Safe Token Value Alignment Program


Token incentive programs by Web3 infrastructure projects today are unsustainable and inefficient, and Safe would not be able to accrue value from its ecosystem by implementing existing models. To address this, we propose a Value Alignment Program (VAP) that allows Safe ecosystem projects to pledge a portion of their tokens, equity, or revenue in exchange for Safe tokens, credibility, and ecosystem support. With VAP, Safe would be able to capture value from ownership and/or revenue generation of selected ecosystem projects, in return for providing credibility.

Proposal details

Purpose and Background

At the time of writing, 183 projects belong in Safe’s ecosystem and 3,786 GitHub repositories depend on Safe {Core}.

The primary way in which Safe brings value to these projects is arguably through its composable security. As projects permissionlessly build on top of Safe contracts, they leverage Safe’s battle-tested security to attract end-users assured by the protocol’s security. For example, Coinshift and Castle leverage Safe {Wallet} to acquire DAOs and NFT collectors as users respectively.

Today, Safe is yet to capture the value that it provides to its ecosystem projects. However, capturing fees or “taxes” on ecosystem projects would discourage ecosystem growth and encourage forks.

Hence, we propose a novel Value Alignment Program that allows Safe to sustainably capture the growth of its ecosystem projects without significantly sacrificing ecosystem development.

Value Alignment Program (VAP)

With VAP, Safe offers ownership in exchange for an equivalent pledge of ownership or revenue from Safe ecosystem projects.

This stands in stark contrast to other Web3 infrastructure projects’ incentivisation programs today, which offers tokens through liquidity incentives, airdrops, and grants programs with little in return.

Recipients of today’s token incentives are often mercenary. They typically sell the tokens as soon as possible, and leave whenever the incentives stop or are no longer attractive enough (caused and worsened by sell pressure). Even if native and loyal applications emerge, they may also leave to form an application-specific chain/rollup once they grow to a sufficient size. Hence, infrastructure tokens often rely on narrative and inflated metrics to justify value.

To prevent Safe from moving towards a similar path, we need clear and concrete value alignment between Safe and its ecosystem projects (e.g. DAO tools & smart account modules). Safe cannot be purely giving away ownership without receiving a fair commitment in return. Of course, the mechanism needs to also be fair to applications, and set up to be mutually beneficial by incentivising mutual success.

The VAP would allow Safe ecosystem projects the option to pledge, to Safe:

  • a percentage of ownership (e.g. tokens, equity, or NFTs representing shares of the project); or,
  • a percentage of revenue (i.e. fees encoded in smart contracts).

While Safe would benefit from capturing:

  • A share of the ecosystem projects’ tokens and their upside; or,
  • A share of their revenue; or,
  • A share of equity ownership

Ecosystem projects that succeed in their pledge applications would gain:

  • Credibility, branding, and legitimacy from being a verified partner of Safe (especially important when a project is in its early stages of development).
  • Guidance from Safe towards high-potential primitives/verticals for product-market fit (for early-stage projects)
  • Help from Safe in growing adoption and finding synergies within the Safe ecosystem (for growth-stage projects)
  • Safe tokens

As a protocol offering arguably the most robust smart account security in the space, Safe is well-positioned to distribute legitimacy visibly in exchange for a pledge of ownership or revenue.

VAP Terms

While there are no standards for VAPs at the time of writing, we can refer to token swaps as precedents for inspiration, which are usually between growth-stage projects. The pledge or swap amount should be significant enough for both parties to be sufficiently incentivised to support one another, while maintaining a diversified ownership. That is usually 5-10% for early stage projects, or 0.1-5% for growth stage projects.

  • Price: For liquid tokens, TWAP/VWAP of 20-90 days, or agreed number of tokens; For pre-token, valued at previous funding round, or agreed valuation
  • Lock-up/ vesting: Promise to mutually hold/stake for 12-48 months
  • Amount: 0.1%-10% of tokens, worth ~$100k-$10m, depending on project stage
  • Use of tokens: Can be used for staking, governance, or in-app e.g. collateral, liquidity provision
  • Non-token pledge: For early stage projects which are pre-token, or have alternative value capture mechanisms, ~1%-10% pledge of revenue, NFT supply, or even tokenised equity could be considered

One example to highlight is the agreement between the Cosmos Hub and Neutron, which has committed to distribute 25% of transaction fees to the Cosmos Hub for providing security.

Other References:

Selection/ governance process

Governance for the Value Alignment Program may initially look similar to a grants program stewarded by a Grants Council, then transition towards an open system in the long run, similar to public goods funding led by the community.

  • Timing: Cadence of once a quarter, 2 month application period, 1 month selection period
  • Application: Initially permissioned by a Grants Committee/ DAO, transition to nomination with staking/SBTs/attestations, eventually scale up with subDAOs/ sub-verticals each with its own mechanism
  • Voting: Initially simple token voting, transition to quadratic voting weighted by SBTs or on-chain identity

It should be emphasised that the VAP is meant to be selective for its social signalling to hold weight. Recipients should possess an outstanding team and a clear path to revenue generation and/or token value creation.


Mid-Long Term Implications

Mutual ownership of each other’s tokens breeds:

  • Mutual alignment & contribution to the success of one another: Due to Safe token ownership, ecosystem projects would be incentivised to support the success of the Safe, and Safe would be incentivised to support the projects that they have ownership of / gain revenue from.
  • Social provenance and governance curation: Beyond recognising verified partners of Safe, the VAP curates SafeDAO governance participants.
  • Implied Treasury Value & Diversification: Once enough pledges and assets are accumulated into the SafeDAO treasury, the Safe token morphs into a pseudo-index of selected Safe ecosystem projects. The value of the selected ecosystem projects would contribute to token value.

Risks & Mitigation

Risk 1: Off-chain value capture - It may not be feasible for projects to swap a portion of their off-chain revenue/equity for Safe tokens today.

Two ways to mitigate:

  1. Start the VAP with on-chain token swaps, while monitoring for suitable mechanisms to reflect off-chain equity/revenue on-chain in the future.

  2. Reflect the off-chain revenue/equity share agreement in the form of an NFT/SBT. Distribute the agreed amount of Safe tokens to an escrow contract and vest to the ecosystem project when the equivalent amount of revenue/equity is verifiably sent to the escrow contract. Meanwhile, the ecosystem project benefits from recognition that they were a Safe token swap recipient.

Risk 2: Tokens cannot yet be swapped between Safe and projects who have yet to launch a token.

Mitigation: Similarly, the token swap agreement may first be represented with an NFT/SBT which certifies that the ecosystem project’s tokens will be distributed in the future, similar to a SAFT agreement.

Risk 3: Legal constraints - Token swaps from the VAP may be seen as an “investment-like” activity.

This could be mitigated by a clear mandate/ constitution for the swap program, including conditions for liquidating/ distributing the accumulated assets (not legal advice).

Risk 4: “Favourable” selection of verified partners

If one ecosystem project successfully receives tokens through VAP, the social validation may result in a competitive advantage over similar players. It is true that a successful applicant to the VAP may gain a credibility edge against competitors, but the benefits arguably outweigh the costs here.

In the long run, the curation of token swap recipients would be delegated from the Grants Council to the community to reduce the perception of bias from the core Safe team.

Alternative Solutions

Other methods of Safe token value accrual may of course be explored in future proposals, including:

  • Directing and extracting MEV from exclusive order flow
  • Platform fees from a potential Safe smart account module registry
  • Fees from decentralised paymasters
  • Freemium Safe {Wallets}

This proposal acts as an additional channel for value capture, rather than a replacement.

Token Value Capture through Transaction Fees

Turning fee switches on for Safe transactions and TVL would encourage forks of the protocol that erode Safe’s moat.

Value Distribution via mining & Value Accrual via transaction fees

As expressed in the VAP section above, Safe token distribution via usage-based mining does not result in long-term token value sustainability and encourages sell pressure once rewards dissipate. Current iterations of Grants Programs are often inefficient allocations of capital as recipients do not often follow through on their projects, but they may still exist and VAP may represent the next evolution of Safe Grants in Wave 2.

Technical & Operational Implementation

  • Provide a platform for Safe ecosystem projects to apply and pledge a share of ownership or revenue to Safe. Ecosystem projects may propose terms for Safe’s Grants/VAP Council to review and accept.

  • Token swaps should be executed via on-chain smart contracts, while off-chain token/equity/revenue shares is to be determined (e.g. release Safe tokens via escrow contract for every dollar shared on-chain).

  • Exclusive non-transferable NFTs can be distributed to successful applicants of the VAP for them to showcase Safe’s legitimisation.

  • Applications may first be reviewed by the Grants Council. One or two members may be added to the Grants Council if required.

Open Questions

  • For ecosystem projects: While there is some validation that some ecosystem projects would be willing to share token ownership or revenue with the underlying infrastructure project they use (e.g. Neutron distributing 25% of transaction fees to Cosmos Hub in exchange for security), it would be helpful to hear from Safe ecosystem projects directly on the extent to which they would be willing to exchange their tokens or revenue in return for Safe security, brand value, and ecosystem support.
  • For legal experts: How the VAP can be implemented in a legally-compliant manner.
  • For community members: How off-chain equity or revenue share agreements can be implemented

Bottom Line

The VAP allows Safe to accrue value from ownership of its ecosystem projects, and provide credibility in return.


To learn more about VAP, read this article.

Vitalik has also hinted at similar ideas in his piece, Legitimacy. Though he writes in the context of public goods funding, he mentions that:

  1. “Some institution” could ‘bless’ NFTs in exchange for some guarantee that some portion of revenue goes towards charitable causes
  2. NFTs can be made more visible on people’s social media profiles, giving buyers a way to show the values that they committed to

You may comment on this proposal on the Notion doc here


This is a great starting point to think about creating value between the Safe ecosystem of builders, projects, and businesses, Safe Ecosystem Foundation, and SafeDAO. Thank you @LongHash_Ventures, @Emerson, and Shi Khai Wei.

Mutual value creation

Of course, the mechanism needs to also be fair to applications, and set up to be mutually beneficial by incentivizing mutual success.


  • If there is inherent value of SAFE tokens in the Safe ecosystem, SAFE will contribute to the majority of value alignment.
  • Creating ways for SAFE to support the 2 other areas (credibility and ecosystem support), is a good start.
  • E.g. Rocket Pool’s protocol seems to do a better job than most others in creating utility of RPL tokens. In order to become a validator (minipool) on the network an amount of RPL is required to be staked in addition to RPL’s governance use.
  • What areas would it be worth teams to stake SAFE for credibility and ecosystem support?
    • E.g. Stake SAFE to add yourself to the Ecosystem Hub and update info.
    • Are there areas we can start to move towards to make the process of becoming an Safe module more automated with the use of staking SAFE? Talking to teams who want to quickly experiment have said this is a big blocker for them.
  • Offering advanced features for teams and businesses in turn for SAFE or staking SAFE seems mutually beneficial.
    • E.g. The Google Play and Apple App store’s create many mostly self-serve tools and services like analytics, reviews, customer support for developers that many Safe developers may stake SAFE to have recurring access too.
    • For a proof-of-concept, figuring out which tool is the most useful to focus on first could be a good place to begin.
    • Moving forward, instead of having centralized tools like with Google and Apple for fully integrated services (analytics, reviews, customer support, etc.), developers could choose from multiple services, not just ones Safe builds, with all accepting SAFE tokens.


  • Safe and Gnosis have built up one of the best product and technical reputations since Ethereum’s creation. Having a credential on behalf of Safe would be a data point of legitimacy for projects and businesses.
  • There could be tiers of verification processes.
  • E.g. Part of Safe ecosystem hub, X components reviewed/audited by Safe team
  • Finding scalable ways to provide credentials is important to consider. E.g. Working towards a more automated approach to adding projects on the Ecosystem hub and updating info. The more manually involved the credential from the Safe team the more resources they have to increase allocation to run this which could be a challenge.

Ecosystem support

  • There’s lots of opportunity here for projects to receive value from Safe.
  • The main factor seems to be the same point above, offering scalable vs. manual support.
1 Like

Thank you very much for this proposal @LongHash_Ventures , this is much appreciated! By way of introduction, I am Steven and just joined Safe as Protocol Designer.

On the Value Alignment Program proposal, I think it’s a great idea to look for ways where both Safe and the broader ecosystem can capture the value. Some early thoughts / questions:

  • How difficult is it to make the VAP work in practice? Maybe there are some example where this worked really well? In the proposal Safe would exchange SAFE tokens for other tokens/revenues that not necessarily have achieved product market fit
  • The projects can benefit from the security and credibility, it would be important for Safe that the selected projects can generate revenues. How would this be ensured? Also, I agree with your remark that one needs to assess to what extent projects are willing to exchange their tokens or revenues
  • It would require expertise on judging business models/monetization strategies of projects to select the ones that maximize the revenues that flow back to Safe
  • Would the set-up lead to additional operational and legal overhead?
  • Grants Program: As mentioned in the proposal, there might be some overlap /synergies here. Maybe one one could think about adapting the grants program to experiment with VAP?

Hey Adam, thanks for your input! Great to hear that we’re aligned on creating value between Safe and its ecosystem of modules, as well as the fact that Safe can bring credibility to ecosystem projects.

What you’re describing around token-curated registries, we believe, is a good move to automate entries into the Safe ecosystem. However, we’d have to avoid surfacing modules holding the most SAFE tokens vs. surfacing the best ones: the modules holding the most SAFE shouldn’t automatically be surfaced as top modules.

In the early stages of opening Safe Protocol up to external modules, it’ll be vital to maintain security. This is where the VAP could come in: where a select few modules / ecosystem projects (maybe 2-3, it depends on quality / future monetisation channels) are chosen every Grants Program Wave to be recipients of VAP and subsequently curated.

The tiers of verification you described to supplement other modules is a great idea, and should be “tags” akin to tiers of Twitter blue-ticks to verify certain modules in the registry. The VAP, however, should be highly selective to a few projects (early-stage or growth-stage) for the credibility to hold weight.

Nonetheless, definitely believe a module registry would be the most monetisable area of AA, and could be best supplemented with VAP verification + audit verification (by the Safe team or other auditors).

1 Like

Congrats on the new role @Steven! Great to meet you. :slight_smile:

As you alluded to, this would be the first time a VAP would be formally implemented, but we’ve seen it being informally implemented in the form of token swaps as cited here.

It’s true that we could be exchanging SAFE tokens for other tokens/revenues that have yet to achieve PMF. In those cases, however, Safe would have the opportunity to capture a higher % of future ownership/revenue in exchange for its tokens (e.g. 2 - 10% vs. 0.2 - 1%).

On revenue generation (if Safe chooses to swap tokens for revenue on that particular deal)

  • We may use an escrow contract to distribute Safe tokens once certain KPIs (e.g. revenue) are met
  • As you alluded to, it’s up to the reviewer can assess the feasibility of the future revenue channel

Otherwise, we may focus on token swaps. I’d also stress that capturing the right tokens in the ecosystem in the future may also be highly valuable. The good thing about VAP in its initial manual iteration is that Safe would have the choice to assess each potential VAP exchange by merit, and determine how likely the exchange could benefit Safe on each individual basis.

On the final 3 points, I see significant overlap between VAP and the Grants Program in terms of operational overhead. Given that they’d already have a comprehensive view of potential early-stage VAP recipients, the Grants Council could serve as the VAP Council as well. If the Grants Council are at maximum operational capacity (as we’d see in Wave 1), we could potentially add 1 or 2 additional members to the Grants/VAP Council. Legally, would love to get the Core Team’s views on the legal overhead required for this.

All in all, we certainly think the VAP can definitely be experimented with the Grants Program. However, branding of the VAP should certainly be clearly segmented, as value exchange opportunities with later-stage ecosystem projects would certainly be valuable as well.

1 Like

Thanks for sharing Republic’s token curated registry (TCR) post! This is a great overview.

The modules holding the most SAFE shouldn’t automatically be surfaced as top modules

Great point. This applies to each type of registry as they should require additional data points other than tokens alone to determine a quality score to avoid gaming the system.

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Hey @Steven, congrats on the new role! Nice to meet u. Also is there any process about Milestone E: An SEP on token utility?

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Hey @Boris, thanks! More on that soon - we will keep you posted. Thanks for your patience!


I’m generally all for this type of thing. There is a huge, and under-explored, design space around mutual incentive alignment.

Only option that I’ve discussed with @koeppelmann and Griff Green (separately) on several occasions is to use mutual liquidity pools as a for this, rather than a straight token swap. Thereby increasing liquidity of both tokens and adding some utility to what might otherwise be inactive tokens.


Thank you for sharing this proposal. While I can appreciate the thought and effort behind the proposal, we (L1D) have some concerns.

First, valuing the worth of Safe’s token in comparison to partners’ tokens can be challenging. Until the SAFE token has a stable market price with a long track record, it is likely that we under or over value the token. More so, the volatility and speculative nature of tokens, coupled with the differing stages of project maturity, could lead to potential imbalances in value exchange on both sides of the swap. This will likely lead to a situation where the parties we swap with have an asymmetric advantage and receive more value (since they only have to diligence one protocol - one that they likely know well - and we’d have to diligence multiple).

Second, there’s a substantial regulatory gray area when dealing with token exchanges that could be perceived as securities. With regards to swapping equity, while we have the same regulatory concern, we have the additional concern that it would result in a lack of transparency for the DAO as private equity valuations are challenging to track. On aggregate, this exposes Safe and its partners to potential legal and compliance risks.

We believe it’s crucial for us to tread carefully and perhaps explore alternative strategies that don’t carry the same complexities and uncertainties.