PIP-38: Proposal for Pocket Network Governance and Economic Reform (SECOND REVISION)

Proposals
1

Further Changes

Based on community feedback on the original proposal and the revised proposal, this proposal further clarifies and narrows the scope of “heads down” periods where the Foundation (or, more specifically, the directors) will have the ability to operate with greater agility and flexibility. During these windows, in order for all energies to be focused on action, development, and implementation, directors will be ineligible for DAO removal outside of certain specific situations but will come up for review and removal at the end of each window at the DAO’s discretion. This second revised proposal retains the removal of the directors’ ability to appoint new directors, relegating that responsibility and right to the DAO.

Based on the feedback regarding proper proposal form, this proposal contains proposed language to update the DAO Constitution and the Foundation’s Articles in furtherance of these proposals if they are adopted by the DAO. If this proposal passes, the Foundation GitHub repositories will be updated to reflect these changes.

In addition, I would like to suggest @shane for the first open Director role as part of this proposal. If Shane agrees before submitting for vote, I will edit the proposal to reflect his inclusion in the coming week. I am open to suggestions for the third director slot and will amend based on feedback. My goal is to have both director slots filled before this proposal goes to vote.

Attributes

Table of Contents

  1. Background
  2. Motivation and Vision
  3. Proposals: Election of New Board of Directors
  4. Proposals: Remuneration Package
  5. Proposals: Constitutional Amendments
  6. Proposals: Article Amendments
  7. Conclusion
  8. Copyright

1. Background

Centralized management of a cross-border, jurisdictionally agnostic protocol is a fragile foundation to build on top of. So, the decision was made to launch the DAO shortly after Pocket Network’s protocol launch and to allocate the governance responsibility and power to the DAO by way of the foundation created to serve as the DAO’s legal wrapper in the Cayman Islands. This decision was driven by legal, practical, and philosophical considerations, including moving the legal representative of the collective to a jurisdiction that is more understanding of emerging governance structures, mitigating operational risk for the US-based teams, and, more importantly, leading from the front by creating institutions that are meant to add up to more than the sum of their parts.

When I, and my original co-founders, first designed Pocket Network as a system, the DAO and Foundation were critical parts to the eventual resilience and success of the protocol. A slower moving democratic DAO is meant to provide the checks and balances for a Foundation that has more autonomy is necessary for a foundational protocol providing decentralized access to data across the open internet.

However, recent years have revealed certain inefficiencies that have hampered the protocol’s ability to ship new products quickly and effectively. The network has been at risk of stagnation and there is a culture that inhibits the building of new products that drive usage and adoption for developers, which neglects the fact that a lack of prioritization of economic mechanisms and marketing efforts to drive the adoption of the network undermines the very things that lack of emphasis were meant to promote. We can have all of the adoption in the world but will ultimately fall behind other projects (current or future) if incentives are not aligned and trending in a direction that supports development, growth, and user retention.

The goal is enhanced proactivity, flexibility, and speed.

I believe I am the right person to drive this vision of the Pocket Network forward because I have led the only team that has built not one, but two versions of Pocket Network, and have sourced, sold, and driven the overwhelming majority of network traffic over the course of the past four years. I also understand the specific challenges and promises in front of entrepreneurs and builders in the Pocket ecosystem, having built Grove, a company generating millions in revenue over the last two years on top of a web3 backend.

To be clear, I am not disparaging the Foundation’s efforts or integrity. I anticipate keeping several of the core work streams that are currently in flight and are critical to Pocket’s continued success, including:

  • Multichain $wPOKT efforts;
  • Gateway-verse;
  • Exchanges;
  • POPs and Sockets; and
  • Incorporating community contributions.

That said, I believe it is in the best interest of the Pocket Network generally to reset the Foundation’s leadership unified behind a singular vision.

I expect that new and developing changes will include:

  • Helping the Supply Side (Node Runners):
    • Changing the number of maximum chains/services that can be staked per Pocket node; and
    • Adjusting the network inflation rate to be temporarily higher in times of high traffic periods.
  • Helping the Demand Side (Gateways):
    • Increasing the emission rate of newly launched chains/services to be 10x higher for six months; and
    • Full rebates for the gateway fee mechanism to remove barriers to entry for gateways.
  • Helping the Protocol:
    • Increase the DAO Allocation;
    • Implementing a concrete marketing strategy; and
    • Reposition Pocket Network to be more AI-forward.
  • Aligning incentives:
    • Making a milestone-based grant for shipping Shannon; and
    • Adopting incentivized compensation packages based on the price of POKT.

Every POKT token holder will agree that we have some of the best fundamentals in the industry. Some highlights include:

  • Shannon, a full rewrite of Morse, and a true technological innovation, is expected to launch this year.
  • We have multiple gateways excited to build on top of Pocket, despite it being permissioned and difficult.
  • We are no longer just RPC - Grove’s AI pilot is in flight, with our Litepaper released.
  • Our forum is consistently active, with some of the smartest and deepest-thinking community members in the space.
  • $POKT is one of the most decentralized cryptocurrencies in the world - to my knowledge no one person or entity owns more than 7% of the supply.
  • $POKT is effectively fully unlocked - we have never played low-float games.
  • Grove’s Quality of Service is world-class. We have multiple centralized RPC providers as customers of ours.
  • Grove has material, growing revenue despite a hypercompetitive market where many RPC providers provide it for free.
  • Grove is the only web3 infrastructure company in the world that has an SLA with hundreds of paying customers fully dependent on a permissionless protocol.

It is my vision that this solid fundamental base be leveraged and reflected by Pocket’s industrywide positioning.

We cannot control the crypto market; we cannot control the macro market; we can control the incentives and dynamics of Pocket Network.

2. Proposals: Election of Michael O’Rourke

Summary: A new board of directors will be appointed, including the confirmation of the interim director. This omnibus form is proper, despite the language of Section 6.2 of the Constitution, because the proposed changes below are meant to be considered in relation to and combination with one another and these proposed changes cannot feasibly be divided into separate proposals without losing their meaning.

Reasoning: This revamped board has been chosen for the purpose of maximizing the chance of successfully implementing the future vision for the Pocket Network by emphasizing the proper combination of experience, expertise, and background of the composed board.

Proposals:

a. Appoint Michael O’Rourke as Director

Appoint Michael O’Rourke as director of the Pocket Network Foundation and notify the supervisor of the Pocket Network Foundation, Campbell Law, to update its register of directors to reflect the foregoing changes.

Within thirty (30) days of the acceptance of the proposals contained in this PIP-38, Michael O’Rourke will resign as Chief Executive Officer of Grove Redefines Our Very Existence, Inc., allocating his full-time efforts to serving as director of the Pocket Network Foundation.

b. Confirm Shane Burgett as Director

Confirm Shane Burgett as a permanent director of the Pocket Network Foundation and notify supervisor of the Pocket Network Foundation, Campbell Law, to update its register of directors to reflect the foregoing changes.

c. Appoint Steve Tingiris as Director

Appoint Steve Tingiris as director of the Pocket Network Foundation and notify supervisor of the Pocket Network Foundation, Campbell Law, to update its register of directors to reflect the foregoing changes.

3. Proposals: Remuneration Packages

Summary: Each of the following is a proposed change remuneration package – the first to the developers of Shannon and the second to Michael O’Rourke individually. This omnibus form is proper, despite the language of Section 6.2 of the Constitution, because the proposed changes below are meant to be considered in relation to and combination with one another and these proposed changes cannot feasibly be divided into separate proposals without losing their meaning.

Reasoning: The goal is to align interests between the various parties building and promoting the Pocket Network.

a. Shannon Remuneration

Approve the following incentive-based compensation package for Shannon developers and contributors.

Subject to the oversight and determination of the Foundation board of directors, the developers and contributors to the Shannon upgrade to the Pocket Network shall be entitled to the following grant of POKT:

  • 48,000,000 POKT

Remuneration Package Terms:

  • This incentive opportunity will be time limited and will expire three years from the date of approval.
  • Payment in satisfaction of this incentive will come from the DAO treasury, be held separately in a multi-signatory wallet controlled by the Foundation board of directors following grant and be distributed to the various developers and contributors at the Foundation board unanimous decision and discretion.
  • Except as otherwise determined by the Foundation, upon advice of counsel, any POKT earned pursuant to this incentive package will be locked for four years from the date of receipt, with 25% unlocking each year thereafter, , where receipt means delivery of earned POKT to the recipient’s digital asset wallet address.
  • Michael O’Rourke will be personally excluded from this incentive.

b. POKT Performance Remuneration

Approve the following incentive-based compensation package for Pocket Network developers and contributors.

Subject to the oversight and determination of the Foundation board of directors, the developers and contributors to the Pocket Network shall be entitled to the following grant of POKT:

  • $0.50: 48,000,000 POKT*
  • $1.00: 48,000,000 POKT*
  • $3.00: 98,000,000 POKT*
  • $5.00: 98,000,000 POKT*

*All prices are the average trailing 90-day price.

Remuneration Package Terms:

  • This incentive opportunity will be time limited and will expire three years from the date of approval.
  • Payment in satisfaction of this incentive will come from the DAO treasury, be held separately in a multi-signatory wallet controlled by the Foundation board of directors following grant and be distributed to the various developers and contributors at the Foundation board unanimous decision and discretion.
  • Except as otherwise determined by the Foundation, upon advice of counsel, any POKT earned pursuant to this incentive package will be locked for four years from the date of receipt, with 25% unlocking each year thereafter, , where receipt means delivery of earned POKT to the recipient’s digital asset wallet address.
  • Average trailing 90-day price will be calculated using the volume weighted average price (VWAP) for the preceding 90 days of trading using price data gleaned from CoinGecko .

4. Proposals: Constitutional Amendments

Summary: Each of the following is a proposed change to the Pocket Network Constitution. This omnibus form is proper, despite the language of Section 6.2 of the Constitution, because the proposed changes below are meant to be considered in relation to and combination with one another and these proposed changes cannot feasibly be divided into separate proposals without losing their meaning.

Reasoning: The reasoning and intention of each change is described within the description of each “Proposed adjustment.”

Proposals:

a. Sections 4.6 and 4.7: The Council’s Control of the Foundation

Approve the following change to the language of the DAO Constitution:

Current Language:

4.6 The Council’s control of the Foundation is hard-coded into the Articles of Association of the Foundation, which separates the powers of all Foundation agents and defers those powers to the Council:

  • Directors/Supervisors are appointed/removed by each other on behalf of the Council
  • Directors must resign from other positions of authority in the Council (except Voter)
  • Supervisors ensure that Directors comply with the articles
  • No Supervisor decision is valid without Council approval.

4.7. New Directors/Supervisors will be appointed/removed according to PIPs approved by the Council.

Proposed Adjustment: Clarifies that there are limitations on the Council’s control of the Foundation, as defined in the Foundation’s Articles and otherwise.

Proposed Language:

The Council’s control of the Foundation is hard-coded into the Articles of Association of the Foundation, which defines the powers of the Foundation’s directors, officers, and supervisor, and clarifies the DAO’s oversight and power (through and by way of the Council) over the Foundation. Examples of this oversight and power over the Foundation include:

  • Directors and Supervisors are appointed and removed on behalf of the Council;
  • Directors must resign from other positions of authority in the Council (except Voter);
  • Supervisors ensure that Directors comply with the Articles; and
  • No Supervisor decision is valid without Council approval.

4.7. Subject to the processes and procedures outlined in the Articles, Directors and Supervisors are appointed and removed according to PIPs approved by the Council.

b. Section 4.9: Right to Refuse

Approve the following change to the language of the DAO Constitution:

Current Language:

4.9. The Directors and Supervisors of the Foundation can refuse the Council’s decisions subject to the limitations imposed on them by the law and their duty to steward Pocket Network. If they refuse without cause, the Council may remove them.

Proposed Adjustment: Clarifies that there are limitations on the removal of directors pursuant to the Foundation’s Articles.

Proposed Language:

4.9. The Directors and Supervisors of the Foundation can refuse the Council’s decisions subject to the limitations imposed on them by the law and their duty to steward Pocket Network. If they refuse without cause, the Council may remove them, subject to the mechanics and procedures contained in the Foundation’s Articles.

c. Sections 6.5 and 6.8: Parameters

Approve the following change to the language of the DAO Constitution:

Current Language:

6.5. The following parameters will be governed by the Foundation in order to fulfill the target values for USDRelayTargetRange and ReturnOnInvestmentTarget set by the Council: BaseRelaysPerPOKT & StabilityAdjustment. The Foundation will anchor around the Council’s target according to a 14-day average; if the actual relay price exceeds this target range temporarily, the Foundation can ignore it, but if the range is exceeded on average for 14 days, the Foundation must respond. […] 6.8 All other On-Chain parameters not specified above will be governed using Majority Approval in votes lasting 7 days.

Proposed Adjustment: Allow for greater flexibility when making parameter adjustments by delegating further responsibility to the Foundation.

Proposed Language:

6.5. The following parameters will be governed by the Foundation in order to fulfill the target values for USDRelayTargetRange and ReturnOnInvestmentTarget set by the Foundation: BaseRelaysPerPOKT & StabilityAdjustment. […] 6.8 All other On-Chain parameters not specified above will be governed at the discretion of the Foundation.

d. Section 7.2: Distribution of Treasury Funds

Approve the following change to the language of the DAO Constitution:

Current Section:

7.2 It is forbidden to propose or approve unconditional general distributions of the Pocket Core DAO Treasury to token holders, which may be misconstrued as dividends.

Proposed Adjustment: Provide additional clarity as to determining whether distributions are unconditional to avoid decision-making gridlock.

Proposed Language:

7.2 It is forbidden to propose or approve unconditional general distributions of the Pocket Core DAO Treasury to token holders, which may be misconstrued as dividends. Notwithstanding the foregoing, the responsibility for determining whether such a distribution is improper shall fall to the Foundation, its board, and (as applicable) the Executive Director.

e. Sections 8.11, 8.12, and 8.13: Protocol Upgrades

Approve the following change to the language of the DAO Constitution:

Current Section:

8.11 Protocol Upgrades (including changes to the ACL) will be approved by the Council according to the PIP process. 8.12. Upgrades are pushed to Nodes in a dormant state then, once the Council has signaled approval, the Foundation will activate the upgrade retroactively by submitting a Governance Transaction. 8.13. Pocket Core’s upgrade process is permissive. Node operators can keep pocket-runner on their Pocket Core installation if they consent to automatically updating their Nodes according to the Council’s decisions. If they decide they want to refuse the Council’s decisions, they can replace pocket-runner with their own versioning software and ignore Governance Transactions. This power is subject to a Tendermint consensus test, whereby 66%+ of the nodes must refuse the Council’s decision in order for the blockchain to continue to operate normally without forking.

Proposed Adjustment: Allow for greater flexibility, subject to the restrictions implemented in the Foundation Articles, by granting authority to the Foundation to implement Protocol Upgrades without the PIP process.

Proposed Language:

8.11 Except as otherwise limited by the Articles governing the Foundation, Protocol Upgrades (including changes to the ACL) shall be approved by the Executive Director, should one be appointed, or the board of directors of the Foundation generally. 8.12. Upgrades are pushed to Nodes in a dormant state then, once approved, the Foundation will activate the upgrade retroactively by submitting a Governance Transaction. 8.13. Pocket Core’s upgrade process is permissive. Node operators can keep pocket-runner on their Pocket Core installation if they consent to automatically updating their Nodes according to the Foundation’s decisions. If they decide they want to refuse the Foundation’s (or the Executive Director’s decisions, as the case may be), they can replace pocket-runner with their own versioning software and ignore Governance Transactions. This power is subject to a Tendermint consensus test, whereby 66%+ of the nodes must refuse the Foundation’s decisions (or the Executive Director’s decisions, as the case may be) in order for the blockchain to continue to operate normally without forking.

5. Proposals: Article Amendments

Summary: Each of the following is a proposed amendment to the Articles of Association of Pocket Network Foundation. This omnibus form is proper, despite the language of Section 6.2 of the Constitution (which applies as changes to the Articles constitute a “Governance Upgrade” as defined in the Constitution), because the proposed changes below are meant to be considered in relation to and combination with one another and these proposed changes cannot feasibly be divided into separate proposals without losing their meaning.

Reasoning: The reasoning and intention of each change is described within the description of each “Proposed adjustment.”

Proposals:

a. Article 1.5: Requirement for DAO Resolution

Approve the following change to the language of the Foundation Articles of Association:

Current Article:

Requirement for DAO Resolution 1.5 Unless otherwise specified herein, no Ordinary Resolution or Special Resolution passed by persons entitled to attend and vote at a general meeting shall be valid or take effect until such Ordinary Resolution or Special Resolution has been approved by Supermajority DAO Resolution.

Proposed Adjustment: Remove the requirement for DAO Resolution approval for day-to-day decision-making, while establishing a list of “sacred rights” that require DAO approval.

Proposed Language:

Requirement for DAO Resolution 1.5 All Ordinary Resolutions passed by persons entitled to attend and vote at a general meeting shall not require approval by Majority DAO Resolution and shall be valid and take effect upon passage; all Special Resolutions passed by persons entitled to attend and vote at a general meeting shall not require approval by Supermajority DAO Resolution and shall be valid and take effect upon passage. Notwithstanding the foregoing, any Ordinary Resolution or Special Resolution shall require the proportionate approval of the DAO in such case as the resolution(s) purport to: (a) liquidate, dissolve, or wind-up the business of the Company; (b) amend, alter, or repeal any provision of these Articles or the DAO Constitution; (c) hard fork the Pocket Network (as is referenced in Article 1.1 of these Articles) where “fork” means any major technical upgrades or change and a “hard fork” means a major technical upgrade or change that is incompatible with the then-existing Pocket Network, causing a permanent split into two separate networks that run in parallel; (d) authorize or amend any remuneration package for directors or their delegates, non-secretary officers, or the secretary, except as otherwise permitted by Article 4.38 of these Articles; (e) unless the aggregate indebtedness of the Company and its subsidiaries for borrowed money following such action would not exceed $1,000,000.00, and other than bank lines of credit incurred in the ordinary course of business, create, or issue, any debt security, create any lien or security interest (except for statutory liens of landlords, mechanics, materialmen, workmen, warehousemen, and other similar persons arising or incurred in the ordinary course of business), or incur other indebtedness for borrowed money, including but not limited to obligations and contingent obligations under guarantees, or permit any subsidiary to take any such action with respect to any debt security lien, security interest, or other indebtedness for borrowed money; or (f) create, or hold capital stock in, any subsidiary that is not wholly owned (either directly or through one or more other subsidiaries) by the Company, or permit any subsidiary to create, or issue or obligate itself to issue, any shares of any class or series of capital stock, or sell, transfer, or otherwise dispose of any capital stock of any direct or indirect subsidiary of the Company, or permit any direct or indirect subsidiary to sell, lease, transfer, exclusively license, or otherwise dispose (in a single transaction or series of related transactions) of all or substantially all of the assets of such subsidiary.

b. Article 4.1: Minimum Number of Directors

Approve the following change to the language of the Foundation Articles of Association:

Current Article:

Minimum number of directors 4.1 The Company shall at all times have at least one director.

Proposed Adjustment: Set the number of board members to three, with a managing or executive director taking day-to-day action on behalf of the Foundation and two additional directors making up the remainder of the full board.

Proposed Language:

Number of Directors; Board Composition 4.1 The Company shall at all times have at least one director and shall have no more than three directors. Consistent with Article 4.28 of these Articles, the directors may appoint one director to serve as “Executive Director” who shall have agency to act on behalf of the Company. Subject to the supervisory powers of the remainder of the board of directors and those given to the chairperson of the board (if any), the Executive Director of the Company (if appointed) shall have general supervision, direction, and control of the business and the officers of the Company and shall have the general powers and duties of management usually vested in the office of chief executive officer of a corporation and shall have such other powers and duties as may be prescribed by the board of directors or these Articles.

c. Article 4.8: Removal of Directors

Approve the following change to the language of the Foundation Articles of Association:

Current Article:

4.8 A director may be removed by Ordinary Resolution.

Proposed Adjustment: Create windows of review and adjustment to board composition, other than for cause, allowing for heightened stability and to allow directors to take actions that may be unpopular in the short term that are to the benefit of the Foundation and the DAO. Further create a mechanism to allow for the removal of directors for cause outside of decision windows.

Proposed Language:

4.8 Any director may be removed: (a) without cause, by Ordinary Resolution during either of two semi-annual “review periods” which shall be January and July of each calendar year; or (b) for cause, by Special Resolution. Termination or removal of a director for cause pursuant to this Article 4.8(b) may occur if, and only if, the director: (x) materially breached any provision of these Articles or habitually neglected his or her duties; (y) misappropriated funds or property of the Company or otherwise engaged in acts of dishonesty, fraud, misrepresentation, or other acts of moral turpitude, even if not in connection with the performance of the director’s duties, which could reasonably be expected to result in serious prejudice to the interests of the Company if the director were retained as a director; (z) secured any personal profit not disclosed to and approved by the Company (and, as applicable, the DAO) in connection with any transaction entered into on behalf of or with the Company or any affiliate of the Company; or (aa) failed to carry out and perform duties assigned to the director in accordance with the terms of these Articles in a manner acceptable to the remainder of the board after a written demand for substantial performance is delivered to the director which identifies the manner in which the director has not substantially performed the director’s duties, and provided further that the director shall be given a reasonable opportunity to cure such failure.

For purposes of this Article 4.8, the director shall not be terminated for cause without (i) reasonable notice to the director setting forth the reasons for the Company’s intention to terminate for cause and a reasonable opportunity to cure such situation (if capable of cure), (ii) an opportunity for the director, together with counsel, to be heard before the board, and (iii) delivery to the director of a notice of termination from the board of the Company, finding that, in the good faith opinion of the board, the director had engaged in the conduct set forth above and specifying the particulars thereof in detail.

d. Article 4.38: Director Compensation (Remuneration)

Approve the following change to the language of the Foundation Articles of Association:

Current Article:

4.38 A director or officer shall only be remunerated for services rendered. Any agreement between the Company and a director or officer concerning the remuneration of such director or officer shall be null and void where such agreement: (a) entitles such director or officer to participate in any distribution, dividend or transfer of assets of the Company or awards or entitles such director or officer to any profits or any assets of the Company, except where the transfer or entitlement of assets is in the form of a POKT token grant subject to at least 3 years vesting; or (b) sets the remuneration according to a percentage of the turnover, income, profits or earnings of the Company; or (c) agrees to remunerate the director or officer for an aggregate sum exceeding US$300,000 per annum (as of January 2023), adjusted annually for inflation by reference to the Consumer Price Index as measured by The Bureau of Labor Statistics, where such aggregate sum includes the annual vesting amount of any POKT token grant, and the value of the per annum vesting of such POKT grant will be determined by the prevailing market price as at the time of the grant and shall not exceed 50% of the director’s US$ salary.

Proposed Adjustment: Allow new compensation agreements for directors and officers, including performance-based incentives, at the pleasure of the DAO.

Proposed Language:

4.38 A director or officer shall only be remunerated for services rendered. Any agreement between the Company and a director or officer concerning the remuneration of such director or officer shall be null and void where such agreement: (a) entitles such director or officer to participate in any distribution, dividend or transfer of assets of the Company or awards or entitles such director or officer to any profits or any assets of the Company, except where the transfer or entitlement of assets is in the form of a POKT token grant subject to at least 3 years vesting; or (b) sets the remuneration according to a percentage of the turnover, income, profits or earnings of the Company; or (c) agrees to remunerate the director or officer for an aggregate sum exceeding US$300,000 per annum (as of January 2023), adjusted annually for inflation by reference to the Consumer Price Index as measured by The Bureau of Labor Statistics, where such aggregate sum includes the annual vesting amount of any POKT token grant, and the value of the per annum vesting of such POKT grant will be determined by the prevailing market price as at the time of the grant and shall not exceed 50% of the director’s US$ salary.

Notwithstanding the foregoing, the Company may authorize by General Resolution (with approval of the DAO consistent with the requirements of Article 1.5 of these Articles) compensation packages for directors or officers that are inconsistent with the limitations imposed by this Article 4.38 of these Articles.

6. Conclusion

There is a lot in this proposal. I have put it all within one because our current situation merits quick change and adaptation. While I remain a firm believer in the governance model of Pocket Network, it’s evident that we need to reach a scale where its checks and balances are truly beneficial.

I care about the price of $POKT. The technical talent and brilliant community we have deserves better. At this stage in our development, it is crucial to have a fully integrated stack from the protocol to the gateway layer, allowing the community to move swiftly and enabling others to build quickly and efficiently.

I am profoundly thankful for the role the current Foundation has played. Their efforts have always been guided by the highest integrity and dedication to Pocket Network. The Foundation has laid the groundwork upon which we can build, and their contributions have been invaluable. However, the current situation calls for a change in strategy, and therefore, leadership, to prevent stagnation and drive the network forward.

I care deeply about the success of Pocket Network and its potential to become the routing layer for all traffic on open data sources. My commitment to this mission is unwavering. With your support, I believe we can create a thriving ecosystem that lives up to the incredible potential of Pocket Network. Together, we can ensure that Pocket Network not only survives but thrives as the backbone of decentralized infrastructure.

7. Copyright

Copyright and related rights waived via CC0.

6 Likes
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Thanks for the updated proposal which is a significant improvement across several key areas:

  • Decision-making delegated to three PNF Directors
  • Mike’s resignation as CEO of Grove
  • Incorporation of vesting across the proposed compensation award
  • Enhanced alignment between Grove and POKT, with Grove focusing on enabling Gateways as their Core Mission.

Mike has listened to the feedback and addressed the potential conflict of interest, plus the proposed 3 PNF Directors should facilitate balanced and expedited decision-making. And with improved DAO liquidity we have far greater flexibility.

Perhaps it would be preferable for the protocol team to be housed within POKT but can live with the proposed arrangement.

lastly, with the increased inflation, we need to avoid mis-steps and nail this narrative. So perhaps worth appointing at least one PNF Director with deep expertise in tokenomics.

3 Likes
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I think these are sensible changes and make this proposal more palatable to the wider DAO.

I’ve been asked to comment specifically on the compensation package, so my thoughts are that I want to come from a place of pragmatism over emotion and what is best for Pocket/(my and your bags):

  • The 48mn for shipping Shannon: while looking though the lens of rewarding a delayed product with extra incentives is morally dubious perhaps, our choice is either to make sure the team have enough incentive to keep building, or they take jobs at other companies and leave (as one of the protocol engineers did recently I understand).

Protocol engineers are expensive, there is no getting around that. If we don’t offer adequate compensation, they’ll leave. So while this could be seen as a ‘gun to our head’, our options are to either grant ~3% or the existing supply to get Shannon shipped, or risk delays up to the entirety of Pocket trying to save on that payment.

I don’t like it, but pragmatism suggests it’s better to make the payment.

  • the future payments for POKT milestones:

If the new PNF team can get us to $3, $5 per POKT, and I can enjoy the upside of those prices, then after 30 days of maintaining them, I have no problem with the team being handsomely rewarded for that achievement. They have 3 years to make this happen, and if they don’t succeed they don’t get paid, so I don’t have an issue with the team being rewarded when I have first option (30 days) to gain from these milestones.

  • remember that the compensation packages are locked up for 4 years, and then only distributed 25% a year. So this POKT won’t go on the market for 4 years and then vested over time.

  • the price targets are for 3 years, so if they don’t hit the milestones they don’t get paid.

Ultimately, the pragmatist in me believes that given the current state of Grove, PNF, DAO finances, we will be saving money on director salaries than the previous set up, which is very much needed Now, and only paying out delayed compensation packages if major milestones are hit that hugely benefit bag holders. If we are abstemious now we endanger future prosperity, and while we can debate the possibly dubious moral nature of this compensation package, if this is the cost of aligned goals for success, I’m grudgingly for it.

4 Likes
4

Director Salaries

Under the revised PIP, will Michael be drawing a director’s salary? If so, how much? And the other two directors?

1 Like
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I am not going to be taking a salary until I feel comfortable with runway and where we are headed. If Shane were to become director I would expect him to receive a bump in his salary given the extra responsibilities. If the third director is more passive I would expect this to be something nominal reflecting their contribution.

4 Likes
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Thank you for the timely revised proposal. I emphasize that I’m not a voter but I would like to raise questions that I already outlined.

So far the intentions are expressed in terms of price projections but the question is to what extent those price levels are achievable from the company’s operating activities and not from hype? Price alone as a concept can’t serve as a representative indicator because price may not be related to the company’s operating performance. A price increase can be made only by creating hype through:

  • hiring specialized marketing companies;
  • hiring MM companies that can increase trading volume and price;
  • hiring youtube, twitter influencers;
  • etc

Many people are satisfied with this proposal after hearing only price levels but it would be more fruitful to add a few words about your vision and understanding of the company’s business projections with expected future performance indicators such as relays, number of gateways, number of AI projects etc.

2 Likes
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Compensation Contemplation

Overview

While rewarding all those who help lift the token price makes sense, structuring rewards as does this revision of PIP-38 is deeply flawed and totally unnecessary. We argue for retro-funding as a far superior reward mechanism. The changes proposed here vastly improve PIP-38 and in no way impede Michael’s ability to revitalize Pocket network.

This post was edited July 24 to move discussion of compensation for shipping Shannon till after that for achieving POKT price targets. We also make clear that retro-funding should be used not just for hitting price targets, but also for rewarding Shannon contributors.

Two Parts

The compensation package has two parts: 48m POKT for completion of Shannon and a combined 292m POKT - a 17.3% dilution of todays’ POKT monetary base of 1.686b tokens - for hitting price targets of $0.50, $1, $3 and $5 (48m + 48m + 98m + 98m respectively). Michael would not participate in the first distribution.

Price Targets

Defining Price Targets: Reputable Source

How does one define price targets? The source needs to be well defined. The TWAP from Coingecko? Some other reputable source? By not defining this clearly we risk cherry-picking from an unreputable source that could lead to an undeserved payout.

Retro-funding for Contributors

The proposal should contain a retro-funding commitment that generously rewards all those who contribute to the achievement of the price targets (the DAO has a proven retro-funding track record). When each of the targets is reached, PNF can prepare retro-funding proposals for a DAO vote. There need not be a three-year limit on reaching these targets. The time frame can be extended or open ended.

Retro-funding gives the DAO a role in determining how grants are allocated. Future retro-funding rounds can be structured in a way that’s responsive to the circumstances and tokenomics that will exist at that time. Among other problems, creating a scheme now needlessly handcuffs the DAO.

Cause-and-Effect Metric Needed

While it’s reasonable to use price targets to trigger a compensation review, other criteria or metrics need to be considered in determining whether to actually pay compensation.

For example, what if the price goes up without appreciable changes to the fundamentals? Can we really expect the token appreciation to endure if nothing on the ground changes? Further, how do we attribute the growth in value? Is that due to Michael and/or other contributors? External factors?

The real question is: Do Michael and/or other contributors deserve compensation if the macro condition improves but the underlying fundamentals remain the same? Other measurements that provide a more well-rounded picture of progress should be considered. Those could be:

  • Trading volume to X value or increased by X%

  • Listings on Tier 1 exchanges

  • Paid relays increased by X value or X%

  • Net inflation (supply growth - burn) less than X%

  • Gateways increased to total count of X

  • Max X% of paid relays from a single source (a metric of diversification)

One or more of these metrics could yield a better picture of the health of the project rather than just the token price.

Hitting the price target must not be a guarantee of compensation. Whether it’s retro funding or not, in determining whether to award a grant the other criteria/metrics would have to be considered. The proposal must make this clear.

Value Creation and Compensation

Including this latest bull, which helped drive the price up for about 6 months (now it’s back to the original baseline), there’s been no sustained value creation for the network. By providing short-term price targets of only 30-day duration, we’re setting ourselves up for another chart like this:

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If another such chart is generated but with new highs, are we really creating long-term value for POKT holders that warrants compensation?

Retro-funding is much better suited to allowing for these assessments. We can gauge value created and reward accordingly. The spirit of this retro funding would be to assess and generously reward all those who helped create value (devs, directors, marketers, etc.) according to their participation. The DAO could even commit to allocate some percentage of value created to those who contribute, say, 10% of all value created. If the fully diluted valuation (FDV) goes from $100M to $1B, then the DAO would distribute the equivalent of $90M ($900M of value creation) amongst all who contributed to this success.

However, if instead of retro-funding, compensation is included as part of this PIP, we must opt for something more enduring like a 6-month TWAP to ensure this isn’t just a pop in the price due to a marketing blitz, short-term incentives, or some sort of unsustainable liquidity increase. The goal should be a lasting increase in value to the token that sets a new baseline for the project.

Unnecessary and Harmful Inflation

The tokens minted to pay the price-target compensation - representing a 17% dilution of the POKT monetary base - could jeopardize the token price once unlocked. See Shane’s recent post in the Den. That there is a 4-year lock and requirement they be released afterward at the rate of 25% a year only kicks this can down the road. Why weaken the token if we don’t have to?

Retro-funding makes it possible to calibrate the grant amounts and tailor the terms in a way that will not hurt the token price.

Alignment of Michael’s Financial Interests with the DAO’s

The tens of millions of POKT Michael currently holds should be incentive enough to reach all the price targets he cites. (Michael says he will not be drawing a PNF salary until he feels “comfortable with runway and where we are headed.”)

However, the current compensation structure misaligns his financial interests and those of the DAO. As noted previously:

We strongly urge Michael to accept retro-funding for his own compensation. It’s the ideal and simplest way to align his and the DAO’s financial interests. However, if he chooses not to do so, he could be given - as suggested in my earlier post - a very attractive threshold option as an alternative to what’s been proposed in this latest revision of PIP-38.

Other Items That Need Addressing

The proposal should make clear that if Michael loses his directorship, he is no longer eligible for compensation for price targets that are hit subsequently.

This is unclear. What does “date of receipt” mean?

Shannon Completion

For the reasons that follow, our view is that the best way to compensate those who worked on Shannon is retro-funding.

Cryptocorn argues that the 48m incentive for shipping Shannon may be needed to complete work on the upgrade. To assess the validity of this argument, Michael would have to disclose whether the engineers and devs working on Shannon already have token packages, and if so, how big. We also would need to know how much POKT Grove is sitting on that could be (further?) allocated to them. Lastly, if Grove has not given these guys tokens and doesn’t have any to give them, it can give them equity if they don’t see upside. Why is it the DAO’s responsibility to incentivise them?

It’s also worth asking what happened to the 30M POKT tokens from PIP-49. In 2023, the DAO bailed out Grove which didn’t have enough tokens to incentivize its 66 employees. Grove then turned and slashed its headcount by over 50%. It’s unknown what happened to these tokens and if Grove recouped them. It’s also been noted by Michael that the protocol team turned over - resulting in the likely recovery of their tokens too.

If Grove were following standard operating procedures, it would have recouped most of those tokens from employees that were let go and reallocated them to mission critical staff that was retained or new hires. It’s difficult to believe that with that amount of tokens to play with, plus equity incentives in Grove, there is an urgent or imminent retention issue regarding the protocol team.

There’s some speculation in this (I’m assuming that these tokens were repurchased by Grove according to a token plan), but either way, the DAO is owed clarity on the outcome of PIP-49 before deciding on new compensation for these same individuals that were among the beneficiaries of 30M POKT. If the DAO mints tokens to pay those who are already well taken-care of, then we’re just making the rich richer at the expense of current holders.

Retro-funding is Shannon Solution

If the DAO is to provide these guys a reward, it should do so by retro-funding. In justifying and quantifying retro rewards, the questions on what they got and should be getting from Grove can be properly considered.

To summarize, to decide on whether the DAO should reward the Shannon shippers, we need transparency from Grove. Any DAO rewards should come from retro-funding.

Conclusion

Retro-funding is the way to go with compensation for sustained price rises that can be traced to actions by contributors. Michael, however, is a special case. To properly align his financial interests with those of the DAO, he should either agree to retro-funding (or have to reach agreement on threshold options with TWAPs of at least six months). Replacing the price-target payouts with retro-funding preserves all the upside of compensation and eliminates all the downsides including inflation.

Cannot Vote for PIP-38 As Is

In good conscience, we cannot support PIP-38 unless retro-funding replaces the ill-conceived 48m and 98m POKT compensation pools including the one for shipping Shannon. Also, clarification must be provided on what constitutes hitting a price target. Further, it must be made clear that retro grants will be awarded only to those who contributed to the price rises by value creation and that hitting the price targets alone will not guarantee anyone a retro grant.

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I echo your sentiments on this.

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I agree with this, allowing for retro funding of created value is much more clear and fair. Or even allow for part (a large one) of the requested milestones to go through retro funding.
For price target it seems right to let the DAO vote on who deserves to be compensated, as you clearly note that the price can go up for several reasons and many of them cannot be controlled by the PNF/Directors.
However I don’t know how a retro funding will work to compensate the Shannon team. The DAO cannot properly judge individuals of the dev team, it would seem wrong to let the DAO vote on their compensation package when they deliver what they were asked for.

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Thank-you @o_rourke for this revised proposal. The format does look to be what is needed to be accepted, however I am working to have it reviewed by a Cayman Island lawyer to ensure these structure changes to not create legal issues. I will keep everyone posted on that review.

Regarding the proposal itself, I very much appreciate that is a 180 of the original proposal. The big changes aren’t actually in this proposal, but in the fact that Grove has addressed it’s own sustainability, which was the reason we are where we are today.

Changes to PNF and the DAO

This proposal doesn’t offer substantial changes to the structure of PNF or the DAO (especially when compared to the first proposal). The changes are relatively straightforward:

  1. One of the directors is now an “Executive Director”. Instead of all directors being involved in the day to day, there is now a central director who makes most of the decisions. This is a relatively simple change.

  2. PNF is given full agency (instead of partial agency) when it comes to parameters and funds.

  3. Director changes only happen 2 specific times a year (July and January), which essentially provides leeway to the Executive Director, who is making most of the calls, from being suddenly removed (without very specific reasoning). This ultimately removes the ability to have unexpected proposals pop up to remove directors (like the first proposal was to the past PNF Directors). If there is a removal outside of those time frames it is because of very specific reasons (like engaging in illegal activities). Ultimately PNF can operate knowing when there will be windows for restructuring.

Changes to Grove

The seismic level change is actually what Grove just underwent. When this all started, Grove was unsustainable on it’s own, with 3 months of runway in hand, with a few more months of runway expected to come in September. There was a clear need to off load costs and get more resources for runway, which was the backdrop to the first proposal.

I was not convinced that restructuring PNF and the DAO would be the right solution to addressing Grove’s unsustainability. PNF and the DAO would just be dragged into Grove’s own issues.

However, through this proposal process with the community, Grove went through the changes required to make it more sustainable. In 1 week of restructuring, it went from 3 to 6 month runway to a 1.5 year runway, and a major shift in focus. Major kudos to Grove leadership for doing this restructuring. Myself and others have been calling for Grove to be sustainable, and it would appear they are on a path towards that direction.

De-Risking

By Grove restructuring itself, and with this new proposal not shutting down the DAO and fully centralizing PNF, I personally feel there has been a lot of de-risking from the original proposal. Grove has begun to address it unsustainable runway, and the changes to PNF are more within reason… so this is objectively positive progress.

There are still risks, and there are well established patterns that leadership should address so history does not keep repeating itself. I already laid them out in detail here.

The New Choice

For me, the context of this proposal went from “How can PNF sustain Grove’s runway” to “Grove is in a stable place, so now what do we do with PNF?”. Ultimately this proposal has moderate structural changes to PNF and the DAO, but is mostly about about who you want to lead after these changes are enacted. Michael has made the case for his vision as Executive Director through this proposal and through his 90 day plan for PNF, so now it up to the DAO to decide if this is the path it wants.

I have agreed to Michael that he can add me to this proposal to remain on as a Director. I can continue with my current responsibilities and keep things moving, while also work with Michael as the Executive Director, who has most decision making powers. This new position of Executive Director puts all vision under them and their judgement, which is why it is critical that the DAO know they are voting in Michael as Executive Director. The role of non-executive director, like myself, is to provide a level of oversight and provide a vote in the few instance that require it.

I’d like to keep comms open between PNF and the community, to help contribute to leadership transparency. I have never agreed that POKT’s issues were because of PNF or the DAO, as the original proposal suggested, so I’d like to preserve as much good form their designs as possible. I personally would like to see PNF and the DAO grow in progressive decentralization.

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Oversight Question

The latest revision of PIP-38 makes Michael Executive Director of PNF and adds two other directors, with you (Shane) being one of them.

It amends the Articles of Association as follows: “Subject to the supervisory powers of the remainder of the board of directors …the Executive Director …shall have general supervision, direction, and control of the business and the officers of the Company and shall have the general powers and duties of management usually vested in the office of chief executive officer of a corporation…”

What exactly are your “supervisory powers”? Can you and the 3rd director overrule the decisions of the executive director?

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Reflections on Retro-Funding

What’s the benefit of paying any rewards outside of retro-funding - presumably based on decisions by Michael and his PNF co-directors? In the context of PIP-38, retro-funding is the most fair and clear process for rewarding contributors.

For agility, PIP-38 expands the decision-making powers of the directors, and limits the DAO’s, regarding protocol changes they deem necessary to revitalize the Pocket Network and lift the token price. This justification for restricting DAO control does not apply to reward distribution; leaving compensation decisions to PNF is unnecessary and in no way furthers the core objectives of PIP-38.

First, before determining whether the DAO should reward Grove employees for shipping Shannon, there needs to be full disclosure of what they’ve already got and will get from Grove, including any equity in Grove, and on top of that, how much more Grove could give them in POKT and equity. In other words, Michael needs to demonstrate why a DAO incentive is necessary to get Shannon to the finish line. Grove can delay disclosing what it’s giving its team and what more it could give till an application for retro-funding after Shannon ships. That would be simplest as it avoids the distraction of this debate now - better not to bog down PIP-38.

Wait for $0.50 Price Target to Reward Shannon Shippers

I recommend delaying DAO rewards for Shannon shippers till the retro-funding round triggered when the POKT token hits its first price target ($0.50). At that point, the DAO will be flush with funds and able to generously compensate them if they make a good case for additional payments. The DAO will almost surely regard an application for retro rewards favorably at that point, since the completion of Shannon will likely have factored heavily in the token’s price rise.

Further, waiting for the token to hit its first price target before rewarding Shannon shippers will avoid duplication of payments: compensating them upon the shipping of Shannon and then later rewarding all those who help raise the token price to $0.50 will see the Shannon team get rewarded twice.

Another reason to wait till the first token price target before giving retro rewards to the Shannon team: If Shannon ships and the token price stagnates, are DAO rewards justified?

The DAO does not have to “judge individuals of the dev team” to decide on whether DAO rewards are justified. As to the distribution of any retro rewards, the DAO would merely consider the same information as the PNF directors, were they to decide on how to allocate the 48m POKT currently being proposed.

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I voted in favor of the original version of this proposal for three reasons. First, the goals were clear (ship Shannon, get on T1 exchanges, drive up the token price). Second, I trust @o_rourke and the people around him and believe he is the best person to lead PNF. Third, not voting for this proposal is a vote for more uncertainty and a lack of leadership.

Let’s not overcomplicate this, @zaatar. My guess is that if you pick a fair way to clarify what constitutes the price target, @o_rourke would be fine with it. Also, in my opinion, if the price stays over the target for 90 days, that’s more than fair. For everything else, we need to put our trust in his leadership and hope for favorable market conditions. The right combination of strategy, tactics, incentives, etc, is anyone’s best guess.

@o_rourke is listening to feedback, as evidenced by the revisions to this proposal. So, I’m guessing he’ll continue to consider suggestions. But there is no perfect plan, and no amount of deliberation or groupthink will change that.

Continuing to do this (debate and deliberate) is the riskiest thing we can do. Again, there are no perfect plans, but a plan without leadership and a clear vision is a plan to fail for sure.

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Your stance is incredibly baffling. I just read all the pushback you gave the CREDS system, and now you’ve completely reversed your position on always having “trustless” model.

It’s amusing how you’re now happy to give your complete “trust” to Mike after advocating for a trustless model just a few months ago.

What a difference the author of a proposal makes.

I won’t question your motives, but this clearly shows how favoritism runs rampant in the DAO. You spent hours critiquing the CREDS system and constitutional changes but haven’t pushed back on anything in Mike’s proposal and were even happy to accept the initial proposal.

Lastly, you speak of not voting for this proposal as a lack of leadership. Far from it. Leadership was demonstrated under the old PNF. What Mike has displayed is anything but.

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Thanks for the feedback. Regarding retro funding, it’s not clear to me how that is materially different than the current structure. The goals are clear. The value created is clear. I need unanimous agreement from the board to receive anything.

Will change the 30 days trailing average to 90 days. I think this is reasonable.

This is onerous. What if a different director takes over and I decide to push things from a different direction? Still need unanimous acceptance from the directors to make anything happen.

Having one clear, simple goal is the most important thing here. We know what the goal is, and the expected outcome. To hit these goals all of the above will factor into it.

Yes, the two directors are able to overrule decisions.

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Thanks for your feedback, @BTTheDefendoooor .

For the record. I was not “advocating for a trustless model,” - I was pushing back on a proposal that I felt would have centralized control (within PNF) while obfuscating accountability. It’s not about the author; it’s about the proposal.

If you read all my comments on CREDS, you would have also seen that I said I would vote for a proposal that centralized control if there was clear accountability.

I did trust the previous leadership and would likely have supported a proposal similar to this one if they had authored it.

The previous leadership stepped down. In my opinion, stepping down in the face of adversity is not leadership. So, yes, from my perspective, a vote against this proposal is a vote for a lack of leadership.

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I think that the difference is that instead of letting the directors decide on how rewards are distributed, the DAO can vote on that by means of a retroPFG, similar to the one we had previously.

I think this is not a bad idea, as it gives the DAO the power to decide on how rewards are distributed. Also, this gives the community members reasons to become DAO voters.

The impact of actions on price increase is difficult to measure, and I think is highly subjective too. A mechanism like retro PGF can be used to avoid accusations on how rewards are distributed.

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I have made a few adjustments to the proposal per @zaatar’s suggestions, including clarifying the recipient’s wallet address and increasing the vwap to 90 days trailing.

I have included @shane in the proposal. After speaking to several folks over the last week I will be amending the proposal to include Steve Tingiris as a Director. I am confident in his skillset alongside myself, Shane and the board observers.

For those of you who aren’t familiar with @steve:

He founded and successfully exited 3 tech companies, has consulted directly with NASA, the IRS, Microsoft, Google, Verizon, and Twilio through his career. He authored one of the first books on GPT-3 that was published by a major publisher in 2021 and has been focused on AI since 2013.

Steve’s background in AI, technical expertise and his expressed interests in economics will help fill out key needs for us moving forward.

Most importantly, he’s been involved with Pocket since before the launch of mainnet and an active and objective community member.

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I strongly oppose appointing @steve as a Director as part of this proposal. The community initially pushed back on the proposal because significant oversight was needed on the Executive Director’s decisions.

While I appreciate Steve’s experience and credentials and once respected his pragmatic approach to evaluating proposed changes that could impact the network, this approach was clearly absent from the outset of this proposal.

Steve was very quick to cede complete control and vote for the first version of the proposal without his usual measured approach, by his own admission, because he fully “trusts” Mike. This doesn’t seem like someone who would provide the necessary oversight that the community wants when needed.

There have been concerns about not wanting Mike’s “Yes men” on the board, and unfortunately, this appointment seems to align with those fears.

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New Compensation Scheme: Cut and Paste

Why DAO-Controlled Retro-Funding is an Absolute Necessity

In clear violation of transparency and conflict of interest principles, Michael’s current plan allows him and his co-directors to make decisions behind closed doors on their own compensation. In addition, our DAO-administered retro-funding scheme allows for reducing the price-target milestone rewards if necessary to protect the health of Pocket Network, thereby avoiding the possibility of large payouts that could drain the treasury and leave the DAO unable to fund vital operations. Other reasons why our retro-funding scheme must replace the current compensation plan are detailed below.

Overview

Below you will find the fully developed retro-funding scheme that we propose in place of the current compensation scheme of the Second Revised version of PIP-38. Supply growth calculations (by Ramiro) show that the number of tokens available as rewards for hitting each price target is very similar - and for the $1 and $5 marks, even larger. Price targets will be deemed to have been hit based on a 120-day TWAP to ensure that rewards are paid for improvement of POKT fundamentals, not price blips. The benefits of our retro-funding scheme will be summarized in bullet form at the end of this post.

Cut and Paste

We recognize that replacing the current compensation scheme of PIP-38 with several rounds of retro-funding takes time and that the effort needed to draft this change might work against its adoption. Accordingly, to spare Michael the work involved, and to help move the proposal to a speedy vote, we provide below the amended scheme that Michael can cut and paste into the final version of PIP-38.

Current Compensation Scheme

Replacement Scheme: Retro-funding Rounds

Cut and paste starts here:

POKT Performance Remuneration

Approve the following incentive-based retro-funding rounds for Pocket Network developers and contributors.

The Foundation board of directors shall organize retro-funding rounds to reward developers and contributors to the Pocket Network when the POKT token price reaches each of the following targets:

  • $0.50:

  • $1.00:

  • $3.00:

  • $5.00:

*All prices are the average trailing 120-day price based on data available at coingecko.com.

  • The price targets must be achieved within three years from the passage of PIP-38, though the DAO can extend this time frame by vote that terminates before the three years lapse.

  • Payment of the retro rewards will come from the DAO treasury, be held separately in a multi-signatory wallet controlled by the Foundation board of directors and be distributed to the various developers and contributors as per voting by the DAO.

  • PNF will create a neutral committee to oversee all retro-funding rounds. The composition of the committee can vary between rounds.

  • Depending on tokenomics at the time of the retro-funding rounds, PNF may require that token grants, or a portion thereof, be locked for a given time period from the date of receipt, with a set percentage unlocking each year thereafter.

  • Retro grants will be awarded to applicants whose work is shown to have had a positive impact on the token price and on Pocket Network fundamentals. The DAO may choose to widen the scope of recipients to include other contributors to the network or ecosystem generally.

  • The Grove team behind the work on Shannon and launching it on mainnet will be eligible to apply for retro-funding as part of the first round held after Shannon’s mainnet launch. Payments Grove employees already received for their work on Shannon could be considered in determining the size of any retro grants.

Percentage of ‘Value Created’

  • The DAO will allocate 20% of “value created” for retro-funding grants after achievement of the first milestone ($0.50) and 10 percent for the $1, $3 and $5 milestones. “Value created” is defined as the total of POKT tokens in the treasury wallet (6386713deb27b609daad5e2e32ee6591753e5f4e) multiplied by the price target that was reached minus the amount of POKT tokens in the treasury wallet (6386713deb27b609daad5e2e32ee6591753e5f4e) at the time of PIP-38’s passage multiplied by token price at that time. PNF or the DAO can reduce the percentage of “value created” to be distributed at each milestone if necessary to preserve the value of the POKT token and Pocket Network health.

  • If a price target (or targets) has (have) been achieved before a funding round for the previous price target has started or if it has started but the application window is still open, the two (or more) rounds, together with their respective reward pools, shall be combined into one.

Cut and paste ends here.

The following chart exemplifies how the size of a retro-funding rewards pool will be determined.

Item Amount Note
Treasury Amount 30,554,471 6386713deb27b609daad5e2e32ee6591753e5f4e
Current POKT Price $0.04 Needs to be calculated at time of passing
Current Treasury Value $ $1,222,179 Needs to be calculated at time of passing
Future Treasury Amount 300,000,000 Input
Future POKT Price $1.00 Input
Future Treasury Value $ $300,000,000
% Payout 10%
Value Increased $298,777,821
Payout $ $29,877,782

The following chart compares the maximum rewards available for retro grants at each milestone with the payouts proposed under Michael’s current compensation scheme.

PIP-38 Reward Change

Quarter Supply POKT DAO Treasury DAO Value POKT Price Tag DAO Treasury Change Milestone Reward Milestone POKT Mike Proposal Diff
Q0 1.68B 30M $1.52M 0.05 Today 0 $0.00 0.00 $0.00 $0.00
Q1 1.77B 93M $4.69M 0.05 -
Q2 1.86B 160M $8.01M 0.05 $6 M
Q3 1.95B 230M $115M 0.5 1st Milestone $113M $22M 45M 48M $24M -$1.28M
Q4 2.05B 303M $151M 0.5 - $150M
Q5 2.15B 380M $190M 0.5 - $188M
Q6 2.26B 461M $230M 0.5 - $229M
Q7 2.37B 546M $546M 1 2nd Milestone $544M $54M 54M 48M $48M $6.46M
Q8 2.49B 635M $635M 1 $633M
Q9 2.61B 728M $728M 1 - $727M
Q10 2.75B 827M $2.48B 3 3rd Milestone $2.48B $247M 82M 98M $294M -$46M
Q11 2.88B 930M $2.79B 3 - $2.78B
Q12 3.03B 1038M $5.19B 5 4th Milestone $5.19B $519M 103M 98M $490M $29M

Comparison between retro-funding and Michael’s current compensation scheme

Comparing the proposed retro-funding method with Michael’s scheme, we see that the total pay package values for each scheme are very similar: slightly lower at $0.50, $6.46m more at $1, and $46m less at $3 and $29m more at $5.

The retro-funding rewards pool sizes noted above will be reduced by any DAO spending.

As the DAO treasury will be growing at a fast clip due to the 75% DAO take, the longer it takes to reach a milestone, the fatter the DAO treasury will be at that time and the larger the POKT pool available for payment of retro-funding grants.

There is a clear correlation between the wealth of the DAO and the rewards that it will be distributing for each milestone. This is much healthier for the DAO’s finances than being locked into paying compensation irrespective of the treasury contents as in Michael’s current version of PIP-38.

Why DAO-controlled Retro-Funding is Superior to the Current Scheme

  • Better for Decentralization. DAO keeps control of its treasury (better for decentralization). There is absolutely no justification for the DAO to relinquish control (to PNF) over the distribution of its treasury funds as part of a compensation scheme; maintaining control over compensation spending in no way interferes with PIP-38’s core objectives - revitalizing Pocket Network and lifting the token price.

  • Avoids Egregious Conflicts of Interest. Having the DAO make decisions on the compensation spending will address the inevitable conflicts of interest that arise when PNF directors seek a piece of the compensation pie. Leaving the decision on how to apportion compensation to the directors will lead to an untenable conflict of interest. Even if they were to recuse themselves from voting on their own compensation, having the directors vote on compensation for their co-directors is equally unacceptable.

  • Transparency and Fairness. A close-door process where the Directors (including the Executive Director) decide on their own compensation violates DAO principles of transparency and fairness. Further, while PNF may publish the reasons for its allocation decisions, by having the DAO control the grant application process, openly engage with applicants, and vote on the grants, the process will be far more fair and transparent.

  • Flexibility. The DAO or PNF can decide to reduce the reward pool size if necessary to protect the token value or health of Pocket Network. This makes it possible to avoid large payouts that could drain the treasury, leaving the DAO unable to pursue other important activities. Also, based on tokenomics at the time of each retro-funding round, PNF will decide whether to require reward locking and unlocking periods.

  • Consideration of Previous Payments and No Double Dipping. Eliminates the separate funding round for the Shannon shippers upon Shannon mainnet launch, and instead, makes the Grove dev team eligible for additional compensation at the price milestone that follows the launch. This avoids a situation where they get rewarded twice for the same work, and also allows the DAO to consider any previous payments from Grove in determining appropriate additional compensation.

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