ICCP-3

IMPLEMENTED

Simple Summary

This ICCP clarifies the definition of how various future product directions utilize Vault distributions of revenue, accounting for variable and fixed cost revenue streams. For products with low variable costs (information goods), revenue represents 100% of all ETH (or other currency, excluding sILV2) generated from the sale of these products. For products with non-negligible variable costs, revenue sent to Vault will be less such costs. For products resulting from partnerships with entities outside of the DAO, revenue will represent the Illuvium DAO’s portion of such agreements, again less non-negligible variable costs, if applicable. The use of commissions and affiliate marketing is also taken into consideration. For experiential events, variable costs plus fixed costs incurred outside of the DAO’s core competency will also be deducted from revenue prior to it being sent to the Vault for distribution. Future proposals for products should select their relevant definition of distribution.

Abstract

The Illuvium DAO and its product scope has expanded significantly and developed greater clarity of vision since the DAO’s inception. As such, prior to the broad launch of various product streams, it is essential to clarify the definition of revenue from greatly differing products. The goal here is to establish clear definitions that are applicable to all future product lines, and how revenue from such launches will utilize the Vault distribution system, i.e., revenue distribution.

Overview

As the Illuvium DAO enters 2023, there are a large and diverse number of product launches expected, ranging from the release of the main game (Illuvium), mobile game (Illuvium Zero), collection game (Illuvitars), as well as a number of physical and experiential products such as merchandise and festivals. In addition, the Illuvium team is working closely with adjacent and synergist DAOs and companies to partner in the release of other digital and physical products. As utilization of the Vault for revenue distribution is central to the identity of Illuvium, it is imperative to clarify what entails revenue for each of these diverse product lines. New proposals for products/revenue streams should identify which definition of distribution is relevant and will be applied if the proposal is approved.

Negligible (Information) and Non-Negligible (Physical) Variable Cost Goods

At its inception, the DAO’s primary product was the main Illuvium game, and revenue from this title was anticipated to be largely digital in nature. Such a product has high fixed development costs, but negligible variable costs, products such as NFTs created and sold could scale easily without additional cost for each newly created unit. The fixed development costs of this product was expected to be fully borne by the DAO via Treasury-held $ILV receiving revenue via the Vault distribution mechanism. However, at the direction of the community, there has been significant interest in additional product lines that introduce non-negligible variable costs. Merchandise is a prime example of a product line with high variable costs. Negligible Variable Cost (Information) Products - products (typically information products) that scale with negligible increase in cost shall send 100% of all revenue to the Vault. Non-negligible Variable Cost (Physical) Products - products (typically physical products) that incur non-insignificant costs as they scale shall send 100% of all revenue LESS variable costs to the Vault. Examples of variable costs include but are not limited to physical goods, labor to produce/distribute such goods, distribution costs, costs of materials and associated packaging.

Commission and Affiliate Marketing

At times, the DAO may utilize affiliate marketing programs and offer commissions to extend the community reach and broaden sales. Commission-associated or Affiliate Marketing Product sales would leverage the relevant distribution strategy above (Negligible or Non-negligible Variable Costs), with revenue sent to the Vault further reduced by all associated commissions or affiliate marketing costs, either fixed in nature or as a percentage of total revenue, depending on the terms of the agreement entered into by the DAO.

Partnerships & Licensing

The DAO may engage in partnerships and licensing of intellectual property and other assets. Partnership Products - products developed/distributed in collaboration with another entity. These products shall send 100% of all revenue attributable to Illuvium’s portion of the agreement, less variable costs borne by the DAO per the agreement with the third party. This also includes royalties received from NFT sales, with 100% of the Illuvium DAO’s share of the royalty being sent to Vault for distribution.

In addition to partnerships, Illuvium DAO may engage in licensing agreements. Licensing Products - products that consist of the utilization of DAO assets by a third party. Revenue from such products shall send 100% of all revenue provided to the DAO per the licensing agreement to the Vault, and the revenue generated by the third party’s utilization of the licensed assets shall have no bearing on the DAO’s revenue from such product.

Event/Experiential Products

One additional revenue stream that has been proposed is that of experiential or event products. Such products involve unique fixed and variable costs that are outside of the DAO’s core competency of game creation. Revenue distributions from such an event would be revenue less non-negligible variable costs plus fixed costs outside of the DAO’s core competency, or utilizing a partner/contractor’s resources. Experiential products - products (typically events) where there are non-negligible variable and fixed costs outside of the DAO’s core competency and scale. Revenue from such products shall send 100% of all revenue less non-negligible variable costs and event/experience specific fixed costs to the Vault.

Rationale

Clearly defining revenue and expectations of Vault distributions prior to the start of recurring revenue is essential. The expansion of scope and potential future product directions of the DAO complicates the simplistic view of revenue as initially outlined in the Whitepaper and early official Medium articles. As there is now greater clarity in potential product directions and revenue streams, it is imperative to clearly define how Vault revenue and distributions will function for each such source. The paramount intent of this ICCP is three-fold:

1. Enable revenue distributions in a sustainable manner to maintain long term operation of the DAO
2. Uphold the commitment to quality in all products associated with Illuvium
3. Ground $ILV staker expectations for revenue distributions

With the definitions outlined above, it should be made clear to all current $ILV holders along with any potential future stakers how revenue is defined and will be distributed.