Companies that build private goods have it easy. Issue stock, give investors voting rights if they want, and everyone's aligned on the same page: make as much money as possible.
But for organizations that build non-private goods, maximizing revenue can come into conflict with its higher level, non-financial purpose. Like when a sports team moves to a new city, prioritizing money over its own community.
A 2-token model solves this by separating these functions:
A governance token. This powers the community's microprocessor - the operating system (OS) containing the community’s decision mechanisms. Optimized for harnessing collective intelligence and allocating shared resources effectively.
An endowment token. This powers the community's battery - accumulating and storing the funds that run the OS. Optimized for value growth and sustainably scaling the project.
Both tokens serve as electric current that can transfer between these functions through swaps, but by separating them, they can both do their jobs better.
A good governance token reaches the people who care most about the non-financial purpose of a community. Its main goal is to power the decision mechanisms that advance the organization's mission, values, and culture.
Some key design principles for this token:
Liquid. To make bottom-up governance and natural evolution cycles of contribution possible, and to preserve its ability to store and transfer value. For issues like plutocracy and vote-buying, we can program solutions for that in the communityOS, rather than cutting off power to the microprocessor altogether.
Stable value. Just like how microprocessors want steady current and voltage, community contributors want stability in the value of their governance power. Volatility creates unnecessary stress and undermines the community's decision-making ability.
Dynamic Issuance. A predictable policy for ongoing token minting and distribution helps make sure the token can keep powering the OS for a long time.
Organizations that build non-private goods usually don't have the luxury of a business model where revenue from sales exceeds expenses. An endowment token helps by combining project revenue with appreciation of a portfolio of assets and speculation from investors.
Some key design principles for this token:
Fixed Supply. An easy way to make sure the token is a strong store of value is to issue 100% of the supply at launch, with no minting function.
Managed Liquidity. Deploy the supply into a portfolio of paired assets that function like an index fund, targeting healthy long-term value growth.
Revenue Receiver. Direct a portion of project revenue into the endowment by swapping and adding to the endowment token's liquidity.
With these functions separated, we're no longer building the proverbial "flying car"—a fruitless engineering task where the traits of good aircraft fundamentally conflict with those of a good road vehicle.
Now we can focus on building a good car and a good airplane separately. Or a good battery and a good microprocessor.
Other engineering considerations for setup that can be tuned to the community's specific needs:
How do we maintain price stability for the governance token using the endowment, while making endowment outflows for governance predictable and tunable?
How do we effectively govern the assets and their weights in the endowment portfolio?
How do we distribute governance tokens to the right people in the community?
Private Goods = 1 goal, 1 token:
make money
Public Goods = 2 goals, 2 tokens:
build good public goods
make money
The time has come... to move past the toxic influence of governance tokens built to go up in price, without naively pretending these tokens have no financial value.
