The Wise Ecosystem — DeFi 2.0
By Peter Girr: Founder and CEO WiseSoft, LLC
WiseSoft is creating innovative protocols, such as LiquidNFTs and Lending & Borrowing, which generate revenue for the Owl DAO. Due to the decentralized nature of the ecosystem, any third-party can launch products and protocols in the Wise Ecosystem. These parties may also choose to create a liquidity pairing with WISE, allowing their token to piggyback off the growth of the Wise Ecosystem. The Wise Ecosystem refers to the WISE token and all the protocols that utilize WISE, or are in some way connected to WISE.
What is the Owl DAO?
The Owl DAO is a fully decentralized, positive feedback loop for the Wise Ecosystem. Specifically, it’s a decentralized smart contract that collects revenue streams from ancillary protocols in the Wise Ecosystem and then distributes that revenue across five governance-controlled initiatives. These initiatives are:
- Providing rewards for stakers — This is the primary value-driver for the Wise Ecosystem. Higher APY on staking directly increases the demand for WISE, which drives up the price of WISE until reaching an equilibrium. As revenue coming into the Owl DAO increases, this cycle will repeat. These rewards are sent by the protocol each week to reward recipients in the underlying coin of the network (ETH, BNB, CSPR).
- Buying and burning WISE tokens — The WISE token has an inflation rate of 4% annually, with 3% going to stakers and 1% to referrers. Some of the revenue coming into the Owl DAO can be used to burn WISE such that the total supply remains static or even deflationary.
- Funding the Wise Grants program — Offering grants to projects who build in the Wise Ecosystem, WiseSoft, LLC would provide developer support for a fair launch auction, should the project’s token be paired with WISE token. WISE must be bought to create a liquidity pair, which directly increases the market cap of WISE and benefits all holders and existing grant recipients.
- Asset management — The Owl DAO invests in other cryptographic assets to increase the power of the treasury over time.
- The VIP program — A small allocation of revenue is diverted to VIPs who have shown commitment to the Wise vision of ethical finance through activities such as contributing to fundraising or staking 5 years or longer.
The key to the Owl DAO is decentralization. Many projects have community-controlled treasuries called DAOs; however, in most cases, there are multisig wallets with all the power, admin keys, and back doors that keep the system from being completely autonomous. Understandably, the centralized aspects of DAOs are usually there to protect the DAO from hostile takeovers and attacks; however, WiseSoft has built a robust, two-tiered governance system that can remain completely decentralized while also being protected by programmed checks and balances that keep the system safe from attacks.
Two Parties in the Owl Dao
The two parties in the Owl DAO consist of the WiseSoft, LLC multisig wallet and the larger community of shareholders in the Wise Ecosystem (shares are obtained by staking WISE). Neither of these parties has ultimate power because either one can veto the proposals of the other. This way, the community can block abuses of power by WiseSoft, and WiseSoft can still thwart hostile community takeovers and attacks. In the case of a deadlock, where both parties are blocking each other’s proposals, the DAO continues to function as it did previously without adjustments. Proposals can adjust preset parameters in the protocols, but no one proposal can cause the system to shut down entirely. Additionally, the WiseSoft multisig only comes into play for “core” proposals that could potentially destabilize the ecosystem. Parameters that would have no potentially devastating effect on the ecosystem could be adjusted using community votes alone (see more about the two-tiered proposal system below).
Protocols built by WiseSoft in the Wise Ecosystem (LiquidNFTs.com, Lending & Borrowing, etc.) are coded with certain parameters that can be adjusted by the Owl DAO. It is important to note that this interaction between contracts is completely decentralized. Revenue from LiquidNFTs, for example, does not first go into a developer-controlled wallet which then gets sent to the Owl DAO. The two contracts interact directly with each other without contact from third parties or centralized points of control. Being completely decentralized, however, does not mean complete control of the Wise Ecosystem. The Owl DAO can only adjust preset parameters. Some examples of the parameters in LiquidNFTs include the specific fee percentage charged for each loan proposal in the system and the ratio of revenue going to the Owl DAO versus the developer wallet for payroll, maintenance, and customer support. Other changes could be made without having preset parameters as well, but this is situationally dependent. One could submit a proposal, for instance, to switch from using Chainlink price oracles to a new set of oracles that didn’t even exist when the protocol was launched.
Two-Tiered Proposal System
In contrast to most DAO systems, proposals in the Owl DAO do not consist of a decentralized voting system that must be acted upon by an all-powerful developer team, who must put the changes into motion. Proposals in the Owl DAO are hardcoded. Proposals that pass immediately trigger into effect without any third-party intervention since every protocol deployed by WiseSoft already has adjustable parameters built-in.
The adjustable parameters in each protocol are designated either “soft” or “core” parameters. Each type warrants a different kind of proposal with a different rule set for voting.
Core parameters are serious changes that can have significant effects on the protocol and sometimes the greater ecosystem as well. Because of this, core proposals have stricter governance rules. To pass a core proposal, the WiseSoft multisig wallet and also the community must have a majority “yes” vote. Each specific core parameter will have its own set of rules on whether a supermajority is needed from either party. One example of a core proposal is adjusting the percentage of revenue that flows to each of the five initiatives in the Owl DAO. This would directly affect staking APY and the demand for WISE.
How Do Shares Work?
Voting power is determined entirely by shares which are obtained by staking WISE tokens. The number of shares generated when staking can be increased by staking more WISE and also by staking for longer periods. The bonus share rate for staking longer is 5% more per year staked up to 5 years (25% total bonus) and an additional 5% bonus after 5 years linearly up to 42 years (30% total bonus). Note that share rate increases every time a stake is ended in the system, so stakes longer than 5 years, though not receiving a larger staking bonus at the beginning, will retain an advantage over future WISE stakes. This system ensures that the individuals who have the most voting power in the system are the most committed to WISE.
What Chains Does the Owl DAO Operate On?
The Owl DAO is meant to operate on all blockchains, but has different treasuries for each variation of Wise token. Currently, there are three varieties of Wise tokens: WISE(ETH), WISB(BNB), and WISC(CSPR). WiseSoft does not plan to launch any more versions of Wise token after the WISC launch on the Casper Network. There are plans, however, to expand the original WISE token across many other blockchains including Polygon, Harmony, Solana, Avalanche, Polkadot, Cardano, and many others. WiseSoft will NOT create a new token on these chains, but the WISE ERC20 tokens will be bridged over. Staking contracts will be deployed on each side chain and the staking rewards will be funded with revenue from products deployed on that blockchain. The Solana WISE staking contract, for example, will reward stakers with airdropped revenue generated from LiquidNFTs and the Lending and Borrowing contract deployed on the Solana Network. Ethereum Layer 2 EVM-compatible blockchains, however, will pool resources to create staking rewards. Revenue made on Ethereum and Polygon, for instance, will reward only WISE stakes on Polygon. This is to incentivize staking WISE on layer 2 solutions with significantly lower network fees.
Note: Although staking rewards (apart from airdrops sent to a Layer 2) on the Ethereum main chain will not be boosted by revenue, users may still stand to benefit from staking. As WISE is moved to stake on Layer 2s, less WISE will be staked on Ethereum, thus higher WISE rewards for Ethereum stakers — until the staking systems eventually reach an equilibrium through arbitrage.
Differences in the Wise Ecosystem Across Networks
The Wise staking contract on Ethereum is a Liquidity 1.0 version integrated with Uniswap; this includes the Wise Insurance contract, a protocol that lowers the penalty for ending stakes early to 10%. On Binance Smart Chain, WISB is a Liquidity 2.0 version of the token, with two liquidity pairs and using the synthetic BNB contract (see the Liquidity 2.0 whitepaper). WISB also includes the insurance staking contract.
WISC, on Casper, will be a Liquidity 2.0 version, like WISB, but will not have the Wise Insurance contract. Instead, the staking contract will include the ability to change the ownership address of each stake. This will allow a secondary marketplace to form, eliminating the need for reduced penalties for ending stakes. On Casper, Polygon, and all future Wise staking contracts, staked Wise tokens will not be burned, but instead held in the contract to be accessed by the Lending and Borrowing contract should a stake being used as collateral need to be liquidated. The Polygon blockchain and all subsequent blockchains will have the latest Wise staking contract and will use WISE bridged over from Ethereum. Additionally, LiquidNFTs, Lending & Borrowing, and any future protocols in development will also be deployed on subsequent blockchains as extensions of the Ethereum WISE token.
The Wise LaunchPad and Partner Programs
WISE is a financial scaling solution for Ethereum, backed by a pool of Ether, but with a much smaller market cap compared to Ether. This presents a unique opportunity for other projects to join the Wise Ecosystem by pairing their token with WISE instead of Ether for their initial liquidity formation. This action integrates them into the Wise Ecosystem, where their token can maintain price exposure to Ether while also being a part of a market cap that is a fraction of the size of Ether and has the potential to expand more rapidly. As the revenue generation protocols in the Wise Ecosystem grow, and as more protocols pair their token with WISE, every project in the Wise Ecosystem will directly benefit. A rising tide raises all ships.
Because of the immediate and lasting effects of a new protocol choosing to pair with WISE, WiseSoft has created a “Token Launch Package” for protocols that wish to partner. This package includes the contracts for a 50-day fair launch auction, the Liquidity 2.0 upgrade, which pairs the token with WISE and allows 50% of the raise to be used as working capital for the team, a fully functional Web3 interface, and strategy consulting services to facilitate a smooth launch. First, these services must be purchased. This is because the first several protocols that opt-in will be joining the ecosystem on the ground floor, benefiting the most; but, as the Wise Ecosystem grows, these services will become free. Eventually, this launch package will become a part of a claimable grant where protocols can opt-in to get paid for joining the ecosystem.
The Wise Ecosystem is designed to be the fairest and most equitable ecosystem in DeFi. Through a series of not-for-profit endeavors, WiseSoft, LLC is creating the infrastructure that will facilitate long-term adoption and expansion. But a successful ecosystem needs a strong community and many developer teams to back it. The aim is for others to build helpful and innovative products in the Wise Ecosystem. This is already happening with third-party websites like https://wiseinfo.io and partners protocols.
The Wise community must continue to educate others on the necessity of decentralized finance. The growth of the Wise Community continues to stem from trusted word-of-mouth and innovative technologies, rather than impersonal paid marketing schemes. We at WiseSoft are ecstatic with the success of the ecosystem thus far and look forward to creating a bright and equitable future together.
Authored by Peter Girr — Founder and CEO at WiseSoft, LLC