TIP-098: The Future of Threshold

[maclane]

@MrsNuBooty

thUSD has been gaining traction as a decentralized stablecoin, and it would be helpful to understand whether tLabs will have any involvement in its development or if it will remain under the purview of the DAO.

tLabs initial focus will be on the priorities described in @sap’s initial post and will not include thUSD. The DAO’s strategy for thUSD and its market position relative to alternatives is a separate discussion that is worthwhile to have.

@MrsNuBooty

Additionally, the DAO’s current guild system has played a critical role in organizing contributors and initiatives to date. How are y’all envisioning changes to the guild structure, or will guilds continue to operate independently of tLabs?

I expect many, but not all, of the functions performed by the guilds (excepting the Treasury Guild) would be subsumed by tLabs. Whether that means the DAO disbands or pares down the guilds is not prescribed in this proposal, but I would expect non-tLabs DAO expenses to decrease.

@MrsNuBooty

Will there be existing DAO contributors transitioning into roles within tLabs, or will their efforts be redirected toward other initiatives?

I expect tLabs will want to transition over certain roles, but those discussions haven’t started yet.

@MrsNuBooty

What specific mechanisms will be in place to ensure transparency and alignment between tLabs and the DAO?

@MrsNuBooty

How will these milestones be communicated and measured, and how will the DAO participate in evaluating progress?

tLabs will present budget requests (along with milestones and progress updates) on an annual basis, or whatever reasonable cadence the DAO prefers. Open to other reasonable alignment/transparency mechanisms the DAO desires as long as they aren’t overly burdensome.

@MrsNuBooty

While tLabs introduces centralized leadership for efficiency, how do we ensure this structure doesn’t compromise the core principles of decentralization?

tLabs will have no involvement whatsoever in the operational aspects of the network. IMO, the primary consideration from a decentralization perspective is that the protocol itself is credibly neutral, censorship resistant, and free from single points of failure.

Finally, the DAO has full discretion to end its relationship with tLabs at any time and switch to an alternative vendor or the current guild model.

[maclane]

@NuLyphStyle

30x that is not feasible to fund a team

The fundraise is going to the DAO’s treasury, not tLabs. I expect tLabs budget requests would represent only a portion of the amount raised. The Treasury Guild would be able to deploy the funds as it sees fit (e.g. to earn yield, etc.)

@NuLyphStyle

End the gated signer set and open the protocol up to all like all networks should be.

I sympathize with this but given the delays around the Schnorr upgrade and the invention of BitVM2, it is no longer clear to me there is a benefit to making the current honest-majority model permissionless in the near-term when a 1-of-N trust model is likely available.

@NuLyphStyle

We shouldn’t separately compensate limited sets of individuals with inflation.

Someone needs to do the work. I’m doing it for free, but I doubt anyone else will.

@NuLyphStyle

It will be members of the DAO deciding whether or not to compensate themselves for a job well done.

I think this more accurately describes the status quo than what is being proposed. In the case of tLabs, I will be responsible for employment decisions and the DAO will be responsible for whether or not to continue the engagement. Since I’m not receiving any payment and I (generally) don’t participate in governance anyways, that seems as clean as it can get, but I’m open to suggestions.

[Vict0r]

Thanks for the proposal @sap. A lot of questions and concerns I have have already been mentioned and partially addressed.
I believe this proposal is a big step, a necessary change, to allow for quicker decision making and execution. I’d like to know more about how this proposal will reshape the current guilds structure as this would be a significant restructuring of the DAO.

[XKOYOPA]

[eh_ethan]

First of all I want to thank @sap for this very well laid out and thought through proposal.

As the Growth Coordinator for Threshold Network I’d like to share my thoughts and experiences to help aid $T token holders in their decision on this proposal.

Tokenomics

Before I was the Growth Coordinator for Threshold Network I worked for a liquid token fund in the UK, where $T was one of the core convictions. We often talked about with just a simple switch to value accrual the market will realise the fair value of $T.

I first raised this issue which brought extensive discussion on Discord maybe 6+ months ago, but due to my own and the DAO’s limited constraints, nothing moved forward, and I think that’s a similar theme that will follow in my response to this proposal, limited constraints within the DAO.

Protocol & Product Development

I am no expert here, so others can speak more in depth, but what I do know is that we have great tech, but it’s not going to stay great forever, we need to allocate time and resources into making sure that tBTC doesn’t just become an outdated solution to an ever present problem.

Threshold Growth

As the Growth Lead, I deal with growth everyday, so I’m certain when I say that Threshold’s tBTC growth is slowing and if we’re not careful, moving on stagnant.

We’re pretty much everywhere on mainnet and for L2’s we are slowly but surely getting there. What do we do once we’re integrated everywhere? Sure we can push some incremental increases in efficiency but the longer it goes on, the lower ROI on the time it incurs.

This incurs the question of taking tBTC to new chains and why we haven’t done this yet.

The main constraints are operational capacity and capital.

My role is capped at 30 hours, whilst I do have some support from others within the DAO, this is limited. It’s not currently possible to manage integrations for chains we’re currently live on, plan launches on new chains and liaise with the Bitcoin community to onboard new capital with the structure currently in place. In addition to this, we have 2 full-time devs, for the whole of Threshold Network, this is not enough to add an additional workload of back-to-back deployments.

The second constraint of capital would be addressed by TIP-96, DeFi is a pay-to-play game and compared to our competitors, we’re losing. Decentralised technology only takes tBTC so far, values of decentralisation ultimately waver if large TVLs and fees are proposed to a team.

It’s my understanding that tLabs will allow for a structure (and management of funds), to address the problems, allowing tBTC to expand very quickly to new chains.

Final Thoughts

I think what tLabs will create versus what we already have in Threshold DAO, is an operational structure that allows for accountability, efficiency and regiment. Where there is one singular entity that has the drive and means to execute, not a structure of decentralised contractors who work with NuCypher and KEEP trying to balance who has what information, who’s leading what and when.

In its current structure no one person or team has the full picture of what’s going on in Threshold, tLabs will solve this.

[student]

I appreciate everyone’s diligence in challenging this proposal on specifics of funding amounts, planned financial structure, and, importantly, impacts on existing DAO guilds.

A proposal this substantial (both in mint size and organizational restructuring) deserves greater clarity for these points.

With all that said, @sap and @maclane, this is a super exciting direction! Thank you very much for jostling the DAO and compelling these important conversations about how to grow!

[shoegazer69]

@maclane

I expect many, but not all, of the functions performed by the guilds (excepting the Treasury Guild) would be subsumed by tLabs. Whether that means the DAO disbands or pares down the guilds is not prescribed in this proposal, but I would expect non-tLabs DAO expenses to decrease.

Just wanted to call out that the proposal, as I understand it, is for tLabs to laser focus on tBTC. While I agree that will reduce load on the current guilds, Threshold still has the thUSD and TACO products, along with associated operational Threshold infrastructure, all of which require effort from the Integrations and Marketing guilds. Of course, we can decide to right-size those efforts and I’d love to see a guild overhaul if we move forward with this proposal.

[shoegazer69]

Thank you @sap and @maclane for your leadership here. Speaking strictly from a product development perspective, I’m convinced that tBTC will fall behind if we don’t so something similar to this proposal.

I’ve been coordinating DAO development/engineering as a member of the Integrations Guild over the past year. We have two very talented engineers but that is simply not enough across all Threshold priorities: thUSD, TACO, tBTC, customer support, websites / token dashboard, docs, incentive campaigns (eg. BOB), reacting to security emergencies, rewards distribution, offchain infra… I could go on. We as the DAO have also not done a great job of prioritizing among those competing needs and tBTC development is suffering as a result.

I think @sap has a good approximation on a team of 10-15 as previously mentioned in the replies.

It’s been stated, but I’m against tLabs taking on anything other than being laser focused on tBTC development and growth. The DAO should continue to handle the rest of Threshold’s priorities and I’m looking forward to helping determine clear ownership, roles and responsibilities in coordination with tLabs.

[igorerker]

This kind of centralisation is a good think. We are turning the clock back where we started before the merge ( which I publicly rejected and was seen to me as a socialist utopia). It looks like the nature is taking care of itself. We need personal and public responsibility and yes, we need a CEO. Unfortunately we lost three years and 80% of market cap. So, strong support for the labs. Printing additional tokens … yes. Inflation is not an explanatory variable of the mcap.

Slightly out of the context and I can go to the market channel on discord which I will - but just to put some more salt on the wound - Nu, measured since going public and adjusted for merge, is 60% (excluding staking reward) lower than SAFT 2 and first listing. Though, it was 10x in the previous bull. Every single L1, even the most obsolete have positive momentum. Perhaps Sap and MacLane proposal is the first initiative to change the momentum. We have good product, but market is ignorant. There are many old projects with good products and positive market recognition as T, but none has a market price as ours.

Perhaps I am last bull becoming bear before the trend reversal (I have had many in my career) but we have to focus on the price as well. Not only on the product.

[sap]

Thank you to everyone who has contributed to this discussion. The quality of the dialogue here is a testament to the healthy and engaged community we are fortunate to be part of.

On DAO Structure: Members of the Integrations Guild, with support from @luna5, have initiated discussions on what a potential DAO reorganization could look like in light of this proposal. We will actively support this process to ensure clear roles and responsibilities for each organization and a smooth transition. This process is ongoing and will likely require a separate DAO-led proposal if the tLabs proposal passes.

On Unlock Milestones:
To address questions about the token unlock structure, we will propose a framework that combines tBTC TVL milestones with outcomes in areas that may include:

• Technical roadmap execution: ensuring core development goals are met.
• Product development: delivering meaningful user-facing improvements.
• Growth and marketing: driving adoption and expanding awareness of the network.

The Threshold Council and the broader community will remain actively engaged throughout this process, ensuring regular updates and clear accountability on milestone progress.

On Team Allocations:
While specifics are not yet finalized due to the pending hiring process, the allocation is intended to attract and retain top-tier talent critical to the long-term success of tLabs and the Threshold Network. Allocations will be benchmarked against industry standards and aligned with the team’s contributions and milestone achievements.

[JohnPackel]

This looks good to me. I shared concerns some expressed regarding a blanket 3% allocation to team incentives before we see the size, roles, milestones, etc., but I think it makes sense to seek ratification on the above structure.

To be super clear, these are key next steps I see. @sap @maclane please confirm or suggest otherwise:

• move this TIP to snapshot today (7-day per governance)
• assuming snapshot approval, Governor Bravo vote to mint follows
• workgroup on DAO structure meets early next week (with goal of recommendation by end of week)
• schedule a community call(s) for Labs to present strategy, roadmap, year-1 milestones (prior to ETH Denver I’d expect)
• schedule DAO vote yes/no on proposed year-1 dev/growth plan and cost (perhaps once fundraise is near completion?)

Separately but related, I recommend that once we move this TIP to snapshot we also work quickly to move TIP-92 to snapshot with vote choices covering the range of options proposed (i.e., no change vs reduce tBTC rewards 50% vs eliminate all inflation; exact choices to be aligned on the TIP-92 thread).

[JohnPackel]

Thanks for confirmation, @sap. Of course, anyone can add their thoughts or questions on next steps.

TIP-98 live on snapshot: https://snapshot.org/#/s:threshold.eth/proposal/0xc80ddd25510430db366f866950f134a01b374794fc53bfd865ba39faa083a1b0

[igorerker]

Can I speculate - we will dismantle DAO if we want to stay relevant. Perhaps not this cycle, but if we survive till next, DAO will be obsolete, at least on the service side. Perhaps treasury/ capital structure not. I know I will not get any likes for saying this.

[nico186]

Thank you for such a well written proposal!

[nico186]

Thank you for moving this to SS vote.

I appreciate all of the comments and discussion in this proposal. Many of the questions I initially raised have been answered in the discussion and the specific information I needed to reach my own conclusion, and support for the proposal.

I have been actively involved with Threshold Marketing Guild since its initial formation and have served as a voted member for the last 3 yers. One of the biggest challenges within the guild format is overall organization and structuring of contributions so they can align with the needs of the DAO. It is challenging for such a diverse group (both geographically and individually) to find time to meet, create process to complete work, and align opportunities for new members to contribute.

I am in favor of Tlabs approach, essentially a top down management style, in organizing the functions of the guilds. I expect there will be ample time and opportunity to discuss, plan, and implement a transition, if this proposal passes.

I am in support of this proposal.

[Agoristen]

As has come to light in the discussion, @maclane will be taking care of employment decisions and compensation, both of which increases my confidence in the proposal given that he himself is working pro bono.

As @sap has laid out, tLabs will be working closely with the DAO to set milestones, I consider this another requirement.

Adjusting the vesting schedule to more than 4 years would increase my confidence further. I believe we need incentives to be aligned with the long term success of T. I don’t think the “industry standards” of 4 years is really important, we want people to still care about the success of Threshold 5 or 10 years from now.

If it is a success, we can expect the price of T to increase as well, so the incentives are there to make sure it happens.

While I still consider the proposal and follow-up somewhat opaque, I’m willing to let that slide due to the understanding that crafting everything up-front is a very challenging, if not impossible task and because a restructuring of Threshold Network appears to be an inherent, perhaps urgent need given many of the challenges we face within Threshold Network and the DAO; in marketing, tech development, competition, lack of growth, price decrease and inflation.

TIP-92 by @maclane was met with a lot of resistance, however BitVM2 is one of several pieces that can directly lead to this puzzle being put together in a manner that makes sense. Maclane has a clear vision and I think it’s an important direction to look at, this proposal will ease the path for not just improved tokenomics, but essential value accrual.

There are no other proposals available that makes sense. I have confidence in both @sap and @maclane. After review, I now believe that the proposal is worthy of either abstain or yes vote.

I’m leaning yes, but have not made a final decision yet.

@maclane

My preferred structure for the team token incentives is for these to be distributed directly to team members via the DAO, rather than to tLabs. While the corporate structure and jurisdiction of tLabs are not yet finalized, if we assume the tLabs entity is based in a taxable jurisdiction, routing team token incentives through tLabs may incur significant tax leakage (i.e. double taxation at both the corporate rate and again at the recipient’s personal rate).

The main concern I have with this approach is the DAO micromanaging compensation decisions. tLabs needs full discretion over hiring and compensation decisions and should be able to provide an address, token amount, and vesting terms to the DAO which deploys a llamapay (or similar) vesting contract. The DAO should just be exercising a continual binary choice on whether to engage tLabs or not, rather than being involved in daily operational decisions.

The other implication of this approach is that the team allocation will not fully vest over 4 years since each individual recipient’s vesting period will start when they are hired.

The core requirement is that there needs to be a sufficient bucket of tokens allocated for team incentives.

This makes sense to me.

[pdyraga]

The proposal focuses heavily on the protocol and product development and while this is very interesting, I would be much more keen on voting yes if the first and primary focus of tLabs was growth. tBTC is the most secure and decentralized Bitcoin bridge on the market with 8 canonical tokens on one of the most popular chains, and as of today, we are 3.1% of total BTC on Ethereum. I find it hard to believe an upgrade to Schnorr, BitVM2, or an app chain deployed even tomorrow would let that number go up. Several new tokenized Bitcoin protocols launched after tBTC v2 and experienced much more significant growth despite their weaker security assumptions. I am all for having a laser-focused team of growth professionals at tLabs with a clear management and responsibility structure but I think we can achieve it with less than 10% dilution of the current supply.

[nkuba]

I appreciate the thoughtful discussion and the efforts to address the challenges we face, but I have some concerns and suggestions.

First, addressing tBTC growth through yet another complex and time-intensive product development raises concerns for me. Previous attempts to innovate in product and integration have not delivered the significant growth we all hoped for. This makes me question whether focusing solely on technical enhancements is the best approach or if we should prioritize improving the adoption of the existing product first.

Second, I firmly believe that tLabs should focus exclusively on driving tBTC growth and increasing the value of the T token. Ensuring that other projects don’t dilute attention and resources is crucial. Concentrating on these core objectives would lead to a more precise and impactful strategy.

Lastly, I’m skeptical about the proposal to mint a significant 10% and allow further dilution of the T token’s value. A phased approach, tied to achieving specific growth milestones, might be a more prudent path forward. This would help mitigate risks, maintain community confidence, and ensure the allocated resources deliver measurable progress.

[lukasz-zimnoch]

I totally agree that the status quo is not something that will work long-term.

Regarding product and protocol development, Threshold DAO made good progress in terms of taking over those responsibilities from the original dev teams. There is still a lot to improve in that matter and we need to ensure tBTC has sufficient dev coverage with no doubts. However, in my opinion, this development power should be more focused on maintaining security, performance, and empowering growth than anything else. However, the proposal’s main focus in terms of product/protocol development is Schnorr/BitVM2 and the Threshold app-chain. It’s clear that the former change will improve decentralization and the latter will decrease reliance on Ethereum but, I’m afraid they won’t get us to a much better place in terms of TVL in the long term. The proposed changes are very complex and risky technical-wise. They are also expensive. There is a high chance we will experience diminishing returns or even losses (in terms of quality) in the most pessimistic case. In my opinion, this proposal doesn’t provide clear arguments that would justify spending a big chunk of the 10% mint on the mentioned technical endeavors.

Regarding the marketing and growth part of the proposal, I totally agree with the key points of the proposal. Moreover, I think more emphasis should be put on this part than on product/protocol development. We have been underperforming in this area since inception. A good strategy here may change much more than new technical developments and innovations.

[maclane]

@pdyraga

The proposal focuses heavily on the protocol and product development and while this is very interesting, I would be much more keen on voting yes if the first and primary focus of tLabs was growth.

tLabs first and primary priority described in the proposal is increased TVL and bridge velocity.

An important component of a successful growth campaign will be maintaining tBTC’s status as the most secure and decentralized Bitcoin bridge on the market which requires a credible product roadmap. But it’s true that most of the product upgrades described will not directly drive TVL or bridge velocity, which is proven by the recent success of technically inferior wrapped BTC derivatives.

An important exception may be improvements related to cross-chain tBTC. Currently, Threshold is not able to meet the demand from both new and existing ecosystems for canonical tBTC (much less direct minting). A tBTC app-chain could effectively become an execution environment capable of accepting light clients from any arbitrary chain, rapidly expanding tBTC availability and a direct minting UX across the entire blockchain ecosystem.

@nkuba

Second, I firmly believe that tLabs should focus exclusively on driving tBTC growth and increasing the value of the T token.

The token improvements described in TIP-92 are related to the proposed custody upgrade to BitVM2. While it’s possible to implement TIP-92 and retain a permissioned beta staker program indefinitely, I don’t believe this is a compelling long-term vision to rally behind without meaningful progress towards a permissionless 1-of-N trust assumption.

And, while more speculative of a demand driver, @jakelynch’s ideas around VE-style burn mechanics where integrating ecosystems are incentivized to buy and burn T to attract BTC liquidity, likely fit much better within the architecture of a Threshold app chain.

@pdyraga

I think we can achieve it with less than 10% dilution of the current supply.

@nkuba

Lastly, I’m skeptical about the proposal to mint a significant 10% and allow further dilution of the T token’s value.

@lukasz-zimnoch

In my opinion, this proposal doesn’t provide clear arguments that would justify spending a big chunk of the 10% mint on the mentioned technical endeavors.

The majority of the mint is earmarked for a DAO financing. Historically, the DAO has sold T on the market at spot (or at a discount via Olympus bond markets, and other mechanisms, etc.) to cover its expenses and diversify its treasury. In the absence of this TIP, that will presumably remain the case.

Expenses associated with this proposal will replace many of the current DAO expenses and the Treasury Guild can deploy a diversified treasury into yield opportunities. In combination with TIP-92, it’s possible that the network and DAO will achieve profitability (or close to it) and, if TIP-54 is implemented, T may even become deflationary on a pro forma basis.