Executive Summary
The Decentralized Market Network (DMN) represents a fundamental rethinking of how decentralized organizations coordinate and allocate resources. While DAOs have attempted to graft traditional organizational structures onto web3, The DMN embraces the core strength of our ecosystem - the Internet of Value - by making capital flows and market signals the native language of governance.
At its core, The DMN uses price discovery to automate funding streams to projects. Each project launches a token (e.g. PROJ) that trades against a network token (e.g. ALLO). The trading price determines ongoing funding levels directed to the project. This creates a system where decision-making is downstream from market signals, generated through aligned actors with skin in the game. Liquidity becomes the vote. Value creation becomes the fundamental mission.
Key innovations include:
- Automated funding streams using Uniswap v4 hooks and price oracles
- Market-based curation through a liquidity bootstrapping system
- Incentive-compatible answers to common governance failure modes
- Aligned value capture through token sinks, trading fees, and project token upside
Instead of slow, governance macro-decisions, The DMN enables permissionless micro-decisions compressed into one reliable indicator – price. By replacing voting with skin-in-the-game participation, we can better harness distributed intelligence while avoiding the pitfalls of traditional governance such as preference falsification and low participation.
Governance Model
The DMN replaces traditional governance with a market-driven coordination system that aligns economic incentives with positive-sum outcomes. Rather than relying on votes and proposals, The DMN uses market signals and locked capital to drive decision-making.
Core Mechanism
Projects receive funding through a streaming mechanism determined by their token’s price relative to a target:
IF Target Funding * min(x, TWAP)/x >= Minimum Funding
THEN Stream = Target Funding * min(x, TWAP)/x
ELSE Stream = 0
Where:
x represents a price target
& Target/Minimum Funding are Project specific requests
This system creates a direct feedback loop between the market and resource allocation.
The DMN needs to accommodate funding requests of all shapes and sizes. We don’t want a $100 request subject to the same capital rigors as $100k. Both can have positive ROI, so we need a framework to reason about relative sentiment across projects. We balance PROJ token supply and liquidity requirements with budget size. This creates a common price evaluation threshold to adjust funding streams.[1]
The DMN is designed to be a launchpad for tokenized products to reach escape velocity without being overly prescriptive of what that journey might look like. The lifecycle for a DMN project includes four market-driven phases:
- **Initialization **- Project details are submitted for open review
- Sponsorship - Market participants lock ALLO to bootstrap project liquidity
- Funding - Automated funding streams according to market performance
- Graduation - Projects reach sustainability or face increasing market pressure
Initialization Phase
Teams and individuals submit requests for funding to The DMN platform including:
- Project description
- Team composition
- Minimum funding rate
- Target funding rate
- Initial funding duration
- Team pre-allocation
These submissions are the projects’ offering to the market. Instead of looking to dodge a committee of potential NO’s, they’re looking for one or more enthusiastic YES’s.
Sponsorship Phase
Sponsorship is a liquidity bootstrapping phase and The DMN’s primary curation mechanism.
Any participant can become a sponsor by:
- Committing ALLO to projects
- Locking their PROJ token for the duration of the project’s planned funding stream
- Accepting UMA’s challenge process as arbitration
To advance to the funding phase, a project must attract enough ALLO liquidity to unlock their minimum funding request.
**Example: **
A project requests $10k/mo for 5 months with a minimum of $6k/moThe DMN’s current funding-to-LP requirement ratio is 1:1The required PROJ LP token supply would be 50k (1 * 10k * 5 mo)It would need to attract 30k ALLO to advance to funding (50k * 6k/10k)Sponsors would own 50k locked PROJ (30k/.6)
See this calculator to create your own market (with a couple more variables):
During this phase, multiple sponsors can commit ALLO to reach a project’s liquidity threshold. Because sponsor PROJ is locked, funded projects are guaranteed at least their minimum budget and duration—creating stability for projects to focus on building.
Funding Phase
Upon successful sponsorship, pooled ALLO and the corresponding PROJ token supply are launched as a new LP position. DMN pools utilize custom Uniswap v4 hooks to enact stream rate updates based on each trade.
IF Target Funding * min(x, TWAP)/x >= Minimum Funding
THEN Stream = Target Funding * min(x, TWAP)/x
ELSE Stream = 0
Where:
x represents a price target
& Target/Minimum Funding are Project specific requests
Every LP opening price will correspond to the project’s minimum funding request rate and begin streaming to the project team (via Superfluid protocol).
Graduation Phase
The DMN launchpad provides projects with the runway to reach independent sustainability. That journey is never a straight line. Some may never get there. The market is the best gauge of whether the project is on the right path.
When the initial funding window ends, sponsor PROJ will unlock—creating enough liquid supply to theoretically push PROJ price below the minimum funding threshold.
Optional Extension
Does the team need another couple of months of funding or is the writing on the wall? Sponsors, traders, and the team will vote with their wallets.
To ensure it’s not offering a free lunch, The DMN begins programmatically minting and selling PROJ into the LP position. This is compensation for funding beyond the initial request. It mimics the supply/liquidity dynamics used to launch DMN projects. The rate at which The DMN sells will be higher than the initial funding request ratio and may increase further over time.
Projects that no longer require funding may voluntarily and permanently close their stream at any time to avoid further dilution.
Team token pre-allocations are only unlocked after their funding stream is closed (plus a short delay). This provides the market time to react to an abandoned project before insiders.
Reward Mechanism
The DMN functions as a launchpad for real products, where success is reflected by price over time. Through a standardized market framework, the system creates aligned incentives that guide all participants toward long-term value creation.
Stakeholder Perspectives
The DMN operates with three key participant roles, each benefiting from structured incentives:
Project Teams
Projects receive early, predictable capital and stake in their own products. They gain continuous market feedback that helps guide development and strategy, incentivizing teams to stay focused on demonstrating value. Consistent delivery and market confidence establish a track record. Successful teams may attract future funding and partnerships both within and beyond The DMN.
Sponsors
Early supporters play a crucial role in project evaluation and launch. Sponsors gain high-upside positions in promising ventures by entering the foxhole with the project team. Their liquidity is locked through the initial funding cycle.
As projects succeed, sponsors build reputation as evaluators. This reputation compounds across multiple projects and creates more opportunities for sustained returns.
Traders
By structuring launches with consistent parameters, The DMN simplifies evaluation for traders. Instead of navigating complex, one-off tokenomics and insider dynamics, traders can focus on identifying high-potential projects.
While speculation is possible, the greatest rewards go to those who recognize and support long-term value. As projects graduate from The DMN and expand their scope, early supporters can realize significant returns from their initial conviction.
Value Capture & Distribution Framework
The DMN employs standardized value capture mechanisms that create consistent value flows—scaling with project success and market activity.
ALLO Token Sinks
A robust DMN market drives demand for ALLO while reducing available supply:
- Projects must attract locked ALLO to start their funding stream.
- ALLO is required for open market PROJ token purchases.
- Project funding cycle extensions trigger ALLO buybacks via PROJ token mints.
Trading Fees & Market Activity
- All trading activity in The DMN markets generates fees that flow back to the treasury.
- Projects must maintain sufficient market interest for continued funding.
Project Token Upside
The DMN can grow to represent a basket of successfully incubated projects:
- Projects allocate a portion of their tokens to The DMN at launch.
- Successful projects help diversify The DMN treasury.
Technical Treatment
Smart Contract Architecture
In order to reduce contract risk, we aim to source existing, well-used protocols as key components in our design. Below is an explanation on each protocol The DMN integrates with, how it’s used, and why we chose it.
Allo Protocol V2
We plan to use an Allo strategy to manage the lifecycle of each project. It’s the wrapper that we use to orchestrate every other component with the system. This is where the project owner sets their initial token parameters and preallocations (registerRecipient), and where the pre-allocation funding is sent (allocate). Once the targets are met, this strategy is responsible for creating the Uni V4 LP, the PROJ token, and activating the Superfluid stream (allocate). We also use the strategy to distribute PROJ to the sponsors and the project team (distribute).
Due to its process-oriented nature, Allo is a natural fit for standardizing the flow of projects across The DMN. The Allo Registry also allows projects from other platforms like Gitcoin to onboard onto The DMN.
Uniswap V4
The DMN utilizes Uniswap v4’s hook system to create the desired market dynamics for project funding. Through hooks, the protocol monitors Time-Weighted Average Price (TWAP) for each project token pair. With each trade, hooks route trading fees back to The DMN treasury and update the project’s funding rate. This creates an autonomous mechanism where market activity directly drives resource allocation.
Superfluid
The Superfluid protocol offers the ideal value transfer method for The DMN’s continuous, dynamic funding model. All DMN funding streams are implemented as Constant Flow Agreements (CFA) between the treasury and the project addresses. The CFA stream rate is set, updated, and closed based on the Uniswap v4 hook logic. Projects may also manually and permanently close their stream.
UMA Protocol
The DMN leverages UMA as a security backstop for the sponsorship system. Any participant who suspects malicious behavior can challenge a Sponsor by posting a bond through UMA’s challenge mechanism. If the challenge succeeds, the malicious Sponsor’s liquidity is claimed as a reward, likely pushing the project below its minimum funding threshold. This creates a permissionless yet secure sponsorship system where bad actors face economic consequences without requiring complex delegation or reputation systems.
The Platform
The DMN is a unified application, not just a mechanism. Traders, sponsors, and project teams can find the information they need to make informed decisions on The DMN.
Metadata and Content
It’s important that we are storing immutable data and allowing users of the platform to communicate their intentions. For example, when a sponsor decides to commit funds in the preallocation, we should capture some of their reasoning. This builds excitement around each project, while also creating valuable history for every profile involved.
Social Elements & Liveness
The DMN aims to provide projects with detailed profile features that give them as many avenues as possible to showcase their ideas, progress, and completed work. Due to this higher degree of transparency, traders gain more visibility into the real progress of each project, which in turn further allows projects to compete on their merits.
Liveness is also an important element of the application’s design. The DMN will display a real-time feed of activity, similar to other token-launch platforms (ex. pump.fun), in order to build anticipation, energy, and interest.
Community OS
The DMN represents a fundamental rethinking of how decentralized organizations coordinate and allocate resources. Rather than iterating on traditional governance models, we’re building a system that embraces the power of decentralized markets.
Our mission is to create a self-sustaining engine for funding innovation.
Core Values
Skin in the Game
By making capital flows the language of governance, we ensure that every action carries weight. When participants stake value behind their decisions, distributed intelligence is distilled into a singular representation of collective intention — price.
Long-Term Value Alignment
Through carefully structured constraints and graduated unlocks, we create an environment that systematically rewards sustainable value creation while making short-term exploitation unprofitable.
| “Play long term games with long term people.” |
- Naval Ravikant
Transparency
In The DMN, all meaningful activity leaves an indelible trace on-chain. Reputation isn’t built through social positioning – it’s earned through demonstrated performance and verified outcomes. This creates an environment where trust emerges from observable actions.
Market-Driven Evolution
The DMN’s structure enables organic evolution through market signals. Successful patterns emerge and failed experiments fade without requiring consensus.
Regulatory Considerations
Memecoins became the meta not just because they require little effort, but because they had credible safe harbor from (overbearing) securities laws enforcement. No future value, no security!
But that’s clearly not the world we want to optimize for. We want to incentivize and support building ambitious new things.
The regulatory winds are changing, but the new design space is not yet clear.
IRL legal frameworks like Colorado’s Limited Cooperative Association and Wyoming’s DAO LLC offer potential foundations on which to implement The DMN in a regulatory-compliant way while maintaining core values like decentralization and broad economic opportunity.
The DMN is designed at every step to mitigate the impact of information asymmetry and bad actor attack vectors to create a level playing field for willing market participants. This is what securities laws and disclosures are ostensibly designed for. Their current gatekeeping role is a result of their outdated assumptions and technology.
If Allo.Capital wants to fund future innovators—not memes or wink-wink valueless governance tokens, we believe we must push into the frontier with eyes wide open.
Endgame: Network Effects & Capital Scaling
The DMN is a network, and Allo is one funding node on this network. Because the DMN is not shaped as a monolithic organization, the architecture should naturally evolve to support multiple funding nodes or sources. Each new funding entity can launch their own token and begin offering streams to projects, leveraging the same market infrastructure and security mechanisms.
For example, a successful project – who would have originally launched a DAO – could now simply integrate into The DMN. As more funding sources join, they benefit from:
- Access to a vetted network of builders
- Market intelligence from existing project performance
- Standardized launch and funding infrastructure
For projects, multiple funding sources create:
- Access to larger capital pools
- Diversified funding streams
- Stronger market validation signals
- Better deals due to investor and backer competition
This evolution strengthens the entire ecosystem. Each new funding source adds liquidity, market activity, and validation mechanisms to the network. In the end, The DMN self-replicates across the ecosystem, scaling horizontally from Allo.Capital as sole funding node, to a vast fractal network of funding sources and intellectual capital.
Notes
Market Cap = Token Supply * Price Per Token—so in short, setting the per token price target in The DMN entails increasing the token supply for larger project budgets at launch. ↩︎