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Thibauld Favre edited this page Dec 31, 2019 · 85 revisions

Continuous Organization smart-contracts specification

Version 1.0 - Last updated: Dec 6th 2019

Abstract

The goal of this wiki is to provide a reference specification for the smart-contract(s) implementing the continuous financing model described in the continuous organizations whitepaper. The continuous financing model enables organizations to finance themselves in a permission-less and non-dilutive way by continuously issuing tokens called FAIR while aligning stakeholders to their financial success.

c-org contract specifications

A. States

On a high-level, the contract acts as a state machine with 3 states:

  1. init state. The default state when the c-org contract is instantiated. In this state, the c-org is initializing and needs to sell a minimum amount of FAIR (init_goal) to switch to the run state. Only beneficiary is allowed to transfer tokens during this state. All other participants can only buy() or sell().
  2. run state. The c-org is running and accepting investments using the bonding curve contract model described in the whitepaper.
  3. close state. The c-org closing, paying out every FAIR holder and not accepting investments anymore. To close the c-org, the beneficiary needs to escrow the exit_fee and call the close() function.
  4. cancel state. The c-org got cancelled (by calling close()) while still in init state.

B. Structures

  1. init_investors. A map with all investors in init state using address as a key and amount (in FAIR) as value. This structure's purpose is to make sure that only investors can withdraw their money if init_goal is not reached.

C. Variables

C.1 constant variables

These variables are preset in the contract.

  1. currency. The address of the token used as reserve in the bonding curve (i.e. the DAI contract). Use ETH if 0.
  2. init_reserve. The initial number of FAIR created at initialization for the beneficiary. Technically however, this variable is not a constant as we must always have init_reserve>=total_supply+burnt_supply which means that init_reserve will be automatically decreased to equal total_supply+burnt_supply in case init_reserve>total_supply+burnt_supply after an investor sells his FAIRs.
  3. init_goal. The initial fundraising goal (expressed in FAIR) to start the c-org. 0 means that there is no initial fundraising and the c-org immediately moves to run state.
  4. buy_slope. The buy slope of the bonding curve. Does not affect the financial model, only the granularity of FAIR.
  5. investment_reserve. The investment reserve of the c-org. Defines the percentage of the value invested that is automatically funneled and held into the buyback_reserve.

C.2 updatable variables.

These variables are preset in the contract but can be altered under certain conditions once the contract is deployed. The variables can be updated using the control address. We highly recommend that this control address be a multisig to prevent unilateral modification of these variables.

  1. control. The address from which the updatable variables (see below) can be updated. Defaults to the contract deployer.
  2. beneficiary. The address of the beneficiary organization which receives the investments. Points to the wallet of the organization. Defaults to the contract deployer.
  3. auto_burn. Set if the FAIRs minted by the organization when it commits its revenues are automatically burnt (1) or not (0). Defaults to 0 meaning that there is no automatic burn.
  4. fee. The fee collected each time new FAIR are issued. Defaults to 0%.
  5. fee_collector. The address where fees are sent. Defaults to the contract deployer.
  6. min_investment. The minimum investment accepted. Defaults to 100.
  7. locked_until. The minimum date before which the c-org contract cannot be closed once the contract has reached the run state. When updated, the new value of locked_until cannot be earlier than the previous locked_until and must be later than now.
  8. whitelist refers to the contracts in charge of enforcing the legal restrictions related to the c-org (lock-up periods, no flow-back, transfer restrictions etc...). The contract referred by whitelist is modeled after the ERC-1404 (with one addition). Set whitelist to 0 if you don't want to enforce on-chain legal restrictions, we advise you to seek for legal advise before doing so. Just make sure you know what you're doing.
  9. revenue_commitment. The "on-chain" revenue commitment of the organization. If the organization has its revenues off-chain, revenue_commitment is set to 0. To protect investors, it is important to note that the revenue commitment can be increased but can never be decreased.

C.3 calculated variables.

These variables are the result of a calculation based on other variables. A key variable in the c-org model is the sell_slope, the sell slope of the bonding curve. It is actually not coded as a variable in this contract but is being calculated on demand (with sell_slope=(2*buyback_reserve)/((total_supply+burnt_supply)^2)) to avoid rounding issues. Other key variables non-coded are issuance_price, the current issuance price for FAIR which equals (total_supply+burnt_supply-init_reserve)*buy_slope and buyback_price, the current minimum buy-back price which equals (total_supply+burnt_supply)*sell_slope + (sell_slope*burnt_supply^2)/(2*total_supply).

  1. state. The current state of the contract: 0=init, 1=run, 2=close. Unless init_goal equals 0, default is init otherwise default is run. Once init_goal is reached, state changes to run. Finally state switches to close when exit_fee is paid.
  2. buyback_reserve. The total amount of value currently locked in the buyback reserve. The buyback_reserve should be implemented as the current contract balance of the currency (instead of a separate variable).
  3. total_supply. The total outstanding supply of FAIR issued, including the pre-minted FAIRs (see init_reserve) but excluding burnt FAIRs (see burnt_supply).
  4. burnt_supply. The total number of FAIR burnt.

D. Methods

D.1 buy(amount, minimum, to)

Method called to buy FAIR. When buy() is called:

D.1.a state = init

When in init state, every investor receives tokens for the same price until init_goal is reached. beneficiary is the only one allowed to transfer() FAIRs from init_reserve if any (ideally using vesting schedules). The investor is the caller or to if specified. Note that minimum is discarded in init state.

  1. If investor is not allowed to buy FAIR (see compliance below), then the function exits.
  2. If amount < min_investment, then the function exits.
  3. If amount > (buy_slope*init_goal)*(init_goal-total_supply+init_reserve)/2 then
    1. next_amount=amount - (buy_slope*init_goal)*(init_goal-total_supply+init_reserve)/2
    2. amount=amount - next_amount
  4. if next_amount>0 then additional_tokens=((2*next_amount/buy_slope)+init_goal^2)^(1/2)-init_goal else additional_tokens=0
  5. Add x to the investor's balance with x=2*amount/(buy_slope*init_goal)+additional_tokens.
  6. Increase total_supply with x new FAIRs.
  7. Add amount to the buyback_reserve.
  8. Save investor's total investment in init_investors[address]+=x.
  9. If total_supply - init_reserve >= init_goal, then:
    1. state=run.
    2. calculate the amount y invested by the beneficiary during init with y=init_investors[beneficiary]*buy_slope*init_goal/2
    3. send (buyback_reserve-y)*(1-investment_reserve)*(1-fee) to the beneficiary
    4. send (buyback_reserve-y)*(1-investment_reserve)*fee to the fee_collector
    5. update buyback_reserve = investment_reserve * (buyback_reserve-y) + y

D.1.b state = run

  1. If the investor is not allowed to buy FAIR (see compliance), then the function exits.
  2. If amount < min_investment, then the function exits.
  3. Calculate the number of FAIR x that the investor should receive for his investment with x=sqrt((2*amount/buy_slope)+(total_supply-init_reserve+burnt_supply)^2)-(total_supply-init_reserve+burnt_supply).
  4. If x < minimum then the call fails. This is a protection against large price movements and front-running attacks.
  5. Add x FAIRs to the investor's balance.
  6. Increase total_supply with x new FAIRs.
  7. If the investor is the beneficiary, then:
    1. if auto_burn==1 then burn(x) is called.
    2. the full amount is added to the buyback_reserve.
  8. If the investor is not the beneficiary, then:
    1. investment_reserve*amount is being added to the buyback_reserve
    2. (1-investment_reserve)*amount*(1-fee) is being transfered to beneficiary.
    3. (1-investment_reserve)*amount*fee is being sent to fee_collector

D.1.b state = close

The buy() functions fails in close state.

D.2 sell(amount, minimum)

Method called to sell FAIR. It is important to note that beneficiary is only allowed to sell in close state or cancel state, beneficiary cannot sell in any other state. When sell() is called:

D.2.a state = init

In init state, the minimum parameter is ignored.

  1. If address == beneficiary, then the function exits.
  2. If init_investors[address] does not exists, then the function exits. Prevents the receivers of free FAIR from init_reserve to sell them at this time.
  3. If init_investors[address]<amount then the call fails. Prevents the receivers of free FAIR from init_reserve to sell them at this time.
  4. amount is being substracted from the investor's balance.
  5. The investor receives x collateral value from the buyback_reserve with x=amount*buyback_reserve/(total_supply-init_reserve).
  6. Save investor's total withdrawal in init_investors[address]-=amount.
  7. The total_supply is decreased of amount FAIRs.

D.2.b state = run

  1. If address == beneficiary, then the function exits.
  2. If init_goal=0 && buyback_reserve=0, then the function exits.
  3. The collateral value x that the investor should receive from the buyback reserve is calculated with x=(total_supply+burnt_supply)*amount*sell_slope-((sell_slope*amount^2)/2)+(sell_slope*amount*burnt_supply^2)/(2*(total_supply)) with sell_slope=(2*buyback_reserve)/((total_supply+burnt_supply)^2).
  4. If x < minimum then the call fails.
  5. amount is being substracted from the investor's balance if it is superior or equal to amount. Otherwise the call fails.
  6. The investor receives x collateral value from the buyback reserve
  7. Substract amount FAIRs from total_supply to remove the sold FAIRs from the outstanding supply.
  8. If init_reserve>total_supply+burnt_supply then set init_reserve=total_supply+burnt_supply

D.2.c state = close

In close state, the minimum parameter is ignored.

  1. amount is being substracted from the investor's balance if their balance is superior or equal to amount. Otherwise the call fails.
  2. The investor receives x collateral value from the buyback reserve with x=buyback_reserve*amount/total_supply.
  3. Substract amount FAIRs from total_supply to remove the sold FAIRs from the outstanding supply.

D.2.d state = cancel

In cancel state, the minimum parameter is ignored.

  1. If init_investors[address] does not exists, then the function exits. Prevents the receivers of free FAIR from init_reserve to sell them at this time.
  2. If init_investors[address]<amount then the call fails. Prevents the receivers of free FAIR from init_reserve to sell them at this time.
  3. amount is being substracted from the investor's balance.
  4. The investor receives x collateral value from the buyback_reserve with x=amount*buyback_reserve/(total_supply-init_reserve).
  5. Save investor's total withdrawal in init_investors[address]-=amount.
  6. The total_supply is decreased of amount FAIRs.

D.3 burn(amount)

Method called to burn FAIR. When burn() is called:

  1. If state != 'run' then the function exits.
  2. Burn amount FAIRs by adding amount to burnt_supply.
  3. Substract amount from total_supply

The burn() method fails during init, close and cancel states.

D.4 pay(amount,to)

Method called to pay the organization on-chain. This is the payable method call when a transaction is sent to the c-org contract. If to is specified and to is allowed to receive FAIRs, then to should receive the newly minted FAIRs. In the case where to is not specified, the new FAIRs go to beneficiary. When pay() is called:

  1. If state != 'run' then the function exits.
  2. revenue_commitment*amount is being added to the buyback_reserve and (1-revenue_commitment)*amount is being transfered to the beneficiary.
  3. Calculate x the number of newly issued FAIRs with x=sqrt((2*revenue_commitment*amount/buy_slope)+(total_supply+burnt_supply)^2)-(total_supply+burnt_supply).
  4. If to is specified, then if to is allowed to receive FAIRs,x FAIRs are added to the to address specified, otherwise the function fails. If to is not specified, x FAIRs are added to the beneficiary's balance.
  5. The total_supply is increased with x new FAIRs.
  6. If (auto_burn==1 && to==beneficiary) then burn(x) is called.

The pay() method fails during init, close and cancel states.

D.5 close()

Method called to close the c-org contract. To close the c-org contract, the beneficiary needs to pay an exit_fee = total_supply*(total_supply+burnt_supply)*buy_slope - buyback_reserve.

  1. If address != beneficiary then the function exits.
  2. If state == 'close' OR state == 'cancel' then the function exits.
  3. If state == 'init' then state = 'cancel'
  4. If state == 'run' and now > locked_until then
    1. if balanceOf(beneficiary) < (total_supply^2 * buy_slope)/2 + burnt_supply*buy_slope*total_supply - buyback_reserve then the function exits.
    2. state = 'close'.
    3. substract (total_supply^2 * buy_slope)/2 + burnt_supply*buy_slope*total_supply - buyback_reserve from the balance of beneficiary.
    4. buyback_reserve = (total_supply^2 * buy_slope)/2 + burnt_supply*buy_slope*total_supply.

F. Important disclaimer

The c-org contract is highly sensitive due to the funds it holds in its reserve and due to the potential number of investors it coordinates. Fairmint is committed to provide the community with c-org contracts of the highest quality and providing the highest security. It is expected that other contracts respecting the below specification will be developed by third-parties. If you are a developer developing a c-org contract on any blockchain, please get in touch with us to make sure we DO NOT release buggy or deceptive contracts on the market. Likewise, if you are a user of a contract not developed or not audited techically, economically and legally by Fairmint, please be very cautious as you might put your money and the money of your investors at risk. Obviously, Fairmint offers no warranty and is not responsible nor liable for any of the contracts implementing this specification. Use them at your own risk.

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