# Fractional Ownership Considerations for Hypercerts & Yeeters / Moloch DAOs

## Overview

We're exploring how Impact DAOs can use Hypercerts minted as ERC-1155 NFTs to fundraise by selling them to collector communities. This involves considering how these NFTs can be fractionalized and sold, and how those fractionalized parts can be incorporated into a Moloch DAO's treasury. The aim is to design a system where the Moloch DAO can effectively purchase these Hypercerts, manage fractional ownership, and establish exit rights for collectors in a way that ensures mutual accountability and prevents either party from disadvantaging the other.

We're looking for a system that:
1. Enables Impact DAOs to mint and fractionalize Hypercerts to fundraise for their projects.
2. Allows a Moloch DAO to purchase these fractionalized Hypercerts via a Yeeter campaign, collecting them into the DAO's treasury.
3. Provides clear and fair exit mechanisms for collectors, ensuring they can retrieve their investment in a way that reflects the true value of their contribution.
4. Ensures shared accountability between the Impact DAO and the Collector DAO to foster a reciprocal, beneficial relationship and prevent unethical practices like "rug pulling."

The goal is to create a robust framework that balances these dynamics, ensuring that both the project teams and the collectors have aligned incentives and clear, enforceable rights and responsibilities.

## Notes

- **Overview of Hypercerts Interaction with Yeeter and Moloch DAOs:**
- Hypercerts utilize the ERC-1155 NFT standard for fractionalization into smaller parts, interfacing with Yeeter which can summon a Moloch DAO.
- The DAO's shares represent fractionalized ownership of shared assets.
- Hypercerts facilitate proactive crowdfunding for impact projects with verifiable outcomes.
- The project team mints the Hypercert as a token-bound account, which is then fractionally sold to the community.

- **Questions and Considerations:**
- Query about whether there is a cap on the number of fractional parts of a Hypercert and who determines this cap.
- Inquiry on how the initial sale price of Hypercert fractions is set, whether based on the fundraising goal, arbitrarily, or by market conditions.
- The funds from the sale of fractionalized Hypercerts provide a financial runway for the project team, termed as a "burn rate."

- **Future Funding and Debt Amelioration:**
- Discussion on potential future funding sources to offset the initial debt incurred from selling Hypercerts (e.g., VC funding, retroactive public goods funding, additional crowdfunding, other forms of NFT sales).
- The role of the Hypercerts marketplace in this ecosystem is unclear and needs clarification.

- **Recuperation and Return on Investment:**
- At a future date, the project team expects to receive additional funding to cover the initial expenses, allowing Hypercert holders to potentially sell their shares and recuperate their investments.
- Questions about the accuracy of this model and whether the transactional relationship with Hypercerts conclusively ends once additional capital is introduced.

- **Fundraising and Yield Generation:**
- Concerns regarding the additional pressure on the project team’s fundraising efforts if they need to redistribute future funds to Hypercert holders.
- Exploration of possible yield-generating opportunities for the project team from the initial capital raised or for Hypercert holders through pooling and investing their capital.

- **Collective Investment in Hypercerts:**
- Consideration of not just individuals, but also collectives pooling capital to purchase fractionalized Hypercerts, expanding the potential investor base and impact scope.

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- **DAO Implementation in Hypercerts Process:**
- Assumes the project team itself functions as a DAO with formal on-chain treasury and governance for fund distribution.
- Raises questions about whether a Hypercert must be minted by a DAO or if any wallet can perform this action, noting a need for further exploration.

- **Buyer/Collector Dynamics:**
- Hypercert buyers are typically individuals with personal wallets, purchasing for economic support and social credibility.
- The purchased Hypercert serves as a badge or emblem, enhancing the buyer's reputation and demonstrating their commitment to impactful projects.
- Discusses the potential for a Hypercert to carry social credibility that persists through transactions, without additional tokens or badges.

- **Additional Token Possibilities:**
- Possibility for Hypercert holders to mint additional tokens (e.g., Soul Bound Tokens) as proof of support or participation, which remain with the holder even after the Hypercert is sold.

- **DAO as a Buyer Concept:**
- Explores the scenario where a DAO, rather than an individual, purchases Hypercerts, facilitating collective ownership.
- The DAO could be specifically formed through a Yeeter campaign with the goal of purchasing Hypercerts.
- Establishes a direct correlation between the value of the fractionalized Hypercert and the shares within the buyer DAO.

- **Funding and Operational Dynamics:**
- Funds raised through Yeeter campaigns are used to purchase the Hypercert, which are then expended on the project’s operational costs by the impact project team.
- Post-purchase, the collector DAO’s treasury would hold the 1155 NFT with no other tokens until additional funds are recuperated.

- **Future Financial Recuperation:**
- The impact project team is expected to eventually stream back funds to the fractionalized Hypercert holders.
- DAO members can "rage quit" (exit the DAO), potentially retrieving their initial investment amount if the value returned matches the original amount contributed.

- **Considerations for Financial Returns:**
- Highlights the need for mechanisms to ensure the value returned to Hypercert holders is equivalent to their initial investment to prevent the classification of the investment as a security motivated by economic profit.

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- **Hypercerts and DAO Integration Framework:**
- Hypercerts utilize the ERC-1155 standard and function as token-bound accounts, acting as wallet addresses that can hold assets.
- The impact project team mints the original Hypercert, containing tokens that represent fractionalized parts of the whole.
- The impact project team retains control over the Hypercert contract, enabling them to manage funds for operations and reinject funds as needed.

- **Ownership and Economic Exchange:**
- Ownership of the Hypercert is central to the economic exchanges between the impact project team and their community of supporters.
- The current structure does not include a DAO formed specifically around the 1155 NFT Hypercerts, presenting potential governance and security challenges.

- **DAO Formation and Governance Challenges:**
- Proposes that the impact project team should formalize as a DAO with neutral third-party members to maintain checks and balances.
- Identifies a potential risk of 'rug pulling' due to the lack of shared treasury and governance rights among fractionalized token holders.

- **Identity Verification and Social Pressure:**
- Suggests utilizing Gitcoin proof of personhood, Gitcoin Passport, and KYC identity verification to mitigate the risk of fraud and ensure accountability within the DAO.
- These mechanisms could help apply social pressure to prevent unethical behaviors by both the impact project team and the collectors.

- **Utilizing DAOs to Prevent Manipulation:**
- Contemplates using Moloch DAOs, deployed from Yeeter contracts, to create a permissionless structure that may prevent manipulation and ensure fair practices.

- **Hypothesis for DAO Operation and Fund Distribution:**
- Proposes a model where the impact project team starts a Yeeter campaign to summon a Moloch DAO, in which they are the voting shareholders.
- Community members can contribute funds to the campaign in exchange for non-voting shares, known as Loot shares.
- After crowdfunding, the impact project DAO mints a Hypercert from the DAO contract, distributing fractionalized tokens to all Loot shareholders.

- **Fund Management and Collector Rights:**
- The impact project team can utilize the funds in the treasury while the collectors hold Loot shares and tokens representing their stake in the Hypercert.
- Envisions a future where the impact project team recuperates funds and returns them to the DAO treasury, allowing collectors to withdraw their proportionate share of funds without losing their fractionalized ownership of the Hypercert.

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- **Unified Treasury Concept for Hypercerts and DAOs:**
- Proposes combining the treasury of the 1155 NFT (as a token-bound account holding fractionalized tokens) and the DAO treasury into a single unified treasury.
- Suggests using a structure similar to Gnosis Safe multisig safes, enhanced with a Zodiac or DAOhaus governance module.

- **Integration of 1155 NFT with Moloch DAO:**
- The 1155 Hypercerts NFT acts as the initial treasury, with the impact project team determining the number of fractionalized parts and their initial values.
- By adding a DAOhaus governance layer, the 1155 NFT Hypercert is effectively wrapped within a Moloch DAO.

- **DAO Functionality and Token Distribution:**
- Participants who contribute economically (Yeet) to the Moloch DAO receive fractional tokens from the 1155 NFT, which are held in the DAO treasury.
- The DAO serves as a liquidity pool for the Hypercerts, with a finite supply of tokens available until the fundraise is completed.

- **Market Dynamics for DAO Shares:**
- Allows individual collectors the option to sell their shares on the open market, either through over-the-counter trades or traditional NFT marketplaces, which function similarly to auction houses.
- Emphasizes that these shares are both shares in a Moloch DAO and fractionalized parts of the 1155 NFT Hypercert.

- **Economic Flows and Value Recuperation:**
- The impact project team utilizes the funds in the treasury, initially rendering the Hypercerts worthless.
- After recuperating the initial debt, DAO members can "rage quit" to reclaim their stored value from the treasury.

- **Challenges and Considerations of Fractional Ownership:**
- Highlights the challenge of not merely purchasing single fractionalized parts but encouraging individuals to own multiple parts, increasing their social credibility and economic stake in the project.
- Discusses the utility and implications of owning multiple fractionalized parts, correlating to increased economic contributions and enhanced social credibility within the community.