Five minutes to understand the governance mechanism and reward design of AladdinDAO, a decentralized asset management market


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How to use DAO to bring human intelligence and decision-making ability as a new type of productivity to the world on the chain, and to inspire the human collective of bee-thinking to continue to make correct decisions?

Written by: AladdinDAO
Translation: Perry Wang

AladdinDAO is a community built for value discovery. A group of DeFi veterans created a Decentralized Autonomous Organization (DAO) to screen and manage revenue farming opportunities. Its vision is to provide one-stop liquid mining services. Using game theory, AladdinDAO has built a win-win market that includes DeFi projects, DAOs, and revenue farming participants. DAO screens the best DeFi projects for revenue farming participants and earns DAO governance tokens.

Tripartite market

AladdinDAO was initially supported by a group of DeFi big names, they were the first “headhunters” of DAO. These headhunters, stimulated by the incentive mechanism, will build the DAO’s initial talent structure, the Boule (committee).

As a world-class expert team in the DeFi field, AladdinDAO Boule is responsible for identifying the most promising DeFi projects and allowing AladdinDAO community members to enjoy the rewards of its liquid mining plan.

In order to initially realize the purpose of DAO’s collective value discovery, diversified due diligence, decision-making and community building, 80% of boule members are nominated by the first batch of headhunters, and 20% of boule members are directly nominated by the community. This structure can ensure that boule members come from different backgrounds. All nominated boule members need to be elected by the AladdinDAO community through a decentralized governance process.

Five minutes to understand the governance mechanism and reward design of AladdinDAO, a decentralized asset management market

Boule members get Aladdin tokens (ALD) by participating in DAO activities. Headhunters and Boule are both mobile and open organizations.

Headhunting attracts the most effective talent

The headhunter is responsible for attracting and recommending potential boule candidates for the DAO. The first batch of headhunters were the original supporters of AladdinDAO, and they were responsible for guiding the rollout of the talent network. Each initial headhunter can invite up to 5 boule members (including themselves). Invited members must be selected by the DAO through a decentralized governance process before they can be appointed.

AladdinDAO is similar to a market where a boule member competes under a gamified algorithm, using cryptography to incentivize the best talents to select the best DeFi projects.

Specifically, when members find the project that brings the most profit to the AladdinDAO community, they will receive the highest reward. The reward comes from the ALD tokens generated through the protocol liquidity mining plan, which is measured on a per epoch basis. Each epoch lasts for two weeks, which ensures that boule members continue to discover new high-quality projects, rather than lying on past earnings once and for all.

Just like the expansion and contraction of the scale of the asset management business, the number of boule members will also change with the change in the total lock-up value (TVL) of the DAO. The best boule member has a promotion path, which can be promoted to the headhunter of the system. For those who underperform, the system will rank them in a lower position and eventually force them to withdraw from Boule in the down cycle.

Over time, AladdinDAO will introduce mechanisms to find talent in the entire community. The goal is to realize the decentralization of the talent search and decision-making process based on the tracking records on the chain. Its long-term vision is to build a decentralized investment engine, and make full use of the wisdom of the public as human society enters the encrypted world and evolves to the organization structure of bee colonies.

Strategy Developer

Strategy developers in AladdinDAO are responsible for integrating liquid mining projects into the platform through technology and writing strategic contracts. In addition to receiving ALD rewards, AladdinDAO’s strategy developers also get some performance commissions from mining rewards.

Market incentive consistency

AladdinDAO has two game-theoretic frameworks designed to ensure that the interests of headhunters and boule members are consistent with Aladdin users for a long time.

Headhunters who invite boule members will receive “headhunting rewards”, and the token rewards they receive are linked to the collective performance of the invited members. Boule members compete based on gamified algorithms and contribute to the discovery of new projects, research, decision-making, planning, and community building.

The philosophy of AladdinDAO is to reward the best performers. Boule members can be rewarded in two situations:

This design is designed to motivate boule members to vote responsibly, independently and with a high degree of confidence. Only the boule member with the best judgment can become the winner in the DeFi game and get the most rewards.

How to calculate the specific reward

To understand how to measure the performance of boule members, we have four principles:

  • Adjusted profit of the liquidity pool. The adjusted profit of each liquidity pool is: After the time decay factor is adjusted, this liquidity pool is the profit generated by Aladdin users. The design of the time decay factor is to ensure that the boule member is constantly committed to discovering new high-quality projects, rather than winning on the previous performance.

  • The relative profit of the liquidity pool. The relative profit of each liquidity pool is the adjusted profit minus the average of the adjusted profits of all liquidity pools.

  • The voting weight of boule member i in fund pool j. If boule member i voted “yes” to fund pool j, and there are a total of N members voted “yes” at the same time, the voting weight of member i in fund pool j is 1/N. If boule member i voted “no” in fund pool j, and a total of M members voted “no”, then the voting weight of boule member i in fund pool j is -1/M.

  • The contribution value (CV) of the Boule member. The CV of each member is the sum of the relative profits of the pool of funds they voted, and is weighted by the corresponding voting weight.

Five minutes to understand the governance mechanism and reward design of AladdinDAO, a decentralized asset management market

At the end of each epoch, boule members are ranked according to their CV. Each member’s reward from the reward pool is calculated based on the percentage of the member’s CV in the total amount in each epoch.

The market will price the performance of all boule members. The profit generated by each fund pool is determined by the TVL contributed by Aladdin users and the annual income APY. Once the liquidity pool is on the shelf, as long as there is still available funds, it will have a place in the CV calculation of each epoch.

This model has two advantages. When boule members recommend a large-scale profitable APY and a sustainable liquidity pool, their own interests will also be maximized. This behavior also ensures that the benefits of Aladdin users are maximized.

Two extreme situations are: the recommended fund pool has a very high APY, but it collapses in a short time; and the TVL is very high and the APY is very low, these two liquidity pools are not ideal choices.

The purpose of this mechanism is to ensure that the boule member evaluates the project with a long-term perspective, which is in the best interests of Aladdin users and the DeFi community as a whole.

AladdinDAO was not created for quick mining, selling, and withdrawal, and mining, selling, and withdrawal has never been the best strategy for mining. We want to build our community with people who want to discover value and think long-term. AladdinDAO’s mission is to find and support projects that create value for the community. Rome was not built in a day. AladdinDAO aims to be a project to help winners win, not to add more noise to the chaos surrounding encryption.

How the project is listed on AladdinDAO

Any project can apply to AladdinDAO for income farming and shelf services.

Each boule member has 4 votes per month. Therefore, boule members need to carefully consider their choices and only vote for the projects they think have the most potential. They can vote for or against the project.

Five minutes to understand the governance mechanism and reward design of AladdinDAO, a decentralized asset management market

For any project listed on Aladdin for liquidity mining, they must meet at least one of the following conditions:

In view of the cost considerations of putting new projects on the shelves, AladdinDAO requires the projects to meet basic consensus standards. At the same time, potential attacks and private collusion in the voting process can be prevented.

Five minutes to understand the governance mechanism and reward design of AladdinDAO, a decentralized asset management market

Decision overturn: If any boule member strongly disagrees with Boule’s decision, they can initiate a referendum to require all ALD token holders to vote. Boule’s decision can be overturned if the following conditions are met at the same time:

Five minutes to understand the governance mechanism and reward design of AladdinDAO, a decentralized asset management market

What are the unique characteristics of AladdinDAO

AladdinDAO has three mining mechanisms:

  • Talent mining: Headhunters compete to recommend the best DeFi talents to the system. They are rewarded based on the collective performance of the recommended members.

  • Brainpower mining: Boule members are competing to recommend liquid mining projects that can create maximum profits in the long run. They are rewarded based on the returns generated by these liquid capital pools for the Aladdin community.

  • Liquidity mining: Mining users enjoy the projects recommended by boule member and one-stop liquid mining services, and are rewarded according to their contribution to the liquidity of the platform.

With this unique design, AladdinDAO has the potential to expand to a trillion-dollar market-it can cover all participants who may be involved in DeFi, although each participant has different goals, incentive goals, cost structures and knowledge levels.

This creates a virtuous circle. The smarter the DAO, the better decisions it will have, the more high-quality projects and liquidity the platform can attract, and the higher the value that Aladdin tokens can capture. In the end, the DAO can attract more talent, invest more work, and vote responsibly. A positive cycle again and again!

Reward structure

AladdinDAO can be regarded as a revenue farming screening service governed by DAO. Aladdin users enjoy one-stop income farming services and provide liquidity to the selected DeFi projects. AladdinDAO uses game theory to create a tripartite market consisting of DeFi projects, DAOs and liquid miners.

The most important task of DAO is to bring in suitable projects. For this we must first recruit the right talents. Therefore, a large part of Aladdin’s incentives is used to compensate for the cost of decentralized decision-making and talent search.

People may be curious: Why does AladdinDAO reward boule members so generously?

As discussed in this article, AladdinDAO uses a decentralized decision-making model based on game theory. We all know the efficiency of centralized decision-making. But its shortcomings are also obvious. AladdinDAO aims to build the smartest and most powerful decentralized investment engine to make full use of the wisdom of the public. We are training this decentralized talent network to build order in chaotic information.

Strategy developers also play a very important role in AladdinDAO. Strategy developers are outstanding creators in the DeFi world. They are the artists and poets of our time. Strategy developers will receive ALD rewards and can share part of the performance costs of AladdinDAO mining rewards.

A new financial tool that trades human wisdom

Blockchain is a technology that allows human and capital to collaborate. It can create and circulate financial assets on a global scale at the lowest cost. Blockchain also enables many new types of financial assets that were previously impossible to be created on a large scale. It is the perfect arena for the digital economy, and all valuable data points can be transformed into measurable and tradable financial instruments.

Most of the DeFi projects we see today are based on the value exchange model. Abstractly speaking, it is based on algorithms to exchange one asset for another. AladdinDAO brings human intelligence and decision-making capabilities to the world on the chain as a new type of productivity. As human society is transforming from a tree-like structure to a grid structure in an encrypted world, it will inspire the swarm-thinking human collective to make the right decisions.

Aladdin tokens are the first financial instruments and crypto-native assets ever used to measure and trade human intelligence. The value of Aladdin tokens reflects the overall intelligence level of DAO. If you are a creative and intelligent person, please join the Aladdin community to make DAO smarter, and at the same time earn generous rewards for your brain power!

Screening DeFi liquid mining projects is the first step of AladdinDAO. We start from reshaping all the components of the asset management market. The longer-term goal is to transcend the meaning and scope of investment and become a new paradigm for human society to enter the swarm organization structure to solve collective wisdom and decision-making. Facing this future, We have a long way to go.

How AladdinDAO breaks the chaos and reconstructs the order

The encryption field is currently full of chaos. Remember the farce of Big Data Protocol and the many scams in the encryption field? The root cause of these projects is the information asymmetry between the project and the user.

When most people see information about cryptocurrencies on Twitter, it is difficult to tell whether it is a signal or noise. Too many opinions are spreading randomly, lacking facts and logical support. Sometimes opinion leaders may put forward completely opposite opinions because they have different sources of information, or their income model is completely incompatible with your interests.

Some big V may deliberately create information black holes. They may play a zero-sum game or even a negative-sum game with the information audience. This huge information asymmetry has caused tremendous damage to the entire encryption community.

AladdinDAO aims to build an order in the DeFi world by adhering to the basic value of the DeFi protocol. We are working hard to build a more effective signal system to help the encryption community optimize the overall resource allocation.

In other words, in DeFi, applying Rudolf Clausius’s theorem on thermodynamic processes, it will be the “arrangement of the components of the DeFi world”, which is quantified by the measure of “entropy”.

The process of reaching consensus in the blockchain is to convert the mining power of miners into the consensus of each block, and finalize which transactions are included in each block as part of the final ledger.

In contrast, AladdinDAO uses the predictive performance of boule members to transform their brainpower into a ranking of DeFi protocols. Because Boule is a liquid and open organization, the algorithm will continue to track and calculate the performance records of boule members. The trust of DAO members in boule members depends on their final performance. In order to keep a seat in DAO Boule, he/she needs to continue to deliver excellent performance.

AladdinDAO uses algorithm design to select people with excellent performance, not those with poor performance, thus creating a human oracle that continuously inputs negative entropy into the system, builds system order, and rewards and retains the best on the basis of retrospective method. member.

If you see a recommendation on Crypto Twitter next time, please don’t believe it easily! Bring it to AladdinDAO for manual verification! Please rest assured that the benefits of AladdinDAO’s boule member are highly consistent with yours.

The design goal of AladdinDAO is not to become a statistical thermodynamic system that causes the heat death of the universe. It will bring Schrödinger’s negative entropy from the outside of the system and create “the order of the organism.”

In the Bitcoin scenario, the consensus algorithm rewards miners who win the computing power in each block. As time changes, as the network computing power increases, Bitcoin becomes more valuable. As the network continues to introduce negative entropy from outside the system, the network continues to develop and change in an orderly manner. Similarly, the Aladdin algorithm rewards boule members who make the best judgment (measured on a per epoch basis). With the continuous improvement of its network brainpower, AladdinDAO creates more value for the community by transforming chaotic information into structured information.

Examples of how rewards are calculated

For example, we have 3 boule members (Alice, Bob, and Susan), and they vote for “Yes” or “No” on 3 projects (A, B, and C) respectively. A, B, and C were listed on AladdinDAO for 80 days, 50 days and 20 days respectively. In this epoch, A, B, and C have respectively created US$1 million, US$2 million and US$3 million in revenue for Aladdin users. The design of DAO mining is 27.36 ALD per block, 100,000 blocks are mined per epoch, and a total of 2,736,000 ALD will be mined in one epoch.

Based on the above algorithm, the following figure demonstrates the ALD distribution of Boule member rewards and headhunting rewards.

Five minutes to understand the governance mechanism and reward design of AladdinDAO, a decentralized asset management market

Five minutes to understand the governance mechanism and reward design of AladdinDAO, a decentralized asset management market

Five minutes to understand the governance mechanism and reward design of AladdinDAO, a decentralized asset management market

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