# Sale of $500K Worth of SHU Tokens to Alphemy Master Fund

Shutter DAO DAO Proposals
1

| Proposal Title | Author(s) | Phase | Type | Date Created |

| ----------- | ----------- | ----------- | ----------- | ----------- | ----------- |

| Sale of $500K Worth of SHU Tokens to Alphemy Master Fund | Alphemy Master Fund | I | Off Chain | 05.07.2024 |

Summary

We propose Shutter DAO 0x36 sell $500,000 worth of SHU tokens to Alphemy Master Fund (“Alphemy”) via an onchain atomic swap - or any other method that is considered efficient by the Shutter DAO 0x36 and in accordance with regulation.

Our aim is to become more actively involved in the Shutter DAO 0x36, growth of the Shutter Network, and the development of the trading framework for the SHU token.

Purchase Terms

  • Amount: Determined by market price, based on the 1-month average price of SHU tokens from 06.06.2024 to 05.07.2024 according to Coingecko average price across trading venues.

  • Purchase Price: $500,000 (five hundred thousand dollars) (paid in USDC, USDGLO or other USD stablecoin approved by Shutter DAO 0x36)

  • Vesting / Lock Up: None

  • Conditions: None

Motivation

Objective

Alphemy seeks to acquire additional SHU tokens to enhance their ability to contribute to the Shutter DAO 0x36. Alphemy believes that a more active and engaged community is crucial for the success and growth of the Shutter Network. As an initial large contributor and active adviser to the Shutter DAO 0x36, Alphemy is thrilled to see the organic activity and the great minds that are building the project. We believe that with a “public-good” philosophy and our knowledge of the markets we can greatly help bring up a new roadmap for the Shutter token. The vision is that chains will have a tough time competing without being Shutterized or having a similar technology embedded. Shutter currently has a first mover’s advantage and we should take action on that while it lasts.

Rationale

  • Support for Shutter Network: Alphemy firmly believes that Shutter Network could become a vital component for the ecosystem of EVM chains. By becoming more active participants, we want to help drive the project forward, fostering more development, activity, and engagement within the community.

  • Roadmap and Proposals: Alphemy is committed to contributing to the development of proposals and a roadmap to attain increased trading and demand for SHU tokens, which is an essential component of Shutter’s further growth. This, in turn, should result in SHU price appreciation, given that Shutter Network’s product is continuously disseminated and adopted, which both are essential for Shutter’s success.

  • Ability to purchase desired amount of tokens: The $500.000 purchase by Alphemy is difficult to execute on the open market given the very limited trading volume and availability of trading venues. Alphemy thus extends an offer to purchase tokens directly from the DAO.

  • Additional liquidity to DAO treasury: The purchase would provide the DAO’s treasury with additional USD liquidity to support operations and runway. A sale of $500,000 worth of SHU tokens on the open market might be troublesome for the DAO to execute given the low current trading volumes, as it would create large sell pressure and would thus likely either take a very long time to execute or result in large negative price action.

Token Holdings

  • Alphemy current SHU holdings: 14,365,122

  • Alphemy future SHU holdings (assuming a purchase price of $0.0366): 28,008,775

Platform

Snapshot

Voting Type

Single Choice Voting

Voting Options

  • Vote “Approve” if you think Shutter DAO 0x36 should sell $500K worth of SHU to Alphemy

  • Vote “Reject” if you think Shutter DAO 0x36 should not sell $500K worth of SHU to Alphemy

  • Vote “Abstain” if you do not have an opinion, but you would like to help the vote reach quorum.

License

CC0: This work is marked with CC0 1.0 as dedicated to the public domain.

5 Likes
2

I support this proposal! I would like to have comments from the community, why is it positive or why is it negative - Then we submit a temp check and submit it for a vote.

1 Like
3

Thanks for the proposal. I am not directly opposed to this. There are definitely upsides to the DAO receiving 500k in liquidity and for the Alphemy team to have more skin in the game. I think doing this would be a net positive, but I do have a couple of points that I’d like to get the feedback of Alphemy on:

  • I am a little bit worries of no lock up period. When the “anon syndicate” stepped in to help with bootstrapping liquidity for Shutter DAO early on it was on the same conditions as everyone else and there was the same vesting scheme applied. If you are buying 500k usd worth of SHU because your “aim is to become more actively involved in the Shutter DAO 0x36, growth of the Shutter Network, and the development of the trading framework for the SHU token.”, then why not get on the vesting and have the same long term alignment as everyone else?

  • Alphemy having 28m tokens would mean that they’d be able to almost reach quorum on all votes on their own and they would have very big impact on all votes. I am not saying this is necessarily a bad thing, as I respect the Alphemy team a lot and I think they are smart people. I just worry that it will give too much power to them since we already struggle with quite lot governance participation.

2 Likes
4

Can you please plainly state the terms? How many SHU for how many USDC?

Also, to be clear, you’re asking for this as an OTC swap because it would be much more expensive for you to acquire this much governance power by trading with current holders of the SHU token using the open markets? Is that correct?

This is important. The treasury holds over 6 million USDC in stable assets and over 500 million SHU. Giving significant control over the treasury (and the 0x36 DAO) in exchange for 500k USDC that the DAO doesn’t need seems like a poor decision.

3 Likes
5

I would support this proporsal in general but I also want to ask the question that @5pence and @czepluch asked.

  1. Where those $SHU come from, from dao treasure ,otc from other holders or buy from the secondary market. If from dao treasure I think certain lockup period is neccessary otherwise it will be a inflation of market liquidity. I actually suggest the team just buy from market in certain amount which can also increase the trading volume of the token espectially the token price is quit low now.
  2. The voting power, It think reach the quorum is not a problem if other holder vote properly. If all the other holder aganist the proposal we still can reject it.
2 Likes
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Good considerations, thank you for bringing these up czepluch.

  1. In Alphemy’s view, it is a large risk for us to currently deploy more capital and purchase SHU tokens in a market where many have been selling off their SHU tokens heavily. To take this capital risk over deploying the liquidity elsewhere, Alphemy wants to be able to utilise the tokens actively e.g. for staking.

  2. This is a good consideration that is definitely worth thinking through. Alphemy is open to discussion to find the most meaningful solution, but it ultimately depends on the degree of steering from Alphemy that DAO members would want/be comfortable with. Here are some of Alphemy’s considerations: On one hand, Alphemy would not be able to reach the quorum single-handedly, however it would, as you allude to, enable Alphemy to largely steer the DAO, which is not necessarily a good nor bad thing - the most important would be for other DAO members to be comfortable with Alphemy’s increased ability to steer things and trust Alphemy as a good DAO member. A consideration could be to coincidingly increase the quorum threshold on votes, however this might also backfire as it would mean quorum would be harder to reach especially on votes where Alphemy would note necessarily vote.

2 Likes
7

Here is some clarity, let us know if something still remains unclear:

  1. 500kUSDC for 13.365.122 SHU
  2. The current market volumes are so low, that it does not make sense for Alphemy to try and fill a 500kUSD purchase. The current trading venues (besides Uniswap) are also not approved for Alphemy to trade on. Alternatives to purchasing from the DAO treasury include purchasing OTC from other sellers, however Alphemy would rather give liquidity to the DAO treasury rather than some random sellers (Alphemy is open arguments if the DAO sees it as being more beneficial that Alphemy gives the liquidity to someone else than the DAO treasury).
2 Likes
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Thank you for sharing your view and considerations as well Frank. I believe your questions are answered in the direct responses to czepluch and 5pence above - let us know if you feel anything was left unanswered.

1 Like
9

Many wallets purchased the SHU token at the LBP or on the open market with the expectation that future interest in 0x36 would create the scarcity that increases the asset value. Providing SHU at a fixed price directly from the treasury removes the upward pressure on the asset value that this interest should create on the open market. I think this breaks an implicit promise the token holders would expect us to keep.

Demand for the governance token creates the supply demand relationship that drives up the value of the token, which in turn creates the economic security of the DAO and the protocol. Selling large quantities of SHU directly from the treasury at the lowest possible price should be an emergency move, and I don’t see the emergency. The DAO doesn’t need the 500k since it currently holds over 6 million worth of stable assets.

Lastly, this would have a pretty serious impact on the Nakamoto coefficient of the DAO.

2 Likes
10

Many who purchased SHU during the LBP have since sold their tokens. We participated in the seed round, provided additional support, and are partners of Shutter. We remain committed to offering our support and have not sold a single token. We do not harbour any expectation that future interest in 0x36 will create scarcity; only a fool would think so. The underlying utility of the token within its tech stack creates demand. SHU’s tech stack is outstanding, though its utility remains limited. Governance is a significant aspect, and we are interested in the token because of our interest in governance. We believe SHU will become one of the greatest projects in the entire crypto space.

Naturally, there will be stiff competition, which we already foresee, and we believe Shutter DAO would benefit from having a participant like us. Furthermore, we are offering our support without any immediate financial gain. Hence, we wish to purchase more tokens so that if our efforts help the project grow significantly and drive up the token’s value, we will be rewarded through the ability to sell some of our holdings. We are aware that many weak hands will continue to offload the token, as has been the case thus far. Our philosophy is that through governance, we can help steer the community towards positive goals.

We also believe that increasing the treasury’s assets is essential and that it should never be depleted. The treasury should not rely solely on stablecoins, which is the ultimate weak-hand strategy; it should be diversified into project-related tokens like ETH, GNO, USDC, and USDT. There should be DeFi yield-bearing strategies, and the entire process should be transparent to the community. The treasury should maintain a minimum balance, using only the yield. Therefore, an increase in the treasury is always positive. Although $6M might seem substantial, at a 5% yield, it represents barely $30K per month to advance the Shutter network, with institutional investors like BlackRock praising it for its revolutionary technology.

Thus, it all comes down to perspective. Alphemy, by committing to an additional $500K risk on the Shutter Network project, aims to show a clear sign of its readiness to support the DAO and the community, with the expectation of a reward if its efforts and strategies prove successful. We anticipate our work and strategy will yield tremendous results, benefiting all community members who hold SHU for the long term.

In all humility and transparency, I must disagree with your argument, which I believe reflects a narrow vision that would hinder Shutter’s ability to onboard and increase the DAO’s decentralisation and impede its growth. I hope my comments are received as positive and constructive, recognising that disagreement can foster healthy discussion. I trust this text will inspire positive reactions and discussions.

2 Likes
11

Yes, I am of course not offended by your polite disagreement. Thank you for receiving my opposing view and engaging respectfully.

We likely won’t see eye to eye on this, but I will add a couple thoughts:

You are interested in the token because of your interest in governance, yet you say only a fool would think interest in 0x36 would create SHU scarcity. If you satiated your interest in SHU by acquiring on the open market, scarcity is exactly what it would create. I agree that there is a fool in this scenario, but I don’t agree with your assessment of who the fool is. :wink:

USDC and USDT are stablecoins, yes?
Regardless, the Treasury currently holds over 3 million USDC, exactly as you’re suggesting. The other 3 million in stable assets is currently in the DSR contract, which is a DeFi yield bearing strategy as you’ve suggested (although it earns over 8%, not 5%). This was all done transparently, as you’ve suggested.

Also, if you believe relying on stablecoins is the weak-hand strategy, why would you seek to put more of them into the 0x36 treasury?

It seems counterintuitive to suggest that this proposal would increase the DAO’s decentralization, but perhaps I don’t have a clear understand of your plans.

We are more alike than our comments above indicate. I share your enthusiasm for the protocol, and I am as excited about its future. I also, like you, have never sold a single SHU token, and have spent much energy working to support the protocol and the DAO.

Perhaps I also provided financial support by investing before the LBP. Although, if I had, it would have necessarily been at a higher price point than you’re asking for here, and it would have been with the commitment of locked tokens that vest using the 0x36 schedule, which you have declined to do here.

Thank you for the support you’ve provided to Shutter and 0x36. The protocol is in your debt. I look forward to continuing to work together to make the Shutter protocol more successful.

I hope you also receive my comments as positive and constructive. Perhaps others will also offer their thoughts. :pray:

2 Likes
12

I support of the idea to do a OTC trade with token funds but against the term of this OTC trade

Reason is very simple and purely technical (from the liquidity perspective ), if the purchaser want to get such a good term on liquidity (settle at market price, no premium , not lock up) they should just buy it from the open market.

While there are might not much buy pressure right now, I believe there is also less selling supply to settle this trade at the market price.

Such term would disadvantage everyone buying from open market and undervalue SHU token.

We could encourage a otc trade but should apply some lock up period

3 Likes
13

Thank you for sharing and being active. Hopefully we have other comments before going forward with a temp check.

1 Like
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Thank you @5pence! Comments and questions well noted and super informative.

1 Like
15

Thank you for sharing your considerations han.

To add some thoughts, a suggestion is for DAO members to consider whether the liquidity and Alphemy’s increased involvement is thought to be valuable for the DAO at the offer extended. Alphemy believes some additional drive and steering would be valuable for Shutter currently and that the DAO treasury should be diversified more beyond SHU+stables to be more resilient as we move forward. To do this, SHU would likely have to be sold in the open market, and generating e.g. just 500kUSD worth of liquidity currently from SHU would likely largely crash the SHU price. Equally, were Alphemy to purchase 500kUSD from the open market the price would likely largely spike. Thus, as to whether SHU is currently overvalued or undervalued is a matter of perspective and naturally depends on actions of market participants. Alphemy is open to getting more actively involved in driving Shutter forward and getting more skin in the game by providing some liquidity for the treasury, hence extends the offer for providing this liquidity to the DAO simply using the average market price from the past 1-month as terms. The majority of Alphemy’s SHU are currently locked and it is not of interest to get more locked tokens. Alphemy offers providing the liquidity in stables such that another discussion can be held separately around treasury diversification hereunder use of the stables, but Alphemy can also offer to e.g. settle in ETH if considered better by DAO members.

We encourage DAO members to consider whether this is of value or not - Alphemy simply extends this opportunity. Hope to hear more thoughts from more DAO members to help foster the best decisions for Shutter :slight_smile:

2 Likes
16

I don’t have much to add other than to say I am in agreement with the points raised by @han and @5pence. As currently proposed I would not vote to approve. Would like to see a combination of higher price, open market purchase and potentially some lock up. I think as proposed the deal would further alienate many of the LBP purchasers.

2 Likes
17

Thank you for sharing d0z3y

1 Like