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Any initiative led by a founding core team faces at some point a shortage of specific skills and competences that are key for the growth and outreach of the project: developers, UX designers, influencers, community managers, business mentors or advisors, attorneys and others.
Most of those initiatives, from startups to open source projects, rely on a small amount of funds that are in most cases not enough to cover the costs of hiring employees or contractors to deal with the project challenges.
On the other hand, many professionals are open to join ventures as contributors by investing their own time in a promising project acknowledging there is no immediate revenue but a valuable opportunity to grow professionally, extend their professional network and maybe even participate in the upside if the project is successful in the market.
Founders and contributors perceive the future value of the project taking in account the work needed to reach sustainability and the high risk of failure.
Sweat Token offers a set of tools for founders and contributors to track effectively the work done on an early stage project.
The scope is to track in an transparent, verifiable and immutable way the actual value delivered to the project based on pre-agreed value amounts and commitment levels - either measured via time and materials effort or milestone deliverables.
Founders provide the project objectives or high-level activities needed to achieve the expected results. Contributors can pick a milestone or provide a continuous commitment based on their skillset or availability threshold. Once these basic rules of engagement are agreed upon, contributors can submit on a weekly or monthly basis their achievements along with the associated value provided for review.
Founders are responsible to review and approve, ammend or reject these achievements with the associated value in an agreed upon reference currency (USD, EUR, BTC, ETH, or another token). When there are disagreements, founders and contributors can resolve through a dispute management workflow. All these interactions about value exchange are ultimately recorded on-chain.
Founders are incentivized to fairly recognize contributor value or risk losing contributors. Contributors are incentivized to fairly assess the value of their work or lose participation in the project.
The risk for either party is limited to the scope of the report reconciliation period and recording results on chain. Therefore a reasonably short period - one week - for example provides a balance between value at risk and project management overhead.
When (and if) the project gets traction and grows in value, founders can convert their project Sweat Tokens to Governance tokens that are then distributed to the participants. Those tokens can then be sold as actual money or kept as shares in the project.
There is a long term risk in founders delaying the rules of conversion from Sweat Tokens to project governance tokens. While it is not always practical to decide on governance tokenomics before the project has an MVP and some minimal market traction, it is also undesirable for founders to delay the process for too long and risk losing their contributor’s commitment.
In some cases founders may choose to decentralize their project early on and come up with governance rules that progressively issue governance tokens to contributors based on the current value of their contributions as the project is being built. In other cases founders may choose to delay the process until product market fit is established and governance tokens are distributed retroactively via air-drops based on metrics related to user growth impact (an example for this option is the ENS airdrop).
Whichever way founders choose to transition from Sweat Tokens to governance tokens, there will be a permanent public record of contributors participation. Over time the relationship between successful project tokens and their early contributors will become a basis for measuring founders and investors on their fairness in rewarding contributors. This on-chain reputation system will influence contributors’ choices going forward.
In the Budgeting and Contributor Rewards workflows page there is the ongoing work of defining how the inner smart contracts should interact to enable a seamless experience to founders and contributors.