PEP-60: Enabling Responsible Allocation of Budget (ERA Budget)

[b3n]

Thanks @Cryptocorn & @SteveO for the questions and giving us a chance to expand on individual items (we were actually a bit worried how quiet it was until now!)

First, we take on the feedback that we could have done a better job in outlining and describing the keystone projects and associated work. We have updated the Era Budget proposal above to include more context on each project, and we will continue to iterate on how we communicate and try to make things simple to follow as we embed the new DAO OS.

First, addressing a few things that need to be understood in context:

@SteveO

First of all, PNF has its own funds. Why not use them first?

This is the wrong framing. The ambitions set by PNF as part of the strategic thesis require all of us to push together in the same direction. All funds from the Era budget and the Era allocation go to service providers or community contributors to achieve our shared ambitions, and these mechanisms are introduced to 1) activate everyone towards these common goals and then 2) make funds available rapidly so that we can all focus on delivery and execution rather than a continuous cycle of new proposals and circular debates to get anything done.

Now is not the time for a scarcity mindset. We would ask the DAO to consider this: If we are not willing to commit ~30% of the DAO treasury to all of the major projects and community contributions leading up to our major catalyst moment of launching v1, then what is the DAO treasury for?

@SteveO

From my understanding, you are asking the entire POKT community (DAO) to unconditionally trust you that you will do the things listed in there?

The condition placed on PNF is and has always been that the DAO/Community can use their governance power to turf us out if we don’t deliver. The proposal states that we will custody and allocate funds on behalf of the DAO, share wallet addresses for full transparency, report on progress as part of our transparency reports and return any unused funds to the DAO within or at the end of the era. We are open to ideas on what else we can be doing to give everyone comfort if this is not enough.

Now to some of the specific questions:

@Cryptocorn

Can you give some more understanding on the V1 protocol development and launch $100k? I appreciate a marketing campaign, cointelegraph articles etc needs a budget and should have one allocated. Can you break down the ‘protocol development’ part? Are we giving money to PNI for something?

Money is not being given to PNI for protocol development. V1 is the highest priority for PNF (and hopefully the whole DAO) and a successful launch should not be capacity constrained. For example, we want to ensure the best talent in the entire industry is available to Olshansky and the protocol team and this will require support for scouting or agency fees to find and attract such talent, which can amount to 25% of the new recruit’s first year salary. Consequently, $70k of this budgeted amount is allocated towards paying world class headhunters to find the very best protocol talent for Olshansky’s team. See here for the protocol engineer job spec, for example. Remember that any funds we don’t spend go back to the DAO, so if you can help to reduce these costs, please do!

@Cryptocorn

v1 economics and governance: $250k. Can you break this down further? My understanding was that rewards economics was largely run by the Fishermen/Watchers and inflation will be at 8% for v1 Launch.
There’s a lot of discussion about inflation, falling into 3 main camps:
a) inflation is too high, it should be cut to 4% or mint: burn immediately.
b) inflation is too low, it should be increased to 20 - 50% APY for stakers.
c) it doesn’t really matter what you do to inflation, it’s immaterial until demand increases.
(*I use the word ‘inflation’ liberally, will leave the etymology for another time)

Our primary objective for the v1 Economics R&D workstream is to conduct a comprehensive review of the entire economic landscape of the Pocket Network protocol design for V1, with the ultimate aim of designing a more sustainable and adaptable economy against the V1 protocol specifications. Both the economics and governance of the protocol are fundamental to how Pocket Network works, as well as to how POKT and the DAO thrive in line with the growth and success of the ecosystem.

This workstream will involve examining the protocol specifications holistically, considering the potential for adding or removing parameters, and investigating ways to optimise the current economic structure.

Secondary objectives for this workstream include to:

• Identify and evaluate different economic mechanisms, such as staking, slashing, application burning, transaction fees, and inflation, to determine their effectiveness and potential trade-offs.
• Develop new economic models that incentivise node and portal operators to provide high-quality services, support decentralisation, and encourage adoption of the protocol.
• Create a framework for measuring and analysing the economic health of the network, including metrics such as staking participation, transaction volume, and fee revenue.
• Foster a community-driven approach to designing, testing, and iterating on the economic model of Pocket Network Protocol V1.
• Educate the broader community on the economic design of Pocket Network Protocol V1, its benefits, and how to participate in the network’s growth and success.
• Quantify the value of using Pocket Network over alternatives per each point of the RPC Trilemma

The various parameters under consideration are categorised under the relevant “protocol” to which they immediately relate, such as the Session, Servicer, State Change, Application, Fisherman, Portal, Validator, and Governance protocol. However, they could also be categorised under the headings of Tokenomics, QoS, Risk Management, and Administrative Functions. Another alternative to a “protocol/focus” research structure would be to conduct research on each “feature path” as every protocol/actor covers a lot of different features.

Ultimately, there is a lot of research to carry out and then to opine on, and we want to ensure we adequately incentivise third party experts (e.g. Blockscience), as well as our existing community members, to set ourselves up for success.

The current (and perhaps you could say perpetual) conversations about inflation do a good job of illustrating the importance of v1 economics and governance. Scale and QoS themselves are not enough to guarantee a resilient and unstoppable project.

Further context on this can now be found in the budget proposal above.

@Cryptocorn

Are we confident that $350k will be enough for a tier-1 token listing? $1M has been mentioned before, although I appreciate that a) it’s not 2021 anymore, b) one can negotiate these things c) integrating an erc-20 is cheaper/easier. A quick response that these are the figures that are being negotiated/have been presented to PNF would be helpful to make sure this has been suitably budgeted.

@nelson is out this week and will comment more but he calibrated this budget based on previous conversations with Tier-1 exchanges.

@Cryptocorn

There doesn’t seem to be any mention of Dev Rel. It may be a secondary activity - PNF is here to help educate developers on Pocket, PNI/Nodies DLA is there to sell relays, and this could be included in POPs/Sockets or Gateway expenses, but I’d like to see some more focus on using funds to facilitate the sale of product - subsidising sales, grants etc.

We agree that DevRel is an important activity for Pocket Network. The first part of the budget was carved out for Must have (Keystone projects), while the 80% of future DAO earnings will go towards Should/Could Have projects. Devrel is a high priority to us but was not included as a must-have project to be delivered by PNF for a few reasons: 1) our focus at PNF is on establishing a marketing foundation for the DAO, which will be necessary before PNF can personally build a DevRel function, 2) there is uncertainty around the need of a DevRel role in the areas that PNF is responsible for (protocol and open-source tooling), 3) the gateways are naturally positioned to do DevRel for the users of their service (the developers I assume you’re referencing) and PNI are already ramping up their DevRel efforts. Once 1 and 2 are settled, a PNF/DAO-led DevRel function can be activated by POPs/sockets that are funded from the 80% of future DAO revenue. To elaborate on 3, it should be emphasised that regarding sale of the RPC service, this is the primary responsibility of gateway/portal providers. PNF and the DAO should be willing to support them with reasonable requests but not to parent them on their specific strategy and implementation. We are impressed by the early work of Nodies DLB and seeing the recent developer community events via PNI that are moving more in this direction.

@Cryptocorn

There seems to be a low focus on improving v0 QoS. It seems that this is one of the most important things we can do to improve our product offering and gain more sales. Again - thoughts on subsidies to watchers, education programs to under performing nodes, building tools to help check and alert, bonus reward programs to better performing nodes if we can’t properly slash low performant ones etc.

This is fertile ground for the gateways and community to coordinate on. Remember, the Era budget is specifically for keystone (must have) projects as set out in the ecosystem thesis AND to create a prioritisation of funds towards community contributions which support our ambitions. PNF is utilising its time and resources towards these keystone projects but QoS is an important part of achieving the ambition of $1B revenue and having the most trusted infrastructure brand, so we encourage community members to propose sockets or coordinate towards POPs that pursue these goals. Such proposals being aligned with the core ecosystem ambitions would be natural candidates for being funded by the 80% of future DAO revenue that would be carved out for them.

Thanks again for the questions and feedback. We encourage everyone to continue to share on points that are not clear or to provide feedback on how we can better communicate on the ways the era budget and allocation aims to activate community contributions towards these shared goals.