Simplified Forge. Community participation in any future capital raise.

[high meadow]

https://docs.google.com/document/d/1yrX8FEZ0Ud8TjKYWLlgjtwSvvzMsPAdCpR7N2mka9dE/edit?usp=sharing

Just wanted to start this conversation I think an edited version of Aaron's Forge IIP could be helpful to have available to the DAO if needed. The idea being to have as many avenues available to get funding if/when we need it.

TLDR: Got rid of team/VC locked tokens in the forge and just made it a way to raise capital by selling treasury tokens to the community at a discounted rate in exchange for them being locked.

Simple Summary

Illuvium Forge gives prospective customers access to DAO treasury tokens at a specific locked ILV positions at a discount. It allows the DAO to seed and team investors to offer its their tokens at fixed discounts decided by the Council. When a customer purchases those tokens~~, the sellers receive their share of the proceeds and the buyers~~ they receive a newly minted Shard NFT that stores all the details of their position. The purpose of this is to give access to early liquidity without directly affecting the token price.

Every time someone acquires a position, it locks the tokens for the selected period (from 1 to 3 years), further reducing unlocked ILV supply.

Abstract

As with any project, the token supply must eventually enter the market. However, not all projects handle this in the same way. Previously, the Council voted on a one-time delay of said tokens while we pushed to bring to market revenue-generating events. With the first land sale’s conclusion, we are ready to begin revenue distributions, and we look to other ways to handle new tokens entering the market.
Forge allows those token holders the opportunity to gain liquidity by selling those tokens at a discount for a large lock-up. It is available for everyone, not just VCs, and the general community can purchase ILV at a discount for the first time.

When and if another capital raise is required for the DAO, the DAO would like to offer its treasury tokens to the community at a discount in exchange the tokens will be locked for a period of time.|

*** Overview***

Prospective buyers purchase positions via an NFT that holds the details of the tokens they stake to receive RevDis and Yield Rewards.

### Vesting Contract
The Vesting contract stores a vesting position for each original locked ILV holder (seed and team members) with all necessary data for its related vesting schedules, such as the number of tokens and the start and end timestamps. Notice that even though it’s an ERC721 contract, transfer functionality is disabled.
It provides the following functionality:
View Balance - Show the holders of locked tokens an up-to-date balance of their positions.
Claim Tokens - Allows the holders of locked tokens the ability to claim tokens as per their linear vesting schedule (usually one year, except for the founders who we configure to unlock over three years)
Claim Revenue Distributions - These specific locked positions do not claim through the existing Staking App and instead use the Rewards contract. This means owners of a staked Shard and existing ILV would need to claim once through the Staking App and once through the Forge app. In a future update, we should merge this as a QOL improvement. However, this is a complex task and to begin, it is much better for security to keep them decoupled.

Registry Contract

The Registry contract creates the interactions between the DOA and the buyer. two interested parties (the buyer and the seller).

It provides the following functionality:

Communicates with Vesting Contract - The Registry Contract has special permissions to update Vesting Positions.
Offers tokens to the market - Holders of Vesting positions use the registry to offer their tokens at the specified discount. When those tokens are purchased, the original holder receives their share of the liquidity.

Allows purchasers to buy locked ILV - A purchaser decides the length of their lock-up, which determines their discount, and the number of tokens they wish to purchase, limited by the number of tokens on offer.

Allows Shard NFT holders to stake - Before the newly created Shard NFTs can receive Revenue Distributions and Yield Rewards, they must stake in the Rewards contract. An auto-stake option exists to make this seamless.

Withdraws tokens from the market - Holders of Vesting positions that have previously offered their tokens can withdraw them from the market, allowing holders the control to only offer when they wish.

Redeems NFTs for ILV - Once the locking period expires on an NFT, the holder redeems it for ILV.

Views total ILV offered - Self-explanatory.

We should clarify that at no point does a purchaser interact with a single holder of a Vesting position. Instead, the prospective buyer only interacts with the aggregate of all Vesting positions that have offered their tokens. Vesting position holders don’t determine the price or the lock-up. Set discounts exist for each lock-up period, fully defined and controlled by the Council, and Vesting Position holders choose to make their tokens available, or not.

Rewards Contract

Staked Shard NFTs representing locked tokens are eligible for Revenue Distributions and Yield Rewards. The Rewards contract works the same way as the current staking pools. The eDao sets the weight of this new pool with values that make it function as an extension of the ILV pool. Between the ILV pool and the Rewards pool, the total weight should be equivalent to 20% of the total rewards. Periodic updates are required to keep these values aligned, and the Council can adjust the target values via ICCP.

The Council can always vote on adjustments to the pool weights. Those weights are not the concern of this IIP.

It provides the following functionality:

Stakes NFTs - Stakes an NFT so that it can receive rewards.

Unstakes NFTs - Unstakes an NFT so that it can be redeemed for ILV.

Claims Rewards and Yield - This allows a holder of a staked NFT to claim their percentage of the total claimable rewards and yield.

Views Rewards and Yield - Shows a holder of a stake NFT their claimable Rewards and Yield.

Proposed Lock Configuration

• 1-year lock: 8% discount

• 2-year lock: 18% discount

• 3-year lock: 28% discount

As with all ILV contracts, these values are configurable by ICCP.

Rationale

Illuvium Forge is a suite of solidity contracts that further improve the Illuvium protocol. It provides a way for community members to participate in any future capital raises by the DAO. a clever way for holders of Vesting positions to gain access to liquidity without those tokens hitting the market. Many future improvements could further extend the functionality, but for now, it is essential to stay focused and implement the core features in a timely manner.

[native zodiac]

I'll weigh in - at a high level, the initial Forge proposal was rejected due to the eligibility of upper management tokens. I see you eliminated “specific locked ILV positions,” which does address that aspect from a scope standpoint.
Secondarily, when this was initially brought up, the intent was to address the pending token unlock, which has now nearing 50% completion for seed and team tokens. Once a change was required, implementation would have missed the primary intended purpose, so priority was decreased.
A key element to not proceed was an assessment of the work required to update and implement the Forge. As resources would need to be dedicated, it was discussed that those resources would be better applied to other (preferably revenue generating) elements of the project rather than delivering the Forge.
Lastly, I believe there remain some potential regulatory questions for the operation of the Forge.
Overall, two primary factors hold me back personally from reactivating the development of the Forge. First, diverting any resources away from delivering revenue generating elements of Illuvium at this stage feel unnecessary. The team needs to focus on the core products.
Second, the Forge is essentially a matchmaker between buyers and sellers. If there are no sellers, the Forge does not operate. Removing seed and team tokens, that leaves purely the Treasury as the seller, at the direction of the council. At the current token price and ongoing discussions around means of extending runway, I would be personally opposed to selling Treasury at the discounts presented and advocate the DAO consider other means of raising funds if required.
While this idea may be beneficial to the DAO long term, I am opposed to revitalizing the proposal at this time or dedicating further resources to its development until other priorities have been delivered.

[alpine drum]

Risk of hack or exploit can't be worth whatever short term positive effect this has on price. Should never have existed in the first place.

[royal depot]

In the event that Treasury tokens need to be sold, I'm supportive of the idea of the Forge. This is something I brought to a councilor (and to their credit, it had already been discussed by the council), because including the community in a raise makes a lot of sense to me. There are many community members who would gladly support the project and would be happy to buy ILV at a discount from market price.

As Deraji mentioned, there are a few factors to consider.

Game development being a priority is a big one. As the public, we don't have a ton of information about what stage of completion the Forge was developed to, and we'd need team feedback on exactly what the development time/cost of restarting a modified Forge would look like.

Clear guidance from legal would be the second priority. The legality and implications of raising capital from the community is absolutely an area where we need to defer to the guidance of experts. It was my understanding when I raised this with a council member that this was a major factor in why the Forge hasn't already been pursued as a capital raising option.

As Deraji mentioned, selling Treasury tokens is absolutely a last resort scenario. Any raise using Treasury tokens at the current price (or potentially lower prices, factoring in development time for the Forge + continuing unlocks) plus a discount is reducing the ability of the DAO to sustain itself in the future. We do need to think about the potential of Treasury tokens to provide a lot of benefit to ILV holders in the future, through raises at better prices and development of larger, more expensive products.

At a core level, this proposal, or some iteration of it, seems like an obvious win, but prior to spending any more time and effort working out specifics, I'd want some clear metrics on development cost/time and legality.

[delicate charm]

I really do not get it.

1. The forge was developed without an IIP. Now the community is finally asking for it.

2. The team said it was only 1-2 people assigned and it did not affect game dev progress, but now we are saying we should not divert resource after the pre/seed has unlocked 50% of their token?

3. What kind of regulatory issue with the Forge? There was not regulatory issue with selling the balancer pool and pre/seed locked token through the Forge.

4. Kieran was so determined to do the bridge raise. He even said things like he will not let the community derail it. He said the council voted for the bridge raise 4-1. What changed?
   Now looking at the current NFT market trading volume and macro in general, I do not believe the Illuvitar sale will do well at all. I believe the buyer of these ingame PFPs will be die hard Illuvium fans who are still in here, which is not many left, judging by discord activity. It is not even on popular marketplace.
   I can imagine in a few months, we are revisiting the raise idea, when the token price has gone lower. Have we not learnt at all?

[native zodiac]

Believe it or not, I actually agree with you on most of this (at least #4). We're taking a different approach to solve it, but fundamentally, I agree.
My push is for the dao to consider implications of all aspects of ensuring preserving funds in the challenging environment.
And regardless of what has been said before, I'm currently opposed to sale of treasury tokens at current prices and terms needed to raise funds via that mechanism in the current market unless absolutely required.

I'm also going to push focus, regardless of resource requirment that the team should focus on revenue generating primart products. Any distraction should be eliminated for now

[high meadow]

I was under the impression the initial reason for the forge was to allow for community being able to participate in a capital raise and the VC and team tokens were added to the proposal later as an innovative way to prevent selling off of tokens as they unlocked.

If I remember correctly Aaron said the forge was mostly ready to go and that taking VC and team tokens out of the application would not be to heavy a lift.