0xZakk / allo-dac

Dominant Assurance Contracts on Allo v2

Experimenting with Dominant Assurance Contracts

Abstract:

Introduction

Dominant Assurance Contracts (DACs) present a compelling opportunity for the private funding of public goods.

• Mechanism experiments:
  • Refund Bonus: (What happens when the goal is not met)
    • Flat
    • Linear
    • Quadratic
  • Fund Distribution: (How do you distribute funds from the pool)
    • To the entrepreneur
    • Bounty, by committee
• Other experiments:
  • Impact Cert: could you issue an NFT for the contribution (mint on contribute; burn on claiming refund)

Background

Public goods problems

Assurance contracts

• game-theoretic mechanism designed to facilitate voluntary creation of public goods
• solve collective action problems (such as free rider problem)

Dominant assurance contracts

• Created by Alex Tabarrok
• Add an extra component: entrepreneur who profits when quorum is reached and pays the signors if it is not
• To create a contract, an entrepreneur must make the initial pledge
• If quorum is not reached, signors receive their pledge back with their share of the entrepreneur's initial pledge
• A player benefits whether or not quorum succeeds
• This creates a dominant strategy of participation: in the best interest to participate because you'll either get paid or get a public good

Allo Protocol

A mechanism approach

• What are the mechanisms by which a dominant assurance contract works?

Experiments

Two areas within the mechanism for experimentation:

1. The refund bonus
2. The distribution of funds

A third experiment is offered as well, which is: the ability to "mint" your contribution towards a contract pool as an impact certificate

Refund bonus

• Refund Bonus: (What happens when the goal is not met)
  • Flat
  • Proportional
  • Quadratic
• How the refund bonus is distributed

Bonus Type	Contract	Description
Flat	Flat.sol	Every donor is given an equal share of the refund bonus.
Proportional	Proportional.sol	Donors are given a refund bonus proprtional to how much they contributed.
Quadratic	Quadratic.sol	The refund bonus is distributed along a quadratic curve, based on when an address donated.

Flat Bonus

With a flat refund bonus, every donor receives the same payout. This happens regardless of when they contributed and how much: the refund pool is simply divided evenly by the number of donors.

Allocation Method	Description
registerRecipient
allocate
distribute

Proportional Bonus

With a proportional refund bonus, donors receive a refund proportional to the amount they contributed. Contributing more means you receive more of the refund pool.

Allocation Method	Description
registerRecipient
allocate
distribute

Quadratic Bonus

In a quadratic refund bonus, the amount you receive is determined by when you contributed. The earlier you contribute, the more you receive

Allocation Method	Description
registerRecipient
allocate
distribute

Fund distribution

• Fund Distribution: (How do you distribute funds from the pool)
  • To the entrepreneur
  • Bounty, by committee

Other possible experiments

Impact cert:

Could you issue an NFT for the contribution (mint on contribute; burn on claiming refund)?

Contract as collateral

• DAC's introduce the entrepreneur: someone who is willing to take a risk to build a public good, provided a dominant strategy can be determined

What if, instead of paying out the contract to the entrepreneur if the goal is met, the sum was used as collateral on a loan. The loaned sum goes to cove the entrepreneur's development and implementation costs and can be paid back b the contract fund.

Conclusion

References