ICCP-22

APPROVED

Summary

This ICCP proposes increasing the Safety Pool threshold from Five Million USD ($5M), as defined in ICCP-9, to Ten Million USD ($10M) or its equivalent. The Safety Pool will continue to operate under the rules defined in IIP-29, but with a revised maximum capacity.

Objective

The objective of this proposal is to ensure that the DAO maintains a sufficient financial buffer given updated market conditions, revenue forecasts, and operational requirements. By raising the Safety Pool threshold to $10M, we aim to balance financial prudence with capital efficiency, ensuring stability while continuing to prioritize revenue distribution to stakers once the buffer is secured.

Background

IIP-29 (February 2023): Established the Safety Pool with a $15M maximum threshold.

ICCP-9 (July 2023): Lowered the threshold from $15M to $5M following a $10M capital raise, while mandating that all current and future revenues be diverted to the Safety Pool until it was filled or Illuvium entered Open Beta.

Rationale

Increasing the Safety Pool to $10M achieves several goals:

Financial Resilience: Provides the DAO with an expanded buffer against unforeseen risks, market downturns, or extended development needs.

Operational Flexibility: Strengthens the DAO’s ability to fund runway expenses, strategic initiatives, or emergency measures without requiring immediate new capital raises.

Alignment with Current Conditions: The initial reduction to $5M (ICCP-9) reflected the capital raise and short-term runway sufficiency. However, with more visibility on long-term needs, a $10M buffer better reflects the DAO’s risk appetite and ensures sustainable operations.

Balance Between Growth and Distribution: While increasing the threshold temporarily diverts funds from revenue distribution, the trade-off provides greater stability for the DAO, ultimately protecting stakers and contributors.

Specification

Threshold Adjustment: The Safety Pool maximum capacity will be raised from $5M to $10M.

Funding Mechanism: Current and future revenues will continue to be diverted into the Safety Pool until the new $10M threshold.

Excess Revenue: Any revenue beyond the $10M threshold will flow directly to the Vault for Revenue Distribution.

Financial Impact

This proposal temporarily reallocates up to an additional $5M revenue into the Safety Pool. While this may modestly delay distributions to stakers, pausing revenue distributions, similar to halting dividend payouts in traditional companies, is a standard practice when a company does not meet its revenue/profit targets.

In our case, the retained revenue will be strategically reinvested to achieve future growth targets,strengthen the DAO's financial position, and ensure sustainable, healthy, and regular revenue distributions moving forward.

In summary it substantially strengthens the DAO’s financial security and reduces long-term risk.

Conclusion

By raising the Safety Pool threshold from $5M to $10M, the DAO strengthens its financial foundation, ensuring it can weather uncertainty while maintaining operational flexibility. This adjustment reflects Illuvium’s expanded scope with the development of the MMO, and demonstrates the DAO’s ongoing commitment to responsible treasury management and long-term sustainability.