Brainbot Update

Shutter DAO
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Dear Shutter Friends,

brainbot has heard your questions and criticisms regarding Shutter strategy and progress - and we want to address them directly.

We understand your concerns. We recognize that we can communicate more effectively. We also acknowledge that we should have been more clear about our priorities and workstreams from Q3 2024 to present. To provide more clarity and ensure alignment:

  1. We have prepared a brief update (below)

  2. We are publishing a three-part blog series (planned for March) that lays out our updated view on:

  • Overall Vision and Problem-Solution Set
  • Product Roadmap 2025
  • Funding & Tokenomics
  1. We will begin hosting monthly “office hours” calls in which we share updates, answer your questions, and where you can provide feedback. The next call is scheduled for Thursday, March 6 at 13:00 CET. Join here: meet.google.com/svc-ance-tpw.

We would also like to take this opportunity to reaffirm that Shutter DAO 0x36 is governed by SHU token holders and operates independently. At the same time, we want to clarify the relationship between Shutter DAO 0x36 and brainbot to ensure transparency and alignment with community expectations:

  1. brainbot collaborates with Shutter DAO 0x36 through grant funding, helping to develop Shutter-related components, products, and marketing initiatives. The DAO retains full control over grant allocations and can decide to fund other development teams at any time.

  2. brainbot is not involved in market-making, SHU token promotion, or similar activities due to regulatory constraints. If the DAO wishes to explore these initiatives, it has the ability to evaluate and vote on proposals independently.

  3. brainbot does not participate in Shutter DAO 0x36 governance. We do not submit governance proposals - other than our own grant proposals. We do not vote on proposals or directly shape DAO decisions on Snapshot or Decent.

brainbot is fully committed to supporting Shutter’s progress and always strives to deliver its best. Your feedback is extremely valuable. We hope you’ll continue sharing your thoughts with us. If you have questions, suggestions or ideas, we encourage you to propose them - either directly to us during “office hours” calls or in the Shutter Forum. We truly appreciate your support and engagement.

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Updated Priorities

Back in Q3 2024, we recognized a challenge with our old strategy: establishing a robust encrypted mempool in-protocol is extremely hard. There’s an inherent complexity, because it involves meshing multiple sets of decentralized systems with each other and requires buy-in from a variety of players. But the encrypted mempool is more relevant than ever, with front-running still rampant and builder centralization at extreme levels. It will require a long-term approach and collaboration with the right ecosystem partners.We also realized the need for more and better value-driven marketing and communication. This insight led us to adapt our focus and resources to grab the opportunity to position Shutter as the go-to source for real transaction protection for Ethereum L1.

To react quickly and be able to secure partnerships in this fast evolving race, we’ve shifted our focus and resources for a number of months already. Therefore we’d like to share this focus with you and are open for additional input on this approach.

Product Focus

Shutter on Ethereum L1

We’ve proposed a much more practical roadmap to implement the encrypted mempool into PBS, using proposer commitments, in collaboration with strong partners, such as Gnosis, MEV Blocker, Chainbound. The advantage is the combination to provide transaction protection in a near future practicable setup while aiming for the real deep integration in the future.

Shutter API

We’ve been building and will launch this week the Shutter API, which allows any dApp to integrate Shutter commit-and-reveal encryption quickly and easily. We expect the Shutter API to unlock additional uses cases and revenue streams in DeFi, governance, auctions, gaming, and more.

The Shutter API was deployed on Gnosis Chain in January to test stability in production environment. We have been building and supporting multiple use cases and dApps on top of it, to accompany the launch and give interested teams inspiration and blueprints.

Marketing Focus

We have revamped our marketing and communication strategy. We have shifted to stronger value-driven messaging, which focuses more on end-user benefits and less on technical specifications. We have also increased our media presence - and we have seen a significant increase in articles, OpEds and interviews. (See, as examples: here, here, and here.) We have also increased our Ethereum event presence - Luis and Loring have already been invited to speak at 6 conferences in Q1 and Q2 2025 - and have applied to speak at 8 others.

Shutter DAO 0x36 Assets and Expenses

As noted above, Shutter DAO 0x36 is governed by SHU token holders. However, to help the community judge the financial situation of Shutter DAO 0x36, we have compiled onchain data regarding Shutter DAO 0x36 current treasury assets and recent expenses. In summary:

  • Shutter DAO 0x36 assets (not including SHU nor stablecoins in LP positions): ~$4.66M
  • Shutter DAO 0x36 average monthly expenses over past 7 months: ~$264.5k
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Two additions regarding the “Shutter DAO 0x36 Assets and Expenses” section above:

Correction

I have corrected the figure for ‘Shutter DAO 0x36 average monthly expenses over past 7 months’ above. It was previously ~$260k. It is now ~$264.5k.

The previous figure did not account for the $25k which Artis deducted from their return of Shutter DAO 0x36 assets in December 2024.

Spreadsheet

I am sharing the spreadsheet which I used to calculate the figures above. It merely complies publicly available onchain information. It is not a proposal regarding future Shutter DAO 0x36 treasury management or expenses.

Please double check my work. If I made any errors or omissions, please let me know. I will correct them right away.

Also, please feel free to copy and modify this spreadsheet for your own purposes.

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@Loring - The basic math of 4.66 million divided by 260k yields 18 months of runway. That also assumes no other grant or special project spending is undertaken.

How long does Brainbot expect it will be before the Shutter projects generate 260k / month of revenue to support the Brainbot expenses? Or, when would you expect some revenue to be generated to begin to extend the runway? Or is the plan to find more grants or investors?

I’d like to understand if we have a plan on this because I believe it informs how we should be voting on other grants and expenditures along the way.

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Annual Review and Spending Audit Proposal

Summary

This proposal aims to conduct a comprehensive review of the DAO’s expenditures to evaluate past initiatives, pinpoint areas for improvement, and ensure accountability across all funded projects. With substantial funding already allocated and the DAO’s treasury at a pivotal midpoint, this review will enhance transparency and inform future decisions. By analyzing expenditure effectiveness, we can celebrate successes, address challenges, and strategically plan future allocations to bolster the long-term sustainability of the Shutter Network.

Background

The DAO has directed significant funding toward diverse initiatives, including grants, marketing, and a substantial budget for development, research, and business development (BD). While some efforts have thrived, others have not met expectations after $2 million in funding, prompting questions about resource efficiency. Key points include:

  • The current financial runway indicates the DAO may not sustain operations beyond one more year.
  • No significant Shutter releases have occurred since at least May 2024, if not earlier.
  • Despite a dedicated BD budget, traction remains minimal.
  • A marketing agency was engaged, yet awareness has not noticeably increased.
  • Numerous grants have been distributed, but transparency is lacking, and the impact of some funded initiatives is not clear.
  • Progress on certain funded projects has been slower than anticipated.

Given varying opinions within the DAO about project outcomes and a slowdown in the L1/L2 ecosystem, this is an ideal time to assess past spending and optimize future resource allocation.

Proposal Details

Conduct an Annual Review:

  • Analyze all major DAO-funded initiatives from the past year.
  • Identify successes and areas needing improvement.
  • Evaluate the effectiveness of grant-funded projects.
  • Document fund allocation and their resulting impact.

Audit Expenditures Over $5,000:

  • Scrutinize all initiatives and activities exceeding $5,000.
  • Determine if objectives were met and funds were used efficiently.
  • Suggest measures to ensure underperforming initiatives align with goals.

Engage DAO Members:

  • Include the community in the review process for varied insights.
  • Solicit feedback on enhancing grant and initiative selection processes.
  • Promote transparency and shared accountability.

Temporarily Pause Further Payments, Grant Disbursements, and stream claims:

  • Suspend new payments and grant disbursements until the review is complete.
  • This ensures we conserve the treasury while reviewing the impact of different funding, aligning future allocations with the DAO’s priorities—especially given the runway is very limited right now.
  • As an alternative to an immediate vote to pause streams, we request that all parties refrain from drawing additional funds until this proposal’s vote concludes.

Expected Outcome

Once completed, funding and initiatives will resume with a refined strategy, ensuring resources are allocated efficiently and effectively to support the DAO’s mission. The review will deliver:

  • A detailed report on past spending, spotlighting successes and areas for growth.
  • Practical recommendations for future funding decisions.
  • Enhanced accountability for grant recipients and service providers.
  • Streamlined processes for approving expenditures.

Next Steps

  1. Issue an RFP : Release a Request for Proposals to engage a qualified individual or entity from the community to lead the review.
  2. Set a Budget : Allocate up to 25 days of work at 9 hours per day and $130 per hour, beginning once all materials are provided.
  3. Compile Findings : Deliver a thorough report to DAO members.
  4. Host a Discussion : Facilitate a community session to review findings and refine spending strategies.
  5. Update Processes : Establish a more transparent and robust funding approval process based on insights and community input.

Content of the Report

The review report should include:

  • Spending Breakdown : Allocation details across development, marketing, BD, and research.
  • Financial Runway : Projected operational duration based on current funds and spending.
  • Proposal Overview : How many proposals have been created, which entities or businesses have benefited, and how many of all proposals directly relate to Shutter Network, the DAO, and its tokenholders.
  • Token Sales : Scope of token sales by initial team members and advisors with free tokens.
  • Development Progress : Code contributions, release frequency, and software advancements.
  • Activity Impact : Outcomes of funded initiatives on the Shutter Network and DAO objectives.
  • Funding Verification : Confirmation of full disbursements without unexpected conditions.
  • Initiative Review : Quantity and impact of proposals on the network and treasury.
  • Development Metrics : GitHub commit analysis, release frequency, and grant-funded code delivery, maintenance, and network benefits.
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Agreed and a lot has to change pretty fast with good auditing sounds more than fair to me as the older way didnt workout anything…

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Hi Spence -

Thank you for your questions.

brainbot can’t speak for or make decisions on behalf of Shutter DAO 0x36. However, brainbot can share updates on our work and identify potential opportunities. I have added some notes below. As mentioned above, we are preparing a blog post regarding “Funding and Tokenomics” in March.

Your calculation is broadly correct. Shutter DAO 0x36 will deplete its ETH and stablecoin resources in approximately 18 months if it does not acquire new funding, reduce expenses and/or leverage the SHU in the Shutter DAO 0x36 treasury.

Acquire Funding

Revenue

brainbot recently decided to focus more on encrypted mempools on Ethereum L1 and the Shutter API because we see these as opportunities for Shutter to earn significant revenue.

Encrypted mempools on Ethereum L1 creates opportunities for Shutter to earn revenue from benign MEV - while still preventing malicious MEV and real-time censorship. This is Shutter’s moonshot. It is a large, complex undertaking (both technically and politically) and it may take several years to implement. However, if successful, it may be the most impactful and profitable implementation of Shutter.

The Shutter API creates two opportunities for Shutter to earn revenue. First, Shutter will earn revenue for providing the Shutter API to projects and companies which require decentralized commit-and-reveal encryption. Second, Shutter may earn a share of the profit or tokens from projects which utilize the Shutter API and which are built/funded by the Shutter Network. This is the most concrete opportunity to earn revenue in the short and medium term.

Grants

brainbot is actively applying for grant funding to support Shutter research, product development and maintenance, marketing, and more. Shutter DAO 0x36 may also seek grants of its own. These grants are available from crypto ecosystem actors (quadratic funding rounds, retroactive funding, airdrops, special DAO grants) and government agencies.

In some cases, grant funding may be delivered directly to the Shutter DAO 0x36 treasury. In other cases, grant funding may be delivered to brainbot - the grant funding will either complement or offset any grant funding brainbot receives from Shutter DAO 0x36.

(A special note on quadratic funding. QF rounds are a regular and potentially large source of grant funding. However, in order to unlock quadratic funding, members of Shutter DAO 0x36 and the broader Shutter Network need to participate in QF rounds by voting or donating small amounts.)

Alternative Sources

Shutter DAO 0x36 may also pursue alternative ways to acquire funding:

LottoPGF allows anyone to create and fund an on-chain provably fair lottery - and then distribute token sale proceeds between the lottery prize pool and a public goods project.

Flaunch allows anyone to create a memecoin - and then direct trading fees to specified addresses.

Perq (by Yelay) allows anyone to create a DeFi vault, invite others to deposit ETH or USDC, and reward depositors with points or NFTs - and then direct yields to specified addresses.

Treasury Management

Shutter DAO 0x36 may seek to earn yield from ETH and stablecoin assets in the treasury. Shutter DAO 0x36 has already approved one proposal to convert USDC to sDAI, and rejected other proposals to deposit USDC into a DeFi vault.

Shutter DAO 0x36 may speculate on the price of volatile assets (WBTC, ETH, etc.) by purchasing those assets with the intention of selling them for a higher price at a later date.

Reduce Expenses

brainbot Monthly Recurring Grant

The brainbot monthly recurring grant accounts for 89% of Shutter DAO 0x36 monthly expenses.

brainbot (and has always been) transparent about our work for Shutter DAO 0x36 under the monthly recurring grant. Every month we publish an update for Shutter DAO 0x36, detailing: use of funds, team, research, products, and marcoms.

As noted above, Shutter DAO 0x36 retains full control over grant allocations and can decide to fund other development teams at any time.

If Shutter DAO 0x36 wishes to reduce monthly expenses, brainbot would be happy to work together with Shutter DAO 0x36 to explore how we can reduce the brainbot monthly recurring grant while still providing adequate resources for Shutter project development.

Illustrative examples: If Shutter DAO 0x36 wishes to pursue encrypted mempools on Ethereum L1, brainbot could provide a revised grant proposal focused on research and development, and reduced marcoms. Alternatively, if Shutter DAO 0x36 wishes to pursue the Shutter API, brainbot could provide a revised grant proposal focused on Shutter API maintenance, developer relations, and new product development.

Ad Hoc Expenses

In the past 7 months, Shutter DAO 0x36 has approved ad hoc expenses, as follows:

  • Other Dev Houses (PolyCrypt, Isotropic, Blockful): $153,153
  • Market Making (Artis): $25,000
  • Sponsorships: ETH Milan, JLH, Privacy Guardians: $16,500
  • Audits (Come Du Crest): $10,000

Leverage SHU In The Shutter DAO 0x36 Treasury

Shutter DAO 0x36 currently holds 560,737,117 SHU in the treasury (not including SHU in liquidity pools).

Shutter DAO 0x36 may also leverage these assets to fund the Shutter project via token sales to new/existing token holders (via OTC or market trades) and/or grants.

Many crypto projects consider token utility to be part of their economic sustainability strategy. In some ways, Ethereum itself proves that this can work and create a steady state, which provides value to its holders, e.g. via staking and/or by requiring to use the token as transaction fees and burning them to reduce the supply.

This approach has pros and cons. Some members of Shutter DAO 0x36 have pointed out: Leveraging the SHU in the Shutter DAO 0x36 treasury may create additional SHU sell pressure, thus decreasing the SHU token price even further. However, SHU staking may lock up sufficient tokens to create scarcity and offset any additional SHU sell pressure.

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