The highly contentious decision market to take ZKFG private at $0.15 USDC has failed, but the activity behind the scenes means we haven't seen the end yet.
We held off on our analysis until the second decision market closed on purpose. But now that a decision has been made, we want to share some thoughts and learnings on what needs to improve going forward. Instead of trying to interpret the legal aspects or who behaved right or wrong, we want to cover what happens to a high stake governance decision that gets debated without all the facts.
The Wrong Debate
Many takes on X touched on the morality of the situation. ZKFG was funded through a MetaDAO raise. The team pivoted to ZINC, found traction and revenue, then proposed to buy its original backers out at $0.15 per token. This came after the first proposal was voided for a lack of substance and guarantees for token holders (which is another story we won’t touch on here). Was that fair? Was it a rug? Who rugged who? Who is acting in bad faith?
Those questions dominated the discussion and could have been avoided or at least minimized if the financial record and ownership surface was legible upfront.
It's very difficult to judge whether a buyout is fair without knowing what is being bought/sold. Throughout the entire decision market, we don’t believe anyone could say with high confidence what was being bought/sold.
Aside from this, other good questions arose too. What happens to an existing ownership coin when there's a pivot and a new token? Should revenue to the treasury be programmatically enforced, rather than left to the team discretion? There's a starting point for answering these questions and it rests on disclosures plus accurate and verifiable numbers.
The Numbers
The decision market asked whether ZKFG holders were willing to sell their claim on ZINC. According to published documents, which appear to have since changed, ZKFG was entitled to a 1% fee allocation from ZINC, plus whatever the governance rights amounted to. The buyout would eliminate both.
We saw a lot of assumptions and estimates about the value of that claim. Particularly how, where, what, and when the 1% fee from ZINC accrues to ZKFG and if the fee split parameters of ZINC are tunable by ZKFG token holders, among other ownership rights.
Claims and unverified numbers spread on X and Telegram chats during the proposal which was exactly what derailed it. It turned a reasonable buyout question into a narrative contest and then finished with personal/community attacks.
We don’t know what the right numbers are, and can only assume because no authoritative books exist to settle it. Open questions remain and until they are answered every valuation of ZKFG would be a guess from our perspective.
Two Scenarios
The ZKFG situation is useful as a case study because it lets us imagine two different scenarios. One is how things played out, the other is how it could have played out.
ZKFG and ZINC without books (what happened):
- A material economic relationship between two tokens exists but the specifics are unclear.
- Estimates of the value of the ZKFG claim on ZINC varied wildly.
- Claims that fees never reached ZKFG in full, or part, could not be confirmed or dismissed.
- The conversation collapses into motive, optics, and attacks.
- Holders priced a decision market with incomplete information.
- Brand risk and FUD for both communities.
ZKFG and ZINC with books (what could have happened):
- An ownership surface explains what ZKFG holders are entitled to.
- An account registry lists all ZKFG treasury wallets and a dedicated ZINC fee receiver wallet(s); not commingled with other expense or operating wallets.
- A classified movement history shows exactly what reached the treasury, when, and in what asset.
- A Total NAV reconciliation prices the balance sheet.
- Holders weigh the buyout offer against a published number.
- Everyone debates from the same source of truth so any disagreement is based on judgement, not facts.
The two scenarios are worlds apart and the big difference is having structured financials in place before decisions are made.
TradFi Comparison
Taking a public company private happens in TradFi and we can learn from it, because it maps closely to the ZKFG situation. When a team buys out shareholders, they are often on both sides of the deal, setting the price they pay while holding the position that benefits from paying less. TradFi faced this conflict and answered it with disclosure and independent valuation before a buyout goes to a vote. The buyer has to prove the deal is fair, on price and process, rather than the seller having to prove it isn't.
In TradFi, this type of deal needs an independent fairness opinion, where a third party reviews the valuation and states whether the price is fair. Sellers also have a right to the books. In the ZKFG situation, there was neither.
Applying these TradFi concepts in an ownership coin native way is possible. A lighter standard could work, and would work better if the books were current. Most of what makes the TradFi process slow is reconstructing numbers and arguing over them. A project that maintains up to date numbers has already done that work so a fairness opinion is easier to come up with. Who does the fairness opinion is another topic.
The Questions
A holder evaluating a decision market should be able to answer any of the following questions from public records. Almost none of this was publicly accessible ahead of the first ZKFG decision market and when information is inaccessible decision markets cannot function fluidly.
- How is the 1% fee calculated?
- What is the start date for fee generation?
- Until what date does the fee entitlement continue to accrue to ZKFG if there is a buy out/liquidation?
- How much of the 1% actually has been transferred to the ZKFG treasury (& which txns)?
- What currency and which wallets hold the fees for ZKFG?
- Can the team change the ZINC fee split unilaterally or can ZKFG holders weigh in?
- What is the ZKFG treasury's Total NAV today, including any unpaid but owed fee receivable, and the NAV per adjusted token?
- Does ZINC have an accounting firm or bookkeeper keeping records?
We sent a version of these questions above to the ZINC team before the first proposal and received no response. The offer behind them still stands. We will add the relevant wallets to the ZKFG page on 01Resolved and prepare independent fee reconciliations and treasury statements. The reason it's important is that, whatever the next decision is, participants can use shared facts instead of guessing. This offer also applies to all other ownership coins.
What this Situation Should Change
01Resolved has no position in ZKFG or ZINC and no recommendation for this decision market. Our interest is in the terms and supporting information for all decision markets instead of the outcome. This decision was argued mostly on moral grounds because the financials were incomplete.
A consequential decision should not be based on whose X post you find most convincing. It should be based on public books anyone can verify. When the books are missing a fair deal can be perceived as a rug, and an unfair deal can be perceived as a gift. The thing that changes the quality of the decision is whether the numbers are there before the market opens, not when it finishes. Until then there is a risk the category will keep producing noisy decision markets.
