementation specifications will be drafted and updated based on feedback from the Implementation membership. + +#### Technology Stack + +- Document Management: Overleaf, LaTeX, Git +- Implementation Fora: Discourse, Telegram +- Blockchain Integration: Substrate, Fully Homomorphic Encryption (FHE) and Zero Knowledge Proofs (ZKP). + +#### Documentation of Core Components, Protocols, Architecture + +- Token Design Document: Document outlining the token's design, regulatory considerations (economic), compliance measures, protocol requirements and implementation notes. + +#### Proof of Concept (PoC)/Minimum Viable Product (MVP) + +Prior work includes extensive research on SEC regulations and the development of preliminary token designs suitable for blockchain networks. +Further PoC/MVP work will be involved while drafting the initial no-action letter request and obtaining feedback from regulators. + +#### Implementation Fora + +- Each sponsoring ecosystem/organization (here, the Web 3.0 Foundation) will have a minimum of three (3) member positions reserved in the Implementation Fora. +- The Implementation Fora will have a maximum of 100 members in each venue. +- Fora members will be required to provide their real names, affiliations and a minimum level of professional information. +- Limited to accepted ecosystem members to ensure high quality discussions. +- Members are first nominated by the ecosystem sponsor, in this case the Web 3.0 Foundation. +- Members membership fees are to be paid by the sponsoring ecosystem (this ensures the sponsoring ecosystem exercises some quality control). +- Memberships will be granted based on expertise and experience generally and specifically in blockchain and token coding and analysis. +- Members must agree to background checks, interviews, referee checks and sign NDAs binding until the public launch of the final (possibly Type-III or Type-IV) decentralized token design. +- Members must agree to a liability indemnity agreement. +- Members must agree that all source code contributions are made under the dual Apache 2.0, MIT license or equivalent, and are released upon the first Type-I token license being granted. +- Members must agree to adhere to the Implementation Forum minimum best practices and standards on code quality, documentation, testing, and security. +- Members must agree to a three strikes and out policy for non-compliance with the Implementation Forum guidelines, and this is at the sole discretion of Mark Van de Vyver. +- Fora: + - Implementation Forum (Private): Discourse forum for detailed and high-level long form technical discussions on integrating the compliant Type-I token design with Blockchain protocols. + - Implementation Chat (Private): Telegram forum for short ephemeral exchanges on integrating the compliant Type-I token design with Blockchain protocols. + +#### Project Limitations / Out of Scope + +- No Marketing Activities: The grant application excludes funding for marketing, business planning, or outreach activities. +- Excludes Future Tokenomics: The project does not cover the future tokenomics of the proposed design, focusing solely on implementation of a regulatory compliant Type-I token design. +- Excludes Methodology: The project does not cover the methodology behind the proposed design, focusing solely on implementation of a regulatory compliant Type-I token design. +- Excludes Legal, Regulatory and Compliance: The project does not cover the legal, regulatory and compliance advice for the proposed design, focusing solely on implementation of a regulatory compliant Type-I token design. +- Excludes Investment Advice: The project does not cover investment advice for the proposed design, focusing solely on implementation of a regulatory compliant Type-I token design. +- Excludes Business Advice: The project does not cover business advice for the proposed design, focusing solely on implementation of a regulatory compliant Type-I token design. +- Excludes maintenance or audits: Each ecosystem is responsible for obtaining their own security and compliance audits before seeking a license or the public sale of the licensed tokens. + +## Team :busts_in_silhouette + +### Team members + +- Mark Van de Vyver, [PhD(Dist)](https://www.resources.uwa.edu.au/award-verification-service/?familyName=Vyver&familyNamePartialEnabled=Y&givenNames=Mark) + +### Contact + +- **Contact Name:** Mark Van de Vyver, [PhD(Dist)](https://www.resources.uwa.edu.au/award-verification-service/?familyName=Vyver&familyNamePartialEnabled=Y&givenNames=Mark) +- **Contact Email:** + +### Legal Structure + +- **Registered Address:** 9681 41st St NE, Saint Michael, MN 55376 +- **Registered Legal Entity:** TAQTIQA LLC. + +### Team's experience + +- Mark Van de Vyver, [PhD](https://www.student.uwa.edu.au/course/award-verification-service?family=vyver&family_partial=on&given=mark&given_partial=on&search=Search) + Expertise is in financial economics, mathematical statistics and implementation in both domains. + +- [Finance PhD (Distinction)](https://www.resources.uwa.edu.au/award-verification-service/?familyName=vyver&familyNamePartialEnabled=Y&givenNames=mark) + - Supervisor [Prof Ross Maller](https://web.archive.org/web/20230605043356/https://researchers.anu.edu.au/researchers/maller-ra). + - Examiners [Brockwell](https://web.archive.org/web/20230731032804/https://dl.acm.org/profile/81100472556), [Chiarella](https://doi.org/10.1016/j.jedc.2018.06.001), [Duan](https://web.archive.org/web/20230131093512/https://d.nuscri.org/profiles/duanjc/) + +- Post-Doctoral Research: + - Financial Engineering Group, Centre of Advanced European Studies and Research. Bonn, Germany. + - Centre of Expertise in Computational Finance, Cooperative Research Centre for Technology-Enabled Capital Markets, University of Technology, Sydney. + - Statistics in Finance, [Mathematisches Forschungsinstitut Oberwolfach](https://publications.mfo.de/bitstream/handle/mfo/2821/OWR_2004_02.pdf?sequence=1&isAllowed=y) + +- Commercial: + - CourseAccess - with John Chionglo (CA), circa 1997. University class scheduling, course grade and materials management web site. When `htc` and `idx` files were a thing. Used by Dr. David Walsh to manage a course of 300+ students served from a (dual!) Pentium-Pro. + - Taqtiqa - startup, circa 2009-11. Rode the AWS and devops wave. Negotiated commercial and academic use licenses with NYSE. + - [Participant](https://doi.org/10.1111/j.1835-2561.2002.tb00191.x) in the Investment and Financial Services Association (IFSA) debate on expensing employee stock options. + +- Technical: + - Thesis topics: Generalized AutoRegressive Conditional Heteroskedasticity (GARCH) option pricing and derivation of the asymptotic distribution of the deviance statistic, and related functions (estimators). Awarded Distinction. + - Supervisor: [Prof Ross Maller](https://web.archive.org/web/20230605043356/https://researchers.anu.edu.au/researchers/maller-ra). + - Examiners: + - [Prof Peter Brockwell](https://web.archive.org/web/20230731032804/https://dl.acm.org/profile/81100472556), + - [Prof Charl Chiarella](https://doi.org/10.1016/j.jedc.2018.06.001), + - [Prof Jin-Chuan Duan](https://web.archive.org/web/20230131093512/https://d.nuscri.org/profiles/duanjc/). + - Market microstructure; [Corporate Finance](https://doi.org/10.1111/j.1835-2561.2002.tb00191.x); Investment Management; [Econometrics](http://dx.doi.org/10.1111/1368-423X.t01-1-00090). + - Wrote a distributed computing screen saver for thesis calculations. Deployed across 400+ student laboratory computers; Served from dual Pentium-Pro (Win/NT 3/4). + - Rust; Ruby; Julia; Python; MPI/MPICH; + +- Open Source: + - - Chef Library Cookbook to manage Weaveworks Ingite. + - - Cross compile toolchains in Open Container Initiative images. + - - Robust Julia version and environment management: Bash and Chef. + +- W3F: + - Grant: [Token-economics survey (2022)](https://github.com/w3f/Grants-Program/blob/master/applications/tokenomics-survey-2022.md) + - RFP: [Designing UpChain: a framework for securing Substrate runtime upgrades and Substrate network upgrades](https://github.com/w3f/Grants-Program/pull/1309) + +### Team Code Repos + +Personal + +- +- +- +- + +### Team LinkedIn Profiles (if available) + +- + +#### Scope of the Project + +- First milestone payment: For developing the current state of the token design, SEC presentation and application letter. Deliverable: see below. +- Second milestone payment upon submission of the no-action letter request, covering further iterations and changes requested by the SEC. Deliverable: see below. +- Third milestone payment upon the SEC issuing a no-action letter. Deliverables: see below. +- Final milestone payment 90-days post SEC letter. Deliverables: see below.. + +#### Specific Outcomes + +- Obtain an SEC no-action letter describing a token design that any licensee can offer and sell without registration under Section 5 of the Securities Act and Section 12(g) of the Exchange Act. + +## Development Status :open_book + +- Design feasability research compelte. +- Theoretical framework for the token designs (subject to SEC required changes): + - Type-I + - Type-II + - Type-III + - Type-IV (if required by the SEC) +- Two (2) preliminary discussions with SEC FinHub staff. +- SEC FinHub presentation in preparation. +- MVP token design (Type-I) documentation in preparation. +- Initial application letter in preparation. + +## Development Roadmap :nut_and_bolt + +### Development Overview + +- **Total Estimated Duration:** 6 months (+ time dependent on Implementation Forum members) +- **Full-Time Equivalent (FTE):** 1 FTE +- **Total Costs:** 60,000 USD and 3,000,000 DOT (to be converted to USD at 7-day ewma, then paid 30% in DOT) + +### Development Roadmap + +#### Milestone 1: Initial Development + +- **Description**: Develop SEC FinHub presentation for the SEC no-action letter request. +- **Deliverable**: SEC email confirmation receipt of FinHub presentation materials. +- **Budget**: USD 30,000 + +#### Milestone 2: Submission and Iteration + +- **Description**: Further development of the initial application letter and submit the no-action letter request to the SEC and iterate based on their feedback. +- **Deliverable**: Scan of the registered mail receipt for the initial application letter submission. +- **Budget**: USD 30,000 + +#### Milestone 3: SEC No-Action Letter + +- **Description**: Obtain the SEC no-action letter. +- **Deliverable**: + 1. SEC no-action letter, + 2. Final application letter requesting the no-action letter. + 3. The Implementation Fora membership fee schedule. + 4. The option to nominate at least three (3) members to apply for Implementation Fora membership. + 5. The option to participate in the grant funding round for the SEC application for the Type-II consumer token design. + 6. The perpetual option for Dotsama ecosystem members to apply for licenses to the Type-I token design once it is made publicly available by the Implementation fora members. +- **Budget**: DOT 2,000,000 (to be converted to USD at 7-day ewma, then paid 30% in DOT) + +#### Milestone 4: Implementation Fora + +- **Description**: Within 90 days after the SEC no-action letter is issued, the Implementation Fora are available, membership applications start being processed and initial design specification and requirements start being released. +- **Deliverable**: + - The Discourse and Telegram fora are available. + - The member application process is available for the first member nominated to apply for Implementation Fora membership. + - The membership payment process is available. +- **Budget**: DOT 1,000,000 (to be converted to USD at 7-day ewma, then paid 30% in DOT) + +### Budget + +- **Milestone 1**: USD 30,000 +- **Milestone 2**: USD 30,000 +- **Milestone 3**: DOT 2,000,000 (to be converted to USD at 7-day ewma, then paid 30% in DOT) +- **Milestone 4**: DOT 1,000,000 (to be converted to USD at 7-day ewma, then paid 30% in DOT) + +## Future Plans + +- Grant funding rounds for: SEC no-action letter applications and implementation of the token designs (subject to SEC required changes) + - Type-II consumer token + - Type-III consumer token + - Type-IV consumer token (if required by the SEC) + +## Additional Information :heavy_plus_sign + +**How did you hear about the Grants Program?** Web3 Foundation Website + +- Prior art: + - Data and experienced gathered in the course of identifying [the unannounced 25% change in Polkadot staking rewards when the runtime was upgraded to v9340 (Jan 13/14 2023)](https://forum.polkadot.network/t/change-in-stake-rewards-rate-2023-jan-13-and-14/2387). +- Pior grants: + - [Tokeneconomics survey 2022](https://github.com/w3f/Grants-Program/blob/master/applications/tokenomics-survey-2022.md)