[BIP-647] Supporting the DUCATA Initiative

Governance General Proposal
1

A Stable and Autonomous DeFi Ecosystem

SUMMARY/TLDR;
DUCATA requests to join the Balancer Partnership Program and requests an exception to the open-source license, similar to Gyroscope, to protect the DUCA Reflexivity Protocol. DUCATA’s innovative protocol aims to provide stability and liquidity through protocol-owned liquidity, leveraging parts of Balancer’s V2 code. The partnership will benefit Balancer by showcasing its capabilities and supporting financial innovation as well as monetary compensation and DUCATA in reducing development time and leveraging Balancer’s proven technology. DUCATA is committed to a transition towards full decentralisation and proposes a licensing fee to support Balancer’s development. With your support, we can build a more stable and autonomous DeFi ecosystem.

If this proposal is accepted, the Partnership Program will still be subject to successful due diligence and mutual assent to terms in a licensing agreement.

The DUCA Protocol operates on a unique model where value is derived from market perceptions and demand-supply dynamics, independent of external collateral. This approach uses reflexivity to maintain a dynamic balance between market demand and protocol supply, fostering stability even amidst volatility. DUCATA’s goal is to solve the stablecoin trilemma and create the first viable form of Programmatic Money with the DUCA Reflexivity Protocol.

STABILITY THROUGH INNOVATION
The DUCA Reflexivity Protocol ensures continuous capital flow throughout the system, not by pegging to a fixed FIAT value but by maintaining liquidity under all market conditions. This is achieved through protocol-owned liquidity, made possible by Balancer’s infrastructure, ensuring stability and reducing dependency on external liquidity providers.

WHY WE NEED YOUR SUPPORT
To maintain the integrity and operational autonomy of the DUCA Protocol, we require an exception to Balancer’s open-source license. This exception is vital to protect our unique business model and prevent unauthorised copies that could undermine our efforts and the benefits we aim to deliver. We understand the importance of open-source principles. This exception is likely a temporary measure to ensure the protocol’s integrity, with a clear roadmap towards full decentralisation where the community will decide on the DUCA protocol’s software status.

Because we believe in commitment to our collaboration with the Balancer Community, we commit to a payment for a licensing fee to use the Balancer V2 code for the DUCA Reflexivity Protocol. As a usual transaction-based fee would compromise the unique mechanism of DUCATA, we propose to pay a periodical continuous fixed technical licensing fee to Balancer. This fee will help support the continued development and maintenance of Balancer’s infrastructure, which is crucial to the success of the DUCA Protocol. We propose the following annual license fee structure:

  • An annual flat fee of 250K per year for unlimited deployment, also paid in equal monthly amounts

DUCATA aims to launch on the Arbitrum Layer 2 with a first expansion on Ethereum Main.

BENEFITS TO THE BALANCER COMMUNITY:

  1. Protocol-Owned Liquidity: The DUCA Reflexivity Protocol relies on protocol-owned liquidity, made possible through Balancer’s infrastructure. This ensures a stable and reliable liquidity source, reducing dependency on external liquidity providers. A unique application of the Balancer code-base that will showcase and further propel the innovations possible.
  2. Supporting Innovation: This collaboration is a cornerstone for creating a new financial system. By integrating DUCATA, Balancer becomes part of the foundation for a new, innovative approach to DeFi and a new form of money: Programmatic Money. A fully on-chain, crypto-native and autonomous form of money that protects purchasing power and generates sustainable yield.
  3. Promoting Ecosystem Growth: The success of DUCATA and its unique stability mechanisms will enhance the reputation of Balancer as a platform that supports pioneering projects. Just as Balancer’s collaboration with CoW demonstrated significant benefits, we foresee similar or greater success with the DUCATA partnership, driving innovation and growth.

OUR COMMITMENT TO THE DEFI ETHOS AND BALANCER
While our immediate need is to protect the protocol through a proprietary license, we are committed to a gradual transition towards a more open and decentralized approach. Our long-term vision includes launching a DAO, and ensuring that all future decisions, including licensing, are governed by the community.

DUCATA agrees to protect the resiliency of the DAO and promote its growth by adhering to basic ecosystem standards.

  1. Ecosystem Values
  2. DAO Accountability Guidelines *This includes adhering to any contract terms covered by an agreement with the Balancer OpCo.
  3. Dos and Donts of Business Development and Marketing related to Balancer
  4. To prevent fraud, theft and token manipulation as much as possible.
  5. To protect the confidentiality and privacy of data and information received in the course of Balancer work.

CONCLUSION
We believe that with your support, DUCATA can significantly contribute to the Balancer ecosystem, the broader DeFi space and even the global financial system. Together, we can create a resilient, innovative financial system that benefits all participants. Your support is pivotal in realising this vision and ensuring a thriving future for DeFi. Creating money for the people, by the people.

Thank you for considering our proposal. We look forward to your support and to building a stronger, more innovative DeFi ecosystem together.

If you want to read more about DUCATA and the DUCA Reflexivity Protocol you can do so here:

Whitepaper | Doc Centre | Website

If you have questions you are welcome to connect with the DUCATA Community and DUCATA Team in Discord.

2

Exciting initative!

Can you elaborate a bit more how specifically this partnership should look like?

From the above text it is not clear how it shall be executed on which terms. I just want to make sure that both DUCATA and Balancer DAO have clear guidelines to adhere to with this proposal.

  • Can you specify this a bit better? $250k per year = $20’833 per month sent to which DAO multi-sig?
  • What would be the terms of the agreement and termination if one or both parties break parts of this arrangement?
  • What happens if DUCATA is insolvent and can’t pay the monthly license fee anymore?

I would really appreciate a more thorough proposal with clear terms. Otherwise, this sounds rather exciting for both DAOs.

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Hey Xeonus!

Thanks so much for your enthusiasm, we’re super excited to get DUCA on-chain! And of course, we’re happy to elaborate. I’ll go through your questions one-by-one.

  1. Your calculation is correct and the multisig is the Arbitrum DAO Multisig: 0xaF23DC5983230E9eEAf93280e312e57539D098D0
  2. We are committed to following the standard terms and conditions that Balancer has in similar agreements as much as possible. The final version of the terms and conditions will be determined in coordination with the Balancer Legal Council after the approval of the proposal. This has been the preferred procedure from Balancer and we follow it accordingly.
  3. Our suggestion is that in the unlikely case that DUCATA becomes insolvent and has not paid its fees for more than 3 months, the exception of open source is automatically withdrawn, thus making the DUCATA application completely open source as in other situations. This will be incorporated in the terms and conditions of the final agreement.

I hope this answers your questions! We kept the proposal as light and clear as possible, but if you have any further details or questions you wish answered, we’re happy to answer them of course!

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Thanks for the clarifying comments. We plan to post this proposal to snapshot this Thursday given there is no additional input from the community.

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https://snapshot.org/#/balancer.eth/proposal/0x4f843d83755ca517bdd0b54bb9711e1ab98e3afcf23616e745636b4787e78a4e

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Dear community,

As executive director for the Balancer OpCo, I’d like to post a brief update on the negotiations with Ducata.

After a few weeks we have compromised with satisfying terms for both parties, with a minimum contract period of 12mo for termination, and 3mo written notice following. During this period, we have also reached out offering tech support and comarketing, which Ducata representatives haven’t engaged with.

On July 10th, DUCAswap went live while the agreement was still under negotiations. On July 17th, DUCA depegged and the team disclosed a security vulnerability was informed by a whitehat, following news that the project would take a step back and reassess their path forward. (Source: Discord).

We have reached to the team, with no response. After consulting our in-house GRC counselor, we collectively decided to void the agreement pending signature, based on the information we had at the time.

After thoughtful consideration, we believe it is in the best interest of the Balancer community to reevaluate this partnership under a new lens and have asked Ducata representative to come forward after the recent events.

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Dear Balancer Community,

We wanted to address Danko’s recent post and share some updates about the DUCA protocol. Danko’s post about reconsidering our partnership because we didn’t respond to a support offer, caught us by surprise. We were busy handling a potential vulnerability and other issues in our newly launched protocol at the time. While we appreciate the support offer, those issues weren’t related to the Balancer integration. Needless to say, this response was not what we expected from a business partner with whom we had just reached a valuable agreement.

The post also mentioned co-marketing. And while the Balancer’s marketing team was added to the collective working group chat, they never replied. Our plan was to reach out again, as soon as our agreement was signed. Collaborating with other communities aligns well with our aim to realize the DeFi philosophy together.

Moving forward, even with the challenges, our investor community remains supportive. They believe in the vision and design of the protocol, despite the initial setbacks. We’re committed to making DUCA successful and are involving our community in decisions as we prepare for the V2 relaunch, which includes testing on a public testnet and re-auditing.

Initially, we planned to sign an agreement effective from our restart, but the tough negotiations and Danko’s post made us rethink our strategy. We felt there was too much hesitation from Balancer, so we’ve decided against a proprietary license.

Instead, we’re launching V2 under a GPL V3 open-source license. This aligns better with both our and Balancer’s visions and serves our communities best by ensuring transparency. We’ve learned that having an engaged community that can respond, learn, and collaborate with us is more valuable.

We’re confident about our upcoming relaunch after testing the new settings with our community. Our goal is to create a robust and sustainable protocol that benefits all stakeholders and upholds the DeFi ethos.

Despite the change in our licensing strategy, we will continue with our integration of the Balancer code base and remain committed to collaborating with the Balancer ecosystem and community. We appreciate any collaboration with the community in this regard, as we work together towards our shared goals.

We’re open to further discussions and welcome your thoughts or feedback. We’re looking forward to properly connecting with the Balancer marketing team to continue working together towards a more stable and autonomous DeFi ecosystem. Feel free to ask out if you need more information or background on our choices.

Thanks for your understanding and we’re looking forward to what’s next for DUCA and Balancer.