Introduction

 

Decentralized Autonomous Organizations (DAOs) as a mechanism for corporate governance are becoming increasingly popular vehicles for single purpose capital deployment. In mid-November 2021, a group of individuals leveraged a DAO to raise $46M in an attempt to purchase an early edition of The Constitution.  Yet, DAOs are about governance and long-term decision making, not just a single allocation of capital.

 

The next frontier of web3 growth outside of the metaverse likely will be in the DAO space. Given the decentralized governance structure, BucketsDAO presents sports fans with a unique opportunity to make professional sports more accessible to all. 

 

BucketsDAO will evolve in three distinct stages in order to ensure that there are practical and immediate benefits for early token holders and that these token holders are able to shape the details of phases 2 and 3.

 

Phase 1 - Seats & Suites: Secure fractionalized ownership over a network of suites and courtside seats in NBA stadiums across the country. NFT owners will immediately receive this perk.

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Phase 2 - Governance Rights: Partner with team(s) to secure governance rights over non-competitive strategy and decision-making. NFT owners will have participation in this phase.

 

Phase 3 -  Ownership:  Pursue ownership in an NBA franchise, which will come with added physical benefits relative to Phase 2(e.g., owners’ lounge access, free allocation of courtside seats, etc.). Note that buying into the NFT drop does NOT offer ownership of a team; the community may pursue ownership in the future.

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Seats & Suites

 

As discussed, we believe that pragmatism, not idealism, is the best path towards DAO integration into a professional sports league. While BucketsDAO continues to engage with certain teams about speedily implementing Phase 2 (see below), BucketsDAO will immediately allocate resources towards purchasing suite(s) and / or courtside seats. 

 

A predecessor to building a cohesive strategy that will increase the value of the team’s brand affinity and intellectual property (collectively, Brand IP) is building a community within our DAO. As this community gets to know each other, the DAO will develop a culture and an ability to make decisions as a group. 

 

The Seats & Suites Plan is sustainable and scalable as a perk of DAO membership year over year, even as the DAO develops its team-specific governance agendas. Immediately after mint, the DAO will choose which stadiums it wants to procure seats & suits at for the remainder of the 2021-2022 season. Once the season wraps, BucketsDAO will choose team(s) it wants to buy seats & suites from during the 2022-2023 season. Only the genesis Master BucketsDAO members will have access to this Seats & Suites Plan.

 

The current view is that we will buy courtside tickets and / or a suite at a majority of the remaining games (ex playoffs) for the 2022 season.

 

All Seats & Suites token holders will be given an exclusive BucketsDAO hoodie. 

 

Governance Rights

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Given web3’s ability to drive new customer acquisition and sustained fan-engagement and given the introduction of NFTs as a new product category and revenue stream, an engaged DAO has an opportunity to significantly drive the value of a team’s Brand IP (defined above). Since all value accrues to the brand, it makes logical sense that the first step towards economic team ownership is influence over Brand IP related decisions. 

 

BucketsDAO is in discussions with select NBA teams to secure non-competitive governance rights for its token holders. Governance items will include:

• Kit design

• Merch design

• Logo redesign

• Marketing campaigns

• Stadium F&B selection

• Suite for DAO Token Holders

• Discounts on merch

• Governance over web3 strategy

• Periodic meetings between DAO representative and a front office representative to make competitive strategy recommendations

 

Given the measurable effect of the DAO’s decision-making, the DAO and the selected team can set predetermined thresholds for performance that, if achieved, could entitle the DAO to purchase a minority equity position in the team (subject to negotiation). 

 Ownership

 

The eventual goal of BucketsDAO is to secure economic ownership in a team. While we have an internal plan and a vision, the only position we are willing to take publicly is that BucketsDAO must start by purchasing a minority equity interest. Majority ownership is untenable in the short run, but participation in some capacity is very much on the table. Not only will the teams’ centralized governing bodies be more open to a minority equity investment, but also the funds required to purchase 1% of a team (assuming a $2.5B average valuation) is $25M — a number that sole-purpose DAOs have proven that they can raise. 

 

There are numerous steps required to purchase ownership in a franchise:

• Discussions with Adam Silver (NBA Commissioner) on high-level vision and benefits for decentralized ownership of a team. This is already in progress.

• Presentations to the NBA blockchain committee (Vivek Ranadive, Mark Cuban, Ted Leonsis, Steve Pagliucia, Ryan Sweeney) on the idea and process required. BucketsDAO can get in front of this group in Q1 2022.

• Present to the NBA Board of Governors on process and steps.

• During each of these steps, we will work with lawyers to ensure we are abiding by relevant securities laws. 

 

Current Status: 

 

Seats & Suites: 

 

For the first drop, we will sell 2,000 NFTs for 0.1 ETH each (~$500,000). We will allocate $250,000 of this towards purchasing suites in two stadiums (one on each coast) and set the other $250,000 aside for operating costs as we sprint towards Phase 2. We are working on a creative for the NFT and are targeting a launch date of mid to late March. 

 

Governance Rights: 

 

We could move towards a term sheet with one team with the terms described above right away, provided that we can generate the capital. Yet, we will instead take the offer to every team that will talk to us. Once we have their answers, BucketsDAO will then entreat the community to decide which team we move forward with. BucketsDAO will update the larger community during weekly Twitter spaces on progress on this and all fronts.

 

Ownership:

 

We have discussed at a high level the possibility with a few owners and the NBA itself. No real steps have been taken to get league approval because we want the demonstrable data point of increasing a team’s Brand IP year-over-year before we ask to participate in the upside. BucketsDAO has to contribute to the upside first – and we will. 

 

Financials:

 

• BucketsDAO will need an estimated $250,000 of NFT proceeds to cover courtside seats and potential boxes in NYC and SF for the remainder of the NBA season.

  • BucketsDAO has allocated a buffer towards any incremental marginal costs that may occur. 

• BucketsDAO believes we will need between $1,000,000 and $5,000,000 to execute Phase 2.

  • Subject to further due diligence.

• BucketsDAO projects $25M as the target goal for Phase 3

  • Subject to further due diligence.

 

Extended FAQ: 

 

Seats & Suites Plan:

 

• How will priority be decided to give out the suite tickets?

  • The DAO will leverage Chainlink’s Virtual Randomization Function (VRF).

 

Business Status: 

 

• What game / team / stadium will BucketsDAO target first for seats?

  • BucketsDAO will focus on cities with the largest crypto communities and the most founding DAO members. 

• What team will BucketsDAO target first to acquire initial governance rights? What will the initial governance rights be?

  • We will target small market teams that have the most to benefit (from an economic and marketing perspective) from forward-thinking Web3 strategy. 

  • Ideas for initial governance rights are below.

• What team will BucketsDAO acquire an economic interest in?

  • TBD. We will likely pursue an economic interest in teams we partner with for phase 2.

 

Operational Framework:

 

• What framework will BucketsDAO adhere to in order to deliver its objectives?

  • We will have a Master BucketsDAO and a series of Team BucketsDAOs. The Master BucketsDAO will be the genesis NFT drop where members have full governance privileges over the entirety of decisions (e.g., which team to go partner with). 

  • The Team BucketsDAOs will have specific phase 2 rights for specific teams we partner with.

  • Phase 1 (fractionalizing courtside seats) will only be offered to Master BucketsDAO members. Also Master BucketsDAO members will be airdropped free Teams BucketsDAO NFTs.

  • The whole premise is that although the total pool of NFTs in circulation is expansionary by nature (and will raise additional funds), no one is actually getting diluted from a value perspective. In fact, the Master BucketsDAO membership gets increasingly more valuable as more team partnerships are formed.

 

Generating Revenue:

 

• How will BucketsDAO maintain a budget to cover ongoing operational costs?

  • BucketsDAO will have an initial budget from the Master BucketsDAO NFT drop to cover phase 1 and the detailed planning and negotiation of phase 2 (i.e., travel to meetings with teams). The major cost buckets will include internal team costs (engineers and business ops individuals), suites and boxes for phase 1, and planning for phase 2.

  • Additional NFT drops will happen for each phase 2 NBA team partner. Proceeds will be used to sponsor a small piece of the franchise (i.e., owners’ lounge) and in return BucketsDAO will receive specific pre-negotiated governance rights.

  • See the financials section for a more detailed model of the projected P&L.

 

BucketsDAO Leadership:

 

• Who is responsible for providing guidance and direction for the DAO?

  • A founding team of 40-50 curated individuals will lead the direction of BucketsDAO.

• How will the DAO establish a sense of order and governance?

  • All major decisions will be put to vote to the entire community that is established utilizing a quadratic voting framework (see below). A small subset of decisions may be withheld for members of the founding team (i.e., hiring engineers, treasury funds allocation).

• How will the community be updated?

  • BucketsDAO will hold weekly Twitter spaces to give updates and answer any questions from community members and non-community members alike. 

 

Tech Architecture:

 

• Should we launch the membership initially as a NFT vs. a token? 

  • Yes. We will start with a genesis NFT drop for the Master BucketsDAO and then subsequent NFT drops for the individual Team BucketsDAOs. 

• Should we launch the DAO on Solana or Ethereum?

  • Arguments for Ethereum are that compelling and sophisticated tooling for DAOs already exists on the Ethereum Blockchain, and the network effects of Ethereum far outweigh those of Solana.

  • Arguments for Solana are that Solana Ventures and Solana Labs will provide BucketsDAO with financial and marketing resources. Additionally, no successful DAO project has been built on Solana. As a result, the ecosystem is primed for BucketsDAO to be a pioneer in pushing the envelope of Solana’s capabilities. 

  • Solana is more appealing to a mass market and mass accessibility given the significantly cheaper fees associated with minting. Ethereum high fees limit its mass market appeal and engagement. 

  • The fact that Solana has recently added multi-sig capabilities closes the divide between the two architectures.

• What voting structure should the DAO implement?

  • While there are a whole host of options, BucketsDAO’s current position is that quadratic voting is the best solution for efficient DAO organization. By giving token holders the opportunity to represent their specialized interests and expertise, quadratic voting poses an interesting solution to optimize voting efficiency. From a tech perspective, we may have to start initially with one vote per NFT, but post-mint we will quickly work to implement quadratic voting.

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Additional Ideas: 

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• Introduce a more sophisticated tokenomics plan that has redeemability for seats (examples include a sub-DAO structure that operates on a bonding curve).

• Introduce competitive governance elements to the DAO (free agent selection, input on draft picks, etc.).

• Tiers of membership similar to Links where the higher tier passes have more perks. 

• Use a whitelist for the genesis Master BucketsDAO launch to build hype (so three mints, first for founders then for whitelist and then for public).

• We should limit the number of NFTs per individual at the initial mint to ensure more fair voting mechanisms.

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