[SC] API3 Hot Wallet

Description:
I propose the creation of a “hot wallet” that enables API3 DAO sub-teams to more flexibly and opportunistically (in the good sense of the word) deploy API3 token allocations for purposes such as strategic long-term partnerships with enterprises, data providers and Web3 projects that go above and beyond simple oracle integrations and help scale the adoption of API3’s technology towards the Web3 and API markets - both of which are needed to realize the vision outlined in the original API3 whitepaper. Additionally, part of the tokens will be used towards the vested token allocations needed to bring more top talent to work on API3 itself. Any such token allocations would be reasonably related to existing DAO Resolutions, or may be included as line items in secondary DAO proposals, at the reasonable discretion of the multisig members.

What:
2M API3 tokens from the API3 Ecosystem Fund.

Where:
The tokens go from the API3 Primary Treasury to a Gnosis Safe 3/5 multisig operated by five founding-level members of the API3 project.

Who:
Burak Benligiray, Andre Ogle, Heikki Vänttinen, Erich Dylus, Dave Connor.

Respectively, the members managing the hot wallet multisig are co-founders (Heikki & Burak), long term contributors (Andre & Dave) and attorney-client duty-bound legal counsel (Erich) of the API3 project.

How:
The hot wallet multisig will serve all API3 DAO grantee teams when it comes to deploying tokens towards high-value, high-impact strategic partnerships, vested contributor allocations and other deserving causes. The tokens will not be used towards DAO governance and will not be staked. The multisig wallet address will be public to the whole DAO by the virtue of being included in the proposal, and when deploying tokens, teams will report the use of said tokens to the broader DAO as transparently and to the extent that they are able. This, of course, begs the question: Why would the teams not be able to disclose what the tokens are used for? …

Why?:
…because many of the partnership discussions we are and will be engaged in include limitations to the teams’ ability to disclose information pertaining to said partnerships to the public without prior written consent of the other party. Most commonly these limitations take the form of your usual NDAs and MNDAs, which are an extremely commonplace feature in the discussions between two organizations exploring mutually beneficial cooperation. Before agreeing that a strategic, high-value partnership is to take place and realizing the fruits of that partnership in a publicly disclosed manner, there is usually a lengthy building, PoC and go-to-market phase, which necessitates the ability to deploy resources before the reason for these deployments is disclosed to the broader set of stakeholders - in this case all API3 token holders. It is often in API3’s best interest of mutual incentive alignment with the counterparty (including involvement in governance) and treasury stablecoin preservation to offer a grant of API3 tokens as consideration to enter into a long-term relationship. As a precedent of this, we formed a 10-year development partnership with Open Bank Project, which had us extend a partner token allocation to OBP before the partnership was published. This token allocation came from the Partners & Contributors allocation of the original token distribution, which enabled it to be done directly from DAOv1. However, as outlined in this proposal, this is not possible going forward without a dedicated hot wallet that enables token distributions without a primary DAO vote.

Additionally, when it comes to more everyday things that include token deployments, like vested token allocations that are needed to attract highly capable contributors to the API3 project, it is not practical to require a primary DAO vote every time, as this requires majority support and causes both inertia and non-negligible costs (gas spent on achieving majority support) for growing the API3 project contributor base. However, it should be noted that the hot wallet would primarily act as a convenience and efficiency improvement in this regard. If a team needed to offer an allocation to its personnel and the hot wallet managers were to refuse to allocate these tokens from the multisig, the team leaders would be able to make a primary proposal for the tokens the same as they are able to without the hot wallet.

In a nutshell:
As it currently constitutes over $100M USD in value locked to the API3 project, there are very good reasons to keep the ecosystem fund behind the most robust voting requirements - that is, in the primary treasury of the API3 DAO. However, this robustness does not come without its tradeoffs in the teams’ ability to find productive uses for these tokens and the ability to deploy the tokens towards said uses in a manner consistent with common business development practices and compliant with the case-by-case contractual requirements. As such, I would urge everyone to vote for the creation of a hot wallet controlling, at current, 8% (2M API3) of API3’s total ecosystem fund (25M API3).

About the author of this proposal:
My name is Heikki Vänttinen and for a lack of a better title I would call myself one of the co-founders of the API3 project. Today, I focus mostly on advising teams on strategic decisions that require inter-team alignment and help out as much as I can on all of the non-technical aspects of the project.

7 Likes

Overall, I think a very productive use of dormant tokens and flexibility in token allocation (and thus governance power allocation) as an incentive alignment tool for large and long-term relationships with third parties. This would serve to provide some comfort to larger prospective counterparties that, if a token allocation is part of an upcoming joint venture or co-development effort, the risk of delay in not obtaining 50% quorum for a single token allocation is alleviated (which also serves to preserve the lower-threshold USDC treasury).

In case there’s any doubt, the tokens in the multisig would remain the property of the API3 Foundation (the DAO’s legal wrapper) and therefore any disbursements from the multisig will be according to a Token Allocation Agreement between the API3 Foundation and the applicable counterparty, often with unlock schedules. None of the individual multisig keyholders has any legal right to the tokens in the contract, as the tokens are merely earmarked for disbursement in reasonable relation to existing DAO Resolutions and the Bylaws generally.

3 Likes

100% support this proposal. I believe this will definitely help the DAO for the long run. Apart from all the things that @heikki mentioned, these tokens could also be used for creating bounties and drive developer adoption.

I agree with this proposal. API3 needs a multi-sig wallet to hold API3 tokens and it is a great process to build for continued strategic growth.

Suggestions:

Who: adding 1-2 more team leads, this ensures proper representation of API3 teams mission.

Voting: Majority vote would be great to specify.

1 Like

seeing as there was no disagreement with my prior post about this topic, and this has been up for 2 days, i think this can be pushed as a proposal

1 Like

On some occasions, teams have been faced with a tight budget due to unexepected expenses, like sponsoring a new event and other related associated costs. Also, there can be certain business integrations that may require costs. To preserve the team’s financial solvency and confidentiality with certain agreements it can be beneficial for this wallet to include USDC.

Suggestion: fund the hot wallet with USDC.

2M API3 tokens + 200-500K USDC.

1 Like

It is my opinion that the teams should include some buffer into their proposals for unforeseen USDC expenses. There is precedent for the teams adding +10% to their overall budget to account for these. For larger funding needs, a secondary proposal (needed for USDC) is a lot more practical to pass than a primary one (needed for API3).

Agreed, will push this to a vote as soon as we have the multisig set up.

1 Like

I would say this is a compelling prosopal addressing a clear need with the potential for significant impact. Looking forward to vote in favor.

Hello heikki,
I like the proposal for the “Hot Wallet”, to expedite the implementation of business strategic initiatives. I would ask, “How often would the supply of the Hot Wallet, have funds reallocated to it”, and “Would reallocation of funds to the Hot Wallet, be subject to General DAO Governance voting?”.

Thank you

Hi JDub, to remit any additional API3 tokens from the DAO Treasury to the hot wallet in the future would require a new separate primary DAO Proposal that calls the governance contract

Hey JDub, as Erich noted above me, each allocation to the hot wallet would require a new, separate primary proposal to be passed. So yes, each allocation of funds to the hot wallet would be subject to a DAO vote.

Went ahead and created the official proposal, which also includes the link to the multisig address.

Hello Erich & Heikki,

Thank you for the clarification. In that case, as I’ve stated earlier. I would be in favor of such a “Hot Wallet”, to help expedite strategic business initiatives.