About Tracer

At its core, Tracer is an open source derivative infrastructure based on smart contracts that permits individuals to control risk. Tracer is the impetus behind the derivative trading industry.

A significant challenge in the decentralized finance sphere involves the reduction of different tokens' elevated risks that they might develop. By employing derivatives like Tracer, these threats can be lowered.

Let's consider an example to better understand the Tracer's risk management.

A prospective Chainlink staker purchases a “LINK” token in order to secure the chainlink network which would be staked for a period of 6 months. This staking comes with high risk owing to the significant volatility of the tokens. And here one can use Tracer derivatives to lock in the price of “LINK” to guarantee a specified price throughout the 6-month staking time span.

There are a range of issues in many trading platforms including lack of transparency, high fees, inability to estimate the risk posed by a party, liquidation risk, and high barriers to entry that often require technical knowledge. Tracer is an easy-to-use protocol designed to resolve issues by providing an open system of smart contracts, low barriers to entry with just an internet connection needed to access the smart contracts and fully programmable markets. Moreover, the counterparty risk is also nullified with programmable liquidations, preventing the counterparties from defaulting.

Existing financial institutions and third-party risk management softwares can benefit by incorporating “Tracer” contracts into their products.

Traditionally, market creation costs are extremely high, thanks to the high cost administration fee, time spent and bureaucratic barriers. Tracer's market factory is an almost zero cost market deployment facility.

Evidently, DAO based organizations are the essence of the future. Tracer DAO provides a platform for its Governors and users to vote on different contract rules. Hence, Tracer ensures a fair, transparent, democratic and trusted financial ecosystem.

A plethora of the defi protocols fail to offer fixed rate products that guarantee returns to the users. By buying a Tracer derivative position, the users would be able to fix their returns and lock in yield generating events within defi. The smart contracts are completely permissionless and new markets can be deployed by anyone.

One of the very first products of Tracer DAO is Perpetual Pools. Perpetual pools are a simple and secure way to create granular tokens that won't expire, don't need to be traded in full and can't be liquidated. Any perpetual pool to be created is not dictated by Governance and Voting granting the users the ability to address a wide arena of assets. The flexibility and dynamicity offered by Tracer is immense as anyone can initiate a marketplace at any point of time and provide liquidity for the market created.

Here is what Tracer offers!

1. Unique Derivative products
2. Factory contracts allowing creation of any type of market
3. Provides governance for factory/template contracts
4. Helps in stabilizing the volatile markets
5. Assists in effective risk management
6. Makes the expensive products accessible to the common market
7. Decentralized, secure, transparent, democratic and trusted financial ecosystem.

Factory contracts

Tracer proposes a direct and secure globally connected peer to peer financial ecosystem. The Tracer Factory is a smart contract that can be used for installation, hosting, modification and effective deployment of financial markets. After the deployment of a financial contract from the Factory, the users are allowed to clear the transactions within a matter of a few seconds without permissions and high costs.

Tracer DAO’s Governance entails the management of the factory including incentives for new market discovery and innovation. To align the network incentives and optimize the financial contracts Tracer DAO and TCR tokens are utilized as a means for governance in the Factory.

Tracer has a unique governance mechanism. Tracer doesn't govern the individual marketplaces, instead it governs the templates that are used to create the individual marketplaces. Deployed contracts are not subject to DAO governance unless the deployer of the contract expressly consents to it.

Tracer strives to provide utmost transparency and standardization. After the installation of the contract from the factory, all the rules, regulations terms and conditions are visible to all the market participants. Another salient feature of Tracer’s smart factory contracts is incentivization based on the innovation. Each new financial contract added to the Factory may provide clear remuneration terms for its creator or modifier.

Quantifiable metrics such as the market usage and contract transaction fees can be utilized for developing dynamic incentive packages. Each contract added to the Factory benefits from the network effects of the Tracer ecosystem.

Perpetual Pools

Perpetual Pools is a simple derivative protocol with two sides, the pool holds collateral, the collateral moves between the two sides, subjected to Price feed/oracle influence and volatility.

Tokens can have leveraged returns because of the way pools are structured. Each pool has two sides, long and short. In this design, long traders and short traders compete to profit off their opponents; any trader who is in a winning position at the end of a token's cycle is paid by the losing trader on the opposing team.

The individuals deposit the collateral into a pool, minimum amount being $200 in the first version. Thereafter the tokens that represent the ownership are minted and the individuals also get the right to a fraction of Pools funds. The tokens can be burnt and the collateral is straight back into your wallet

The perpetual Pools entail methods to create Leveraged tokens that cannot be liquidated. The created tokens are user friendly for trading purposes and do not require management.

Here is what Tracer offers!

1. Provision to go short or long on underlying asset
2. Leveraged assets. Currently it's only up to 3x. V2 will allow users to go any leverage they'd based on permissionless market creation
3. The pools are Non-liquidatable, fully collateralized, fully-fungible, perpetual in nature

Tracer's one of the most striking features to be noted is the transparency offered via these tracer Pools.

How Tracer Started

Tracer DAO entails an immensely intriguing Genesis story. Contrary to the organizations that begin with centralized structures and then gradually shift to a DAO, Tracer exemplifies the spirit of absolute decentralization from Day 1.  

They began in the initial months of 2021. Commencing with formulating the basic code, this was claimed as DAO kernel and was posted on Github. Mycelium were the core contributors to Tracer DAO who posted the code to Github which was then deployed and this was the turning point!

It was sent to ethereum mainnet, and there were over 100 international claims for Tracer DAO!  100 random addresses claimed 0.01% each - Mycelium made a proposal to develop the product, market and communicate it & engage a community. The 100 initial claimants voted this proposal through as successful.

The reach gradually gained momentum, the initial contributors propagated the utility to new people, these new people further apprised other potential contributors and this chain of promotion built up stronger each day.
A proposal was put forward to be voted in by the initial 100 claimants who had claimed 1% of the network to be vested over a three year period for deciding the core contributors. Thereafter, another proposal for software development of Tracer over 3 years was submitted.

For each and every decision to be undertaken, a proposal is submitted for democratic, sustainable and transparent voting by the members.

Tracer DAO Governors - Batch 1

Timeline - Feb end to March end

In this section the recruitment process of the next 200 governors i.e. the first batch, after the initial 100 core contributors who developed the DAO, is explained.

Tracer follows a systematized mechanism for onboarding the governors based on the recommendation of Mycelium.

Here is the link for the proposal of recruitment recommendation for your reference-
https://snapshot.org/#/tracer.eth/proposal/Qmf84st8w1LYyFchdmKXgkyVSSiiH5pL5taSsyrkYGV5x1

According to the recommendation provided, in the form of a proposal, Governors were recruited in a batch of 50. This decision was taken considering that if 50 new DAO governors are accepted, this would allow flexibility and more voices to be heard on each proposal, Moreover, accepting members in batches further facilitated the recruitment of more governors via the networks of already accepted members.

After receiving the applications, these were segregated under three lists based on qualitative criteria, technical competency and experience. This system is highlighted below-

LIST 1- Qualitative criteria
Under this list the governors were shortlisted based on qualitative parameters such as their contributions to the DAO, maintenance of engagement, strength of written application and the contributions to the Discord channel.

List 2: Technical Competency

Lists 2 and 3 have been generated via replicable filtering methods using filters such as Active participation in Defi Space, smart contract engineer or crypto economist, experience in DAO governance etc. Written responses were not taken into consideration in their compilation.

List 3: Experienced Users

The filters applied Active DeFi User, Active CeFi User, Involvement with other DAOs in the DeFi space and Experience in 3 or more fields relevant to DAO governance.

The selected governors would receive a remuneration in the form of TCR tokens and would commit to the Deliverables. The failure to deliver with respect to the deliverables may result in termination of engagement. The deliverables are-
Voting on each Tracer DAO Proposal; and
Active engagement in Tracer’s communications channels (Discourse, Discord, Twitter).
Contributing to discussion relating to upcoming proposals (justified/ for/against).

Of the 200 governors Tracer proposed to bring in, only 52 were selected and provided with TCR to govern. Since then, TCR is more widely available after a public sale to distribute the token. This means that governance is now widely distributed, and there is little need to provide TCR to another batch of governors.

Tracer DAO also used a batch auction to distribute 5% of its governance token, TCR. That means 50,000,000 TCR were allocated to bidders from highest to lowest price, until all units were sold.

Voting for all critical decisions

All the critical decisions such as the treasury decisions, the partnership decisions, the roadmap etc. are taken via voting on proposals posted on Snapshot.  Tracer DAO ensures transparent and democratic voting by an equitable voting mechanism via snapshot.

Partnership Decisions

There are no tied decisions, everyone has equal voice and input into all strategic aspects of the company. This can also be seen from voting on critical decisions like partnerships

Partnership with Bankless DAO
Voting was undertaken for having a paid partnership with co-hosts of Bankless DAO(David & Ryan) as personal advisors to the DAO. The terms and conditions were transparent and accessible to every member interested in knowing the same.

The unique advantage of partnering with Bankless is the opportunity to work with an informed team that cares about DeFi values, access to a network of loyal followers who trust us and know they can rely on our partners. The benefits of this strategy were mentioned in the proposal to elucidate the added value it will bring to Tracer's members. The information pertaining to the remuneration demanded by Bankless was available, for effective decision making and voting.
https://snapshot.org/#/tracer.eth/proposal/QmTeSABKcXFvgm9Ht6zwu5rydH2XptbzfGAM5oVh376dcC

Partnership with RMIT Blockchain Innovation Hub
To quote another proposal for effective decision making, the proposal regarding partnership with RMIT Blockchain Innovation Hub could be mentioned.
When RMIT Blockchain Innovation Hub proposed a research collaboration (section 1) with the Tracer DAO for the development of governance and crypto economic design relating to the Tracer Project, a proposal was posted on Snapshot to obtain the opinion of the members.
According to the proposal, some members of the RMIT Blockchain Innovation Hub, who would be participating in the Tracer DAO and shall be allocated governance tokens for performing the same.

The proposal also mentioned the Deliverables such as Participating in four conferences, publishing 24 Medium articles relating to Tracer, publishing four academic papers, speaking at events relating to Tracer, hosting or co-hosting DeFi conferences and events, sponsoring teams relevant to the Tracer DAO in events, including hackathons and workshops, promoting job opportunities relevant to the Tracer DAO through relevant RMIT BIH portals etc. for a clear understanding of the collaboration.

Here is the link for the proposal-
https://snapshot.org/#/tracer.eth/proposal/QmUaFtGvtTa5cwHyG68K1MFbSjv1hL5f6oJqTcATe1cYfU

Treasury Decisions

Voting procedure was undertaken for decision making relating to the governance token of Tracer i.e. the TCR token. The proposal was aimed at diversifying a portion of the TCR governance tokens held in the Tracer DAO treasury into USDC via a direct TCR acquisition by Framework Ventures and its strategic partners.

The strategic diversification arising from this prosol entailed some associated terms and conditions such as -

Tracer DAO will transfer 100,000,000 TCR tokens (10% of TCR token total supply) to the strategic partners.
In consideration, the strategic partners will collectively transfer 4,500,000 USDC to Tracer DAO.

Here is the link for the proposal-
https://snapshot.org/#/tracer.eth/proposal/QmSZVrNpnXFGmSiZXNb5gc34nCGswBQXAyvSxTETantLY6

Another such proposal was relating to the Growth fund which involved the deliverables such as a monthly update, via Discourse, including all activities conducted by the Managers; and
Ensuring that the fund is effectively spent on the part of growth fund managers.
This proposal also elaborated on the various areas wherein this Growth Fund would be utilized.

Here is the link for this proposal-

https://snapshot.org/#/tracer.eth/proposal/QmNYJ8HC13Pf2kug72qKFfpHfK6EV8k7u6qh6iYawT4ng7

Product Decisions

The key decisions relating to the product that assume a pivotal role in the project, are also taken via voting.
Let us consider the proposal for protecting ETH Perpetual Pools through Risk Harbor and proposal for creating a new market as an example.

The proposal to choose Risk Harbor’s services provided that Risk Harbor would protect the DAO against smart contract risk and network vulnerabilities, invest safely and earn risk-adjusted rewards by providing protection and maximize capital efficiency with market-informed dynamic pricing.

This proposal aimed to have Tracer DAO protecting each of the currently offered markets in Perpetual Pools including: 3L ETH token; 3S ETH token; 1L ETH token; and 1S ETH token.

Here’s the link to this proposal-
https://snapshot.org/#/tracer.eth/proposal/0x7d451d1b9c942cd275bdbcbf3ceef55ec1a8bd249adb068ca9645c8816b1b092

When only ETH/USDC and BTC/USDC markets were available for users and EUR/USD was also recently passed as a proposal for a new Perpetual Pools market, Tracer had a proposal suggesting that 2 new markets could be added to Tracer Perpetual Pools as there are 17 other current Chainlink price feeds on Arbitrum that could be used in Perpetual Pools.

A snapshot vote took place by Tracer governors to select these markets.

Tracer also implemented various community initiatives such as Twitter and Discord polls to advise the members and governors to ensure that the members take an informed decision.
Such measures undertaken based on the community sentiment imply that the governors will make a more informed decision on what is appropriate for the product.

Here is the link for this proposal-
https://snapshot.org/#/tracer.eth/proposal/0x18c66a0712c66a1c9274793fcf927a3bbade3e6370b644348808a9efa980225c

‍Conclusion

Decentralized Autonomous Organizations (DAO) are a completely new space, and there is a lot that can be learned about this relatively new type of organization. Tracer DAO in particular has set up a great example of governance practices for other DAOs to be able to learn from. There is always something new to gain and learn;  other DAOs could learn a lot from the experience gathered by Tracer, especially given their existing and very transparent governance processes.

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