Updated August 22, 2022:
- Added creation of medium-term roadmap to Deliverables for first 30 days, as per @b3n suggestion
- Clarified the distinction between the terms “working group” and “committee,” modified the proposal to ensure consistent usage of these terms and to clarify that the convening of a DAO committee to conduct official DAO business is outside the scope of this proposal and would be subject to separate DAO vote.
Updated August 21, 2022:
- implemented “trailing 30-day average” to Budget section as suggested by @kjenkins and @Andy-Liquify
- Clarified Checks and Balances section to address COI concern raised by @RawthiL.
- Expanded Dissension section based on comments voiced by @crabman and @RawthiL
- Implemented copy edits provided by @Blue (TG)(AKA @Zaatar), lawyer and copy editor extraordinaire.
Attributes
- Author(s): @msa6867
- Recipient(s): Terracelum, Inc.
- Category: Agreement
- Agreement Summary: Fulltime dedication of @msa6867 to provide economics R&D to the Pocket DAO in exchange for $POKT equivalent to $13,750 USD at time of enactment and monthly thereafter until cancelled.
Summary / Abstract
During the last two months I have dedicated a significant amount of time and energy to helping inform and guide DAO policy decision-making through the application of sound economic analysis and reasoning. This contribution has been well received and quite a number of DAO members have suggested that I should enter into a more formal arrangement with the Pocket Network DAO to receive a monthly stipend in exchange for continued service to the DAO in this area. This proposal seeks to establish this formal relationship between myself and the Pocket Network DAO. This funding will allow me to work on POKT full time on behalf of the DAO as outlined in this proposal.
Motivation / Rationale
As the DAO grows, and an increasing amount of governance responsibility is transferred from PNI to the DAO, it is necessary for the DAO to become proactive in funding initiatives central to the success of the Pocket Network and not think of its treasury merely in terms of reactively reimbursing the many great peripheral additions to the Pocket ecosystem that the community provides (wallets, linters, block explorers, etc.).
One need central to the success of the Pocket Network is the need to make sure that every governance decision and progress path taken by the DAO is thoroughly vetted for economic impact. Economic impact cannot be assessed in a vacuum; it must be assessed as part of a system-wide tapestry including QoS impact, security impact, etc. As such it may be thought of as part of the broader discipline of systems engineering, and is most effectively executed by one well versed in both finance and systems engineering . The economics of a blockchain project is also much larger than just its tokenomics. Tokenomics, in and of itself, is usually fairly straightforward – a closed system of rules and data. It is but one of many factors that feed into the economic milieu of a token such as Pocket. Economic analysis must include external drivers and human psychological factors such as greed, fear, procrastination and inertia to making changes.
In the past there has been a void of expertise and leadership within the DAO in this arena. Since mid-June, I have been attempting to fill this void by analyzing, modeling, modifying, authoring, debating and/or guiding community discussions on every PIP and PUP that has been put forward, from the perspective of economic impact and long-term success of Pocket Network. In the background I have been reviewing the system from top to bottom (including fixing an error in the cherry-picker code that subtly and unintentionally biased rewards toward lower-QoS nodes, PR 901), and undertaken economic research and development which will lead to new parameter update proposals, performance improvement proposals, white papers and models for Pocket Network. One such model for node runners to gauge profitability under various internal, governance and macro conditions is being beta-tested by a half dozen to dozen community members and will be released to the entire community after beta-test feedback is incorporated (dm if you wish to beta test).
These efforts until now have been voluntary. This is not sustainable. I have dropped other clients and projects to focus on Pocket Network and am passionate to see it succeed. In order to sustain continued involvement, forming a compensation agreement between myself and the Pocket DAO is a win-win for all parties.
Needs Being Met
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The Pocket Network DAO has a need to make sure that its proposal pipeline stays filled with high-quality performance improvement and parameter optimization initiatives that improve the economic milieu of Pocket and its various stakeholders, with immediate focus on parameter changes and/or quick-to-implement improvements that can optimize the system for the remainder of V0 and prepare for the onset of V1.
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The DAO has a need to discern the economic impact of all policy changes (e.g., PIPs and PUPs) that it undertakes so as to reject or rework proposed changes that have a high probability of negative economic impact and pass changes that have high probability of favorable economic impact.
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The DAO has a need to raise the awareness and economic literacy of all of its community members and most especially its voting members so as to avoid singular points of failure by overreliance on one person’s analysis or viewpoints.
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The DAO has a need to scale as it grows by fostering the collaboration of community members through informal working groups to conduct joint research and development activities and by chartering official DAO committees to which it can delegating tasks, analyses, and similar responsibilities. (Please see Definition of Terms section distinctions between the terms “working group” and “committee” as used in this proposal.) One working group that would be beneficial is an Economics R&D working group. An Economics Committee may also prove beneficial in the future as the DAO continues to grow.
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The DAO has a need to create a vision for what economic success looks like for all POKT stakeholders 5 to 10 years from now. There is no guarantee that such a target will be met, but it is absolutely guaranteed that it cannot hit a target that is never set. There must be a guiding principle or vision used to shape the various individual policy changes that are considered along the way.
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The DAO has a need to understand the tokenomics and economics implications of the switch to V1, including but not limited to:
– adjusting allocation percentages for servicers, validators and DAO to make room for the new fisherman role (including working out the implication that the rewards of each of the former roles may go down as a result),
– considering if, how and when the DAO may wish to incentivize the creation and deployment of a decentralized web of access point aggregators (portals) exploring both on-chain and off-chain incentives,
– exploring the implications of scaling allowed by V1 including the removal of restraint on the number of validators (e.g., revisiting PUP-14 and by extension PUP-19). -
The DAO has a need to explore and vet out-of-the-box ideas that may lead to substantial innovation to the Pocket architecture beyond V1 with the goal of maximizing the long-term health and financial success of the Pocket Network and its stakeholders.
Scope of Work (SOW)
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Analyze every PIP/PUP/PEP (excluding standard reimbursement requests) for system impact (tokenomics, security, QoS, constitutionality, impact on node runners, dApps, investors, bizdev efforts etc.); suggest changes/improvements to the same where appropriate; submit change proposals as needed; spur discussion on forum and TG as needed. [Completed: PIP-22, PUP-19,21; current: PIP-24 PUP-22-24, future: revisit PUP-14-17, revisit PIP-23, revisit proposer allocation, revisit emission reduction post portal-monetization and post v1, set fisherman allocation, revisit PIP-22 parameters, etc.). [See Need # 1, 2]
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Develop and evolve node runner model to project node runner and service provider profitability, break-even points under various parameter settings (WAGMI reduction, PIP-22 parameters, proposer allocation, LC) and macro-economic conditions (POKT/USD price). (completed: beta version to incorporate PUP-19, PIP-22, PUP-21, current: incorporate suggestions made by beta-testers and release to the community; future: incorporate LC, v1, fishermen, future proposals). [See Need # 1, 2, 3, 6]
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Form, lead and facilitate an Economics R&D working group composed of representatives from PNI and Pocket Community. Identify contributors for this working group. Vet, discuss, debate and refine economics-impacting vision, ideas, suggestions, proposals and upgrades. Note that the formation of a DAO Economics Committee is outside the scope of this proposal and would necessitate a separate DAO vote to create) [See Need # 4, 5]
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Analyze V1 (and future system upgrades) for system impact and opportunities. Impacts include incentivization of fisherman and decentralized portals and the potential to increase the number of validators. Opportunities will open up with the new architecture to automate some economics-impacting functionality and/or move on-chain, similar to how QoS enforcement migrates on-chain with V1. [See Need # 6, 7]
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Produce educational materials on Pocket that may take the form of whitepapers, documentation, presentations, etc. Some topics being considered are listed below (subject to change according to community needs). Engage with the community via social media channels to raise literacy of the community on economics issues, point to resources, answer questions, solicit ideas for consideration, etc. [See Need # 3, 5, 6, 7]:
– Positive and Negative Feedback Loops within Pocket
– Token Supply, Inflation and Exchange Rate: Clarification and Interrelationship of Terms
– Economic/Tokenomic Impacts of V1
– Comparative Analysis of Current and Future Monetization Schemes
– Analysis of POKT Price Pressures: Liquid vs Locked and Pseudo-locked Tokens
– Envisioning Economic Success for all POKT Stake holders
– Other topics per community requests and/or as new occasions arise -
Conduct research and development (R&D) on potential architecture upgrades to Pocket, vet for feasibility and advance for community discussion and consideration those ideas that pass first-level feasibility tests. Provide economics impact and feasibility analysis for ideas suggested by other community members. A sample of topics being explored are listed below. Note, this list does NOT imply the topic is being advocated! Rather they are ideas being explored for potential benefit, impact and feasibility. Some subset of these may later be put forward to the community for consideration if they pass these preliminary tests. [See Need # 7]:
– Raise MinStake by a substantial factor
– Enable dynamic pricing for new nodes
– Explore Two-token model for Pocket
– Define Logarithmic or similar nonlinear coupling between aggregate relays and rewards
– Enable Differential rewards according to the region and chain
– Formulate Asymptotic Emission Schedule so that Max Supply can be defined
Engagement with the community via social media channels is a vital element to all of the above. Community engagement will be used to discuss proposals, models, analyses, point to educational resources as they become available, start discussions on future PIPs or PUPs being considered, as well as to solicit ideas on whitepaper topics, analyses to conduct, architecture improvements to consider etc.
Disclaimer: This agreement should not be construed as endorsement or approval by the DAO of any analysis or research idea generated under the terms of this agreement. Any analysis, idea, suggestion etc. will be subjected to the same rigor of scrutiny that would attend contributions made by any other party.
Deliverables
Since this proposal defines an ongoing relationship, specific deliverables will change month to month while others are more ongoing in nature. Once the Economics R&D working group is created and populated, that working group can help shape monthly deliverables that best conform to the current needs of the community.
Deliverables Specific to the first 30 days:
- Incorporate beta-tester comments and release node runner profitability model to the community
- Form, lead and facilitate an Economics R&D working group comprised of representatives from PNI and Pocket Community. Hold inaugural meeting
- Release first economics educational material. Topic is TBD, pending feedback from the community.
- Produce a report that provides a roadmap of the most valuable activities to be undertaken over a medium-term horizon
Other deliverables are ongoing in nature, including analyzing and helping shape current PIPs and PUPs, analyzing V1 for impact and opportunities, ongoing R&D on future improvements, etc. Monthly progress reports on the above will be delivered to the Economics R&D working group.
Checks and Balances
Because this proposal defines an ongoing agreement rather than reimbursement for a finished product, a mechanism is needed for the DAO to evaluate performance against the terms of the agreement and be empowered to take remedial action as necessary up to and including termination of the agreement. It is natural that one of the roles of the other members of an Economics R&D working group, once formed, would be to act in this capacity, namely to evaluate my performance against the SOW and deliverables of this agreement and report the same to the community. Concerns by community members at large may be directed to myself, to one of these other working group members, and/or to @JackALaing or @b3n as liaisons between PNI and DAO, to gain insight or context that might alternately alleviate or confirm their concerns. If still not satisfied, any community member could then submit a proposal to terminate this agreement. The DAO could then vote to terminate this agreement if my performance is deemed not to be satisfactory. Separately, the DAO and @ms6867 should revisit this agreement at the one year mark, and yearly thereafter, to ensure that adequate value is being provided to the DAO under the terms of this agreement, to modify the scope as necessary to conform the agreement to the changing needs of the DAO and to revisit the budget for the upcoming year.
Budget
Budget is $165,000 USD per annum, payable in POKT in monthly installments of $13,750 equivalent. First remittance is due at passing of this proposal and then monthly thereafter. Trailing 30-day average POKT-USD exchange calculated at time of each remittance will be used to determine the number of POKT in each remittance. Note that the requested budget represents a substantial discount to the $250k + of total compensation that I have averaged in both my prior full-time employment and in my previous contracts as an independent consultant. Taking into account the experience, skill set, positive impact to the project and the various adjustments factored into the ask (cost of living in Los Angeles, slip and liquidity risk related to receiving compensation in $POKT, etc.) the proposed budget is very reasonable.
Dissenting Opinions
Overall, disposition to this proposal has been very favorable . However, dissenting opinions have been offered and are addressed here. In addition, I answer several other dissenting opinions that might arise later.
“DAO proposals should be something quantifiable so that the proposer could be held accountable for it”
I have outlined a mechanism for accountability. Not every task that it is incumbent on the DAO to perform is easily quantifiable; that does not mean it is not vital or should be avoided. Nor does “quantifiable” necessarily lead to ease of ability to hold accountable. I think the whole wPOKT/ferrum situation is a perfect case in point. Given my involvement in the community and given the formation of a Economics R&D working group which will double as an oversight committee to ensure that I am delivering value to the DAO, I believe the accountability element is sufficiently defined.
“Shouldn’t PNI fund this type of effort, not the DAO?” “You should apply for a job with PNI rather than submit a proposal to the DAO”
PNI has its own needs for economic modeling and analysis, especially as relates to bizdev, which for now still falls mainly to PNI to perform, at least for now. That being said, substantial governing responsibility has already been turned over to the DAO, much of which cannot be done without a strong guiding voice on economics. If that governance is wielded prudently can lead to great success for the project and substantial financial rewards for all POKT stakeholders. Conversely if the DAO makes two or three major slips in governance decisions it could bring irreparable harm to the project. The funding of this work should reside where the governance responsibility lies, and that is squarely with the DAO.
“I think that an opinion coming from someone directly hired by the DAO could be too strong, i.e. if you write a PIP or PUP (or even make a comment) it will be seen as “endorsed by the DAO”, even though this is not your intention.”
Precedence shows that the DAO membership is savvy enough to not have this happen in practice. I think PUP11, 13 is a perfect example. Those proposals were written by someone directly hired by PNI, who prefaced the proposals by saying " Note: I am a Pocket Core team member… The ideas in this proposal are my own and don’t necessarily reflect the views of others on the core team or Pocket Network, Inc. " I would preface any proposal the same way. And trust me… being directly in the hire of PNI did not spare those proposal from getting beaten up pretty badly and reshaped by the community.
“The creation of the Economics R&D group, that would be in charge of overseeing your work, will be formed and lead by you. This could lead to a conflict of interest.”
The text has been modified to clarify that neither the Economics R&D group nor any of the members therein would act as gatekeepers to due process. Any community member may raise issues of concern as to performance and submit a proposal to terminate the agreement. The DAO as a whole could then vote on that proposal.
In addition, I answer several other dissenting opinions that might arise later.
“The asking amount is too large” / “This will cause too great a drain on the DAO Treasury”
It is human nature to approach budgeting and spending plans from a scarcity mindset. This must be resisted. Imagine a traditional startup that raised funds in an IPO and sat on its IPO funds and refused to use it to hire employees. That company would fold and its investors would be up in arms. The funds are there to fund initiatives that generate greater value than the funds themselves thus creating win-win situations for all stakeholders. At the recent $POKT price of $0.10 the ask is just under 140k $POKT per month. This represents roughly 3.5% of current monthly $POKT inflow to the DAO treasury. This is anything but a crippling drain on the DAO Treasury. To further put it into perspective, if my involvement helps guide the DAO into sound economics decision-making in a way that nudges the POKT price upward by just a single penny per year, the DAO will have received in return more than double what is paid out in terms of the resulting increase in the USD equivalent value of its treasury.
“Shouldn’t the first remittance from the DAO be at the end of the first month, not at the start of the agreement?”
An initial remittance almost universally accompanies the start of a consulting or similar agreement and acts to set the “effective date” or “execution date” of the agreement. I have worked tirelessly over the last two months contributing to the Pocket DAO proposals, ecosystem and community; as such one perspective, if it helps, might be to think of the first remittance as reimbursement for the contributions made over the last two months and each remittance thereafter as a reimbursement in arrears for the previous month’s work for the DAO under the terms of this agreement. (To clarify, the above is just offering some perspective and is not part of the construct or narrative of the proposal itself, which is forward looking with an effective date set to the day the proposal passes.)
“I see you have a PhD in physics. Don’t we need someone with a degree in economics for this position?"
At its core, the service being offered falls under the purview of what in some circles is called “financial engineering”. This may be thought of as a subset of systems engineering and in most circles is performed by someone whose main background is in mathematics, physics or engineering. The blend of skill sets in math, physics (problem solving!), engineering and finance that I bring to the table is a natural fit to the needs of this position.
Contributor(s)
Pseudonym – msa6867
Real name – Mark Abinante
Location - Los Angeles
https://www.linkedin.com/in/abinante/
Cofounder of Terracelum, Inc. a boutique consulting firm. Formerly with Hughes Network Systems and Boeing Satellite Systems where I was both companies’ subject matter expert in Network Systems Engineering and where I worked with the IETF to ensure that developing Internet standards met the challenging needs of SpaceComm. Co-author of several patents related to DiffServ and other transport-layer QoS innovations. BS and PhD in Physics from MIT and UCLA, respectively.
Conflicts of Interest
None. Full disclosures are as follows:
- I will concurrently service one legacy client (unrelated to blockchain industry) at no more than 5 hours per week and completely outside and above the 40+ hours per week I will commit to Pocket.
- I run a node, mine and participate in bug discovery for the Ironfish testnet. Ironfish is a zk-SNARK L1 blockchain with no conflict of interest with Pocket Network. On the contrary, it may become a client. This is mainly a passive activity and requires no more than 5 hours per week and falls completely outside and above the commitment to Pocket.
- I am passively invested in about two-dozen altcoins. None are competitors to Pocket Network.
- I have no affiliation with any service provider, node runner or other company or project within the Pocket Network ecosystem and therefore no conflict that might cause a conscious or subconscious bias in analysis or policy in favor of that project or company. I have a small number of tokens in the fractional pools offered by PoktPool and SendNodes and have a single node staked with NodeFleet. A portion of each remittance will be used to stake nodes with many other node providers as well so as to avoid reliance or bias toward any one provider.
Definition of Terms
Working Group: An informal group lacking DAO charter, authority or weight; populated and convened at the will of the organizer with informal input from the community for the purpose of conducting unofficial collaborative work.
DAO Committee: A formal committee of the DAO bearing charter, delegation of authority and/or weight of opinion; populated and convened at the will of the DAO as expressed by formal vote, for the purpose of conducting official DAO business.
Copyright
Copyright and related rights waived via CC0.