Etherplan - The Global Wealth Management Network - Proposal

[DonaldMcIntyre]

Hi everyone, this is our proposal for Etherplan, The Global Wealth Management Network!

Abstract: Etherplan is seeking an investment from The DAO of $1.000.000 to finance 12 to 18 months of operations. The company is a for profit business that is planning to change the way people everywhere in the world manage their wealth and eventually pass it on to beneficiaries. If successful, the system will help users replace the traditional financial industry and bypass the legal and court systems by managing their money on the trust minimized and highly secure environment of the blockchain and using their social graph as beneficiaries and trustees to their wealth.

Please read the full proposal here: http://etherplan.com/etherplan-proposal

The proposal in PDF format: http://etherplan.com/etherplan-proposal-draft-v1.pdf

Our website: http://etherplan.com/

Find us on Twitter: https://twitter.com/myetherplan

Our Youtube channel: https://www.youtube.com/c/etherplan

EDIT: Extensive due diligence questionnaire by a TheDAO token holder https://docs.google.com/document/d/1ZPuoyRvNZ0jEKatOq7DP6nK1skvaXZirRcsUpvpxTfM/edit?usp=sharing

Thank you so much, let's change wealth management and estate planning!

Let's start the conversation!

Onward

[nvmr]

The proposal is clearly structured and I think I understood what you aim for after reading it once. It looks like you have done your homework in defining the market and competitive landscape as well as identifying some risks. Your team combines financial services and blockchain expertise likewiese, which is definitely a plus.

So overall I consider it one of the better proposals up for discussion so far. Having won Nick Szabo as advisor will probably earn you considerable "street cred" as well, so I guess it's a good start.

Now for some questions and challenges.

the system will help users replace the traditional financial industry and bypass the legal and court systems by managing their money on the trust minimized and highly secure environment of the blockchain and using their social graph as beneficiaries and trustees to their wealth.

With the exception of the social graph part this sentence characterizes exactly what Bitcoin already is for many people. In the abstract, I would have expected a concise statement describing what makes Etherplan unique. What is it?

As more customers, advisors, beneficiaries and trustees join the network it becomes more valuable to everyone in the ecosystem.

Maybe it is just me, but I certainly wouldn't want my "wealth social graph" to be public at all. Since this seems to be a key element, it would be a deal breaker for me. But again, that's just me.

Can you elaborate what the network effects are in this context, who would benefit from it and how?

The Etherplan Vetted Asset list (EVA list) to prevent investing in scams within smart portfolios

Who would curate this list and based on what criteria?

The organizational structure you outline makes sense to me. Who would be in the development team? Will Nick be on it? In what role? Where do you recruit developers?

The investment volume of 1 million USD is probably in the range of what we can afford given the risk, but how is it broken down? Please give an itemized list of expenses.

A big downer for me is the fact that this is another instance of the proposal class "I have a great idea - give me your money to test it" in return for a small part of the profit.

Even more importantly: What on earth makes you believe you can get away with a revenue cap? Unless I have misunderstood something important you propose is a gamble, not an investment.

As I have stated before elsewhere I have a a strong view on this. If we take the full risk, we should also get the lions share of the profits, if any. And of course without any cap!

[thecryptofiend]

I think this is a perfect fit for the DAO. It is a long term investment for the future and viewed in that way it is a great idea if some of the concerns from nvmr can be addressed then I would vote yes.

[terranix]

A big downer for me is the fact that this is another instance of the proposal class "I have a great idea - give me your money to test it" in return for a small part of the profit.

I agree with this sentiment - I will be much more likely to approve a plan for a completely automated business where 100% of the revenue will vest in the DAO, rather than a traditional capitalist enterprise funded with seed money from the DAO.

I believe the DAO will always look more favorably on proposals to create companies which also work as DAOs.

Proposals such as this which are also intended to increase the wealth of individual wallets are fantastic if they can become self-funding. However we must keep in mind that the primary goal of the DAO should be to increase the profitability of the DAO.

[DonaldMcIntyre]

Hi @nvmr, thank you so much for taking the time to read the proposal and posting these questions, critical thinking and rationality is very much appreciated and useful for the community at large.

Now for some questions and challenges.

From the abstract:
the system will help users replace the traditional financial industry and bypass the legal and court systems by managing their money on the trust minimized and highly secure environment of the blockchain and using their social graph as beneficiaries and trustees to their wealth.

With the exception of the social graph part this sentence characterizes exactly what Bitcoin already is for many people. In the abstract, I would have expected a concise statement describing what makes Etherplan unique. What is it?

I agree, the blockchain helps replace the financial system and our social graphs may help us bypass the courts systems, but these may be regarded as generic benefits rather than specific to Etherplan. We are putting together these innovations to recreate a new type of wealth management paradigm, though. I think Etherplan is broad and I could alternatively describe it like this:

1. On Etherplan you can manage your money and achieve your financial goals much better than any other alternative service
2. When you open an Etherplan wallet your smart portfolios, organized by financial goal and estate plan, will be automatically created for you (you can change them whenever you want). Financial planning and global investing will be easy and available for everyone and not only for the rich
3. If there is a financial crisis (and there likely will be at least one again in our lifetimes) you will not worry because your money will be safe even if banks go broke (or even if Etherplan disappears)
4. If you have your money at Merrill Lynch, HSBC or Betterment you only have one provider and it's very difficult to change if you are not happy with their service. On Etherplan you can have several advisors helping you manage your money (you can hire them in a system similar to Uber but for financial professionals) and you can change them in 20 to 260 seconds (depending on the block times!)
5. You can also manage your smart portfolios yourself or a combination of advisors and yourself
6. If something happened to you, instead of having your wealth go through the legal system, pay high fees and take forever to reach your heirs (or any other beneficiaries you choose), your money will be distributed in 20 to 260 seconds once your beneficiaries inform to the smart portfolios and your trustees (who can be your best friends or professional advisors) certify the event
7. In a world where there are national borders and isolated jurisdictions, through Etherplan you can manage your wealth on a global borderless platform so you have access to the best investments, you can enhance returns, diversify risk and use the best advisors wherever they may be

Rather than a financial services firm, Etherplan is a gateway to use the blockchain as your full service financial firm and your estate plan is resolved with astronomically high security, more certainty and incredible convenience.

[DonaldMcIntyre]

As more customers, advisors, beneficiaries and trustees join the network it becomes more valuable to everyone in the ecosystem.

Maybe it is just me, but I certainly wouldn't want my "wealth social graph" to be public at all. Since this seems to be a key element, it would be a deal breaker for me. But again, that's just me.

Can you elaborate what the network effects are in this context, who would benefit from it and how?

In the case of Facebook or LinkedIn the purpose is for people to connect and interact socially or for work, but on Etherplan the focus is for wealth management and it does not have to be sharing information or exchanging messages or ideas. It's just to have people linked with smart portfolios to transfer wealth and to inform (very much like oracles) of events that trigger those wealth transfers.

The main reason a smart portfolio owner would bring his/her beneficiaries to the platform is to connect them to their wealth so they can receive the wealth transfer at a later time. The beneficiaries do not need to have access to the actual information of the portfolios or how they are managed, neither to the % that correspondes to them. This is a prerogative of the smart portfolio owners.

Smart portfolio owners can give access to beneficiaries, trustees or advisors in the levels of privacy they choose for each one. Examples:

1. I can connect my 3 kids to my wealth so they get their inheritance in the future, but they don't see the portfolios, values nor percentages or payment schedules (lump sum or in installments as they grow older)
2. I can provide access in the future to see information, but not trade or withdraw
3. I can provide full access (same authority as me) to all functions of my smart portfolios (maybe my kids are grown up, I am old and I just don't want to manage all this!)
4. Likewise, I can hire an advisor and limit his/her scope to a portion of one of my portfolios e.g. my retirement portfolio may be managed 50% by Fidelity (advisors can never withdraw funds, though)
5. I can also provide access to my tax accountant to see or download only tax info once a year from the smart portfolios (dividends, realized capital gains, etc.) so he/she may prepare my tax returns
6. There may be other combinations of access and privacy

Social network:

We think it is possible that, if customers bring their social graphs as beneficiaries, trustees and advisors, that the more participants in the network the more useful, thus valuable it may be for everyone using it. This could make people bring more people without us spending so much in marketing which is the main financial benefit to the business model.

Example of network effect:

If my uncle Bob invited me to Etherplan so he could put me as a beneficiary to his smart portfolio in the system, maybe my friend Alex saw that as an opportunity to use me as his trustee for his portfolio, so he brings his money to Etherplan. Eventually I inherit or even bring my own savings to the Platform. If many people do this, even employers could see this as an opportunity to bring their corporate retirement plans so they can hookup their employees in an easy to use trust minimized platform. And so on, as more join, more will be attracted.

Once there is a big enough stock of wealth on the platform, well known investment firms could eventually want to participate to gain access to this wealth and to better manage their existing clients money.

Granted, the above is theoretical, but we think the opportunity is to be the first to uncover the "wealth graph" that already exists and create a platform that could create a lot of value to everyone.

[DonaldMcIntyre]

The Etherplan Vetted Asset list (EVA list) to prevent investing in scams within smart portfolios

Who would curate this list and based on what criteria?

The idea of the EVA list is not to be a traditional research unit with "buy, sell or hold" recommendations, but to protect users, advisors or even Etherplan from the perils of scam DAOs or assets that may be issued on the blockchain, but are really intended to steal money.

Examples:

1. The DAO tokens are not restricted for investment on Etherplan because the code and incentives model (economic and technical) are sound and consistent with a real investment objective and potential upside value creation

2. Native assets of proven public blockchains like BTC or ETH are never restricted

3. SooperCoin is a DAO token that is restricted/banned because its code and model are clearly a pyramid scheme

4. HyperDAO is restricted, but not banned (if customer approves each trade, advisors may buy it in their portfolios) because it is sound in terms of code, but its organizational structure is not trust minimized and depends only on trust in the founders

Who will do this:

We will develop a methodology e.g. like S&P has a methodology to screen credit risk, and in the 3rd semester of our plan we have a the goal of hiring a professional financial executive (chartered financial analyst and /or certified financial planner) to manage this department.

[DonaldMcIntyre]

The organizational structure you outline makes sense to me. Who would be in the development team? Will Nick be on it? In what role? Where do you recruit developers?

If we get the investment from The DAO, I will immediately move to the Bay Area (the alternatives are NY, London, Berlin and Zurich/Zug for the Ethereum developer pools in those areas as well) to organize the office and hire two developers (for product and design core processes I prefer for the core team to be in one place in the building process -- our key advisors reside in the area as well) to start building the MVP.

I am open for the team to be in diverse places as we grow.

I will conduct the other activities as a generalist with advisors and contracted professionals, lawyers and specialists (we need to do the research to validate our on-blockchain model with off-blockchain regulation and trust law on a jurisdiction by jurisdiction basis), but not necessarily in-house yet until we achieve product-market fit and to keep burn rate as low as possible.

Nick Szabo is a hands on advisor, but not full time. He helps me with business model, trust minimization principles of smart portfolios and design in general. He recommended the organizational structure presented in this proposal for example.

Elaine Ou is also not full time, but she will implement the smart contract proposal to The DAO and she will coordinate the team of two developers in the Bay Area to build the MVP. She calculates we can meet our MVP goals with 2 devs in the ~12 months with the scope presented in the proposal.

Juan Llanos is a specialist in KYC/AML processes for blockchain startups, he will design that department and train a full time chief compliance officer we plan to hire also in the 3rd semester.

Summary: The initial core full time team will be 3 people, 2 Ethereum developers and Donald McIntyre as business generalist. Our 3 advisors are hands on and will lead specific projects with specific goals in the first 18 months.

[DonaldMcIntyre]

The investment volume of 1 million USD is probably in the range of what we can afford given the risk, but how is it broken down? Please give an itemized list of expenses.

One of the things I love the most about the Ethereum community are the principles of accountability and transparency. Vitalik is a great example of this, always giving the numbers of Ethereum Foundation and even his salary and his ether portfolio allocation!

This is the link to the spreadsheet book on Google docs for your review, it has all the info up to now, it will be updated frequently.

Please copy and paste the link below to your browser without the brackets:

[https://docs.google.com/spreadsheets/d/1MnEQX_OgjblC6wnZYata9qESbbms8ZrYxyJInRbP9-s/edit?usp=sharing]

Anyone with the link above can view and comment.

I think it is potentially too much info and we can all have different opinions about details about expenses and projections. But I suggest to leave comments and continue the debate, I hope we can reach a consensus on budget and projections!

[DonaldMcIntyre]

A big downer for me is the fact that this is another instance of the proposal class "I have a great idea - give me your money to test it" in return for a small part of the profit.

Even more importantly: What on earth makes you believe you can get away with a revenue cap? Unless I have misunderstood something important you propose is a gamble, not an investment.

As I have stated before elsewhere I have a a strong view on this. If we take the full risk, we should also get the lions share of the profits, if any. And of course without any cap!

I agree, if we can create an organizational model that gives The DAO permanent ownership participation I would do that. The restrictions we worked with to reach this financial ROI proposal were:

1. The DAO cannot own shares in a traditional corporation
2. To solve the above The DAO needs to perceive a stream of cash flows from the project because it has no upside in the value of the shares
3. A permanent stream of cash flows out of the top line revenue may suck cash needed for a startup to finance growth
4. A cap with a substantial upside potential gain (ROI) for The DAO could be a synthetic solution for all of the above

Our proposal seems to fit the described situation above, however we would be happy to create permanent "ownership" to The DAO if we can create a system where it enjoys upside in value as well rather than only cash.

The 20% cash flow payment out of the top line is similar to owning 100% of the business for that specific period (2017 until $5 mm is recovered) because 20% is a normal net income after taxes for financial services. Nevertheless, it is true that if the business is worth $100 mm or more in the future The DAO will not get $20 million or more in the future. We are open to create s structure to make this possible.

I will think more about this and see if I can come up with a "permanent ownership" solution. My priority is to make Etherplan a reality to solve the wealth management problem for millions of individuals and families around the world and I totally agree we all have to benefit of this value creation.

[DonaldMcIntyre]

Agreed, we are open to re-think the model The priority is to make Etherplan a reality. I answered more about this to @nvmr here:

I agree, if we can create an organizational model that gives The DAO permanent ownership participation I would do that. The restrictions we worked with to reach this financial ROI proposal were: The DAO cannot own shares in a traditional corporation To solve the above The DAO needs to perceive a stream of cash flows from the project because it has no upside in the value of the shares A permanent stream of cash flows out of the top line revenue may suck cash needed for a startup to finance growth A cap with a substantial upside potential gain (ROI) for The DAO could be a synthetic solution for all of the above Our proposal seems to fit the described situation above, however we would be happy to create permanent "ownership" to The DAO if we can create a system where it enjoys upside …

[DonaldMcIntyre]

Thank you so much, I wrote my answers in this forum, I would love to read your opinion about them.

[terranix]

Thanks, it sounds like you've thought things through; I hope your proposal succeeds and we are able to implement this together!

[thecryptofiend]

Will do when I have a bit more time as I am not a financial expert so will need time to understand it all!

[s8c]

Hi Donald, I browsed your proposal for five minutes, stop at the economic proposition and once I saw it was just another "theDAO takes the risk, I keep the upside", very much Slock.it style, I disregarded it.

Now, I have read how you answer the community questions and I take my first impression back: you come across as an honest businessman.

Maybe you want to talk to the guys at Otonomous or some other people that are taking a look into how to implement an equity-like proposition. Maybe instead of equity you may want to look into convertible debt, it might be easier for a number of reasons.

Anyway, good luck. TheDAO needs more entrepreneurs like you.

[DonaldMcIntyre]

Thank you for your kind words. I will take a look at Otonomous and also the convertible debt model, I think this is a good idea if we start with The DAO as a cash flow only deal and then, when the possibility of equity ownership by a DAO is resolved technically and legally, we can agree to convert to equity.

Do you think along these lines there is a possible solution? (I always shied away from convertible debt in traditional business, but in this case seems a plausible alternative).

[s8c]

Hi Donald,

I'm afraid we are going to get to a dead-end too quickly.

In my opinion, theDAO is just not viable as investment vehicle as of yet. There are a number of reasons, but let me focus in one: there is still no framework to accommodate the rights and obligations of an investor-investee relationship (btw, there is no framework either to accommodate a contractor-client relationship).

I mentioned convertible debt because at least you don't have to deal with the valuation discussion for some time.

I understand that from your point of view, it is (probably) safer to take money within a client-contractor relationship. I mean from a legal perspective. However, a client-contractor framework does not work as a funding tool for early stage start-ups, again for a number of reasons. It is simply a terrible idea for an investment vehicle, a losing money proposition, but that is theDAO's problem, not yours.

I don't know how this is going to evolve. It is sad to see the number of very obvious deficiencies theDAO has as investment vehicle, and the passivity of the community in this regard. As it is, I am afraid, all money invested will be lost.

Anyway, you, as the receiving side of the money, have a different perspective. Maybe you can get funded as a contractor. That'd be good news for you.

Slock.it is obviously going to push for a contractor relationship. It is not in their interest to wait and let theDAO organize itself so they are surely doing everything possible to accelerate the process. Once they do it, you will have a good chance to get funding with a similar model.

Excuse my cynical view. I'm not too prone to emoticons, virtual high-fives and messages of to infinity and beyond. It is ok to have enthusiasm, but you also need substance. Unfortunately, theDAO has a lot of the former and too little of the latter.

I have not reviewed your business plan, so I cannot comment, but I really like your attitude. It is very refreshing to see what seems an effort for transparency and honesty. As you know, a $150M honey pot stimulates very interesting human behaviour, as you surely can see yourself by looking at how things are unfolding.

Regards.

[nvmr]

Your transparency approach in exemplary, @DonaldMcIntyre. This is how you gain trust in the community. At least you elevated my trust level in the project by making the numbers public on which you base your plan.

Now find a way to make the DAO participate in the revenue stream without the cap and I'm in. At least I would seriously consider it because I believe you are addressing a real need.

Anyhow I don't understand how convertible debt will solve the problem. Wouldn't it just kick the can down the road regarding the still missing ability for the DAO to hold equity?

What would be so bad about a scheme in which a percentage of every transaction is paid to the DAO for eternity? That way you would gain tenthousands of evangelists for your cause at once.

Consider that many DTH are likely to become customers, too.

[ranford]

the simplest way to go as nvmr suggested is to simply pass a percentage share of every transaction to the DAO (in eternity , NOT to some cap), then I too would support this in general, as it stands I wouldnt.

[thecryptofiend]

So have had a read through. Here are my thoughts:

This would be great and I would wholeheartedly support it if there weren't the cap on return to the DAO.

We take the risk on the failure, yet if you get to have greater than expected success we get cut off at $5m.

That seems unfair and is a total deal breaker for me.

Unless this clause can be removed I don't think you will get much support.