U.S. SEC recently reported that DAO tokens would be deemed as securities, thus requiring legitimate registrations to SEC. The community has been debating on this, and lots of FUDs were witnessed as well. But this doesn’t seem to stop the outstanding DAO march, as some of leading figures of the community chills down the fears.

TheDAO broke our regs like crazy, but we aren’t going to do anything about it except write words to scare other people. -Nick Szabo Untraceable, international, no central authority, funds can’t be frozen. The SEC ICO warning is the best ad for ICOs. -Elaine Ou Actual very good advice from SEC for ICO participants: ask for clear plans, open code and security audits. -Alex Van De Sande

Anyways, SLOT, the SlotNSlot governance token is gonna have a well-established profit distributing mechanism to rightfully benefit its investors. Many of top-funded ERC20 tokens only work as utility values on specific uses(GOLEM, STATUS, etc.), and some give out platform profits to token holders(AUGUR), and there are DAOs repurchasing the tokens back(GNOSIS). Among those providing gambling services, Funfair and Dao.casino tokens look to be utility tokens, and Edgeless, iDice, vDice directly shares the house profit.

SlotNSlot team find it really difficult to make true “utility” for a token that is used in gambling scene, where the tokens have no point of contact to any currencies that have actual value in real life. There, the team initially considered the profit sharing model to be direct distribution of platform profit.

Direct Profit Distribution

Distributing the platform profit to token holders would work like this. In the platform smart contract, profits will be accumulated for a specified N blocks. For every N blocks mined on Ethereum, the accumulated profits are distributed to token holders in proportion to the amount of SLOT they hold.

As the team struggled to come up with better models, a serious disadvantage was found in this model. If there were M token holders(or wallets), then every distribution would incur M*21000 gas. More “unique” investors would mean poor efficiency.

Dutch Token Buyback

An alternative way to share profits to investors is to repurchase the tokens with platform profits, a naive idea of which was suggested by an anonymous potential investor from our Hipchat room. Our initial idea was to receive bids from token holders with price ETH/SLOT, and number of tokens to sell at that price, over N block period. After N blocks are mined, accumulated profits buy back as many tokens as possible, from the lowest bidding.

But this model still had an efficiency that could potentially be improved. Token holders submitting the bids suffer gas prices for each bid. After N blocks, some kind of transaction must be submitted with sufficient gas to process all the bids. The single lowest bidder paying all the gas for every accepted bidders isn’t fare. But at the same time we don’t want there exist a need for external transaction to activate the buy back.

There we came up with a dutch-auction style buyback model, which would work like followings.

1. For every N block period, ETH/SLOT price will be coded inside the contract to increase from an extremely low value.

2. It will increase in a discrete manner, e.g. for the first 100 blocks it’s 0.01ETH/SLOT and then 0.05 ETH/SLOT for the next 100 blocks, and so forth.

3. Any token holder can send SLOT to the contract to sell at the price at that specific moment. * The amount of accumulated ETH, N-block period, interval, and ETH/SLOT price will be visible real-time in several channels including the SlotNSlot webpage(which will be also possible to calculate with all the codes open on our Github).

Using this model, every transaction from a token holder is assured to trigger an actual exchange between that token holder’s SLOT and ETH on the profit contract, unless the transaction was broadcast with invalid inputs. Thus there would be no gas fee used inefficiently. At the same time, the one who wants to make the purchase is the one who pays the gas fee. There’s no need for external third party transaction to trigger the contract.

Tokens bought back by the platform profit contract would then be used for either a) reserve for later additional issuance, b) reward for bounty programs on the platform, or c) burn.

Though the dutch auction token buyback would make it much more efficient and reasonable way to distribute platform profits, there’s still potential issues to deal with, including…

i) detailed settings such as the N-block period, starting&ending prices of dutch auction, etc.

ii) there might potentially remain a small number of HODLers who refuses to sell, and the profit remains unclaimed on the platform.

iii) New investors might experience high entry barriers.

While SlotNSlot team is researching on possible profit share models, any suggestions for better methods would be appreciated. We look forward to get feedbacks and contributions from all Ethereum & blockchain societies.

The dev team is currently finishing the improvement on game processing logics, and the super-fast playing demo video will be uploaded anytime soon.