This article will cover:

• Overview of DAO Compensation

• DAO Compensation Structures and Working Groups

• How DAOs use Coordinape

• Native Token Compensation Incentives

• Hybrid Compensation Models

Let’s dive into the current state of DAO compensation, what’s working, what isn’t, and what different DAOs are doing.

DAO Compensation Overview

The DAO compensation space is complicated, inconsistent, and varies based on the individual needs of the DAO and the needs of different workstreams within the DAO. However, one need remains consistent: flexibility.

DAO structures are constantly changing, and so are the needs of DAO contributors.

Some DAOs have incredibly flexible compensation structures that require each contributor to submit a proposal for each project they complete/each payment they request. Other DAOs allow contributors to choose compensation structure (% in native token vs. stables) or break compensation down into different workstreams, where is structure is voted on for each individual workstream.

Compensation Structures and Working Groups

It’s important to have clear, transparent compensation guidelines, but flexibility is critical in keeping up with the evolving nature of any DAO. Here’s where working groups / workstreams come in, which you’ll see mentioned a lot throughout this article.

DAOs like Index Coop, CabinDAO, Lido Finance, ENS, and Gitcoin create different workstreams for greater composability when it comes to compensation. Each workstream creates its own budgets, proposals, and compensation structures. This is useful because DAO has different functions, and each function has its own needs. Working groups allow for each budget and compensation structure to be tailored to the individual needs of each specific function of the DAO. Budgeting for each working group is typically broken up in quarters, which many DAOs refer to as “Seasons”.

Other DAOs like Yearn Finance and DXdao use a tier system to create different compensation structures based on the level of commitment from each contributor.

Many DAOs who have adopted workstreams use Coordinape to allow each workstream to determine their own compensation, where DAOs who use a tier system often have a set compensation structure. While some DAOs split the entire DAO into workstreams/working groups, others only use them for their part-time contributors, and create completely different structures for their core-contributors.

Before we go into detail on compensation structures, let’s dive into Coordinape and why it’s an extremely useful tool for DAOs.

What’s Coordinape?

Coordinape is a powerful tool that focuses on DAO compensation allocations. Coordinape, which emerged from Yearn Finance’s grant program (we’ll touch on Yearn later), is all about deciding compensation.

Contributors use the platform to report and validate the work they’ve done, and have their peers decide on the appropriate allocations. At the end of each period, contributors will receive a % of GIVE tokens out of the amount dedicated to the working group within the DAO, and the contributor will receive that % of the total working group budget (in stable coins or native tokens, varies by DAO) as their salary allocation.

100s of DAOs are currently using Coordinape, including DAOhaus, BanklessDAO, Index Coop, Yearn Finance, and Seed Club.

Bankless uses Coordinape to compensate their part-time contributors, which are split into 3 sub-groups: Level 1 contributors, Level 2 contributors, and Guess Pass holders. Each level receives a monthly allocation of 500k BANK, and contributors in each level will determine each others BANK allocations using the Coordiape platform. Like other DAOs, Bankless keeps its core contributors on a set compensation structure. See their Snapshot proposal along with the proposal specs for a detailed outline of the DAOs compensation for “Season 4” (5/2/22–7/29/22).

While some DAOs use Coordinape for all contributor reward allocations, others use it for a specific tier of contributor, and create different compensation models for their “core” contributors. Let’s dive into what these structures look like and how they vary across the top DAOs.

The Different Compensation Structures of DAOs

Many DAOs, as mentioned above, split their contributors into different levels and tiers. Certain levels receive only stables, certain levels receive only native tokens, and in some cases, a mix of both! This varies across each DAO. Let’s look at a few different DAOs and how they aim to incentivize contributors to mission-align with the DAO while minimizing impact to their treasury.

Native Token Compensation Incentives

DAOs like Lido Finance and Yearn have created incentive programs to discourage contributors from dumping the DAOs native token. By locking your tokens, the DAO gives you the opportunity to earn an extra % on-top of your native token compensation based on how long you agree to lock your tokens. ShapeShift has used this strategy as well, which we’ll dive into later in the article.

Why are these incentives important?

Let’s look at one of the top DAOs, who does monthly payments rewarding contributors with a significant amount in their unlocked native token. In 2022, there were 5 payment distribution days that resulted in a negative price impact. Across these 5 dates, 85% of all payments sent in native tokens were sold almost immediately, resulting in an average negative price impact (within 48 hours of payment distribution) of ~6%.

Another top DAO, who pays contributors more unlocked native tokens than stables for their salary, sent more than 50% of their 2022 payments on one distribution day, leading in a negative price impact of ~11%.

These examples show how sending contributors unlocked tokens, while not letting them choose their compensation allocations, can lead to immediate and significant dumping of the DAOs token on the open market. On the other hand, across a certain DAO’s most frequent contributors, only ~30% of all native tokens paid were sold, which can be accredited to the ability for contributors to stake their tokens (>20% of all native tokens paid were staked).

DAOs are combatting this issue in different ways, so let’s dive into how a few of them are doing so.

Yearn Finance

Back in April, Yearn’s Chris Eberle spoke about their new compensation structure at the DAOist GGG in Amsterdam, where he outlined what makes their compensation philosophy so unique.

The DAO splits their contributors into 4 levels:

• Entry: receive bug bounties or individual payments

• Contributor: through Coordinape, where payments are determined by peers

• Trusted contributor: No set standard; this can be grants or project-specific payment requests for a specific amount of time

• Doer: full-time/core-contributors who follow their streamlined compensation strategy

Before the streamlined strategy, compensation became a new conversation for each team member, there was little payment transparency, and all YFI (Yearn’s native token) came with a “no-dumping” understanding. The DAO decided this was unfair, as contributors need to meet their short-term financial needs.

Yearn addressed all these problems with their upgraded compensation plan. Now, all compensation to their “Doers” is in the stables. Contributors are given the option to buy YFI with the compensation they received that month in stables. As seen in the table below, contributors can buy VFI with a time-lock, with a minimum of 1 month and a maximum of 4 years. The longer the lock-up period, the greater discount the YFI can be bought at.

Upon using stables to buy discounted YFI, it will immediately be locked for the chosen time-period and returned in veYFI. Not only does this structure help contributors meet their short-term needs, it also encourages them to buy into the DAO, mission-align, and participate in governance, all while keeping YFI off the liquid markets.

Lido Finance

Lido has 83 contributors spread across 20 workstreams. Each workstream is allocated both LDO & DAI for compensation, with a larger sum in LDO (Lido’s native token). LDO is distributed to contributors with no time-lock, but contributors are given the option to earn a bonus on their LDO.

Lido’s Long-term Incentive (LTI), which was just proposed in early July, allows contributors to earn a bonus on their base annual salary by locking LDO: 1 year cliff with 3 year total sequential monthly vesting.

MakerDAO

While they compensate their “recognized delegates” (part-time contributors) in DAI, MakerDAO differs from Lido and Yearn as the compensate their core contributors exclusively in MKR (MakerDAO token). Core contributors are rewarded in vesting MKR: 3 year vesting period with a 12 month cliff. After the first 12 months, MKR will vest every 3 months until the end of the 3 year vesting period. The DAO uses the trailing 6 month average of MKR price used to calculate USD value for MKR payout, but allows for manual pre-pricing to prevent contributors being punished by negative market conditions. This strategy is a great way to mission-align with contributors and keep tokens off the open market, but not all contributors can afford to only receive their compensation in illiquid tokens.

USDC, or Stables, That is the Compensation Question

Compensating contributors in only stable coins can quickly drain a DAOs treasury and shorten their runway, while compensating in only native tokens leads to contributors dumping their tokens to meet their short-term financial needs, often leading in negative price impacts for the DAOs native token. Certain DAOs are starting to ask; why not compensate contributors with a mix of both?

Hybrid Compensation Models

DAOs like ShapeShift and DAOhaus (both on Gnosis Chain) are using hybrid compensation models to send contributors a mix of stablecoins and native tokens locked inside NFTs. This model is a compensation powerful tool that more DAOs should explore to help weather the bear market.

DXdao, Seed Club, and Index Coop also use a hybrid compensation model, rewarding contributors in both native tokens and stables. Let’s look at how they do this, and how ShapeShift and DAOhaus use the Hedgey protocol to execute their hyrbid compensation strategy.

DXdao

DXdao uses a tier/level based system to determine the contributor compensation and its allocation in stables vs. native tokens. The higher the level, the higher the pay, and the higher % of the compensation in DXD (DXdao’s native token). It’s important to give contributors stables to meet their short-term needs, but as the commitment and compensation of a contributor grows, giving a higher % of pay in their native token increases the alignment of contributors with the DAO and encourages participation in the governance process.

DXdao contributors create individual proposals outlining their contributions and what level they are/think they should be. Contributors can submit proposals for a week of work, 6 months of work, or any amount of time. Some contributors submit proposals for retroactive compensation (for work they’ve already completed), or for an upcoming 6 months of contributions.

You can find all the DXdao contributor proposals here.

Seed Club

Like many DAOs, Seed Club splits it’s compensation into Core Contributors and Part-time Contributors. Core contributors receive a mix of CLUB and USDC based on their role, while part-time contributors have a choice between receiving 100% in USDC, or 50% in CLUB and 50% in USDC.

Part-time contributors who decide to receive CLUB will have no vesting schedule, while core-contributors receive 1% of the CLUB token supply as part of their compensation, vested over 4 years with no cliff. For core-contributors, all retroactive compensation is paid in unlocked CLUB.

This is an effective model because part-time contributors who need their whole compensation in stables have the option to do so, and because of this, they are less likely to immediately market sell CLUB if the choose to receive it. For core-contributors who are paid larger amounts of CLUB, having a vesting schedule is a great way to create gradual liquidity while preventing significant dumping on the open market.

Index Coop

Index Coop uses Coordinape to allow each working group the freedom to decide on how they would like to set up their allocation structure. Every month, Index Coop pays over 100 contributors across 14 working groups, who each control their own budget and compensation allocations. Hammad1412 does a great job of outlining how Index Coop uses Coordinape in their Flexible Contributor Rewards forum post.

All contributors whose compensation is controlled through Coordinape are considered part-time, while full-time contributors have a set yearly salary and choose between three options for compensation: 100% USDC, 50% INDEX: 50% USDC, or 100% INDEX. Just like Seed Club, allowing contributors to choose their salary allocations gives contributors freedom to make decisions based on their individual short-term and long-term needs.

Using Hedgey to distribute locked tokens inside NFT wrappers

Both ShapeShift and DAOhaus have used the Hedgey protocol to implement their hybrid compensation model. This Mirror article below does a great job outlining how they’ve used Hedgey to execute their monthly compensation distribution by locking their native tokens inside NFT wrappers.

https://mirror.xyz/mikey333.eth/IvGdY4dkz43a-z-4oGQHlwM7tCRNycKznJUcpXxth_0

ShapeShift

ShapeShift passed this proposal to enable contributors to receive partial salaries (monthly) in FOX, opposed to just USDC. To incentive participation, contributors can receive a bonus in FOX by taking part of their salary in time-locked FOX. The longer the lock-up period, the bigger the bonus. Here are some of the details:

These time-locked contributor reward distributions come with a twist: using the Hedgey Snapshot Strategy, each NFT retains the same voting power as liquid tokens. This can be merged with other Snapshot strategies to combine voting rights of locked & unlocked tokens.

This strategy allows communities to mission-align contributors while still giving them an active voice in governance.

https://twitter.com/hedgeyfinance/status/1541881995416031232?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1541881995416031232%7Ctwgr%5Ede17ecf65d5f1800241280c57d08fc9bd03b61eb%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fcdn.embedly.com%2Fwidgets%2Fmedia.html%3Ftype%3Dtext2Fhtmlkey%3Da19fcc184b9711e1b4764040d3dc5c07schema%3Dtwitterurl%3Dhttps3A%2F%2Ftwitter.com%2Fhedgeyfinance%2Fstatus%2F1541881995416031232image%3Dhttps3A%2F%2Fi.embed.ly%2F1%2Fimage3Furl3Dhttps253A252F252Fabs.twimg.com252Ferrors252Flogo46x38.png26key3Da19fcc184b9711e1b4764040d3dc5c07

DAOhaus

DAOhaus was the first to use the Hedgey protocol to send their contributors time-locked tokens, wrapped inside NFTs. DAOhaus already used a hybrid compensation structure, allowing contributors to choose their % compensation in stables vs. HAUS. Implementing the distribution of HAUS locked inside NFTs allowed contributors to earn double the HAUS, locked for one year.

https://twitter.com/hedgeyfinance/status/1514384416507928579?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1514384416507928579%7Ctwgr%5E5968cc8aa8ade563e9f7a4d8a75aba17014f6175%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fcdn.embedly.com%2Fwidgets%2Fmedia.html%3Ftype%3Dtext2Fhtmlkey%3Da19fcc184b9711e1b4764040d3dc5c07schema%3Dtwitterurl%3Dhttps3A%2F%2Ftwitter.com%2Fhedgeyfinance%2Fstatus%2F1514384416507928579image%3Dhttps3A%2F%2Fi.embed.ly%2F1%2Fimage3Furl3Dhttps253A252F252Fabs.twimg.com252Ferrors252Flogo46x38.png26key3Da19fcc184b9711e1b4764040d3dc5c07

DAOhaus has taken this to the next level by creating a Time-Locked Distribution Boost, allowing any DAO using the DAOhaus platform to send multiple contributors time-locked tokens wrapped inside NFTs.

https://twitter.com/hedgeyfinance/status/1545447921331699713?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1545447921331699713%7Ctwgr%5E1dc2cce0296cd4a5da9c958e7756f99e8205aef9%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fcdn.embedly.com%2Fwidgets%2Fmedia.html%3Ftype%3Dtext2Fhtmlkey%3Da19fcc184b9711e1b4764040d3dc5c07schema%3Dtwitterurl%3Dhttps3A%2F%2Ftwitter.com%2Fhedgeyfinance%2Fstatus%2F1545447921331699713image%3Dhttps3A%2F%2Fi.embed.ly%2F1%2Fimage3Furl3Dhttps253A252F252Fabs.twimg.com252Ferrors252Flogo46x38.png26key3Da19fcc184b9711e1b4764040d3dc5c07

Read more about the Boost and how it works in this detailed thread, or go directly to the DAOhaus Boosts Marketplace to check it out and create your own time-locked contributor reward distribution.

https://t.co/pdAwmJvid3

What next?

As the space continues to evolve, it will be interesting to see what new trends emerge, and how many DAOs adopt tools like workstreams and vesting token distributions.

If you’re interested in delivering locked tokens to your community, or just want to learn more about Hedgey, follow us on Twitter, join our Discord, or reach out to us directly on Telegram at t.me/goforlindsey.

Locked tokens, inside DAO flavored NFTs, powered with Snapshot voting rights.

The concept is simple. DAOs are able to use Gnosis Safe to interact directly with the Hedgey NFT protocol for distributing locked tokens to multiple recipients using a novel application of NFTs.

The protocol allows the creator to set an array of recipients, define how many tokens each recipient receives, and how long the tokens are locked for. When the transaction is executed, the Hedgey protocol locks the tokens and mints unique NFTs to each of the defined recipients.

These NFTs act as unique ownership keys to a predefined amount of tokens which can be claimed by redeeming (burning) the NFT after the unlock date.

The NFTs can participate in voting with specific amount of tokens they represent using the Hedgey Snapshot strategy, can be transferable or non transferable (non transferable going live later this month), and can include logos of the DAO as embedded features in the NFTs.

Shapeshift and DAOHaus examples (Gnosis Chain)

Each month DAOHaus and Shapeshift distribute locked tokens to their core contributors as part of an ongoing contributor compensation cycle. The locked properties of Hedgey NFTs are applied as part of their hybrid compensation model. During their first uses of Hedgey, Shapeshift executed the transaction using Gnosis Safe via Wallet Connect.

Visual identity for digital token communities

While the core value of using NFTs is their ability to act as unique access keys to locked tokens, an added perk is their ability to contribute to the visual culture of a community.

By giving locked token holders a visual representation of their position, they are able to visually signal their contribution to the DAO in a way traditional locked mechanisms fail to do. NFTs have been a fun, lightweight, and easy win for early DAO communities. With the added feature of holding locked tokens, these NFTs also allow contributors to align with the long-term mission of the DAO.

To see the full collection of Hedgey NFTs on Gnosis, head on over to the Eporio NFT marketplace.

Snapshot voting and new features

With the recently added Hedgey Snapshot strategy, locked tokens can now participate in active governance on snapshot. You can check out how ShapeShift implemented this here.

This is the first of many features in line for the Hedgey locked token distribution. We’ll be creating streamlined systems for distributing NFTs directly through Gnosis Safe App, as well as expanded features with how NFTs vest. If you’d like to keep up to date, follow us on Twitter or join our Discord .

If you’re interested in delivering locked tokens to your community, reach out to us directly on Telegram at t.me/goforlindsey.

Web3 and DAO treasuries have taken a substantial hit in recent weeks. Asset prices globally are down and inflation is up. Some DAOs, such as 1Hive, were able to utilize diversification strategies during the peak of last cycle to convert their native tokens to stable coins, to build up that emergency runway, but most did not. It has never been more apparent of how important diversification is. It may seem like there is nothing left to do, because selling tokens at these prices may only further exacerbate the problems and put additional sell pressure on token prices, especially when buyers are becoming more scarce until things settle down. However, I believe there is still one great option to deploy native DAO tokens to earn yield and responsibly convert them to stable coins: long dated covered calls.

Background: Hedgey Finance launched the ability for any DAO to deploy a covered calls market (pair of token <> usdc), across any EVM. Covered Calls are derivatives, commonly referred to as Options, where the Seller of the call is Selling (and receiving payment for) the Right (for the Buyer) to purchase X amount of Tokens at a specific Price per token before a specific Date. Simply what this means is that as the seller, I am getting paid up front in USDC, and locking my native tokens in the DeFi protocol where the buyer can purchase those tokens from me at our agreed upon price anytime before the expiration date. When the buyer buys my tokens, referred to as ‘exercising the call’, they pay me the agreed upon USDC to purchase the tokens. If the call expires (doesn’t get exercised before the expiration date), then I just get my tokens back and can deploy and sell another covered call.

While traders may think of covered calls as a strictly day trading strategy, for the DAO<>community relationship, they can be a very powerful tool that does not require constant trading. Rather than a short term speculative toy, selling 3 - 6 month (or longer) dated covered calls has the power to align benefits and incentives of a DAO and its community.

Good for the DAO: DAOs would be selling covered calls to 1) earn some yield in USDC on their native tokens today and 2) responsibly and transparently convert those tokens to USDC at a higher price than current market prices at some point in the future. This strategy does a lot of things:

• Creates immediate stable coin liquidity

• Transparently and responsibly converts tokens to stable coins as price appreciates - at publicly known price levels

• When converted, builds a real runway of stable coins, generating true diversification of the treasury

• Builds trust with the community and investors, while also giving them the opportunity to profit

Good for the community: On the flip side are the buyers of the covered calls offered by the DAO - the community (and other investors). While many have seen their portfolios suffer recently, buying long dated covered calls is a way for the community to pay significantly less up front to get significantly more leverage on the token appreciation in the future. As an example, lets suppose we are interested in buying 100 of token X, currently priced at $5. We can purchase those tokens for $500. Alternatively, if DAO_X is selling a covered call of 100 tokens, with a strike of $7.5 and premium of $50 we could purchase that instead at 1/10th of the cost. Without getting into the weeds, if the price of X goes to $10, then we’ll have gained 100% on the Hodl strategy but 200% on the options strategy, and if it goes to $15: 200% on the Hodl strategy but a whopping 1,400% on the options strategy. As prices have dropped so swiftly, this is a great opportunity to purchase at a discount - and buying long dated covered call options will render even more opportunity for gains when the next bull market hits.

Summary: Hedgey’s peer to peer long dated covered call options are an effective tool to build stablecoin runway in a bear market. Buyers should have the appetite to take advantage of depressed token prices, and purchasing covered calls gives them an even higher upside profit potential. DAOs can utilize the covered calls to generate some runway up front, and responsibly let the community buy tokens at given price points above current market prices (ie no dumping).

If you are interested as a DAO or community, but need help in understanding how to price the covered calls reasonably and fairly, please join our discord and reach out to @iceman (or @icemanparachute on telegram).

Disclaimer: This the articles and materials on this site are not intended to provide, and should not be relied on for, financial advise or legal or tax advice, or investment recommendations. There is no consideration given to the specific investment needs, objectives or tolerances of any recipients. Recipients should consult their advisors before making any investment decision. This information is not intended to and does not relate to any specific investment strategy. Investments and Options involve risk, and in volatile market conditions significant variations in the value or return on that investment may occur, including the risk of a complete loss of the investment. Nothing contained herein shall constitute any representation or warranty as to future performance of any digital asset, financial instrument, credit, currency rate, or other market or economic measure. Due to various risks and uncertainties, events and results may differ materially from those reflected or contemplated in the materials. By accepting the information contained in the materials the recipient agrees and acknowledges that no duty is owed to the recipient by Hedgey. The recipient expressly waives any claims arising out of the delivery of the information or the recipient’s use or reliance of the information.

NFT-gated token explained

NFT token gating, a strategy that gives token holders access to exclusive products, token offerings, experiences, content, and more. For example, NFT holders may receive perks like special discounts on new products, early access to store openings, or invitations to members-only events.

From discounted token offerings for communities to creating a new path to DAO fundraising — this approach is an innovative way to reward and provide unique opportunities to early & core contributors.

NFT-gated deals are one part of a bigger future for DAO treasuries, made possible by Hedgey.

How do NFT-gated OTC deals work?

A project can specify a specific NFT they require a user to hold in order to access the OTC token offering. When a user connects their wallet, it will be checked against the unique contract address for the NFT. If the wallet contains the specified NFT, they will be able to purchase the NFT-gated deal. This is a unique way to create whitelisting for specific offerings. This logic can be applied to many use-cases outside of OTC offerings as users continue to discover new ways to interact with the Hedgey protocol.

1Hive NFT-Gated OTC: Round 1

The first to use this was our friends at 1Hive DAO, who created a discounted $HNY OTC offering, exclusively for holders of the @1HiveNFBeez collection.

https://t.co/NFb9EAz57k

1hive NFT-Gated OTC: Round 2

1hive just released their second NFT-gated OTC deal. The 1hive DAO is selling 217 $HNY at a discount. How is this different from their first NFT-gated token offering? This time, the deal can only be accessed by holders of either the @1HiveNFBeez collection or the @PanvalaHQ Stamps collection.

The Hedgey NFT-gated OTC contract allows anyone to create a NFT-gated deal with flexibility on who can access the specific deal.

Other Use Cases for NFT-Gating

The Rave community on the Harmony network recently used the Hedgey protocol to sell $RAVE tokens locked in hNFTs, using their own custom art. The community then used these NFTs to create a Verify Bot to allow owners of the $RAVE hNFTs access to an exclusive Discord channel.

This is one of many potential uses for NFT-gated content, and the Hedgey protocol provides DAOs/token teams the ability to use this feature and create their own use cases.

Want to create your own NFT-Gated OTC deal, or just learn more about Hedgey? Hop into our Discord! https://discord.gg/hedgey

The DAO challenge

One of the major challenges that many DAOs face is the fact that their treasuries mostly consist of their own native token. If not done correctly, asset diversification can lead to dumping of the native token on the open market, resulting in a negative price impact.

While we initially though the strongest driver for D2D token swaps was treasury diversification, it became clear that DAOs view these swaps as a powerful collaboration tool to invest in other DAOs and participate in each others governance processes.

What is a token swap?

A DAO-to-DAO (D2D) token swap is exactly what it sounds like, a token swap between two DAOs. By trading native tokens with each other DAOs can: diversify their treasury, participate in each other’s governance and form strategic alliances thus, potentially yielding more powerful influence on the entire DeFi ecosystem. A key component of a D2D swap is that each DAOs tokens avoid the open market.

Hedgey D2D swap

DAOs like GnosisDAO, Alchemix, Thales, Saddle, Sperax, Layer2DAO, and Agave have all been early adopters of DAO-to-DAO (D2D) swaps through Hedgey. Today, Hedgey V2 DAO-to-DAO swaps is available to everyone.

https://app.hedgey.finance/dao2dao

Hedgey D2D token swaps let DAOs and tokenized communities mutually swap tokens without an escrow. D2D swaps allow DAOs to participate in each other’s governance processes and staking opportunities, along with signaling their commitment to the partnership itself. DAOs can use our product to swap any amount of any two tokens and optionally lock them using Hedgey’s locked token NFT protocol. Locked tokens can retain Snapshot voting rights, be used for NFT-gating, along with many other benefits.

How to execute a DAO-to-DAO token swap

Here’s a high-level summary of the key step in a DAO-to-DAO token swap.

How to kick off your DAO’s next massive partnership

First step, find a DAO you’d like to swap with and join our DAO Builders Alpha group to start collaborating with a flurry of top-notch DAOs.

Once you have a swap lined up and ready to go, decide which DAO will initiate the swap. If your DAO is kicking off the swap, head over to our app.

From our app you’ll have three options to connect your wallet:

• MetaMask

• WalletConnect

• Our dedicated Safe app, directly through your Gnosis Multi-sig wallet

Once your wallet is connected, there are a few more details you need to fill in:

1. Choose the token and the amount of the token you’d like to send

2. Choose the token and the amount of the token you’d like to receive

3. Enter the wallet address that you’ll be swapping with

4. Choose whether swap unlocked or locked tokens

   1. If you choose to swap locked tokens, select an unlock date

   2. Upon completion of the swap, each DAO will receive NFTs that represent your locked tokens

   3. After the unlock date, the NFT can be burned in exchange for the underlying tokens

All that’s left to do is approve the token you are sending and initiate the swap. After the transaction is complete, you’ll see the screen below and can send the link provided to the DAO you are swapping with.

You can view or cancel the swap you’ve created on the My Swaps page, and the other DAO will be able to complete the swap on that same page on our UI.

Once the swap is complete, you’ll be able to view the swap under the Historical Swaps section on the My Swaps page.

If your swap is locked, you’ll be able to view your locked tokens in your Portfolio. You can see an example of these NFTs below from the first DAO-to-DAO swap on Arbitrum between Layer2DAO and Sperax.

https://twitter.com/hedgeyfinance/status/1558152410077487105?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1558152411247788032%7Ctwgr%5Eb7505bd13522bf9afd8f79cd1dd0839b1f6e0fc4%7Ctwcon%5Es2_&ref_url=https%3A%2F%2Fhedgey.mirror.xyz%2Fkmq3t3H4d076VImLFTOO2FxTREQCBsBsVaxVCbvvIjQ

Use-Cases:

The first D2D token swap on the Hedgey protocol was executed between Gnosis DAO & Agave, executed by third-party Karpatkey. Combined $2.4 million in $GNO & $AGVE was exchanged and executed through a Snapshot proposal (you can also view the on-chain event here).

After this first swap, we saw DAOs want to use Hedgey DAO-to-DAO swaps to create powerful collaborations with other DAOs.

The Layer2DAO community came in strong, participating in the first D2D swap on Arbitrum, with Sperax, and the first on Optimism, with Thales.

https://twitter.com/arbitrum/status/1562788792582696965?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1562788792582696965%7Ctwgr%5Eb7505bd13522bf9afd8f79cd1dd0839b1f6e0fc4%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fhedgey.mirror.xyz%2Fkmq3t3H4d076VImLFTOO2FxTREQCBsBsVaxVCbvvIjQ

https://twitter.com/hedgeyfinance/status/1567246433899651093?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1567246433899651093%7Ctwgr%5Eb7505bd13522bf9afd8f79cd1dd0839b1f6e0fc4%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fhedgey.mirror.xyz%2Fkmq3t3H4d076VImLFTOO2FxTREQCBsBsVaxVCbvvIjQ

What now?

The Hedgey protocol provides an array of unique tools that alleviate this problem amongst DAOs, and DAO-to-DAO token swaps is just the latest tool under the Hedgey umbrella. Hedgey helps DAOs prosper.

We’re pulling in tons of awesome DAOs into our Hedgey DAO Builders Alpha group. Hop in, introduce yourself, and get collaborating! You can also hop in our Discord and chat more with the team.

https://t.me/+fryAaSHS5yA2NmIx

Documentation:

https://hedgey.gitbook.io/hedgey-community-docs/hedgey/dao-to-dao-token-swaps

Audit:

https://hacken.io/wp-content/uploads/2022/09/Hedgey_24082022_SCAudit_Report.pdf

The native token dilemma

DAOs/Treasuries have gained massive wealth over the last two years, much of which has been in the projects native token. This creates a native token dilemma, where the project has a large treasury that resides in a highly volatile, illiquid asset that needs to be converted to more stable coins, but is forced to do so through means that create negative price impacts and poor market sentiment from community members. This leads to projects holding more tokens than they should, and not building up the stable coin reserves/diversified treasuries required to build and grow in changing market conditions.

The problem with DAOs/projects selling tokens

Selling native tokens for stable coins isn’t something projects or communities want. At any volume it creates negative price impacts which can in turn create instability in the community of the DAO. But what other solutions are there? Once a token project is live the primary pathway to converting native tokens to stables lies in either market selling or private OTC deals with large investors.

Selling tokens off-market with Hedgey OTC

At Hedgey, we’ve taken the concept of Over-the-counter (OTC) and democratized it to create a new frontier in DAO financing and the communities that support those DAOs.

1. **Sellers create Public OTC offering on **app.hedgey.finance

2. OTC deal is broadcast across the Hedgey protocol, widening its exposure

3. Buyers purchase locked tokens through the OTC deal

4. Seller receives payment upfront

5. Buyer receives NFT that acts as their access key to locked tokens

Hedgey OTC allows DAOs to generate income by selling native tokens through public (multiple buyers) time locked OTC offerings on their token. This means that the DAO is able to generate revenue today, while controlling how and when tokens enter liquid markets.

Better token deals for project contributors

Buyers of these OTC deals can now be not only large investors, but active contributors to the DAO/token project. Public OTC offerings allow contributors to access off-market token deals, that may include discounts to market price in exchange for a lock up period.

In a new primitive, buyers of OTC deals mint NFT access keys that act as transferable ownership of locked token positions. This creates more flexibility for buyers, while also protecting the interests of the DAO community.

How to get started

Hedgey OTC is a permissionless contract. There are no platform fees or listing fees. Any token on 8+ chains can self launch public OTC deals at app.hedgey.finance

• Create an OTC offer

• Ask questions in our Discord

If you want support or have questions, hop in our discord and chat with the Hedgey crew.

Introducing a new approach to token rewards that allows DAOs and token teams to give tokens to core members while having better control on when tokens enter liquid markets. Learn more on our DISCORD.

First, an incredibly important shout out to DAO HAUS. The Hedgey NFT protocol was designed to be used primarily for DAO treasury diversification in combination with our public OTC deal offering protocol to create public, time-locked token sales. It is only because of the innovation, exploration, and collaborative nature of DAO HAUS that this concept came to fruition. So — big shout out to DAO HAUS, Ceresbzns, and Spencer. If you’re not in that ecosystem you’re NGMI.

To learn more about DAO HAUS or see the first proposal passed to implement Hedgey in rewarding 17 DAO HAUS contributors with 1 year time locked tokens, click here.

What are Contributor reward NFTs?

Contributor Reward NFTs are a vehicle that DAOs and token teams can use to give contributors a specific amount of tokens, locked for a pre-determined period of time, which can be accessed anytime after the unlock period by redeeming an NFT (example shown above).

How does it work?

When a DAO or token team wants to create contributor rewards, they are able to send tokens to the Hedgey NFT protocol and define a lock period and recipient of those tokens. In locking the tokens, the Hedgey NFT protocol simultaneously mints a unique NFT which acts as the sole access key to those locked tokens. Once the unlock period expires, whoever holds the NFT can send the NFT back to the Hedgey (burning it) to redeem for locked tokens.

Example: Spencer from DAO HAUS wants to reward 30 DAO contributors a set amount of tokens for helping out over the month. In a twist of events, the DAO contributors all agree that they would lock their tokens for a year to get a small multiplier in return. Using Hedgey NFT protocol, Fencer decides to reward each contributor a unique amount of tokens, locked for a year. In locking the tokens, each contributor is automatically minted a unique Hedgey NFT directly to their wallet with custom SAO HAUS skins. In one year (or anytime after) the recipients can send the NFTs back to the Hedgey protocol, redeeming for their HAUS.*DAO HAUS did this using a direct batch minting function directly with the Hedgey protocol on their own governance proposal execution interface (which is amazing btw).

About the NFTs

The NFTs are Hedgey centric at their core with the ability for Hedgey to create custom folders of art for DAOs and token teams on a project-to-project basis (not endorsements and at no cost). For DAO HAUs, we added unique skins with the DAO HAUS logo. Additionally, the token, amount locked, and unlock date for each NFT is displayed directly on the NFT metadata and viewable on any NFT marketplace.

Want to lock tokens in an NFT?

TRY IT AT: https://app.hedgey.finance/#/portfolio (click Mint Vest NFT)

Lock tokens in an NFT and send them to anyone (even yourself)

Or ask how to get started on our Discord.

This article will walk you through how to do this.

First, head over to the Portfolio page on the Hedgey app where all your Hedgey NFTs (across all chains) will be displayed. If you haven’t already, connect your wallet, either through Metamask or WalletConnect.

Once your wallet is connected, you’ll see the “Mint Vesting NFT” button. You will be prompted to enter the contract address for the token you’d like to lock. To find the token address, click on the designated token in your wallet, open the dropdown menu, click “Token Details”, and copy the token address.

Below is an example where we’ll be locking up 1USDT on Harmony Mainnet. The Hedgey protocol supports an additional 8 networks/chains.

Once the contract address is entered, new fields will populate.

At this step you will enter the amount of tokens you would like to lock in the “I want to lock” field, the date you’d like the tokens to be locked until, and the wallet address for the recipient of the NFT.

As shown in this example, I want to lock up 20 1USDT until May 31st, and since I’m minting the NFT for myself, I’ll click the “Use connected wallet” option. From there, I’ll click “Approve 1USDT” and sign the transaction in my wallet.

Okay, last step! Click “Lock tokens and mint NFT”, sign the transaction, and in a few minutes (at the most), you’ll be able to see your unique Hedgey in your portfolio!

There you go, look at my freshly minted Hedgey, along with all my other Hedgey NFTs in my portfolio! You’ll notice each Hedgey NFTs background color corresponds to the network/chain it’s on (Gnosis green, Celo yellow, etc.).

Use this link to check out the Hedgey I minted, go straight to our app to try this yourself, or join our Discord to learn more & get involved!