From eca7d764a652e444f77a50e4ddbc23a295cd7b2a Mon Sep 17 00:00:00 2001 From: Mark Van de Vyver Date: Mon, 31 Jul 2023 15:00:08 +1000 Subject: [PATCH 1/2] Updated Signed-off-by: Mark Van de Vyver --- ...ecentralized-capital-pricing-tool-scope.md | 246 ++++++++++++++++++ 1 file changed, 246 insertions(+) create mode 100644 applications/decentralized-capital-pricing-tool-scope.md diff --git a/applications/decentralized-capital-pricing-tool-scope.md b/applications/decentralized-capital-pricing-tool-scope.md new file mode 100644 index 00000000000..0a90c96b00f --- /dev/null +++ b/applications/decentralized-capital-pricing-tool-scope.md @@ -0,0 +1,246 @@ +# Decentralized Effervescent-Token Model and Capital Pricing Tool: Scoping study + +- **Team Name:** Mark Van de Vyver [PhD](https://www.student.uwa.edu.au/course/award-verification-service?family=van+de+vyver&family_partial=on&given=mark&search=Search) +- **Payment Address:** 15WoVugRLfBAogS1FBmhzxVv8WZqZK1z4KKHALijTZfdVcCm (USDT) +- **[Level](https://github.com/w3f/Grants-Program/tree/master#level_slider-levels):** 3 + +## Project Overview :page_facing_up + +This application is in draft status - seeking feedback on whether this topic is in the scope of a W3F grant. +If this topic is in the scope of W3F grants, additional milestone detail will be provided where indicated, and re-submitted. + +### Overview + +A scoping study for: A Blockchain capital pricing workbook template and documentation. +Prior related W3F Grant: [Token economics survey 2022](https://github.com/taqtiqa-mark/tokenomics-survey-2022/) + +Together the workbook and user guide are intended to demonstrate how to: + +1. design a (hypothetical) blockchain token with known (theoretical) equilibrium relations, +2. build a model the equilibrium token dynamics, and +3. construct a capital pricing model for the token. + +The target audience is blockchain developers, analysts and users. The tool implementation will refer to Substrate components relay chain, parachain, solo-chain, on-demand chain. Otherwise it is blockchain agnostic. + +#### Description + +Design a hypothetical token with a known pricing relation to observable variables that influence the token value dynamics. +The token use case and design will strive to be consistent with the constraints and requirements described by [Cong, Lin William, Ye Li, and Neng Wang. “Tokenomics: Dynamic Adoption and Valuation.” The Review of Financial Studies 34, no. 3 (August 2020): 1105–1155.](https://doi.org/10.1093/rfs/hhaa089). +Implement a capital pricing workbook for the so designed token/coin. + +The capital pricing framework will be the Black Zero-Beta capital asset pricing model (CAPM). + +#### Motivation + +Particular tokenomics can introduce different token users with conflicting interests. And [it is known](https://doi.org/10.1111/jofi.13192), under [different conditions](https://doi.org/10.1287/mnsc.2023.4756), such conflicts can lead to the token/platform breaking down. +However, currently there is zero help or guidance for developers create a token economy that does not have these vulnerabilities. Yet all the tools are provided to do create such vulnerable/fragile tokens. + +This is a recipe for disasters. + +This project establishes the scope of work required to develop a workbook and user guide to assist developers in creating a token economy that is not known to be vulnerable to breakdown. + +There is a need for blockchain developers and users to have access to tools and documentation that allows them to explore the dynamics of a token, and to later verify those expectations using data from the blockchain. + +There are two use cases: Pre-launch and post-launch + +- Pre-launch - development tool: + - Can you identify the productivity benefit that is driving your token value? + - Are there proxy or real data that measure those things? Directly? Indirectly? + - Is their use case compatible with the token requirements/assumptions? + - Does the Substrate chain support the configuration required by the token design? + - Do the developers understand the range of token price volatility to expect? + - Do you and your users understand the 'best-estimate' timeframes required for your expected network effects to materialize? + +- Post-launch - validation tool: + - Are the proxy or real data consistent the intended use case? + - Are users adopting the token as was expected pre-go-live? + - Is the token price dynamics within the range expected pre-go-live? + - Are the network effects and user adoption materializing as you expected? + +Furthermore, it is common for capital costs to be calculated using a variant of the Capital Asset Pricing Model (CAPM). Specifically, a survey of CFOs by [Graham and Harvey (2001)](https://doi.org/10.1016/S0304-405X(01)00044-7) indicates that 73.5% of responding financial executives use the CAPM for capital budgeting. [Truong, Partington and Peat (2008)](https://doi.org/10.1177/031289620803300106) find that in Australia, 72% of responding financial executives use the CAPM for capital budgeting. + +The workbook and user guide will assist developers and users in calculating a cost-of-capital estimate for their token design. + +### Project Details + +#### Draft scope + +The workbook and user guide will assist developers building a blockchain token economy, by providing: + +- an example (hypothetical) token design and use case; +- an adoption checklist of criteria to be met for the token model to be applicable; +- an example construction of a token state variable given the token design and use case; +- a simulated sample distribution of future token values; +- an example adoption curve for the token; +- an estimate of the discount rate for token expenditures; +- an estimate of the expected rate of return for the tokens under Black's Zero-Beta CAPM. + +In addition, it is desireable this tool: + +- be decentralized i.e. run on a user desktop, not a (centralized) web site; +p- be accessible to any developer, business analyst, regulator or like minded user tasked with developing or assessing a Substrate based blockchain token; +- be extendable by any user with minimal script/macro skills; + +- Mockups/designs of any UI components: + - Worksheets: + - Charts: adoption curve (simulated), expected token value distributions (simulated), etc. + - Riskless return data + - State variable (model and construction) + - Token dynamics + - Benchmark portfolio construction + - Zero-beta portfolio weight calculations + - Token beta and expected return calculations + - Token simulations: 1Yr, 3Yr, 5Yr +- Core functionality + - Token expected return p.a. (a.k.a treasury/project discount rate) + - Adoption curve (1, 3, and 5 years) + - Token value distributions (1, 3, and 5 years) + +- Technology stack + - Public data providers + - curl/wget, jq + - Linux shell scripts, shellspec + - Parquet/DuckDb/SQLite + - LibreOffice + +- Documentation: + - Scripts + - User Guide + +### Ecosystem Fit + +- Where and how does your project fit into the ecosystem? + - The tool and guide should be useful to any developer or analyst seeking to understand the design of a blockchain token. + - The tool will provide outputs (e.g. discount rate) that serve as inputs to a blockchain treasury capital/project budgeting tool. +- Who is your target audience? + - Developers, business analysts, regulators, users. +- What need(s) does your project meet? + - Provides an example of how to construct a token/coin such that there is a known pricing relation that articulates the observable variables that influence the token value dynamics. +- Are there any other projects similar to yours in the Substrate / Polkadot / Kusama ecosystem? + - No. +- Are there similar projects in related ecosystems + - Not that I am aware of. + +## Team :busts_in_silhouette + +### Team members + +- Mark Van de Vyver, [PhD](https://www.student.uwa.edu.au/course/award-verification-service?family=van+de+vyver&family_partial=on&given=mark&search=Search) + +### Contact + +- **Contact Name:** Mark Van de Vyver, [PhD](https://www.student.uwa.edu.au/course/award-verification-service?family=van+de+vyver&family_partial=on&given=mark&search=Search) +- **Contact Email:** + +### Legal Structure + +- **Registered Address:** 9681 41st St NE, Saint Michael, MN 55376 +- **Registered Legal Entity:** Begley Brothers Inc. + +### Team's experience + +- Mark Van de Vyver, [PhD](https://www.student.uwa.edu.au/course/award-verification-service?family=van+de+vyver&family_partial=on&given=mark&search=Search) + Expertise is in financial economics, mathematical statistics and implementation in both domains. + + - Commercial: + - CourseAccess - with John Chionglo (CA), circa 1997. University class scheduling, course grade and materials management web site. When `htc` and `idx` files were a thing. Used by Dr. David Walsh to manage Financial Management course. That is, 300+ students served from a (dual!) Pentium-Pro. + - Taqtiqa - Solo, circa 2009-11. Rode the AWS and devops wave. Negotiated commercial and academic use license with NYSE. + - [Participant](https://doi.org/10.1111/j.1835-2561.2002.tb00191.x) in the Investment and Financial Services Association (IFSA) debate on expensing employee stock options. + + - Technical: + - Thesis topics: Generalized AutoRegressive Conditional Heteroskedasticity (GARCH) option pricing and derivation of the asymptotic distribution of the deviance statistic, and related functions (estimators). Awarded Distinction. Examiners [Brockwell](https://web.archive.org/web/20230731032804/https://dl.acm.org/profile/81100472556), [Chiarella](https://doi.org/10.1016/j.jedc.2018.06.001), [Duan](https://web.archive.org/web/20230131093512/https://d.nuscri.org/profiles/duanjc/). Supervisor [Prof Ross Maller](https://web.archive.org/web/20230605043356/https://researchers.anu.edu.au/researchers/maller-ra). + - Market microstructure; [Corporate Finance](https://doi.org/10.1111/j.1835-2561.2002.tb00191.x); Investment Management; [Econometrics](http://dx.doi.org/10.1111/1368-423X.t01-1-00090). + - Wrote a distributed computing screen saver for thesis calculations. Deployed across 400+ student laboratory computers; Served from dual Pentium-Pro (Win/NT 3/4). + - Rust; Ruby; Julia; Python; MPI/MPICH; + + - W3F: + - Grant: [Token-economics survey (2022)](https://github.com/w3f/Grants-Program/blob/master/applications/tokenomics-survey-2022.md) + - RFP: [Designing UpChain: a framework for securing Substrate runtime upgrades and Substrate network upgrades](https://github.com/w3f/Grants-Program/pull/1309) + +### Team Code Repos + +Personal + +- +- +- +- + +### Team LinkedIn Profiles (if available) + +- + +## Development Status :open_book + +- [Token economics survey 2022](https://github.com/w3f/Grants-Program/blob/master/applications/tokenomics-survey-2022.md). + - Selection of the token design described in [Cong, Lin William, Ye Li, and Neng Wang. “Tokenomics: Dynamic Adoption and Valuation.” The Review of Financial Studies 34, no. 3 (August 2020): 1105–1155.](https://doi.org/10.1093/rfs/hhaa089). + +## Development Roadmap :nut_and_bolt + +### Development Overview + +- **Total Estimated Duration:** 3 months +- **Full-Time Equivalent (FTE):** 0.6 FTE +- **Total Costs:** 30,000 USD + +If this topic is in the scope of W3F grants, additional detail will be provided. + +### Milestone 1 — Token use case, design and model + +- **Estimated duration:** 1 month +- **FTE:** 0.6 FTE +- **Costs:** 10,000 USD + +If this topic is in the scope of W3F grants, required milestone detail will be provided. + +- Document token design and (hypothetical) use case. + - Identify required properties of the state variable specification. + - Identify optional properties of the state variable specification. +- Prepare W3F grant application for implementation. +- Documentation. + +### Milestone 2 — Token use case, design and model + +- **Estimated duration:** 1 month +- **FTE:** 0.6 FTE +- **Costs:** 10,000 USD + +If this topic is in the scope of W3F grants, required milestone detail will be provided. + +- Identify required model development for an empirically measurable state variable. +- Identify required data for measurable state variable model and possible data sources. +- Identify required workbook structure and components. +- Identify required user guide structure and components. +- Prepare W3F grant application for implementation. + +### Milestone 3 — Token use case, design and model + +- **Estimated duration:** 1 month +- **FTE:** 0.6 FTE +- **Costs:** 10,000 USD + +If this topic is in the scope of W3F grants, required milestone detail will be provided. + +- Finalize required model development for an empirically measurable state variable. +- Finalize required data for measurable state variable model and possible data sources. +- Finalize required workbook structure and components. +- Finalize required user guide structure and components. +- Finalize W3F grant application for implementation. + +## Future Plans + +- W3F grant application for implementation +- W3F grant application for a DAO treasury capital budgeting tool. This will assist teams and communities systematically and objectively evaluate treasury resources among competing applications. +- If user interest is sufficient, port relevant parts of the documentation and spreadsheet content to an applied tokenomics tutorial using the Open Web3 Stack. + +## Additional Information :heavy_plus_sign + +- [Truong, G., Partington, G., & Peat, M. (2008). Cost-of-Capital Estimation and Capital-Budgeting Practice in Australia. Australian Journal of Management, 33(1), 95–121.](https://doi.org/10.1177/031289620803300106) +- [Graham, J. & Harvey, C. 2001, ‘The theory and practice of corporate finance: Evidence from the field’, Journal of Financial Economics, vol. 60, pp. 187–243.]() + +**How did you hear about the Grants Program?** Web3 Foundation Website + +Here you can also add any additional information that you think is relevant to this application but isn't part of it already, such as: + +- Pior grants: + - [Token economics survey 2022](https://github.com/w3f/Grants-Program/blob/master/applications/tokenomics-survey-2022.md) From de1fa5273370c9ae18eb32f0919e699bad0b77c4 Mon Sep 17 00:00:00 2001 From: Mark Van de Vyver Date: Thu, 10 Aug 2023 07:59:23 +1000 Subject: [PATCH 2/2] Update applications/decentralized-capital-pricing-tool-scope.md MIME-Version: 1.0 Content-Type: text/plain; charset=UTF-8 Content-Transfer-Encoding: 8bit Co-authored-by: Sebastian Müller --- applications/decentralized-capital-pricing-tool-scope.md | 2 +- 1 file changed, 1 insertion(+), 1 deletion(-) diff --git a/applications/decentralized-capital-pricing-tool-scope.md b/applications/decentralized-capital-pricing-tool-scope.md index 0a90c96b00f..3be676f05b6 100644 --- a/applications/decentralized-capital-pricing-tool-scope.md +++ b/applications/decentralized-capital-pricing-tool-scope.md @@ -2,7 +2,7 @@ - **Team Name:** Mark Van de Vyver [PhD](https://www.student.uwa.edu.au/course/award-verification-service?family=van+de+vyver&family_partial=on&given=mark&search=Search) - **Payment Address:** 15WoVugRLfBAogS1FBmhzxVv8WZqZK1z4KKHALijTZfdVcCm (USDT) -- **[Level](https://github.com/w3f/Grants-Program/tree/master#level_slider-levels):** 3 +- **[Level](https://github.com/w3f/Grants-Program/tree/master#level_slider-levels):** 2 ## Project Overview :page_facing_up