After our AMA with DefiDaily two weeks ago, part of the Wonderland 2.0 team hopped on the Deus ex DAO podcast. We talked about the past and the future of Wonderland with Bruce0x.

In the podcast we discuss our views on:
10:53 — Transparency and anonymity
21:18 — Why we remain enthusiastic about Wonderland
22:28 — The changes we think are necessary
27:17 — The role of the community in making WL2.0 a reality

Listen to the full episode below!

Deus Ex DAO is a decentralized invite-only investment community, angel syndicate and advisory active on the frontiers of crypto innovation.

We believe that Web 3.0 ecosystem will be a great good, the crypto space is our “god out of the machine”. Excited by the new paradigm of DAOs as a more egalitarian and empowering format for capital coordination. We believe crypto can be a positive-sum game and are excited to continue fostering partnerships with other teams and builders in the space.
 — https://deusexdao.com/

Wonderland 2.0 is a community effort.

At the time of writing we are a group of nearly 50 frogs authoring the proposal. Each part of the proposal has been analysed, picked apart and discussed. We’ve welcomed the comments of over 250 community members. We’re proud that we’ve created a comprehensive and extremely extensive proposal on the basis of consensus. 300 frogs, 300 opinions, 1 proposal.

Transparency and communication are major focus points of Wonderland 2.0. In that spirit we’d like to share what we’ve changed during the RFC process. Below we’ve provided a condensed overview of community feedback and our respective responses and incorporations

What was it that drew us to you? Perhaps it was that we saw you as a great innovator. Or the protocols you and your team built, disrupting the DeFi landscape. You promoted a future where the people can take back their freedom from “The Suits” and where their collective power was greater than any decision by the United States Senate. That narrative, momentum and ability to start a multi-billion dollar movement is something completely undeniable.

You publicly lynched “The Suits”. You told us you worked day and night for the people. You promised us a way to take back the financial power that’s been stolen from us by multi-national institutions for decades. That we as a collective could control our own destiny. You gamified the narrative. You offered your followers a “Wonderland” in which “frogs” would be cherished and their wealth would increase so long as they stuck together. The people trusted you. We believed in your story. Together we invested hundreds of millions of our hard-earned money in Wonderland Finance.

But the path for this vision coming to fruition kept changing. One day, you decided that Wonderland would be the SPAC of the crypto world. The next, that TIME tokens should be replaced with wMEMO tokens to “solve” the persistent declining value of TIME. On January 25h, 2022, the price of wMEMO plunged more than 50% below its backing value. The promise that the team would protect the backing price was broken because… you were asleep. Were this the first time that the entire treasury team slept through a liquidation cascade, one might be a little bit forgiving, but this had happened just the previous week. Your choice to simultaneously set your Twitter profile to private over this period could be called less than fortuitous and an odd coincidence.

This resulted in thousands of investors who had borrowed against their wMEMO through Abracadabra, another project you created and managed, became victims of an unfair and orchestrated liquidation cascade. During this liquidation, anonymous parties extracted at least $100 million in value from small, liquidated investors.

In traditional finance, this alone would warrant an investigation into what systems failed and what measures would be taken to keep the issue from happening in the future. But that opportunity never came because the following day, we received another surprise. The revelation that you knowingly left investor’s funds in the hands of Wonderland Finance’s treasurer, Michael Patryn, a former convicted fraudster involved in one of the largest crypto scams in history. In other words, thousands of us are now connected via our personal wallets with a convicted felon with no disclosure or explanation as to how or why this happened. You’re a smart enough man to understand that millions of people in the cryptocurrency community are now wondering if this is the result of complete and utter negligence and a lack of basic judgement or complicity and an exit scam.

Enough is enough. This is a pivotal moment for DeFi and we, the community at large, are in the spotlight. We are at an inflection point where crypto and DeFi are reaching mass adoption and flourishing with an explosion of creativity and innovation. But whether we like it or not, regulation is coming and it’s up to us as a community to ensure smart self-governance and accountability. Otherwise, we will be held up as an example as the politicians rip apart everything we have worked so hard to build.

We, the community, are demanding accountability. We are astonished that, up to today, the Wonderland team has made no publicized effort to identify:

• What triggered the decline in price?
• Who benefitted from the liquidations?
• Why you promoted efforts to materialize the profit of those parties through a wind down, requiring the community to revolt and halt those efforts?
• Why your proposed solution was to merge Wonderland with Abracadabra at a discount.

Our goal is not to police, to stifle innovation or slow opportunities for profit. We simply want to keep our fellow community members safe.

Mr. Sestagali, we are Wonderland 2.0. We have no leader or savior. We don’t have the negotiation power of whales, the audience of Harry Yeh or SkyHopper. We don’t even have the benefit of a close relationship to you like they do. Wonderland 2.0 is made up of hard-working community members who believe in crypto, who believe in DAOs and who believe in fighting for the small investors. We started with 10 people and have built our team to 40 members. Our combined expertise speaks for itself and we continue to grow our numbers daily, continuing to find roles for each member where their skills will flourish and generate value for the community.

Now is the time to show us your true colors. You can choose to ignore this grassroots initiative, continue to boost parallel proposals or ignore us reaching out to you, but you cannot deny our willingness to make Wonderland what it was always supposed to be.

We believe Wonderland can be a real DAO with strong, fast, efficient governance, controlled by the people. It can become one of the strongest investment syndicates, onboarding the best performers in crypto with a clear, transparent process. Not just a game of musical chairs for whales and friends of the founders.

You may have just joined the Discord, but we’ve seen the suicide notes. The people losing their surgery money, student loans and choosing between rent and food. These people deserve more than some vague promise of charity. They deserve dignity. Now is not the time for fairytale tweets about the Cheshire Cat. Now is the time for reality checks, accountability and transparency.

Respectfully,

The Wonderland 2.0 Collective

0xHedgehog — Background in digital marketing & strategies, customer loyalty game theory and marketing psychology. 14 years of experience as media director for public companies, freelance web design and marketing. Interest in DeFi largely comes from work in game theory and non-traditional asymmetric incentive systems.

OctopOus — 15 years experience in hedge fund strategies, structured financing and derivatives. Overseeing the risks of a multibillion esoteric financing book. Investor, cofounder and board member in a number of startups in crypto, renewable energy and tech. Running a number of DeFi strategies for friends and family. OctopOouS is passionate by the new governance paradigm DAOs enabled. Disability awareness advocate, enjoys the outdoors and taking his toddler son to rugby every Saturday.

Larry Fisherman — Management consultant advising large institutions and corporate clients during the day. Crypto investor during the night and weekends since 2013. Active in mining, crypto investing and defi. Advisor to a few start-ups and to asset managers on their defi allocation. Backcountry snowboarder you can meet at big dumps in the alps. Passionate about knowledge, innovation and therefore decentralised governance/DAO’s. Larry is into hip hop, unfortunately the proposal does not show it but the next AMA will.

Xenocyde — computer hardware editor for Softpedia and other smaller blogs beginning with 2006. Joined the team of one of the most reputable PC hardware review sites in the summer of 2017 where he is now a senior tech writer covering processor, GPU, and laptop news. Also into astrophysics, sci fi and crypto.

Curmudgeon — Multidecade experience in trad fi, spanning derivatives, collateralized lending, and risk management. He’s managed teams in these activities and currently spends his days focusing on macro issues and trading exchange traded derivatives for a large firm. He is an avid defi investor and is a member of an investing syndicate of crypto-native professional investors. His experience helps him understand the macro backdrop and tokenomics of protocols, as well as the sustainability of business models, particularly in trading and lending product lines.

Ezpz — Founder of 2 startups, 15 years in management in a large government / law enforcement organisation. Avid DeFi and CeFi investor. Education and expertise in contract law, procurement and finance across the tech sector, having negotiated many large multi-million dollar deals. Nerd at heart and love all things tech, but goes crazy without a regular fix of sport and the outdoors.

Kingmaker — Into numbers and finance, currently majoring in Financial Mathematics. In a previous life he used to be an elite athlete. Kingmaker enjoys exploring the globe, on his travels he learns about worldwide cultures. Often talking with locals in their native language, as he speaks 5 languages.

Wonderland 2.0 Medium Article
Wonderland 2.0 RFC
Contact

RFC Wonderland Forum:

https://www.wonderlandforum.xyz/t/rfc-wonderland-2-0/12859

Motivation and Objective

The concept of a Decentralized Autonomous Investment Organization (DAIO) is an extremely interesting and innovative concept within the DeFi space. However, as shown by the merger proposal, price action of the TIME token, liquidation cascades and resource management decisions, there are a number of shortcomings to the existing Wonderland 1.0 system:

1. There isn’t enough product differentiation between Wonderland, Popsicle and Abracadabra to justify the existence of Wonderland as a separate product.
2. The current application, governance and tokenomics do not lend themselves to a co-investment fund use-case.
3. Centralization of management decisions.

The past few weeks have shown these limitations and how they can cause cascading problems during a bear market. We would like to propose a multi-stage rebuilding to create Wonderland 2.0 with the goal of creating a syndicate governed by a DAO and allowing investors to aggregate their investments and reach a critical size, enabling access to the highest quality investment management capabilities in the crypto industry.

Wonderland 2.0 aims to achieve sustainable growth of all investors wealth, while being a catalyst of innovation in the crypto industry and the golden standard of governance and risk management practices. The changes we are proposing are focused on the following 4 goals:

1. Create a greater product differentiation within the Frog Nation ecosystem.
2. Alter the incentive structure to reduce overall volatility of the underlying asset, while still retaining a market premium over backing value.
3. Alter the governance structure to achieve a better balance between long-term holders and short-term capital and to give both confidence in a robust control structure that protects assets.
4. Fee structure that incentivizes longer term investors rather than shorter term momentum speculators

This would be accomplished through the 3-phase plan as described below:

Phase 1 — Unwind & Transition

First, the DAO will transfer all assets to a new contract for Wonderland 2.0 within 168 hours. The entire Wonderland 2.0 treasury will be converted into low-risk yield farming positions, until investment managers are appointed. After the transfer everyone can exchange their TIME, MEMO or wMEMO for gMEMO (Governance MEMO) at a TIME equivalent value (i.e. 1 TIME = 1 MEMO = 1 gMEMO). This exchange period will be left available for 3 months before officially closing. At this point, any TIME, MEMO or wMEMO remaining that has not been exchanged or redeemed will be non-redeemable, these tokens are then considered deprecated.

Under the Wonderland 2.0 DAO, the treasury will primarily be used to create a diversified portfolio of venture capital projects centered on the thematic of developing innovative applications and novel use-cases for the cryptocurrency industry. Additionally, this diversified strategy will also include investments designed to generate stable revenue within the bounds of risk limits governed by the Pond Protectors.

We propose to keep all remaining illiquid investments (BSGG, Cross the Ages) in the treasury as-is. The future benefits of these investments will be passed on to gMEMO stakers.

Note: Previously, we included provisions for a ragequit and the BSGG airdrop. Since WIP#5 addresses ragequit, and airdrop claims have opened, we removed these provisions from the proposal.

Phase 2 — Development of new application layer, governance structure and strategy

Application and Incentives

The second phase begins after the initial unwinding, once the approximate value of the remaining treasury and who is interested in remaining with the DAO is better understood. A new application layer will be created with two new tokens:

• gMEMO: the “principal” and governance token with a fixed supply.
• wSHARE: the “profit share” token with a dynamic supply, pegged to the treasury value denominated in MIM.

When profits are realized from treasury investments, the profit will be distributed to gMEMO stakers in 1 of two ways based on which of 2 pools an individual investor is staking their gMEMO in.

• MIM Dividend Pool: wSHARE is converted to MIM, minus a 30% performance fee that is retained by the treasury and gas for each AVAX transfer. These will be automatically pushed to the end-user once a user-defined threshold is reached (depending on gas sensitivity).
• wSHARE Compound Pool: the wSHARE is converted back into gMEMO through buybacks on a linear basis over 180 days. The user can recover any amount of unconverted wSHARE at any time through the staking contract but will pay the performance fee on that amount as per the chart below.
• Note the conversion of wSHARE to gMEMO is accounted for on a last-in-first-out basis, while the performance fee is accounted for on a first-in-first-out basis. This means a user who converts a portion of wSHARE after holding for 180 days could pay only the 5% fee as those wSHARE tokens would be recognized as being held for more than six months as the converted tokens would be the newest ones first.

Governance

Governance & transparency are central themes in this proposal. Wonderland has grown rapidly, but a lack of governance and transparency eroded the community’s trust. To rebuild that trust and make Wonderland flourish again we need checks & balances.

Checks & Balances
At the top there is the DAO, the DAO has the last word in all matters. Not every decision can be voted on though, that would take too long, give competitors an advantage, and would ask too much time and effort of the community. So, the DAO delegates a mandate to the core-team, all officers are free to make decisions within these bounds. It might not always be clear when officers act within or outside of these bounds, this is where the Pond Protectors come in. The Pond Protectors act as an advisory board for the officers and as a ‘fly on the wall’ for the community. Let’s see how this works in depth.

Governance structure
We introduce changes at three levels of the governance structure: functioning of the DAO, introduction of the Pond Protectors & Restructuring of the Core-team.

Community governance

We want to empower us, the frogs. To do that we propose some changes to improve the functioning of the DAO in relation to: Scope, Voting Power, Voting Procedure & Communication.

Scope of the DAO
All key decisions will be run through the DAO. Your vote decides which investments are made, which team members are hired or fired, etc.. At the other hand, we cannot put every little decision up to a vote. Some decisions must be made quick, in confidentiality, or by experts. Thus, we propose the following:

Note: closely-related decisions may be presented in a single proposal, to minimise strain on the DAO. For example, the DAO may set a high-level treasury allocation: 30% pre-sales; 15% GameFi; 15% NFT’s; 10% Curve wars; 30% yield-farming. In this example, one vote can be enough to set the entire high level allocation, instead of having five separate votes.

Voting Power
The current linear voting power model allows for short-term capital to decide our long-term future. We want to increase the voting power of frogs, i.e. long-term holders. Thus we propose that gMEMO holders get voting power according to duration and size of their investment. We introduce a hybrid of two voting power models:

1. Harpoon Voting—smaller holders get more voting power per gMEMO than larger holders
2. Time-weighted Voting — long-term holders get more voting power per gMEMO than short-term holders

Combining these two we have:

The voting power formula has two inputs:
x: your average gMEMO balance over the past 6 months
h: ‘the Harpoon’

The harpoon determines how much whale votes count compared to frog votes. When the harpoon is positive, whales get less votes per gMEMO than frogs. The larger the harpoon, the greater this effect. In linear voting, the harpoon is zero.

We suggest to start with a cautious harpoon of 0.03 to test the waters, but still give frogs a little advantage. The policy officer can experiment with the whale factor to find the optimal value.

Procedure
All proposals must follow the voting procedure, the team is bound to implement any proposal that successfully completes the voting procedure. The voting procedure takes a minimum of 12 days and a maximum of 27 days. These minimal duration ensures that the long-term decisions that the DAO makes are not taken too hastily. While the maximal duration prevents discussions taking forever with no end.

Communication
To make our DAO flourish we need to improve transparency and communication within the governance process. The authors of proposals that reach RFC status are invited to join the weekly AMA to motivate their proposal and answer question from the community. RFC’s also get their own discord channel for the duration of their RFC status.

Core-team

The core-team will consist of 5 members, each member is able to ask the DAO for the resources they need through the governance process. All core-team members are able to select or hire their team as desired. Individuals in each of these 5 roles must be fully doxed/KYC via a 3rd party (but not necessarily to the DAO).

Below we present a high-level description of what each role should achieve within the first six months. These are the minimal expectations, officers are expected to go beyond these, either within their mandate, or by consulting the DAO.

1. Strategy Officer
   - The vision and strategy of Wonderland are approved by the DAO
   - All strategies and operations align with the vision of Wonderland
   - Wonderland has an up-to-date development roadmap
   - Wonderland has access to a constant stream of business and investment opportunities
2. Operations Officer
   - The overall product is improved
   - The product roadmap is realised
   - Wonderland’s contracts are audited
   - There is an up-to-date dashboard of all investments
   - Eligible tokens are airdropped
3. Marketing & Community Officer
   - The community is provided with regular updates
   - Documentation of the protocol is complete and up-to-date
   - The public image of Wonderland is restored
   - All teams communicate actively and transparently with the community
4. Financial Officer
   - All investments are in-line with Wonderland’s approved strategies
   - The treasury is successfully managed by Investment Managers
   - Investment managers have the information and tools they need
   - Investment managers adhere to Wonderland’s guidelines
   - The treasury is audited each quarter
5. Policy Officer
   - The community is able to govern Wonderland through the DAO
   - All team decisions within the DAO’s scope are put forward as proposals
   - All proposals correctly follow the governance policy
   - The governance policy is effective and transparent

Each of the 5 roles would put up their team and desired working budgets for approval via a Snapshot vote on. Roles are up for election every 6 months and can also be called for a snap election with approval of 2 officers and a majority of the DAO.

We introduce an important measure to ensure that officers comply with the decisions of the DAO. Each of the 5 officers have a publicly visible escrow wallet during the tenure of their leadership. Half of their compensation is transferred to this wallet, the other half vests for one year. Whenever officers act malicious, the Pond Protectors and DAO are able to freeze all of the vesting compensation.

Pond Protectors

We introduce the Pond Protectors, a group of seven elected community members. They represent the interests of the community on part-time basis (4–6 hours a week). They meet regularly in order to facilitate governance and advise the core-team. Pond Protectors will be individuals form the community with a good reputation in the industry and a network that helps Wonderland. Core tasks of the Pond Protectors are:

• Advise the core-team to ensure long term stability
• Facilitate the search for full-time team members
• Inform the community of internal events and issues
• Signatory of multi-sig
• Revoke signatory rights of team-members (Emergency basis only)

The Pond Protectors compensated commensurate with the part-time nature of the role.

Treasury management

Treasury management by a single individual has proven to be problematic. Thus, we suggest to have various treasury managers competing to provide ROI for Wonderland. Teams, firms and individuals may propose to manage part of the treasury. The DAO decides who manages how much, based on proposal quality and past performance. The Pond Protectors manage the selection of treasury managers and the Financial officer oversees day-to-day treasury operations.

The suggested treasury management model has a few distinct advantages:

• No Single Point of Failure — granting one treasury manager full control of the entire treasury is risky. The proposed model introduces checks & balances to mitigate risks like a second ‘Sifu gate’, fraud or corruption.
• Competition — Investment Managers are incentivised to maximise risk-adjusted returns, because in order to keep their position or increase their allocation they have to outperform.
• Flexibility — We will be able to compare the performance of multiple Investment Managers and allocate a larger share of treasury to the best performing ones. If we only have 1 treasury manager we would have to take a guess whether a replacement would get us higher returns.

How does the model with multiple Investment Managers work?
Imagine 0xLisa is a third-party manager who is hired by the DAO to engage in stablecoin yield farming on protocols X, Y, and Z. In addition to limiting the protocols, the governance vote authorizing her may impose which stablecoins are allowed (with caps), how much leverage can be taken, and/or what could be the maximum allocation to a specific protocol. Changes to any of these parameters can be proposed and approved through the governance process.

0xLisa would be issued a multi-sig wallet with her team, but with the Pond Protectors having sufficient signatures to force transactions as needed. The relevant stables would be transferred to/from this specific multi-sig wallet when allocations change. Especially for liquid strategies, we envisage frequent reallocations as longer-term investment opportunities are chosen.

This decentralization of treasury management gives the following advantages:

1. if 0xLisa engages in bad behavior, the damage is isolated to a separate wallet with no more than the amount entrusted to her at risk.
2. anyone can verify easily that 0xLisa is respecting the conditions of her allocation — all movements authorized by her team would be visible isolated from all other DAO activities12.
3. if 0xLisa is to be removed from management, the Pond Protectors can unwind all her positions and send them back to the master multi-sig.
4. 0xLisa is not micromanaged by the DAO, but does have discretion to move across different strategies within her opportunity set (for example, move from one Convex pool to another as reward rates change each week). These are strategies that would not scale to an individual user who did not have a large portfolio because of gas fees and would not be suitable for full DAO governance due to the frequency of allocation.
5. Fees can be defined and paid for 0xLisa’s work under terms agreed and approved by governance. For transparency, any fees would be paid from the master multi-sig wallet with an appropriate announcement made at the time.

From the point of portfolio vote, the team would work to bring teams, projects and investments forward that would align with the desired portfolio and the DAO can approve or reject the proposals. As the team is an elected or hired group, they will be required to be blacklisted from receiving air drops or incentives, but will still be allowed to purchase the token with their own funding. Airdrops would also be distributed 30% equally to all holders, 70% proportionally to holders and would be distributed at the same vesting period determined by volatility.

Finally, there should be a quarterly audit of the financials with a full risk assessment, a live dashboard showing all treasury funds and a weekly report given to all investors at least 24 hours prior to a weekly scheduled AMA with the Financial Officer and team. Treasury management should be audited at a regular frequency as well.

Phase 3 — Growing the DAO

It’s likely that it will take a fair bit of time, consistency and structural changes before Wonderland’s reputation is fully re-established. We believe that the measures outlined above will create immediate results in the stability and sustainability of the protocol, however there are additional changes that must be implemented in order to return to growing the community and facilitating healthy community activity.

Firstly, we need to invest some funding into communicating with our community more effectively. We should be investing into full-time community management and marketing operations. Early on, this means paying our community team to create better documentation, explain issues, get out in front of PR issues, communicate with the media and develop more frequent community AMA times (each of the 5 roles should be speaking with the community on a weekly basis).

This means that the development, investment and governance teams will be required to take a backseat when it comes to communicating the roadmap and reporting. The community management and marketing team will be in charge of scheduling AMAs, producing weekly reports on protocol health, reaching out to publications and scheduling interviews with team members. This is by design to avoid having conflicting information coming out based on one team’s opinion and mitigate the risk of a bad actor creating the environment for a high volatility event.

Thanks for reading! follow our updates on our Twitter: https://twitter.com/0xWonderland

31–1–2022: Edited to reflect community feedback.
2–2–2022: Edited to reflect community feedback.
3–2–2022: Edited to reflect community feedback.
4–2–2022: Edited to reflect community feedback.
6–2–2022: Edited to reflect community feedback.
16–2–2022: Edited to reflect community feedback & recent developments.