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Breadchain Crowdstaking Protocol: The Engine for Funding Post-Capitalist Projects on the Blockchain

One of the major problems with our economy today is that the needs of capital dominate over the needs of labor. Although one may argue that the extent is potentially less in popular blockchain-based governance mechanisms, this still holds true. Standard token governance relies on the neoliberal notion of “voting with your dollar” where voting power is directly correlated with financial power as a voting token can be directly purchased on the market. This creates a system where the lucky few with the financial means to do so can greatly influence the outcome of proposals made on these “decentralized” applications.

At Breadchain, we believe that just because this has become the standard, it does not reflect the ideal governance system for a project like this. Our approach instead, seeks to keep financial influence out by dividing the representations of mutual aid given through capital and labor. For this blog post we will focus on how we represent contributions given through capital by leveraging the ethereum blockchain to build what we call the Breadchain Crowdstaking Protocol which forms as a major engine for funding the project.

Bread Crowdstaking Protocol

Bread Crowdstaking Protocol Logo

The Breadchain Crowdstaking Protocol is the first application to be brought to production by the Breadchain Cooperative and the smart contract has already been deployed on the ethereum blockchain. At the moment we’re finishing the front end which makes it easier for anyone to interact with it and become a Crowdstaker. In the meantime, let’s discuss what we are trying to achieve with this conceptually.

So how does the Breadchain Crowdstaking Protocol work? The protocol is essentially a smart contract on ethereum that forwards Crowdstakers’ $DAI (a US Dollar pegged stablecoin) into a Compound lending pool in which all of the interest earned on the $DAI goes to the Breadchain Gnosis (multi-signature) Safe Wallet which is controlled democratically by the Breadchain Cooperative members. In return for giving $DAI, Crowdstakers mint and receive a token called $BREAD as collateral in the same quantity as they gave in $DAI. The $BREAD token acts as both a form of collateral from the cooperative and a digital local currency for the Breadchain Network of projects and broader ecosystem.

It acts as a form of collateral not only because it represents the exact amount of $DAI provided by the Crowdstaker but also because Crowdstakers can burn their $BREAD token to receive an equal amount of $DAI back. In this way, Crowdstakers are not donating any of their capital (although they can do that too if they want to) but are instead giving Breadchain the permission to take the interest generated through Compound on their $DAI which will then be used to fund the operations and future projects from Breadchain. This means that as a Crowdstaker you have two choices, either mint $BREAD (fund the cooperative) or burn $BREAD (defund the cooperative). You can think of it as a decentralized cooperative bank where you have much more say in how the bank uses its money, in this case for funding decentralized cooperative projects.

Bread Crowdstaking Protocol Diagram

Since the $BREAD token is given in the same quantity as the $DAI provided and can be redeemed 1 for 1 at any moment, $BREAD is also therefore similarly a stablecoin pegged to the US Dollar like $DAI. The implications of this are much deeper than what it may seem on the surface. If we consider the Breadchain Network as a type of digital town in which citizens are people who align with the Breadchain principles, than the $BEAD token serves as the basis of a digital local currency for this town which can choose to democratically decide on building on top of. It can be transferred and traded just like any other ERC20 token but keeps a stable value of roughly $1 according to the current price of $DAI.

The Breadchan Crowdstaking Protocol acts like a membrane for building a post-capitalist economy within the confines of present-day capitalism. With the combination of 24/7 access to burning your $BREAD for $DAI and a clear price point, it is easy for the Breadchain Cooperative to protect the token from speculators through the use of automated trading bots. If a bad actor tries to pump or dump the price of $BREAD compared to $DAI on cryptocurrency markets, Breadchain can take advantage of the situation through arbitrage between the crowdstaking protocol contract and the exchange in either direction. The earnings of the arbitrage instigated by bad actors can then be turned into more funding for Breadchain. It’s a win no matter what!

USD = DAI = BREAD

Potential benefits of holding the BREAD token

One downside to fundraising through crowdstaking is that it can be a slower process as compared to traditional fundraising models as it depends on the APR (annual percentage return) of $DAI in the Compound lending pool which can vary from 2% to as much as over 10% during heightened trading frenzies. For example, if there is 100 DAI in the Breadchain Crowdstaking Protocol, over one year with 10% APR, the cooperative would earn 10 DAI. This means that in order to maximize returns to Breadchain, it’s in our best interest to make it worthwhile for Crowdstakers to either hold or circulate their $BREAD. Below you will find a non-exhaustive list of potential benefits for Crowdstakers.

  • Access to $BREAD token-gated social networks
  • Voucher for discounts on merch or digital products
  • Recognition as a supporter on the Breadchain site
  • Airdrops of new tokens, NFTs, etc. related to the projects in the Breadchain Network
  • Exclusive rights to claims on new Breadchain offerings
  • Spend within the network to encourage economic activity / solidarity
  • Rewards for join a $BREAD liquidity pool to help secure the peg
  • Purchase offerings from partners of Breadchain that accept $BREAD
  • If all else fails, you can always burn your $BREAD to receive your original $DAI back

This list is not exhaustive and does not mean that any of these things will happen, but they form a good list of ideas on what is possible. What is important to note is that the $BREAD tokens do not represent any hard governance power over the network and should not be considered an investment opportunity, it is a stablecoin that represents your solidarity with the mission of Breadchain, funding decentralized cooperative projects building open source tools for an alternative vision for blockchain. Let us know which benefits you think would be the most compelling to you or if you have any other ideas we should consider by emailing us at breadchaincoop@gmail.com

Alternatives that were considered

In the process of delving into the details of how we wanted the Crowdstake application to work, we considered several possibilities. For transparency, here are a couple of the alternatives we considered and why we did not implement them. This does not mean that in the future that we will not make adjustments as according to the needs and desires of the community.

Maximum Capped Supply

Pros: Gives holders potential upside if project becomes popular as demand increases and supply decreases

Why we did not implement it: There would be a difficult governance structure needed as holders will be potentially biased towards decisions that increase price, which could attract more short-term and profit minded behavior which does not fit the ethos of the project.

Added fees for burning or minting $BREAD

Pros: Potentially speeds up fundraising efforts if fee is also collected by the cooperative and may incentivize users to hold BREAD so that they don’t incur the fee

Why we did not implement it: We believe this would potentially leave a bad taste in the user’s mouth and could be seen as predatory. We believe that there are better ways to incentivize users to not burn their $BREAD. That means there are no fees for burning $BREAD beyond the gas fees inherent to using the ethereum blockchain.

Conclusion

The revolution will not be funded by the current rulers of the economy. Only by creating bonds of solidarity and networks of mutual aid for cultivating dual power will we reach true economic democracy and freedom. $BREAD is not a governance token and it is not just a stablecoin. The Breadchain Crowdstaking Protocol can be seen as many different things depending on the lens you use, but most of all, it is the engine for funding projects that explore post-capitalism on the blockchain.

In the long term, assuming the Breadchain Crowdstaking Protocol is successful, this type of fundraising mechanism can also form the basis for creating a platform for multiple radical projects to fundraise. Considering the smart contracts are open source, anyone can start using the same mechanisms, but where Breadchain can add significant value is by hosting and providing the front end infrastructure for these projects to prevent activists from having to learn how to program Web 3.0 and give them more time to focus on whatever it is they do best and their cause.

In the future we will explain in more detail how we plan on democratizing the allocation of the collected interest through the use of a different type of governance token which can largely only be collected by contributing labor to the project. This makes it so that only those who are actively contributing and therefore, have the best interests and intentions at heart, have the most say over how resources are allocated and the direction of the project and not those who can simply purchase the most tokens. With this setup we believe that we can build new and radical forms of democratic ownership which were not possible before.

While we have the Breadchain Crowdstaking Protocol contract already deployed on the ethereum main net, at the moment we are still working on the front end application for a general audience to be able to mint $BREAD, so expect that in the coming weeks once it is done. If you want to support the project in the meantime, feel free to contact us at breadchaincoop@gmail.com (let's talk parnerships!) or consider contributing to our Open Collective, donating some ether to Breadchain at 0xD547bd0C023c3aDb8E0F2CC47340f5A4657be910, and sign up for our newsletter!

Introducing Breadchain Version 0.1: Building Web 3.0 Tools for Radical Organisations

Inspired by the mission and success of BreadTube, a loose association of YouTubers working to fight against the dominance of right wing content on YouTube, Breadchain is a loose organization of blockchain or DLT (distributed ledger technology) based projects that are working to advance a more progressive vision for this technology and its effect on society. The primary goal of this endeavor is to challenge the largely conservative and outdated economic models and assumptions in which many cryptocurrency and DLT projects are built upon and demonstrate that an alternative, more cooperative framework is possible.

In order to accomplish this, we adhere to particular principles and goals to guide the development of projects in the network and when working with each other. Our current guiding principles and goals are as follows:

Economic Democracy - We strive for an economy in which resources are allocated democratically rather than solely through market forces.

Mutual Aid - We are only as strong as the weakest among us which is why everyone should be entitled to the things they need to live a dignified life.

Transparent governance - Everyone should be able to have a say and those given power by the community must be held responsible for their decisions for all to see.

Dual Power - We must build parallel institutions from the grassroots using the tools we have because technology without direct social intervention only favors those in power.

To stay true to these principles, the Breadchain legal entity will be incorporated as a cooperative, likely owned by a representative from each project part of the network of Breadchain projects (aka the Breadchain Network). The exact governance and country of establishment has yet to be defined.

An important aspect for open source projects like these for economic sustainability is the mechanism which funds are raised. Breadchain will not seek funds from venture capitalists nor take on burdensome amounts of debt in order to fund its operations. Instead, Breadchain will largely be funded through four different forms of donations from those who agree with the vision of Breadchain and would like to help fund DLT-based projects in the Breadchain Network.

So far we’ve determined three types of economic expression that a supporter would be able to show support for Breadchain through providing capital and due to the nature of the project, we would like to allow support to take the form of either fiat or crypto-currency to take advantage of both forms. Donations made through fiat will be handled through traditional financial tools held by the Breadchain Cooperative and those made through cryptocurrencies will be handled through a multi-signature wallet held by each Breadchain Network project. In the image above you can find a table that summarizes the various methods of funding we would like to make available to supporters.

There are currently two projects confirmed to be a part of the Breadchain Network. The first is the Basis Project, an open source post-capitalist productive network that seeks to enable an economy where everyone has a say in their workplace, property is managed by the people who use it, and production focuses on ecologically meeting needs instead of generating profit through in-kind cost tracking. The exact technological stack of Basis is still yet to be determined, although it is likely to use some DLT whether blockchain or not. Through discussion with technological and economic experts, along with input from others in the community, the best technological stack for the goals of Basis can be determined.

The second is the Breadchain Crowdstaking Protocol, an alternative crowdfunding mechanism taking advantage of liquidity mining protocols built on the ethereum blockchain. This smart contract protocol allows for crowdstakers to provide funds to Breadchain by staking the DAI stablecoin into the DAI liquidity pool on Compound, one of the largest decentralized finance lending protocols. Any yield earned on the DAI stablecoin that is staked by crowdstakers is claimable by the admins of the project being funded, in this case, Breadchain. However, unlike standard crowdfunding, crowdstakers can withdraw their stake and receive their deposited DAI back whenever they wish to stop generating yield for the project. Crowdstakers are always guaranteed their stake through collateral in the form of the BREAD token backed 1:1 against the DAI staked. The BREAD token will act as the local currency g within the Breadchain ecosystem where holders can expect to spend it or hold it for different types of benefits. What's important to note is that the value of the BREAD token will always be equal to the value of DAI which is meant to be stable with the value of 1 USD, so there is little to no speculative nature to the token. It is instead a symbol of solidarity and support for Breadchain. The Breadchain Crowdstaking Protocol will be an experiment in alternative crowdfunding and a form of economic expression that is not easily possible with traditional financial tools.

Other applications for DLTs and blockchain we would like to explore through Breadchain include providing support for strike funds, discouraging strikebreaking, encouraging the creation of platform cooperatives, assisting radical political organizations with handling cryptocurrency, and much more. This is still just the beginning of the Breadchain journey. Much is yet to be defined and the project is currently run purely by volunteers. We hope that this quick first introduction has sparked your interest in Breadchain and you consider providing help in whatever way you can.

If you want to provide financial help, we've already gotten our Open Collective page up and runnning to accept donations and patronage! If you wish to give through cryptocurrency on the ethereum blockchain, the Breadchain multi-signature wallet address (thanks to Gnosis for the free deployment) is 0xD547bd0C023c3aDb8E0F2CC47340f5A4657be910.

Keep in mind that everyone working on Breadchain so far are also working full time jobs at the same time to make ends meet. That means things may not go as fast as we may all want without your support. By supporting Breadchain, you are supporting open source development and tools for radical organizations to fight for economic democracy and for smart developers to focus not rely on wage slavery.

Some of the things that still need to be done:

  • Creation of the Breadchain public forum / social media platform
  • Cooperative legal incorporation (any country suggestion?)
  • Continue fixing this website (any front end devs?)
  • Deployment of the Crowdstaking Protocol to the ethereum mainnet
  • Define the project onboarding process into the cooperative network
  • Continue formalizing governance structures
  • And likely many more! (anybody want to help translate?)

If you would like to help with any of the listed activities or with anything else you think we'll need help with, email us at breadchaincoop@gmail.com or if you would like to be the first to know about the progress of the project, sign up for our newsletter and expect more to come soon!