As if the above post wasn't long enough yet, let me add a few more thoughts.
There are voices that call for immediate action from the DIF to support the Dash price, some even going so far as
asking the DIF to sell assets and buy Dash. Again, let me refer to my Reddit history on that, you see my reply right underneath the linked post.
Even if watching the price drop is painful, I believe for the DIF to make panicky steps to try and countersteer would be not only naive and foolish, but also ultimately futile and self-destructive.
I see the DIF along the lines of an angel investor or VC. It is designed to allow the network to participate in the success of commercial Dash-funded projects in a way the treasury alone never could. Too often, commercial projects gladly took DAO funding only to give us the short end of the stick once they were up and running.
Case study:
Livingroom of Satoshi
Funded in 2016 with 1000 Dash it has become a seemingly successful business:
https://www.livingroomofsatoshi.com/graphs How much profit share does Dash get from it? Zero. Now look at their website again and see if you find Dash on there. I'll wait ... Found it? Yea, me neither. Why has it disappeared? I don't know. But I do know that cases like this should not happen again.
The DIF and the treasury should both focus on projects with a clear benefit for Dash. That's a given. The difference is in the expectation of a financial return.
The treasury is giving away money as a gift with no enforceable obligations to the recipient once it has been paid out. That's suitable for cost-heavy projects without direct profit. Open-source software development, events, marketing campaigns etc.
But why should Dash gift money to startup founders who hope to create a profitable enterprise and ultimately obtain personal wealth from their success? That's where the DIF comes in. By providing capital in return for equity, not only will we all benefit from the success of our portfolio companies, but we will also be able to ensure alignment with Dash long past the initial investment.
We all have to be very clear, though, that this is a long-term play. You can't invest in a startup today and pull the rug from under its feet tomorrow. This shouldn't really come as a surprise to any crypto veteran familiar with the "hodl" meme. It applies in startup funding just as much. Only here investors are even contractually tied to their investment until an exit event occurs. And "Dash price is dropping!" ain't one.
We also have to be clear that startups often have a long ramp-up time before they generate profit. Facebook took 5 years. Amazon took 7. Exit events can happen earlier, but it should be very clear that everyone wanting to see returns or even calling the DIF a failure after a year or two of operations needs a reality check of his/her expectations.
I was one of the early employees in a startup called TubeMogul. Years later, the company was sold for $540m to Adobe providing a very nice payday for everyone. We would never have made it there if our early investors had let us hang out to dry.
However, this is not to say that the DIF has carte blanche to absorb funds from the treasury at will. We often pride ourselves of having a self-funding network. It's one of the main differentiators from BCH or LTC. It's also only half the truth.
The DIF receives hundreds of Dash each funding round, 70% of which get liquidated to USD according to the last report. Together with DCG funding, most of which is also converted to fiat, this puts significant sell pressure on Dash. Between the DIF and DCG, each month hundreds of thousands of dollars of fresh fiat money have to flow into the Dash ecosystem just to keep the price stable.
If that fresh outside money doesn't flow, price drops, which can put us into a vicious cycle of diminishing investor confidence, even less money flowing, even lower prices and ultimately less funding. That means the onus is on the DIF and DCG to at least provide enough value to the network to offset price dips from budget sales.
Of course it's easy to point fingers at the overall crypto market now: "Hey look, everything's tanking! We can't stem that tide!" Sorry, no cop-outs! Investors will be familiar with the concept of "alpha", a measure of performance against the overall market. For simplicity, we can use the DASH/BTC rate or the DASH/BCH rate as an approximation. DIF and DCG should work towards keeping those rates at least stable if not rising=outperform.
Still, I won't make this post about DCG performance and I stand by what I said earlier about the DIF. The DIF is not in a 100m sprint, it's in a marathon. And with a couple hundred $k AUM, it's barely viable as an investor. It needs significantly more firepower. Angel/VC investing is inherently very risky. 90% of average angel investments result in a loss, a good half of that in total loss. Of the remaining 10%, most will make a little money beyond the initial investment and probably less than 2% will become outsize successes. I'm already bracing for impatient MNOs calling DIF a failure when the first investment dies. Which will inevitably happen. But like it or not, that means we do need a whole portfolio of companies to have a decent chance at catching one of those superstars that end up moving the needle for the entire Dash network.
So, for better or for worse, we will still be in the fundraising stage for quite a while, yet we need to strike a careful balance between loading up fast enough to play with the grown-ups and putting too much pressure on the network when its already under stress.
I promise I'll shut up now!
