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The Evolution and Mechanisms of Juicebox in DAO Financing


Leo Henkels

Decentralized Autonomous Organizations (DAOs) have emerged as an innovative way for communities to organize and fund collective projects in a transparent, decentralized manner. However, the mechanisms for financing DAOs are still evolving. One notable platform at the forefront of this evolution is Juicebox.

In a recent episode of the Just DAO It podcast, the founder of MIDAO, Adam Miller, explored the technical setup and potential use cases of Juicebox with Jango and Filip from Juicebox. In this blog, let's explore how Juicebox works, give examples of DAOs using it, and discuss the future innovations it may enable in DAO financing and governance.

What is Juicebox?

At its core, Juicebox is an open-source, programmable treasury for community-owned Ethereum projects. It allows anyone to easily set up and configure a DAO funding mechanism. As Jango explains:

"Juicebox is a language; it's very open-ended. There are certain things at our disposal that we can organize in different ways, but it doesn't really give you much structure as to how you should organize it, so it's pretty open-ended."

How Juicebox Works On-Chain

Filip provides a clear technical overview of how Juicebox operates:

"At a high level, there are some different versions of Juicebox, but fundamentally, it involves what's called a Juicebox project. So, anyone can create one of these Juicebox projects, and what happens is anyone can pay into one of these projects, as Jango mentioned, and in exchange, they receive some of that project's tokens. The funds that are paid in don't go to the owner's wallet; they are actually held within this kind of project treasury, which can back the value of the tokens."

Critical aspects of Juicebox's on-chain setup include:

  • The ability for anyone to pay into the project and receive project tokens
  • Funds are held in the project treasury rather than going to the owner
  • The ability for token holders to burn tokens to reclaim a proportional share of the treasury
  • The owner can set incentives, like earlier participants receiving more tokens per ETH
  • Ability to set a redemption curve where earlier redeemers get less treasury share to encourage long-term holding

This flexible on-chain setup provides the foundation for DAOs to get creative with their funding and incentive structures. As Jango notes, despite being "a pretty open-ended language," most have used it in "very straightforward" ways, but the potential is there for much more.

Integration With Other DAO Tools

One key strength of Juicebox is its interoperability and seamless integration with other popular DAO tools. As Filip explains:

"Juicebox interoperates with a bunch of other DAO tooling out there. So, both of those projects were owned by a Gnosis Safe multi-sig NFT up front, so people had this guarantee about multi-sig signers. Then they were able to conduct voting pretty easily through Snapshot because the Juicebox project tokens, you can read them directly with a snapshot strategy for them. Juicebox projects can also have ERC20 tokens, so if you're using on-chain governance or something like that, it's not so crazy to interoperate with other popular DAO tools."

This allows DAOs to leverage battle-tested tools like Gnosis Safe for treasury management and Snapshot for off-chain governance while seamlessly integrating the Juicebox programmable funding mechanism. This modular approach lets DAOs mix and match components to craft an operational setup tailored to their needs.

Strategies for Utilizing Juicebox

With this flexible foundation, DAOs can utilize Juicebox in creative ways by dialing in the right tokenomics and incentive structures to engage early supporters. Let's look at some examples and key parameters to consider.

Engaging Early Supporters Through Token Incentives

Filip notes how the Juicebox setup allows DAOs to easily reward early participants:

"Juicebox provides a few nice things out of the box for DAOs. It's a pretty expressive language depending on what kind of behavior you're trying to encourage. If you want to encourage people to hold onto their tokens for a longer time, or if you want to encourage more people to buy them up, you can set up your project in such a way that that behavior is encouraged."

By adjusting a single parameter, a DAO can choose to issue more tokens per ETH contributed early on, with that amount decreasing over time. This creates an incentive for people to get in early and support the project from the beginning.

Sustainable Funding Through Bonding Curves

Another key aspect of Juicebox is how tokens are minted and redeemed in relation to the treasury. As Filip explains:

"A lot of DAOs will run into an issue where they have a fixed supply of tokens and they're selling them at a fixed price. This can work well, but there can also be shortcomings. Maybe they don't sell all of those tokens, and it kind of looks like people aren't actually that excited to be part of the DAO. Or maybe they do sell all of the tokens, and then there are a bunch of other people who really wanted the token and couldn't get it, and then the DAO is kind of undercapitalized, so to speak, relative to the public demand."

"So Juicebox is nice in that tokens are issued on a continuous basis, but you can still control the incentives of how that evolves over time, or the arc of how that evolves over time. Within the bounds of what you set up, it can respond to the market in a very natural way."

This bonding curve approach, where tokens are minted and burned based on funds entering and leaving the treasury, allows for a more organic and responsive funding mechanism than one-time token sales. DAOs can still configure the parameters of the curve, but within that structure, they can adapt to market demand.

Example: SharkDAO

Jango shares a notable example of a DAO leveraging Juicebox for a focused goal:

"The largest and most notable projects now include the fundraiser for the Tornado Cash developers' legal defense. That's ongoing---I think it might have just ended, so hopefully, all got into that. In the past, we've seen ConstitutionDAO as a common one. Remember there's SharkDAO who contributed to buying five of the first 20 Nouns as a group, and several in between."

SharkDAO demonstrates how a group can pool funds for a specific purpose, in this case, acquiring valuable NFTs. The Juicebox setup allowed them to quickly create a funding mechanism and coordinate their efforts.

Ethereum cryptocurrency concept

Example: Moon DAO

Another example Jango highlights is Moon DAO, which took advantage of Juicebox's funding cycles and incentives:

"Moon DAO had a great setup where they set their reserve rate, a lever in Juicebox language, to 50%. They issued one million Mooney tokens per ETH coming in. That was the boundary, and it ran for one lunar cycle, 28 days. So for 28 days, anyone could come in and contribute one ETH and get 500,000 Mooney tokens, and 500,000 would go into the DAO's reserve."

"They ran a very successful multi-million dollar fundraiser during those 28 days and then shut off funding from then on out and stopped the issuance of Mooney... The end result is a distribution of Mooney who are governing a treasury of ETH and Mooney. With just those initial resources, they were able to conduct the first set of auctions. Anyone who contributed got a chance to be on one of the Blue Origin trips up to lower Earth orbit, I believe."

By running an intense 28-day funding cycle with strong incentives for participation, Moon DAO quickly raised a sizable treasury and achieved its initial goal of enabling community members to participate in a Blue Origin space trip. This demonstrates Juicebox's flexibility in configuring funding cycles and incentives to align with a project's specific needs and timeline.

The Future of Juicebox and DAO Financing

As more DAOs experiment with programmable funding mechanisms like Juicebox, it opens up new possibilities for how these organizations operate and evolve. Let's explore some of the potential future directions.

Reducing the Governance Burden

One area Juicebox is exploring is reducing the overhead and risks associated with DAO governance. Jango explains:

"Isn't that what Aragon was supposed to be? But the thing is, they have this legal entity that kind of underlies everything and makes it hard on their own."

Filip builds on this, noting the tradeoffs between on-chain and off-chain governance:

"It's much harder to do diligence when you have to read through the bylaws of this entity in Switzerland and go through all these processes which are hard to sort through. It would be nice if you could just have those on-chain guarantees and know what you're getting into as a token holder."

As DAOs scale, the overhead of managing governance can become a significant burden. By encoding more key parameters and logic on-chain, DAOs can reduce this overhead while providing greater transparency and certainty to participants.

Mitigating Governance Risks

Another related challenge is the inherent risks that come with open governance systems. As Jango explains:

"Energy is good in general. Energy is a sign of a system kind of itching for something; it doesn't really know what it wants, but it's there. And to say, like, no energy is better than energy is the last gasp solution. I think trying to think more creatively about how to channel it or dance around it is always not only a fun exercise but sometimes leads to good outcomes."

"Finding some creative way to deal with it is good. The bot problem, that's a real thing, right? Like, I was thinking about this a lot today even, where you know, a hundred million dollars is pocket change for a few people in the world. It's pretty easy to create a bunch of wallets, distribute $100 million, and maybe do a backlog of a month to six months of social engagement on all these accounts automatically. And then all of a sudden, create a charismatic persona to lead a meme coin and then have an illusion of hundreds of millions of dollars trickle in in recognizable patterns. Then amplify, and then all of a sudden, other people join into this thing."

As DAOs wrestle with the challenges of open participation and the risks of malicious actors, platforms must evolve to provide better tools for mitigating these risks. This could involve new on-chain mechanisms to identify and limit the influence of bots and whales, or off-chain tools to help DAOs manage their governance processes and respond to threats.

Emergent Possibilities

Beyond addressing risks, the composability of tools like Juicebox also opens up new positive possibilities. As Jango envisions:

"Now we get to do, the work that all of us have wanted to do, which is build Juicebox projects. Like, no one wants to spend time building Juicebox itself; I think everyone---that's just a byproduct of us now getting to do what we want to do, which is, you know, create the things that we want to create artistically, technologically, experimentally, whatever, and have the engine that is flexible and has mostly been used in pretty vanilla ways now being able to bend it in just the right ways that we see the benefit of doing interesting things."

As the DAO ecosystem matures and stabilizes, the focus can shift from building the basic infrastructure to leveraging that infrastructure for creative new use cases. With programmable, composable money legos, the possibilities are vast. We may see new forms of funding and coordination that are difficult to imagine from our current vantage point.

Polygonal hands with a tablet

Unbottling Innovation with Juicebox

Juicebox represents an important innovation in the DAO tooling space. It provides a flexible, programmable funding mechanism that integrates seamlessly with other key components like Gnosis Safe and Snapshot. Allowing DAOs to easily spin up funding cycles and dial in incentives like token issuance schedules and redemption curves provides a robust foundation for experimental new forms of DAO financing and operations.

However, Juicebox and the broader DAO ecosystem still face significant challenges around governance overhead, risk mitigation, and figuring out sustainable models as these organizations scale. Ultimately, the goal is to move beyond building infrastructure to actually leveraging that infrastructure for impactful ends.

As Filip sums it up:

"I think structures like multi-sig and Juicebox projects and these kinds of on-chain things that make it very easy to do diligence by looking at the parameters are great because you can get certain guarantees as a supporter."

By providing greater certainty and transparency to supporters and participants, Juicebox and other DAO financing innovations can open up a new opportunity for Web3 communities to coordinate through crypto-economic means. While the road ahead is still being determined, if Juicebox and projects like it can successfully evolve to meet the needs of maturing DAOs, we may see a Cambrian explosion of new organizational forms and funding models that were never possible. The age of programmable finance has only just begun.