On the 7th, the increase was nearly 50 times. What kind of venture capital experiment is CULT DAO conducting?
The core characteristics of CULT DAO are: 1) a distinct decentralized ideology; 2) a token economy that relies on strong deflation to create a positive cycle; 3) although it is an anonymous project, it operates in a very organized and disciplined manner.Author: echo_z, Chain Teahouse
Recently, the CULT DAO has been making waves, launching in early February and after nearly a month of dormancy, it suddenly began to surge at the end of March. As of April 3, the 7-day increase reached ~48 times, compared to an initial increase of ~100 times, while the founder remains anonymous to this day.
CULT DAO is essentially a venture capital DAO that benefits investors by crowdfunding investment projects and receiving project shares. However, among many venture capital DAOs, CULT stands out in a short period of time due to its unique characteristics.
The core features of CULT DAO are: 1) a distinct decentralized ideology; 2) a token economy that relies on strong deflation to create a positive cycle; 3) although it is an anonymous project, its operations are very organized and disciplined.
The blockchain world is often murky, making it difficult to distinguish between Ponzi schemes and genuine value. In this project, you will see both idealism and funding mechanisms that can induce FOMO. Below, Chain Teahouse will provide a detailed analysis of the project mechanism, operational status, and future prospects.
Table of Contents:
Operational Logic
1.1 Distinct Decentralized Ideology
1.2 Strong Deflationary Token Economic Model
Operational Status
2.1 Current Investment Projects
2.2 Detailed Token Distribution
Mysterious Team
Advantages and Risks
1. Operational Logic
1.1 Distinct Decentralized Ideology
CULT DAO elaborates on its founding philosophy in a 12-page manifesto/white paper, dedicating 5 pages to express strong dissatisfaction with reality and government. This sentiment is reflected in various designs of the project.
Firstly, the investment direction of the project must meet three criteria: to combat centralization; to promote decentralized initiatives; and to directly benefit a sacred cause (i.e., liberation). CULT DAO aims to invest in radicals and revolutionaries.
Secondly, the ownership of proposals and voting rights is designed according to decentralized logic. Holders of the project token $CULT can stake $CULT to receive dCULT, and the top 50 dCULT holders become Guardians, who are closely related to the project's interests and can propose which projects should receive CULT investment. However, unlike other projects, these individuals cannot vote; voting rights are held by dCULT holders outside the top 50, referred to as the Many.
This design distinguishes CULT DAO from all other DAOs. CULT DAO aims to ensure that the ultimate decision-making power remains with the majority, rather than being concentrated in the hands of a few. This is highly attractive to grassroots participants.
Thirdly, the founding team of CULT DAO has discarded the private keys of the smart contracts, meaning the code can never be upgraded. CULT DAO will operate forever according to the pre-written rules, unaffected by human will. Compared to DAOs where rules can be changed by a few decision-makers, CULT DAO truly achieves decentralization and automation (Decentralized & Autonomous).
1.2 Strong Deflationary Token Economic Model
The most appealing aspect of CULT DAO lies in its token economic model. We will see how strong deflation and a positive cycle are achieved within this model. The following image succinctly explains the entire economic model.
The DAO's treasury is the investment fund pool, and unlike other venture capital DAOs, this funding does not come from direct investments by investors, but from a 0.4% transaction fee on $CULT tokens in the secondary market. As long as there are continuous trades in the market, the treasury will be replenished.
The top 50 dCULT holders can propose investment projects, and the proposal must clearly state the overall token supply of the project, the amount of tokens that will be returned to CULT DAO (i.e., dividends), the token economic model, audit results, and plans for burning and distribution, along with the project contract address. If the proposal is approved, funds will be automatically transferred to that address.
The most interesting part lies in the next two sections regarding the destruction of $CULT tokens.
Whenever a proposal is approved and the treasury's $CULT value is equivalent to 15.5 ETH, CULT DAO will automatically burn 2.5 ETH worth of $CULT and transfer 13 ETH to the project address. In other words, each investment from CULT DAO is fixed at 13 ETH, and each time 2.5 ETH worth of $CULT is burned, leading to continuous deflation of $CULT.
When the invested project begins to return tokens, the project party must first purchase an equivalent amount of $CULT from the secondary market, then distribute half to dCULT holders and send the other half to the burn account. This means that half of each dividend goes back to stakers, while the other half is burned, creating deflation that benefits all token holders.
The $CULT supply cap is fixed; it will only be burned and not increased. The deflationary design may create a positive cycle: token deflation directly benefits holders, promotes trading in the secondary market, which in turn replenishes the treasury, leading to more investments and further enhancing deflation.
This is precisely where $CULT can easily induce FOMO: the possibility of continuous deflation encourages early purchases. Its value prospect lies in the fact that if CULT DAO invests wisely and continues to generate returns, this economy will never collapse.
Additionally, projects that are invested in can gain exposure through listing, injecting market confidence into the project, making CULT akin to a Launchpad platform. In fact, recent proposals on CULT DAO include Falcon 9 and vEmpire, both of which have performed well. This may incentivize project parties to purchase and stake $CULT, triggering a CULT-war.
Of course, if CULT DAO fails to invest in good projects and yields are scarce, it could devolve into a funding game, potentially entering a death spiral at some point.
2. Operational Status
2.1 Current Investment Projects
CULT DAO launched in February and currently has a total of 7 executed investment resolutions, investing a total of 91 ETH.
Among these, 2 projects are aimed at incentivizing early $CULT stakers, distributing a total of 26 ETH to stakers. The other projects include: Metis DAO, Falcon 9 (which has raised funds in 2 rounds), vEmpire DDAO, and ThreeOh DAO.
Metis is an Ethereum scaling project. Falcon 9 is a launch platform for SHIB-like projects, aiming to strengthen the SHIB ecosystem and community. vEmpire DDAO is a decentralized metaverse investment institution and a virtual real estate developer. ThreeOh DAO aims to secure a political position for the crypto world and will support politicians who stand for the crypto community.
Falcon 9 and vEmpire DDAO saw significant price increases after being listed on the CULT platform, but today they have also experienced a sharp decline. The platform's exposure can clearly bring short-term applause, but the core still depends on the long-term performance of the projects.
Taking Falcon 9 as an example, we can observe the investment returns. Falcon 9 has raised funds in 2 rounds, totaling 26 ETH, valued at ~90,000 USD, and has promised to return 1% of its total token supply, distributing 1% monthly over 100 months. Falcon 9 has a total token supply of 999,999,999, with 1% equating to 10 million tokens, currently priced at $0.014, totaling approximately 140,000 USD. Based on the current price, this is slightly above the investment amount, but due to the long rebate cycle, it effectively locks in the investment at a low price for an extended period.
Moreover, being listed on CULT is also a form of benefit and may lead to conflicts of interest between Guardians and project parties. Currently, the ongoing vote on PandaDAO was initially proposed by a Guardian, but later it was discovered that there were still disagreements within PandaDAO regarding the commitment to CULT DAO. This Guardian has since begun to rally opposition against PandaDAO. The current dispute remains at the level of verbal influence, but if the interests are sufficiently intertwined in the future, it may trigger a Cult-war similar to the Curve-war.
2.2 Detailed Token Distribution
The total token supply is 6,666,666,666,666, or 6.67 trillion tokens. The number "666" represents Satan in the West, and this figure has been carefully designed.
CULT DAO initially conducted a presale on Unicrypt, selling 50% of the total token supply to raise 250 ETH. The project would launch once the amount reached 125 ETH. Ultimately, 178 ETH was raised, with 60% of the funds locked for 264 years.
Source: Unicrypt
Of the remaining half of $CULT, the majority is used for initial liquidity; approximately 10% is allocated for rewards to the development team, distributed linearly over 12 months, with 2 months already distributed; a small portion has been given to some well-known figures in the crypto space as initial Guardians.
At the launch of CULT, before any investment projects were made, approximately 25% of the tokens were burned. The author has not seen the reason for this burn; if any readers know, please feel free to add. Some community members have mentioned that it might be the unsold remaining tokens, but the unsold tokens should amount to total supply * 50% * (250-178.4)/250, which is about 14% of the total supply, inconsistent with the ~25% mentioned here.
Based on information from the official website and Etherscan, we can roughly piece together the current token distribution: 1) ~27% is staked, with a TVL of about 90 million USD;
2) ~25% has been burned, most of which occurred during the initial launch, so although the total token supply is 6.67 trillion, only about 5 trillion remain;
3) ~10% is allocated for team salaries, still locked;
4) ~1% is in the treasury, totaling about 1,377 ETH;
5) The remaining ~36% can be considered as market circulation, which is not far off from the circulating supply shown on the CULT website, with about 4% absolute value.
$CULT token current distribution, compiled by Chain Teahouse
3. Mysterious Team
The founding team remains anonymous, but the auditing agency SolidProof that they submitted to has tweeted that the founder is a well-known entrepreneur in the crypto space. Moreover, when the $CULT token had just completed its presale and the official website had not yet officially started operations, CMC had already begun tracking $CULT, indicating that the founder must have rich resources.
Source: https://twitter.com/SolidProof_io/status/1486020348982222850
There are speculations that it could be SHIB founder Ryosh or AC, but there is no solid evidence.
Additionally, at the early stage of the product launch, CULT DAO announced a group of Guardians willing to disclose their identities, who should all be associated with the founder. This includes: the community manager of BanklessDAO, a Web3 event organizer, and the CEO of vEmpire DDAO (the individual at the bottom of the image), all of whom are active players in Web3.
4. Advantages and Risks
Chain Teahouse summarizes the core advantages of CULT DAO as follows:
1) The strong deflationary token economic model creates a positive cycle of trading → deflation → trading, which is very attractive for early entrants;
2) The team has resources and background, and the operational performance so far has been impressive;
3) The project has a very strong decentralized ideal, attracting Web3.
However, the distinct decentralized banner of CULT DAO and its collaborative model aimed at overturning reality also make it more like a social experiment. So far, DAOs have either been small in number with high entry barriers (like FWB, PleasrDAO); or have a core operational team with relatively weak roles for public decision-making (like Bankless DAO, Juicebox DAO).
CULT DAO, on the other hand, completely opens the qualification for Guardians with proposal rights, allowing anyone with money to participate; at the same time, it hands over the core decision-making power of investments to the public. While rejecting centralized and opaque governance in DAOs is certainly attractive, whether this model can endure and what issues may arise in the future are also the project's most fundamental challenges.
It can be said that this is also a significant challenge for human society.
