Dalycoin Whitepaper

Powering a decentralized Investment Fund with Dalycoin (DLY)

Cover.png

Abstract. A decentralized investment fund using the Ethereum blockchain network to facilitate voting and profit distributions. A token based democratic investment fund where voting is controlled by the amount of Dalycoin (DLY) tokens held by each address. Similar to Bitcoin, 21,000,000 tokens have been created. Tokens can be purchased during the initial funding round where 60% of the coins will be minted immediately. Additional tokens will be mined based on the achievement reaching set goals and targets. Token holders will have the opportunity to reinvest their distributions to increase their token holdings or they can elect to receive distributions. Tokens will be purchased at the fund level to incentivize portfolio performance.

1. Introduction - Fund Thesis

The funds purpose is to create long-term generational wealth for token holders and contributors. Investors will own coins at the fund level. Equity will be maximized when the Fund is optimal vs. when their individual entity is performing, thus aligning interests directly with investors of the fund. What is needed is an electronic investment and voting system based on cryptographic proof, allowing any willing parties to transact directly with each other without the need for a trusted third party. This increase liquidity in the alternative asset investment class. We define a token as a chain of digital signatures. Each owner transfers the token to the next by digitally signing a hash of the previous transaction and the public key of the next owner and adding these to the end of the coin. A payee can verify the signatures to verify the chain of ownership. Blockchain allows for a single, immutable record of equity transactions which is interpreted by established rules in an unbiased way. This solves data quality issues at source increasing compliance and accuracy when dealing with vesting scheduled and legal notifications. Profit sharing and distribution criteria can be established upfront, executing automatically resulting in increased confidence and clarity for all employees and stakeholders. Administrative effort of record-keeping and reconciliation is eliminated and voting can be easily facilitated. A fixed percentage of established distribution will be donated to select non-profits. The advantages of this proposed structure, allows to minimize internal accounting and reconciliation, legal and compliance. It reduces costs, provides structure to invest and vote, which should provide a distinct advantage for Fund 1 portfolio companies.


2. Funding and Investment Process

We will create a diverse portfolio whose goal is to maximize its annual rate of gain in intrinsic portfolio value on a per token basis. We will own a diversified group of businesses that generate various distributions of value to all token holders in proportion to their token holdings. All business will be conducted through separately incorporated subsidiaries whose Founders will operate with extreme autonomy. The Fund Management Team will be responsible for facilitate the voting process for investments and will also facilitate the election of portfolio company leadership. Profits from portfolio companies will be distributed as dividend or redeployed to set up / acquire new subsidiaries. This model promotes extreme decentralization of operating authority, with responsibility for business performance placed entirely in the hands of local managers and investment decisions shared across all limited partners (tokenholders). As preferred conduct, we will almost never spin off a portfolio company. Voluntary spin-offs, typically make little sense in most situations as the fund would lose control, capital-allocation flexibility and potential tax advantages.

Investors will own coins at the fund level. Equity will be maximized when the Fund is optimal vs. when their individual entity is performing, thus aligning interests directly with investors of the fund. Tokens can be purchased during the initial funding round where 20% of the coins will be minted immediately. Additional tokens will be mined based on the achievement reaching set goals and targets. Token holders will have the opportunity to reinvest their distributions to increase their token holdings or they can elect to receive distributions. Tokens will be purchased at the fund level to incentivize portfolio performance.

Dalycoin.jpg
Dalycoin.png

3. Investment and Deal Approval Process  

Tokens will converted to a voting equivalent which is validated by a chain of digital signatures. Each owner has the opportunity to transfer their votes to a delegate by digitally signing a hash of the previous transaction and the public key of the next owner and adding these to the end of the coin. If invested in the Fund and the voting to approve an invest or distribution is made with 75% approval then all token holders automatically accept the investment terms and the decision is made on behalf of all token holders. The payee verifies the signatures to prove the chain of ownership. Here is the solidity code below:

(1) The Deal arrives and is assigned to Partner based on experience in the sector/contact with the CEO/Deal Source. Partner does some preliminary research (reference checks etc.) and then if interested, looks to recruit a second, which might be a partner or principle.

(2) The Deal becomes active when a partner assumes lead and drafts a 1-5 pages memo introducing the company to the fund and profiling the company’s market, team and technology. The sponsor of the deal team will solicit questions and feedback from the management team and work to resolve them. 3-4 key risks will be identified and mitigated before an official recommendation is made. The Lead partner in a deal will receive additional tokens for successful deals brought forward.

(3) The Deal generates positive sentiment among partners and support an investment subject to certain terms or outstanding questions. Pending further diligence performed by the management team, an investment deal will be put forward to be considered or abandoned. An investment memo is created and shared with all token holders. A vote is facilitated through a decentralized application. One vote will be received for every token owned, all Token Holders will receive a notification through the dApp. Tokenholder will have a minimum of 48 to vote and can elect to defer their vote to someone else in the group. An approval of 75% higher approves an investment decision on behalf of the entire fund and then investment is made.

 
ShareholderAgreement.png
 

4. Distribution Calculations

Portfolio company leaders will be paid a modest salaries but stand to receive very significant bonuses if performance goals are achieved. The formula for determining this payout could vary by business and is tailored so that it will be appropriate for that company’s complexity and capital requirements. Token holders will have the opportunity to approve each compensation package as part of the voting process. Compensation bonuses will place heavy emphasis on generating and delivering profit to the fund for relocation. The bonus formula will not be capped.

 
DLY_Distribution.png
 

5. Conclusion

We have proposed the establishment of an early stage Venture Investment Fund which is power by the Blockchain. We will develop a decentralized application system for electronic and automatic distribution of profits and voting. Tokens will be built using smart contracts on the Ethereum blockchain, which provides strong control of ownership and prevents any double-spending or voting. We will leverage a peer-to-peer network using proof-of-work to record a public history of transactions that are computationally impractical for an attackers to target. Any Investor can pariticpate in the initial Fund rase, however, future rounds may be restricted to those who invested in earlier rounds. Digitally voting will be facilitated using token balances.

We believe that there exists an exciting opportunity to develop a token based decentralized investment fund with the potential to deliver passive income and long-term generational wealth for token holders. By using blockchain powered smart contracts on the Ethereum network, we can use an electronic investment and voting system based on cryptographic proof, allowing any willing parties to transact directly with each other without the need for a trusted third party. This increase liquidity in the alternative asset investment class. Blockchain allows for a single, immutable record of equity transactions which is interpreted by established rules in an unbiased way. This solves data quality issues at source increasing compliance and accuracy when dealing with vesting scheduled and legal notifications. Profit sharing and distribution criteria can be established, executing automatically for all tokenholders. Administrative effort of record-keeping and reconciliation is eliminated and voting can be easily facilitated. This we believe, will provide a significant competitive advantage.

 
BlockChain.png
 

Author: Brendan Daly

Brendan Daly