On June 28th, 2024, as planned and discussed in the weekly Breadchain community call, the Breadchain core developers successfully deployed the first version of the BREAD voting and distribution smart contracts and application to start the next phase of the project. The vote lasted until July 1st when, based on all of the votes received, the first BREAD distribution to all of the Breadchain Network projects was completed. We finally did it. We did post-capitalism, on-chain!

In this report we will share some of the highlights and insights we’ve gathered from the experience and outline some of our next steps.

Highlights

• The first cycle of voting was completed successfully without a hitch

• 7,764 BREAD in total was distributed among 5 projects

• This is the start of the monthly voting cycle for distributing the crowdstaking yield

• We will continue improving upon the application now that we can confirm functionality

https://x.com/breadchain_/status/1808182136002040215

How the vote works

In case you need a quick refresher, supporters of a post-capitalist web3 mint (bake) BREAD tokens by giving xDAI on the Bread Crowdstaking Application which converts the xDAI to sDAI, generating yield for the cooperative that is distributed within the network. The cooperative itself is a network of projects that are aligned in post-capitalist ideals which you can find on our homepage. The projects included in the network are decided upon by consensus between all other existing Breadchain projects. The goal is to collectivize efforts and resources to build the infrastructure for a post-capitalist world. The purpose of the crowdstaking mechanism is to provide a novel way of funding so organizations doing important work don’t have to rely solely on donations.

BREAD tokens are given 1 for 1 per xDAI given and can be used to redeem the xDAI back from the contract, therefore BREAD is pegged to USD as it is pegged to the collateralized xDAI. BREAD can be used just like any other stablecoin as well as a way to accumulate voting power to decide how the yield generated will be distributed in the Breadchain Network each voting cycle. The xDAI given by users is always stored in the smart contract and so BREAD is always fully collateralized. Only the yield is distributed in the vote. At the moment, the voting cycle is once per month.

https://x.com/breadchain_/status/1790401942964838622

For the distribution of the yield, we combine two mechanisms for calculating distribution of the total yield:

(1) The solidarity distribution is where half of the monthly accumulated yield from sDAI is distributed evenly among all 5 projects.

(2) The democratic distribution is based on a time-weighted form of token-based voting where voting power is determined by the average amount of BREAD held by the user in the previous time month.

The total yield distributed to all of the projects resets each month (30 days). The solidarity distribution prevents the influence of capital to determine everything while the democratic distribution incentivizes supporters to bake BREAD. Each project has its own system for allocating their received BREAD which will be described in our documentation soon.

When entering the governance app, users who held BREAD during the qualifying time period for voting have their voting power shown and are able to take part in the ongoing vote. They can then allocate points across the options that will produce a ratio between all options to apply their voting power towards each. This will then be applied to the ongoing voting results in which the final ratio which is the aggregate of all voters will be applied at the end of the 30 day voting cycle to determine the distribution for each project. The next 30 day voting cycle then immediately starts again.

To learn more about how voting power is determined, you can read more in our documentation here. You can find a demonstration of the average user flow for this vote here.

Insights and Learnings

There is a lot to be proud about with this successful deployment, vote and distribution. It’s been incredible to be able to get this far in the first place without having to compromise on our values by taking venture capital or any other forms of investment so far.Of course without the kinds of resources that well-funded VC-backed crypto startups have, we have different kinds of compromises to make. For example, many on the core team have other jobs in order to make ends meet or are volunteering their time which creates its own limits. With this deployment done however we expect to have more BREAD baked by those in the greater community as trust and confidence in the team grows.

For this first voting cycle we wanted to ensure completion and the start of the next cycle by the beginning of July and so since we were only able to finish deployment on June 28th, there were only a couple of days for BREAD holders to submit their vote. This means we had 17 accounts in total take part in the vote out of approximately 200 BREAD holder accounts that could have voted. For future voting cycles we will be communicating about the vote through the Discord server, over Twitter, and our newsletter.

Although the Breadchain Core treasury did not vote in this round, the majority of the vote went to the Breadchain Core team. We suspect that this has in part to do with the fact that the main outlets where the vote was announced are owned by the core team (including this Mirror blog page). If the voting results were applied to the total yield then the core team would have received the majority of the total yield (56%).

However, as shown in the chart above, the core team did not receive the majority of the total yield (38%) because of the offset by the solidarity distribution (even split of half of the total yield). It is not surprising that at least in the start, that the core team has the most engaged community and are therefore more likely to vote for them. We learned that some BREAD holders did not have xDAI due to originally minting on Polygon and not having assets on Gnosis Chain but the xDAI faucet did help them get in their vote. This will be helpful for other users in a similar place. It is also worth noting that the largest holder of BREAD (Gnosis DAO) also did not take part in the vote even though their holdings contribute roughly $2k per month of yield.

This amount of BREAD distributed for this cycle will likely be larger than what it will be in the coming months because the amount was accumulated since moving to Gnosis Chain. While there is a chance that this affects how BREAD holders will perceive voting in the future, this also pressures us to make the value proposition for users to bake more BREAD. In order to get any influence in the system, it requires users to put something in by baking or holding BREAD.

Some of the feedback we heard from others in the community was to add more information about each project and what they would be doing with the funds. For this we are thinking of creating dedicated pages in our documentation site for each project to fill in for BREAD holders to look through and use that to inform their vote. We are also looking into solutions so that BREAD that is put into a liquidity pool can still be counted towards a users’ voting power.

While the next voting cycle has already begun, you can still be sure that you can take part in the month after if you have not baked BREAD yet by going to the Bread Crowdstaking Application and staking your xDAI. If you want to contribute financially to Breadchain directly you can also donate to us on our Open Collective page. If you’re working on something that you think fits with the ethos of Breadchain, apply to have your project be part of the network or just to drop us a line, email us at contact@breadchain.xyz.