Hi, I'm dumb: how does the profitability of Foundry translate into profits for FRY holders?

I’ve read through the website / presentation.pdf and I feel like I’m missing something. So Foundry makes these products, the products generate income, income goes to treasury, treasury is (eventually) governed by FRY holders allowing them to fund new initiatives …

OK, but is there going to be a dividend or anything to that effect? Is that just up to the FRY holders at some future date?

One thing I just can’t understand about the stock market, is that the dividends don’t seem to justify the ever-escalating prices. The return on owning Apple stock, for example, is huge, but the dividends are a pittance. But nobody seems to care about dividends because the price alone keeps growing. It’s utterly baffling and circular to me but that seems to be how the whole stock market machine chugs on.

Anyway, so is that how it’s going to be for FRY as well? Because I don’t see anything in the documentation I’ve read so far, discussing how the profits from Foundry products go anywhere but the treasury. And there doesn’t seem to be any mechanism/linkage between the treasury and FRY ownership directly.

I believe your statement here is correct. Foundry as a DAO (when governance is completed) should be able to vote for/against this.For me personally, I see this happening as this would make a nice incentive to become a FRY holder.

Remember, once governance is completed, FRY holder aka High-Fryers will be in control of the treasury.

That’s right. Currently there is no direct, explicit link from the Treasury to FRY holders, except for the fact that once Governance is working, FRY holders will be the sole owners of the Treasury.

We have written about a way this link can be made more direct, in the appendix of the whitepaper - specifically section 6.1. There we talk about a “buy back” mechanism.

This would function as essentially a “reversed” version of a single bucket of the current bucket sale. Agents can bring FRY to the contract and burn it, in exchange for some assets in the Treasury that are auctioned off. Development-wise, this would be relatively trivial. The current bucket sale contract would need only slight modification, as well as the interface.

This is something that Governors (FRY voters) can propose and vote in. It could be a single-time vote, or an automatic, recurring version. They could do it for one token like DAI or perhaps a set of tokens.

So in short, while FRY holders currently have no direct access to profits from the Treasury, they could at any time vote in this direct access as described above. (after Governance is complete, of course)

Interestingly, it’s not clear whether this will actually ever happen. But the fact that it could, does attach the value of FRY to the underlying Treasury assets.

For the moment, there are reasons not to put this in place immediately. For one thing, by only having a sale (and not a buy back) we guarantee that the Treasury (and thus the runway) only grows with time, giving us more of a chance of making it to Foundry autonomy. And there are just more urgent things to get done first, in any case, and here I’m thinking again of the three pillars of Foundry autonomy: completed governance; an intelligent, autonomous Fryer network; and a fat Treasury.

The idea with $FRY tokens is that what they “do” is direct the funds of the treasury. They also control (or will control), via the treasury, a set of smart contract access points to which the treasury will have access rights.

There are three links from project incomes to $FRY value we’ve previously discussed.

  1. Any product that Foundry funds could commit to sending some money back to the treasury.
  2. Any product that Foundry funds could commit to sending money to a buyback contract that buys back and burns $FRY
  3. Any product that Foundry funds could commit to providing liquidity for the $FRY.

All three the above options would increase the value of $FRY by either providing it with cashflow or restricting it’s supply.

I suspect that all 3 would be necessary to have a truly diverse and healthy remuneration model for $FRY. Any one in isolation could lead to a skewing of incentives and cash flows as we’ve seen with MKR. In MKR’s case, there are long periods during which no MKR is burned due to the stability fee being set to 0% out of necessity. MKR also has the unenviable problem of not having treasury funds and forcing MKR holders to sell off their holdings to receive profits, meaning the reward for having governed well as an MKR holder is to see your stake in its control decrease. If FRY has burns, liquidity and incomes, we can tweak the specific balance of those 3 to best serve the goals of Foundry.