Proposal description
In 2020 the DIF has seen amazing progress. From its very first investment in ReadyRaider, with DAO support we have also secured an investment in Quadrency, CrayPay, and an investment in the financial industry which is due to be announced around the end of this month.
Our third quarter balance sheet displayed assets of just under $264k. We were able to take those reserves along with continued DAO funding and invest $300k in private equity. Execution of these investments was helped greatly by price appreciation of Dash during the quarter. In fact, we have enough left over to cover our 2021 director fees. The DIF operation expenses are approximated to remain the same as the previous year, they are $50k per year plus $5k of legal fees for investment closed. Note: this $50k has already been paid upfront for 2021, in addition to all other current liabilities for the year ahead.
The DIF has recognised that this current treasury cycle is substantially undersubscribed, so we would like to offer the network the opportunity to allocate further Dash to the DIF as a one-off payment for the January cycle. The DIF would use this supplemental payment to help replenish the $300,000 of reserves that have been allocated to investments during the previous quarter. In addition, we plan to allocate some of the funds to initialize market making activities. This is in order to stimulate growth of fiat DASH/USD pairs in selected regions, primarily to help support the FastPass network. The first market we have targeted is a Dash/USD pair on Liquid Exchange, based in Japan. Although market making engenders a certain element of risk, we expect market making activities to be revenue positive overall.
Thank you for a very successful 2020 and looking forward to serving you in 2021.
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Discussion: Should we fund this proposal?
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1. Recently there was a DIF investment made in Craypay.com however, where is the vote to approve that investment? I thought we were a decentralized project not a centralized one? I also thought that Darren Tapp stated that the DIF would not make an investment without first getting it approved by the network with a vote?
https://newsroom.dash.org/122917-dash-investment-foundation-dif-invests-in-craypay-and-announces-155000-merchant-instant-savings-app-for-dash
It is noted that Ryan Taylor has got involved with the DIFF management and probably explains why this investment was kept secret from the network. Ryan's style has been to do his own thing e.g. making source code closed and not responding to questions in 2018 in the Dash core funding proposals etc and it seems that Ryan's management style is now infiltrating the DIF. Ryan's approach is the opposite of what a decentralized project should be which is to make everything transparent and getting feedback and consensus from the network.
I would like to know why wasn't this proposed investment sent for the vote to the network?
Let us look at this recent DIF investment in Craypay by the DIF and why I think it is investment money wasted. This is the network's money that could have been better spent on actually having an impact. Firstly, Craypay is based in the USA with the 155,000 merchants also based in the USA. The goal of craypay is to give people discounts if they buy through their service - some sort of loyalty program. Note that crypto is no competition to paying with USD. USD is regulated, fast, and already approved by the government. Therefore, we need to consider the following points when it comes to the USA.
1. Taxes. If I'm not mistaken Crypto is seen property in the USA could someone confirm this? If this is correct then if someone spends their crypto in USA a tax event is triggered in which they would need to calculate the capital gains on every purchase and as a result they would need to pay capital gains tax on all their purchases with Dash every year. They would then need to account for this in their tax returns. That means that the user would have now to keep track of all their expenditure on all their DASH and then calculate the capital gains on every single expense they make? If they do that then it becomes a nightmare accounting situation. Of course, you could spend the money and not report it, but do you want to take that risk?
2. IRS could identify crypto user purchases through craypay.
Let's just say that that individual that is spending their crypto in the USA is OK with doing the complex capital gains tax calculations on every DASH purchase with craypay and they are also OK with the time and money required to account for this correctly with the tax authorities then there is also a factor that now the IRS knows that that individual is holding crypto - so, what happens if that individual does not declare they are holding crypto on their tax returns? I read a report that said that most people in the USA that hold crypto are not reporting it with the IRS. So, do you think it would be safe for them to broadcast the fact that they have crypto to spend through craypay?
3. OK, so let's just say that they are OK with the cost and time to do the accounting, the time spent to do the accounting, they are also OK that they have always reported all their crypto holdings with the IRS, not just this year but every year and they submit their tax return declaring all their crypto capital gains on all those Dash purchases through craypay. Now, what is the motive to actually spend DASH in the USA? the rewards? like, the 5% rewards or is it 10%? Who in their right mind is going to cash out their crypto to get a reward of 5% when their reason for buying crypto in the first place is for appreciation in value. That does not make sense. Yes, you will have the DCG and other die hard fans that live on crypto pleased now they have some outlets they can spend their crypto but, those are the minority.
So, what has the network actually got for the investment in Craypay? 155,000 places in the USA where people potentially could spend DASH but most likely won't because it's the USA and the USD works much better for the purpose of making payments. In addition the tax laws in the USA are a complete minefield, even for people that know what they are doing. I don't think people would be willing to take that risk to spend their Dash through craypay so they can get a measly 5% cashback.
Now, let us compare the same type of investment in a place like Venezuela or other country where they do not have a stable currency and have hyperinflation. In such countries it makes sense to spend Dash and use Dash as a currency. In addition the tax laws are significantly easier going than those in the USA. An investment of this type in such a country with hyperinflation would, perhaps make sense.
I've mentioned these points before in two articles which I posted on the Dash forum here:
https://www.dash.org/forum/threads/a-case-for-venezuela-why-focus-dash-promotion-in-venezuela-and-latin-america.40419/
https://www.dash.org/forum/threads/03-decentralised-decision-making-what-are-dashs-target-markets.50371/
Therefore I do not see the logic or sense of making the investment in craypay for Dash in the USA.
I have also undertaken a search at Alexa.com and I can see that craypay.com domain receives very little in the way of internet traffic with an Alexa ranking of 4,718,704 https://www.alexa.com/siteinfo/craypay.com Therefore, craypay does not appear to be an established company.
We already know the problems that Alt36 had in accepting Dash payments - no banks would accept them. So, how is craypay going to get around this issue? Have they got a bank that is OK with accepting Dash payments?
The only good I can see from this investment at this stage of Dash's development is for
a) the die hard Dash holders such as DCG
b) as a PR stunt.
Apart from this I don't see this investment as a good investment for the reasons given above. However it appears that the DIF think it's a great idea. So, I would appreciate it if the DIF can answer the points I've raised here on users paying with DASH and the accounting they need to do for US capital gains tax and the other points I've raised of why this investment is a bad idea in the US.
Until the DIF is completely transparent on all investments my vote is no.
Until the DIF agrees to send a vote to the network for approval before an investment my vote is no.
Until Ryan Taylor leaves the DIF my vote is no.
They have altered the deal. Pray they don't alter it further...
https://blog.dashinvests.org/posts/change-of-process/
Anyway, that's their prerogative. IF we didn't have so many trolls like yourself arguing reflexively against anything the DIF does, they might not have taken that step. I'm sure they will make mistakes along the way (like accepting DashRetail's worthless equity), but this change means less headaches for them and for me.
In 2020 the DIF has seen amazing progress. From its very first investment in ReadyRaider, with DAO support we have also secured an investment in Quadrency, CrayPay, and an investment in the financial industry which is due to be announced around the end of this month.
Our third quarter balance sheet displayed assets of just under $264k. We were able to take those reserves along with continued DAO funding and invest $300k in private equity. Execution of these investments was helped greatly by price appreciation of Dash during the quarter. In fact, we have enough left over to cover our 2021 director fees. The DIF operation expenses are approximated to remain the same as the previous year, they are $50k per year plus $5k of legal fees for investment closed. Note: this $50k has already been paid upfront for 2021, in addition to all other current liabilities for the year ahead.
The DIF has recognized that this current treasury cycle is substantially undersubscribed, so we would like to offer the network the opportunity to allocate further Dash to the DIF as a one-off payment for the January cycle. The DIF would use this supplemental payment to help replenish the $300,000 of reserves that have been allocated to investments during the previous quarter. In addition, we plan to allocate some of the funds to initialize market making activities. This is in order to stimulate growth of fiat DASH/USD pairs in selected regions, primarily to help support the FastPass network. The first market we have targeted is a Dash/USD pair on Liquid Exchange, based in Japan. Although market making engenders a certain element of risk, we expect market making activities to be revenue positive overall.
Thank you for a very successful 2020 and looking forward to serving you in 2021.
The Dash Investment Foundation was a great idea, and now we can see the proof. We're doing things that were simply not possible before and they are having an impact. People are excited about Dash again and a large part of that is due to the DIF.
Although it breaks my heart that the DIF will no longer seek approval from the DAO a priori for any investments, I suppose this is part of the natural evolution of the foundation. As long as we have good leadership and competent supervisors at the DIF, I don't see this as a problem.
Thank you again DIF supervisors. I hope you will consider paying yourselves stipends or honoraria soon.