Breadchain Crowdstaking Protocol: The Engine for Funding Post-Capitalist Projects on the Blockchain
One of the major problems with our economy today is that the needs of capital dominate over the needs of labor. Although one may argue that the extent is potentially less in popular blockchain-based governance mechanisms, this still holds true. Standard token governance relies on the neoliberal notion of “voting with your dollar” where voting power is directly correlated with financial power as a voting token can be directly purchased on the market. This creates a system where the lucky few with the financial means to do so can greatly influence the outcome of proposals made on these “decentralized” applications.
At Breadchain, we believe that just because this has become the standard, it does not reflect the ideal governance system for a project like this. Our approach instead, seeks to keep financial influence out by dividing the representations of mutual aid given through capital and labor. For this blog post we will focus on how we represent contributions given through capital by leveraging the ethereum blockchain to build what we call the Breadchain Crowdstaking Protocol which forms as a major engine for funding the project.
Bread Crowdstaking Protocol
The Breadchain Crowdstaking Protocol is the first application to be brought to production by the Breadchain Cooperative and the smart contract has already been deployed on the ethereum blockchain. At the moment we’re finishing the front end which makes it easier for anyone to interact with it and become a Crowdstaker. In the meantime, let’s discuss what we are trying to achieve with this conceptually.
So how does the Breadchain Crowdstaking Protocol work? The protocol is essentially a smart contract on ethereum that forwards Crowdstakers’ $DAI (a US Dollar pegged stablecoin) into a Compound lending pool in which all of the interest earned on the $DAI goes to the Breadchain Gnosis (multi-signature) Safe Wallet which is controlled democratically by the Breadchain Cooperative members. In return for giving $DAI, Crowdstakers mint and receive a token called $BREAD as collateral in the same quantity as they gave in $DAI. The $BREAD token acts as both a form of collateral from the cooperative and a digital local currency for the Breadchain Network of projects and broader ecosystem.
It acts as a form of collateral not only because it represents the exact amount of $DAI provided by the Crowdstaker but also because Crowdstakers can burn their $BREAD token to receive an equal amount of $DAI back. In this way, Crowdstakers are not donating any of their capital (although they can do that too if they want to) but are instead giving Breadchain the permission to take the interest generated through Compound on their $DAI which will then be used to fund the operations and future projects from Breadchain. This means that as a Crowdstaker you have two choices, either mint $BREAD (fund the cooperative) or burn $BREAD (defund the cooperative). You can think of it as a decentralized cooperative bank where you have much more say in how the bank uses its money, in this case for funding decentralized cooperative projects.
Since the $BREAD token is given in the same quantity as the $DAI provided and can be redeemed 1 for 1 at any moment, $BREAD is also therefore similarly a stablecoin pegged to the US Dollar like $DAI. The implications of this are much deeper than what it may seem on the surface. If we consider the Breadchain Network as a type of digital town in which citizens are people who align with the Breadchain principles, than the $BEAD token serves as the basis of a digital local currency for this town which can choose to democratically decide on building on top of. It can be transferred and traded just like any other ERC20 token but keeps a stable value of roughly $1 according to the current price of $DAI.
The Breadchan Crowdstaking Protocol acts like a membrane for building a post-capitalist economy within the confines of present-day capitalism. With the combination of 24/7 access to burning your $BREAD for $DAI and a clear price point, it is easy for the Breadchain Cooperative to protect the token from speculators through the use of automated trading bots. If a bad actor tries to pump or dump the price of $BREAD compared to $DAI on cryptocurrency markets, Breadchain can take advantage of the situation through arbitrage between the crowdstaking protocol contract and the exchange in either direction. The earnings of the arbitrage instigated by bad actors can then be turned into more funding for Breadchain. It’s a win no matter what!
Potential benefits of holding the BREAD token
One downside to fundraising through crowdstaking is that it can be a slower process as compared to traditional fundraising models as it depends on the APR (annual percentage return) of $DAI in the Compound lending pool which can vary from 2% to as much as over 10% during heightened trading frenzies. For example, if there is 100 DAI in the Breadchain Crowdstaking Protocol, over one year with 10% APR, the cooperative would earn 10 DAI. This means that in order to maximize returns to Breadchain, it’s in our best interest to make it worthwhile for Crowdstakers to either hold or circulate their $BREAD. Below you will find a non-exhaustive list of potential benefits for Crowdstakers.
- Access to $BREAD token-gated social networks
- Voucher for discounts on merch or digital products
- Recognition as a supporter on the Breadchain site
- Airdrops of new tokens, NFTs, etc. related to the projects in the Breadchain Network
- Exclusive rights to claims on new Breadchain offerings
- Spend within the network to encourage economic activity / solidarity
- Rewards for join a $BREAD liquidity pool to help secure the peg
- Purchase offerings from partners of Breadchain that accept $BREAD
- If all else fails, you can always burn your $BREAD to receive your original $DAI back
This list is not exhaustive and does not mean that any of these things will happen, but they form a good list of ideas on what is possible. What is important to note is that the $BREAD tokens do not represent any hard governance power over the network and should not be considered an investment opportunity, it is a stablecoin that represents your solidarity with the mission of Breadchain, funding decentralized cooperative projects building open source tools for an alternative vision for blockchain. Let us know which benefits you think would be the most compelling to you or if you have any other ideas we should consider by emailing us at breadchai[email protected]
Alternatives that were considered
In the process of delving into the details of how we wanted the Crowdstake application to work, we considered several possibilities. For transparency, here are a couple of the alternatives we considered and why we did not implement them. This does not mean that in the future that we will not make adjustments as according to the needs and desires of the community.
Maximum Capped Supply
Pros: Gives holders potential upside if project becomes popular as demand increases and supply decreases
Why we did not implement it: There would be a difficult governance structure needed as holders will be potentially biased towards decisions that increase price, which could attract more short-term and profit minded behavior which does not fit the ethos of the project.
Added fees for burning or minting $BREAD
Pros: Potentially speeds up fundraising efforts if fee is also collected by the cooperative and may incentivize users to hold BREAD so that they don’t incur the fee
Why we did not implement it: We believe this would potentially leave a bad taste in the user’s mouth and could be seen as predatory. We believe that there are better ways to incentivize users to not burn their $BREAD. That means there are no fees for burning $BREAD beyond the gas fees inherent to using the ethereum blockchain.
The revolution will not be funded by the current rulers of the economy. Only by creating bonds of solidarity and networks of mutual aid for cultivating dual power will we reach true economic democracy and freedom. $BREAD is not a governance token and it is not just a stablecoin. The Breadchain Crowdstaking Protocol can be seen as many different things depending on the lens you use, but most of all, it is the engine for funding projects that explore post-capitalism on the blockchain.
In the long term, assuming the Breadchain Crowdstaking Protocol is successful, this type of fundraising mechanism can also form the basis for creating a platform for multiple radical projects to fundraise. Considering the smart contracts are open source, anyone can start using the same mechanisms, but where Breadchain can add significant value is by hosting and providing the front end infrastructure for these projects to prevent activists from having to learn how to program Web 3.0 and give them more time to focus on whatever it is they do best and their cause.
In the future we will explain in more detail how we plan on democratizing the allocation of the collected interest through the use of a different type of governance token which can largely only be collected by contributing labor to the project. This makes it so that only those who are actively contributing and therefore, have the best interests and intentions at heart, have the most say over how resources are allocated and the direction of the project and not those who can simply purchase the most tokens. With this setup we believe that we can build new and radical forms of democratic ownership which were not possible before.
While we have the Breadchain Crowdstaking Protocol contract already deployed on the ethereum main net, at the moment we are still working on the front end application for a general audience to be able to mint $BREAD, so expect that in the coming weeks once it is done. If you want to support the project in the meantime, feel free to contact us at [email protected] (let's talk parnerships!) or consider contributing to our Open Collective, donating some ether to Breadchain at 0xD547bd0C023c3aDb8E0F2CC47340f5A4657be910, and sign up for our newsletter!