Disclaimer: This post does not constitute financial or legal advice. Please conduct your own research and consult with a professional before making any decisions.
The Submission below is for the DAO Design Contest. Thanks to @thedevanshmehta for helping me draft this proposal and @sejal_rekhan for telling me about this contest.
ALLO DAO Tokenomics Proposal
Highlights
- Position ALLO DAO as a prediction market for the ecosystem growth funding space.
- Make ALLO GMV redeemable for veALLO or betting credits. Donating in Gitcoin rounds, Octant epochs, and other mechanisms using the ALLO protocol now gives credits to bet in the capital allocation prediction market.
- $ALLO may also be purchased and staked to obtain a fixed number of veALLO every month.
Proposal Categories
Non-financial
- Do not make any requests of the ALLO fund or its venture studio.
- This serves as a Schelling point for the space, giving value as a social space.
- Resolution in these markets is done by the player creating it, similar to manifold markets (challenge is possible by staking $ALLO).
Example:
- Will GainForest win the X prize?
- Will buidlguidl be the top-performing project in the GG23 retro round?
Financial
- Request resources from the DAO.
- Such proposals must have resolution criteria that add to the treasury sustainability.
Example:
- A new funding mechanism seeks {GTM, funding, marketing, audits, recruiting} from the ALLO treasury.
- In return, ALLO treasury will get 1% on all GMV through this mechanism.
- By accepting this ask, predict whether the treasury will earn $100 by August 2026.
Governance
There are 4 principal stakeholders in the ALLO ecosystem:
- Players – Create proposals to access funding from the treasury based on successful market conviction.
- Predictors – Analyze proposals and place bets on project outcomes using veALLO. They can earn $ALLO and reputation badges for accurate predictions.
- Proctors – Onboard new participants, help players with market creation (setting base rate or initial price), serve as arbitrators for predictors in case of dispute, and handle other required roles.
- Prospectors – Supply capital to the ecosystem. They can earn veALLO for donating through funding mechanisms like Gitcoin or Octant that use the ALLO protocol. As investors, they can earn newly minted $ALLO in exchange for deposits in the protocol-owned pool or DAO treasury, redeemable upon fund closure.
Reward Mechanism Proposal
- Players – Paid via trading fees based on the volume of the market they have created.
- Predictors – Paid based on whether they make accurate predictions.
- Proctors – Paid from financial proposals and receive a fixed salary from the 2% management fees from the ALLO fund (serving a similar role as a neutral foundation).
- Prospectors – Paid based on ALLO fund returns and dividends from fees earned by the protocol.
Value Capture
- Every financial proposal to ALLO for a new funding mechanism should commit to a splits contract with weights that include the share returned to the ALLO treasury.
- Example: A splits contract allocates 95% to projects through a novel mechanism. 5% is for the mechanism builders, of which 1% is for support from ALLO in GTM, recruiting, funding, marketing, audits, and introductions.
- Predictors lose their stake if they make an incorrect prediction, ensuring they have skin in the game.
- Non-financial proposals boost the network effects of the ALLO protocol by driving usage, attention, and creating a utility for mechanisms to integrate with ALLO protocol, giving their users free betting credits.
Value Token: ALLO Core Functions
- Staking & Voting – Lock $ALLO to receive veALLO for governance and prediction market participation.
- Rewards & Slashing – Earn $ALLO as yield for accurate predictions; incur slashing for incorrect ones.
- Liquidity & Redemption – Burn $ALLO to withdraw equivalent value from a protocol-owned liquidity pool, establishing a redeemable floor and unlocking more capital for deployment.
- Dispute Resolution & Proposal Initiation – Burning $ALLO is required to submit proposals or disputes, ensuring participants have “skin in the game.”
Risk Management
- Price Stability – Funders contribute to the protocol-owned liquidity pool, and automated market makers (PAMMs) help dilute treasury holdings when prices exceed set thresholds.
- Capital-Backed Minting – All $ALLO minting is tied strictly to capital inflows—whether from community purchases via PAMMs or yield rewards from successful predictions.
- Emergency Circuit Breakers – If reserve coverage drops below a defined threshold, minting and burning activities are halted to safeguard liquidity.
- TWAP-Protected Pricing – A Time-Weighted Average Price (TWAP) smooths short-term volatility and defends against price manipulation (e.g., flash loan attacks), ensuring pricing reflects sustained market trends.
Value Distribution
- Accumulation – ALLO GMV earned by contributing in GG rounds, Octant epochs, etc., can be spent as veALLO in the prediction markets.
- Example: devansh.voicedeck.eth donated $100 in all GG rounds and Octant epochs; he has 100 veALLO.
- Delegation – If devansh.voicedeck.eth does not use his 100 veALLO, it can be used by the mechanism through which he donated. His VP is delegated to Octant & Gitcoin.
- Staking – Users can procure extra betting credits by purchasing $ALLO and staking it, which gives them a fixed number every month.
- Example: devansh.voicedeck.eth stakes 100 $ALLO and receives 100 veALLO per month.
- Returns – The ALLO fund follows a typical 2/20 structure:
- 2% – Pays proctors
- 20% – Used to redeem veALLO
- 80% – Goes to funders
Market Resolution Example
- Alice requests 10,000 USDC from ALLO DAO to launch GreenToken (GTN), burning $ALLO to submit her proposal.
- Prediction Market:
- Charlie bets on success (1,000 veALLO)
- Bob bets against (500 veALLO)
- With 70% confidence, the DAO approves 10,000 USDC.
- Alice swaps 14,000 GTN for 10,000 USDC with the DAO.
- GTN triples in value; the DAO sells for 30,000 USDC, making a 20,000 USDC profit.
Outcome:
Charlie wins $ALLO rewards
Alice succeeds
Funders profit
Bob loses
DAO grows → Everyone wins!
Community OS
- Leaderboard – A ranking system showing the most accurate predictors and best bets. This leaderboard should NOT be gameable by simply throwing a lot of money.
- User Interface (UI) – Similar to Manifold markets or Polymarket.
- Implementation – Aragon’s custom plugin module is preferable over Governor contracts for building it out.
