[PASSED] ICCP-3 Defining Vault Revenue and Distribution for Future DAO Product Directions

[wind moth]

Updated January 20, 2023
Author: Deraji

Simple Summary
This ICCP clarifies the definition of how various future product directions utilize Vault distributions of revenue, accounting for variable and fixed cost revenue streams.
For products with low variable costs (information goods), revenue represents 100% of all ETH (or other currency, excluding sILV2) generated from the sale of these products.
For products with non-negligible variable costs, revenue sent to Vault will be less such costs.
For products resulting from partnerships with entities outside of the DAO, revenue will represent the Illuvium DAO’s portion of such agreements, again less non-negligible variable costs, if applicable. The use of commissions and affiliate marketing is also taken into consideration.
For experiential events, such as Illuvifest, variable costs plus fixed costs incurred outside of the DAO’s core competency (e.g., venue rental, temporary labor costs, and contracting with outside entities such as entertainment) will also be deducted from revenue prior to it being sent to the Vault for distribution.

Full ICCP: https://docs.google.com/document/d/1X3YCBPnVXLg1hyw_PnkSxVlkVSTMrq72sqg8v8tbDCo/edit?usp=sharing

Shortened ICCP: https://docs.google.com/document/d/1_bTBXcSOrMieU3CMoTcsXqXb5poLzgJF2lkUaKEVQ-I/edit#heading=h.hd8acdz0vjvy

[flat yew]

Ya to me this seems SUPER straightforward and am very appreciative to have this clarification set in stone.

The only thing I can think of is how we as a DAO can have insight to some of those non-negligible costs should we feel like the profit (revenue distributed to the vault) is far below what was expected based on initial revenue generated by a certain initiative.

For example, I've run international conferences before and, to be frank, they're almost always a money sink and don't actually generate profit. It's items like this that I'm sure will spark confusion in the community as to why nothing went to the vault.

This begs the question though for what happens when an event puts us in the "RED". Does the treasury make up the difference and then does it take priority to get refilled when the next (profitable) revenue generating event occurs? Then the remainder is distributed to the vault? (This will most likely happen with an item like Illuvifest).

[peak timber]

Very good point. This feels like something that an Illuvifest proposal would need to cover. In addition to potentially operating at a loss, it would also likely require a large upfront outlay of funds. The council would need to discuss a "deepest red" scenario and ensure confidence that such an event is fiscally responsible at the time. I'm with you, definitely something to clarify and ensure the community understands prior to the event.

[flat yew]

I hope this isn't off topic, but are the initial funds for these items (like the upfront cost of merchandising) taken from the treasury? If so, is there something defining how the treasury is "refilled"?

I guess the "refilling" is the non-negligible costs being covered first....so that infers the treasury (or wherever the funds are coming from) get paid back what they fronted in expenses?

[crisp latch]

It is concisely stated and straightforward. I agree that clear definitions are essential and will avoid potential community/staker issues that could have come up.

The only question i have at the moment is in the example of a festival, many of the costs, both variable and fixed would need to be paid before any revenue is generated from the event (venue rental or equipment rental for example). Where do those costs come from? I would assume the vault. The concern is if there is a large enough event or a large enough up front (before revenue) cost for something, will that upfront cost have a noticable effect on regular distributions from the vault from other sources?

[peak timber]

Agreed- similar to MrFuzzle's thoughts, I anticipate a proposal for a festival would need to include alignment to funding the event and how to manage the situation if the event operates at an overall loss. For the intent of this ICCP, hopefully this grounds expectations of what funds would be sent back to the Vault for distribution. This proposal takes a more "after the fact" approach than defining what needs to happen before. Critical thoughts as the DAO considered live events! Thanks

[crisp latch]

Yeah. Its probably impossible or at lease extremely impractical to include every variable in this proposal. It seems to do a great job on grounding expectations.

I hope it passes, but perhaps to add language that says large events or anything that has upfront cost or could result in a net loss would need a proposal of their own to be passed before implementation.

[dry oxide]

Would it be practical to have a wallet for each non-negligible product? Say one for merchandise, one of events. That way we would be able to transparently track costs.

[crisp latch]

Funding all products out of the same wallet would still be transparent, albeit probably not as easy to make sense of as community members. Adding a new wallet for each event however, would create the meed to fund that wallet from the vault (or whatever souce) anyway though. I can see that adding a bit of issue with the community at large perceiving that funding as something that needs its own proposal/vote each time.

For example illuvifest is being planned and a proposal is approved that outlines the cost and those funds are transferred to the event wallet. A few unexpected expenses come up (as does with pretty much every event) and a nominal amount more needs to be transferred, say $1,000 worth of funds. I could see members of the community demanding another proposal and vote. This would take time and that time could seriously mess up the planning process. As opposed to if it all operated from the vault (or whatever source) I think it would be easier and better received by the community for the event proposal to include a range for event costs as opposed to additional individual transfers if costs are exceeded.

[peak timber]

something to consider. However, that feels like it gets more into an IIP. The intent here was to keep this proposal limited to defining revdis for each potential product stream enabling clarification and minor adjustments to previous discussions on Vault distributions, not adjusting the tracking or distribution.

[dry oxide]

I'm happy with the ICCP as written.

Just throwing out the idea, since how do we track costs was brought up. I think it could be written into IIP for each non-negligible cost product in the future: Where the funds come from. And that could be where it is determined if it comes from a new wallet, an existing one or what not.

[left falcon]

Agreed that cost tracking for individual streams can be determined as those streams go online. It would be a LOT to start thinking that far ahead and planning for cost tracking for things that aren't imminent, and quite possibly wouldn't do an adequate job if there are some unknowns we don't consider.

Individual proposals should be able to handle determination of where upfront payments are sourced from (would likely be the Treasury in our current setup)

[crisp latch]

Yes. Im sure more specific clarification will be needed for specific applications as they come up. But this broad language is needed as a groundwork and will allow a foundation to build other proposals and specific applications on top of

[dry oxide]

Wouldn't mind seeing one for Merch Store 😉

[crisp latch]

Yes. That's a great point. The merch store should have a proposal and specifics laid out.

Also, could we build an archive that categorizes and stores all proposals that have been approved and are active?

I know that information can be found somewhere but it is very difficult to look back through posts and track them down. Also what about someone coming into the DAO say a year from now. How would they find all of them. There needs to be a publication that contains all of the rules (for lack of a better word) cataloged in on place.

[left falcon]

Right now the "official" repository for proposals that have gone to a vote is Github (but Snapshot honestly works just as well).

I think most people will tend to use Snapshot to look over past proposals.

As far as collating all the rules into one place (like, across all proposals), that sounds like an updated Whitepaper more than anything. That is certainly something I'm interested in looking into more.

[crisp latch]

Ok cool. Where do i find a link to that?

If i missed it others probably did too. Perhaps male a read only channel that funnels people to it.

[left falcon]

https://gov.illuvium.io/#/

Can be found via #🔗〕helpful-links if you're looking in the future.

[crisp latch]

It seems like the white paper hasn't been updated in a while. It would be cool if someone was delegated to keeping it up to date every time there is a change.

Sometimes tso much os happening that I feel like if i go on vacation and dont check discord for even a couple days its so hard to catch up. That's a sign of growth amd its great but i think a solution needs to scale as scope and community grow

[left falcon]

I honestly think this might be a better endeavor to undertake in Gov V2, as there will be many more people involved. At this point, it doesn't just need minor updates (although that's a good way to handle things once its' up to date), it's going to need a pretty large overhaul.

[broken onyx]

Should you not address the Tier 5 Land revenue and things related that go to those land holders?

[solar shore]

As i am working on onboarding materials and things I would have to say the whitepaper needs an overhaul at this point. I'd be happy to help work on that if the other council members think its necessary

But this isn't necessary until gov V2 is live. Since its a giant component of the new and improved whitepaper

Oh blickter already covered it damn. My bad

[solar shore]

This is a really good point. I think its always case by case though. This proposal seeks to discern the difference between revenue and variable revenue and land doesn't really fall into those categories. I believe it has been determined the revenue from land goes to the land owner, regardless of tier.

The advertising and things on land is a unique concern but until the T5 kicks up im not confident we have enough information to draw up guidelines. A black and white statement could be good. Anything a T5 holder does with advertising etc is 100% on them. I suppose if illuvium helps them then that would be a unique partnership deal that is organised. And falls under this proposal

[left falcon]

Revenue from the sale of T5 land would fall under low variable cost goods (information goods) by this definition. Revenue sharing for things like the Arena on a T5 plot should be covered as a partnership, but would need to be defined further by a specific proposal or agreement between the T5 holder and the DAO.

I'll double back to what Deraji mentioned - The intent here is to categorize different types of revenue, and how revenue is treated in general terms based on the costs associated with the category of revenue stream. The intent isn't to make exhaustive rules for every specific sale or partnership that could arise in the future.

[broken onyx]

not talking about the sale of the plot, Kieran (im going from a long time ago) and probably fabricating this quote, and maybe some is bad memory, said something about revenue generated from these tournament partnerships etc are not all going to the vault

[left falcon]

It's possible something like that was said in the past, but it should be clearly defined when the T5 plots actually go on sale. Nothing has been formally passed to create such a structure for partnerships on T5 plots, and additionally the plots haven't been sold yet.

Regardless, that would fall under a proposal around the sale of T5 land plots, not necessarily the general treatment of revenue with fixed or variable costs.

I do think this proposal is robust enough with its' definition of partnership revenue to handle whatever solution is proposed.

[broken onyx]

ok, so we make up a scenario, someone Infringed on Illuviums rights, and agreed to pay a fine of $1,000,000,

how is it classified 😄

What's the definition of like a dev cost, in relation to a service that is outsourced for a "information" product. That these costs are all covered by the dev team?

[peak timber]

To me, that example is effectively licensing. It's just the agreement is done after the use.
As for development costs tied to this, in theory this is the creation an information product, which fixed costs are covered by the dao.

T5 is pretty clearly defined as no variable costs identical to the land sale.
I believe fuel sale has been defined elsewhere that the dao provides 19 fuel for every 1 provided by land owners (thus 5% to land owners). Fuel also clearly falls under non variable cost information item.

[vestal galleon]

Good proposal.
With regard to any items that ended up being a net loss, I think based on the proposal it seems pretty clear to me that the treasury would take the hit for that loss since the only time anything goes to the vault its from funds that are to be distributed to stakers. To this point it may be worth clarifying that vault funds should NOT be used to offset other losses or liabilities and anything falling under the category of variable costs should be deducted BEFORE funds are sent to the vault, not after.

On a nitpicky note I think ICCPs are intended to modify existing IIPs? So it may be more appropriate for this to be filed as an IIP rather than an ICCP.

[broken onyx]

A sad day in August, The Illuvium main office building burns down after Grant cranked up the rendering cluster, the power went out, and the backup deisel generated blew up and caused the fire. Insurance paid 1.2 million for assorted costs ranging from furnishings, to classic illuvium concept art from Rogier.

[peak timber]

I was debating the iip/iccp thing as well. Since vault distributions are mentioned in the white paper and the land sale revdis, it felt more a clarification of those than a new proposal.

[peak timber]

You're good at this! I need you to do some risk analysis with me. That insurance payout feels largely a 1:1 replacement for the damaged property. Should the dao deem those funds better spent on something else, I'm sure there can be another proposal to reroute those funds. Just spitballing.

[vestal galleon]

I would say IIP it since its the first time this specific topic has been addressed through governance. I look at the whitepaper more as an expression of intent for how the project will operate, not an official governance document. That or make it an ICCP modifying the existing IIP (IIP-22) relevant to revdis distributions as an added clarification.

But not really a big deal either way.

[broken onyx]

very analytic thinker... probably too much thinker

[ocean igloo]

No brainer ICCP @peak timber

Next.

[potent pollen]

well done!

[stray spade]

Looks good. Send it.

[glacial sandal]

So DAO treasury pays for the legal fees associated in defending IP rights in this case and not deducted from the settlement?

[rain mortar]

Great ICCP @peak timber … it stands to reason that what should be distributed is actually profit. Revenue minus expenses. But the fact that this is defined by revenue type is great for all ILV stakers as the rev dis concept is so universally appealing to investors and gamers alike.

[rancid glacier]

@glacial sandal If that is the case. The DAO treasury should be reimbursed after the settlement is claimed. IMO.😁

I think that law suits and other legal litigations should have it's own ICCP. Because those kind of things have a potential to bankrupt companies.

[peak timber]

Much like the festival question above, this feels like another proposal before taking action and agreeing how to support such effort. As you say, there's likely a large upfront investment required and also no guarantee of success. In such case, the dao needs to determine how to proceed and how to reimburse the funds if the ruling isn't in the dao's favor.

[glacial sandal]

Will try to recommend a generic "formula" to supplement the iccp. But overall this is a great step.

[peak timber]

Actually, the legal defense falls under the same criteria as events. Revenue is reduced by fixed costs outside of the core competency of game development. Litigation definitely outside, so I would reference that in how to handle potential judgments should the dao pursue such a case.

Just like any of us tied up in Celsius, gemini earn, ftx, etc., the lawyer share always gets taken off the top.

[zinc oar]

Looks good. Lets pass it through.

[inland ruin]

Huh. I’d never thought of an ICCP being a modification of an IIP, but I see how they could definitely work that way. I saw ICCPs as a reconfiguration of variables in any system already in place.

[vestal galleon]

I dont really disagree with this.

The way I look at it, a variable must have been initially set through an IIP in order for ICCP to reconfigure it. If there was never an IIP to set something up in the first place then theres nothing to reconfigure and it should just be an IIP to set up the initial configuration.

[inland ruin]

When looking at this proposal It’s helpful to accept that the scope of Illuvium has changed. The deduction of costs seems reasonable. I appreciate the leeway it gives to partner with third-party platforms. If some day the Apple App Store is possible…the 30% cut would likely be worth the additional market access.

[solar shore]

This is reconfiguring the whitepaper. Which is kind of like the original document that iips are used to build upon. Does that count?

[peak timber]

that was my theory - whitepaper is basically founding governance.

[glacial sandal]

Hi <@&814435151307866142>, finally had time to go over the document again.

I understand the context of the document but I got confused where you had to spell out what would fall under what and went into detail what they are (e.g. Commission and Affiliate Marketing; Partnerships & Licensing; Event/Experiential Products)

Wouldnt it make more sense to just define what constitutes "Negligible or Non-negligible Variable Cost Products" in terms of threshold amounts or even ratio/percentages? That way regardless of stream of income if conditions hit the threshold they automatically be considered as a non-negligible variable cost and you apply "less variable cost".

Also, I would suggest we tackle here who pays the upfront costs of events whether it be a marketing event, or a litigious event, or any similar events which needs upfront costs.

[peak timber]

We talked this a bit more at the council meeting this week (hence why this hasn't gone to vote yet despite support, though I do expect it to be voted on in the next few days). Overall, preference is to keep proposals simple. As we get into specific products or instances, future proposals can clarify which revdis terminology they fall under. As for the upfront costs, that also feels more relevant to specific future proposals. The details on whether the DAO should embark on a new venture and understand funding associated upfront costs would be specific to the venture, and not a blanket statement that the DAO will always pay upfront. There may be other partnership, loan, or funding opportunities that mitigate risks or even alternative community investible options that would be better keeping these details in the proposal versus this generic definition of revdis.

[glacial sandal]

In most laws and even in corporate by-laws you define the general rule and only spell out exceptions which you outline specific conditions for it to be considered as an exception. Here it seems like were putting general applications on specific circumstances. This then make it seem that the negligible or non-negligible definitions only applies to these things specifically laid out in the ICCP.

[peak timber]

There's a new version being worked on that simplifies this proposal, removing the examples. I believe they helped clarify the discussion, but the final approved version is likely to be stripped down to only the definitions.

[glacial sandal]

Ah great! Looking forward to reading it. Im for simplifying things and defining general/blanket conditions which any current or future events can be applied to. Thanks for the clarity Deraji

[left falcon]

Updated version: https://docs.google.com/document/d/1X3YCBPnVXLg1hyw_PnkSxVlkVSTMrq72sqg8v8tbDCo/edit?usp=sharing

[wind moth]

ICCP-3 Defining Vault Revenue and Distribution for Future DAO Product Directions

[Voting On]ICCP-3 Defining Vault Revenue and Distribution for Future DAO Product Directions

[solar shore]

Hahahah you think like me 😛 I like defining things bound within ranges and the like. But there are just too many variables and I suspect strict boundaries will cause more problems than it solves in the future unfortunately.

[wind moth]

ICCP-3 Defining Vault Revenue and Distribution for Future DAO Product Directions

[glacial sandal]

But thats what you guys are doing with the ICCP. You listed three revenue streams and outlined if theyre negligible or non-negligible or could be both. Ex. Partnerships & Licenses are pigeonholed as non-negligible and negligible variable costs respectively.

Id like to still push general conditions where it defines what revenue stream falls under negligible or non-negligible. Rather than dictating it already with these 3 revenue streams lets craft it that we can future-proof its application.

[peak timber]

I disagree, and under the proposal, it is up to future proposals to clarify which definition of distribution they fall under. As we said in hypotheticals earlier, getting clear on conditions invites more caveats and exceptions, which make the definitions more unwieldy. Partnerships and licensing are likely to be significantly common to justify further clarification. At its heart, the proposal is about negligible and non-negligible variable costs, and what is the core competency of the DAO's standard development operations.
If I were to step back and entirely rewrite this, the only critical elements are as follows:
Negligible Variable Cost (Information) Products - products (typically information products) that scale with negligible increase in cost shall send 100% of all revenue to the Vault.
Non-negligible Variable Cost (Physical) Products - products (typically physical products) that incur non-insignificant costs as they scale shall send 100% of all revenue LESS variable costs to the Vault.
Everything beyond that is more nuanced to address either current or future proposals, and how additional costs are borne by the DAO and setting $ILV staker expectations.

[glacial sandal]

Thats exactly my point. Mentioning these 3 streams made the proposal confusing. The overview and definition was enough. Theres no need to expound on the specific streams unless your dealing with absolutes or exceptions.

Absolutely agree to maintain the critical elements you mentioned and the overview as to why dao has to define these and in what context.

I would prefer that a process is also outlined for future council members to be guided by a framework in determining what applies to that project or revenue stream. This is to avoid instances where there is inconsistency in applying what falls under negligible and non negligible. But thats just me.

[dry oxide]

I think to simplify we could just define"Negligible Variable Cost Revenue" and "Non-Negligible Variable Cost Revenue".

Then let's get a merch ICCP written and group these together like with safety pool IIP and illuvitar ICCP.

I really like how that discussion is going and we have an overview and an example of use separated out.

[wind moth]

[VOTING] ICCP-3 Defining Vault Revenue and Distribution for Future DAO Product Directions

<@&814435151307866142> Snapshot vote for ICCP 3 is LIVE https://gov.illuvium.io/#/proposal/0x245e440c3b517a0b7a7ff11c2c038cfd96c503ab9cbf3e593bd8d7c73cd07fae

Updated shortened ICCP version: https://docs.google.com/document/d/1_bTBXcSOrMieU3CMoTcsXqXb5poLzgJF2lkUaKEVQ-I/edit#heading=h.hd8acdz0vjvy

[wind moth]

[VOTING] [PASSED]ICCP-3 Defining Vault Revenue and Distribution for Future DAO Product Directions

[PASSED]ICCP-3 Defining Vault Revenue and Distribution for Future DAO Product Directions