PIP-38: Re-electing Michael O'Rourke to the Foundation

[zaatar]

Clarity Needed on Pay

@o_rourke

I should clarify, the POKT for this proposal isn’t going to me - my intention is to distribute it to everyone who helped build and participate in Shannon. Yes, this includes Grove employees but also everyone else who has participated up until now and moving forward. I don’t intend to take any for myself in this distribution. The same goes for the price-based milestones.

Who Gets and How Much?

Re the 48m POKT for shipping Shannon, the proposal should identify the recipients and, roughly, their respective allocations, that is, “everyone else who has participated up until now.”

To repeat, Mike says: “I don’t intend to take any for myself in this distribution. The same goes for the price-based milestones.”

Is Mike saying he does not intend to share in the other milestone payments? Or is he saying that he’ll share these payments with all responsible for achieving these milestones.

The proposal needs to make all of the above clear.

[o_rourke (Michael O'Rourke)]

Based on feedback from the community I have added a a 2/3 multisig, voted by the DAO for transfers over $100k once we hit the $0.50 milestone.

Good call out @zaatar - I do intend do distribute myself POKT for the price based milestones specifically. Not the Shannon milestone.

[zaatar]

Reflections on PIP-38

The central goal of this proposal is to lift the token price and thereby ensure Pocket Network’s success.

Need for Nimbleness

Many seem persuaded that to achieve that goal in today’s circumstances, the slow and unwieldy process of DAO proposals and voting is ill-suited.

Oversight Key

However, the proposal, as currently formulated, fails to properly address conflict of interest. Further, there are valid concerns about ceding too much power to Mike and subverting the DAO.

Given that 75% of a quorum of voters are needed to pass this proposal, Mike would be wise to add some DAO oversight as suggested in this thread. Oversight would not only check power abuse, but also it would prevent actions designed to place Grove’s interests over those of the DAO, allaying conflict of interest concerns. DAO oversight also addresses concerns over centralization and SEC reaction, and effacement of the DAO. In addition, it would reduce divisiveness and help preserve community cohesion.

Leaving concerns about lack of oversight and conflict of interest unaddressed could lead to the failure of this proposal. For those who support the central goal of this proposal and believe that PNF nimbleness is needed to achieve that goal, the failure of this proposal would be unfortunate.

@o_rourke

What happens if this proposal doesn’t pass?

I would conclude that the community doesn’t agree with my vision, which is fair and fine. As a founder of this project, I would be frustrated and sad. Grove would continue operating and I would ultimately push the economic proposals forward regardless.

Mike says he will push forward with his economic proposals if PIP-38 is rejected. Having the DAO consider them collectively or piecemeal would delay, if not block, their passage. Requiring a trusted DAO member or members to sign off on Mike’s economic proposals would facilitate their quick adoption and, at the same time, give the DAO the oversight assurance that it needs.

The trick is to design an oversight mechanism that’s meaningful but at the same time does not prevent nimble decision making.

It’s been suggested that the DAO appoint or elect people to provide that oversight.

Lucky55 proposes advisory board(s).

Breezy proposes that we elect three new “board members” (PNF directors?) - with combined legal, tokenomics, and technical expertise - a majority of whom would have to approve Mike’s protocol changes. “The DAO," says Breezy, "would retain the ability to vote on key changes and override decisions inconsistent with our vision.” The “board members” would have to justify to the DAO in writing their decisions to back Mike’s changes. Not sure of the legalities, but perhaps this could be an advisory board as opposed to a slate of PNF directors.

For a 2d opinion and possible refinement, and to gain the DAO representatives’ support, Mike could consult them before finalizing any changes.

This would provide real DAO oversight without cumbersome, time-consuming DAO proposals on every change that’s introduced. Where Mike fails to get the required 2 out of 3-person backing, he could put his proposed change up for a DAO vote.

Alternatively, it’s been suggested that oversight come in the form of a shorter time period for Mike’s sole directorship, say, 6 months, subject to renewal by the DAO. But this does not resolve conflict of interest concerns or protect against harmful changes.

@Misskitty42

Instead, why not consider keeping Shane on as director, while appointing Mike for a limited term – say, 6 months – and giving him enough resources and leeway to implement his plan. At the end of the term, the DAO could then reevaluate and decide whether to extend Mike’s tenure, possibly as sole director. Feels like this strikes a good balance between the DAO being hands off and letting Michael hustle, while still retaining oversight and the ability to step in should something unforeseen happen.

To sum up, an unobtrusive, though effective, oversight mechanism is needed. Starting with the good ideas already provided in this thread, let’s devise one.

Amendments to Articles and Constitution: Final Form Required

@o_rourke

Good call out - I’ve added these sections and a couple more for the Articles and Constitution. These are just examples but will consult legal for proper phrasing if the proposal is passed.

@JackALaing

the Article amendments must be officially filed with the secretary, exactly as written in the proposal, by the director(s)

According to Jack, you’ve got to “consult legal” before finalizing your proposal.

Constitutional Changes Only Where Necessary

I agree with MSA that constitutional changes should be made only where necessary to achieve this proposal’s objectives. Therefore, the reasoning for each of the proposed constitutional amendments should be added to the proposal so that voters can properly consider their necessity.

For example:

   Article 22: Transfer by Way of Continuation

   Current Article:...

   Proposed Adjustment:...

   Reasoning:

Without the reasoning, It’s difficult for voters to understand why the change is being sought.

Further, constitutional changes should be only as extensive as required to achieve this proposal’s objectives; setting out the reasoning for each of the proposed adjustments will help voters see whether they’re sufficiently narrowly tailored.

Summary

The proposal as currently formulated needs amending. I recommend rewriting it as a pre-proposal for further consideration. I would then incorporate new and prior community feedback to try and build consensus around this PIP.

(I would have refined this post further but wanted to publish it before today’s ecosystem call.)

[drschvantz]

As a mostly quiet investor in POKT coin this seems to be the classic case of the Captain of the ship trying to regain control after not being satisfied with the direction the ship is going in. There is a lot of finger pointing and egos involved. To be clear I’m not opposed to the idea but more oversight and shorter checkpoints are needed to make sure the ship isn’t being ran into the ground.

“Example: 4.38 For a period of 24 months from the date of this proposal passing, the sole director may establish new compensation agreements for directors and officers, including performance-based incentives tied to the price of $POKT, without being subject to the existing limitations in Article 4.38.”

The above scares the crap out of me. I’m reading it as “he”/“sole director” can change his own compensation without anyone else’s approval? Someone tell me I’m wrong.

Final thought/question…who gets to vote on these proposals and how do they vote?

[mike (Mzynga)]

There are community members who have a vote,Snapshot

[AVAV (AV)]

I am not a DAO voter but I have been following this project since 2021 and had written an idea about the structure of inflation which I had been pondering for a long time in conditions of lack of information. So I think I have the right to give my opinion about this proposal.

I have attentively read this proposal and am continuing to read all messages in telegram group, so there emerged many questions about the past money management and the effectiveness of its use, the made strategic decisions etc. which cast a shadow on the future success of the project or shows this project to be more risky with the possibility of becoming successful. Most likely such a drastic proposal should have been discussed first within the two organizations internally between the main actors what could have prevented the price from falling by 30 percent. On the other hand, all the factors are unknown to me in order to say what could be done and what couldn’t. The only thing I like so far is Mike’s confidence in that the project can or will be revived.

Before moving on to some points of the proposal it is worth paying attention to the conceptual wrapping of the entire message coming from “reflexivity”, on the basis of which appeared specific Mike’s ideas. The focal point lies in Soros’s theory of “reflexivity” which can be considered of speculative nature. At the time of the financial actions of his hedge fund “Quantum Fund” he was a pure speculator with some philosophical ideas about an “open society”. Soros once said :

“It doesn’t matter at all whether you are right or wrong. All that matters is how much money you make when you are right and how much money you lose when you are wrong.”

However, the theory of reflexivity сan’t estimate the value of an asset, comprehend long-term prospects and is aimed at extracting short-term profits with the help of mass psychology using media and advertising. Sometimes this theory works well, a good example of hype would be the succesful initial public offering of BYND stock - the company that produces an artificial meat substitute. But then this business went poorly and the stock fell. Every step he took in speculations was with his new ideas without the possibility of using standard NPV, IRR and other models in real investments. Soros had a well-developed intuition that helped him speculate. As he said:

“My personality is that I don’t have any particular investment style. Every time there’s something new – new approaches, new methods, new ways to achieve your goals.”

Soros even worked for a while with Jim Rogers who additionally carried out the fundamental analysis. So this theory not about business but about speculation. From this point of view, the principles of Warren Buffett who are adheres to the theory of value investing is much more suitable.

Strategic points

A) Pocket project represents a real business with a new category of digital asset - pokt. The token price is not the best representative criterion for the success of the project’s business. Hence, it would be better if this proposal was presented in terms of business prospects (relays) rather than a token price.

Let’s make some calculations to comprehend the necessary number of relays for token price levels. For instance, if we eliminate the speculative component moving away from exchanges when where are only clients which buy tokens from Pocket network then price (intrinsic token value) will be created only by demand from clients and inflationary supply. In this case:

• 5 usd per 1 pokt at the current level of inflation will be correpsponding to 220k pokt * 5 usd / 0,00000085 = 1,3 trillion daily relays;

• 3 usd per 1 pokt will mean 780 billion daily relays;

• 2 usd per 1 perk will show 520 billion daily relays;

• 1 usd per 1 pokt will give a number of 260 billion daily relays;

• 0,5 usd per 1 pokt will be stipulated by 130 billion daily relays.

As a token price rises to 5 usd inflation can be reduced to 30% (calculation not shown) - a level that would meet the interests of node runners and stakers (on condition of 10% allocation to DAO and 45 000 (15k pokt) nodes)

Next, as it was shown in the new tokenomics model that for LLMs the price per relay can be twice as expensive. It is not possible to say what part of relays would come from LLMs but there could be guessed offhand that 20%, then an average price per relay would be 0,00000102 usd what gives another (0,00000085/0,00000102) 20% reduction of relays for the target prices. Then the adjusted number of relays to reach the target prices will look as follows:

• at 5 usd per 1 pokt - 830 billion daily relays;

• at 3 usd per 1 pokt will mean 500 billion daily relays;

• 2 usd per 1 perk will show 320 billion daily relays;

• 1 usd per 1 pokt will give a number of 167 billion daily relays;

• 0,5 usd per 1 pokt will be stipulated by 83 billion daily relays.

In addition the Price to Earnings ration (P/E) from the traditional financial analysis can be applied to evaluate the number of relays which are needed for a price of 5 usd per token and for the company to be considered well-establlished in the market. In this example revenue will be taken instead of net profit. Number of tokens is taken after inflation increased by 20 percent. The current P/E ratio for Pocket is 411, сomparable to the value of venture dotcoms. Provided that the average P/E ratio for technology companies on the stock market is about 40 it is possible to get a number of relays:

P/E = (5 usd per token * 1,7 bln tokens * 1,2 additional inflation in proposal ) / (Daily Number of relays * 0,00000085 usd per relay * 365 days) = 40

where Daily Number of relays should be 820 bln which is close in value to the aforementioned assumptions based on the estimation using intrinsic token value.

If to speak in terms of reflexivity or “expectations” of market participants the reflexivity ratio can be got as the market token price divided by the intrinsic token value what equals as of today:

Reflexivity ratio = 0,045 / (524 mln daily relays * 0,00000085 usd per relay / 220 000 pokt) = 22,5

When a token rose on the news about Big Announcement, Upbit listing, Crypto listing, Andrew Kang tweets then this ratio reached 100. Why is this number “22,5” attractive to date? On the reason the today’s reflexivity ratio is net-clean and in circumstances of uncertainties is based only on goodwill of Pocket Network. Moreover, this project isn’t backed by T1 VCs like Jump Trading, Jump Crypto, a16z, Paradigm, Multicoin, Polychain, Binance Labs, Coinbase etc. which have vast marketing possibilities.

What does this “22,5” reflexivity ratio show? This number allows to 22,5x reduce the number of relays at the appropriate token price levels based only on the intrinsic token value.

So combining both approaches together there can obtained the ranges of the volumes of daily relays necessary to reach the token price levels:

• at 5 usd per 1 pokt - 37 …… 830 billion daily relays;

• at 3 usd per 1 pokt will mean 22 ……. 500 billion daily relays;

• 2 usd per 1 perk will show 14 ……. 320 billion daily relays;

• 1 usd per 1 pokt will give a number of 7,4 …… 167 billion daily relays;

• 0,5 usd per 1 pokt will be stipulated by 3,7 ……83 billion daily relays.

Thus, Mike’s proposal should include the additional target criteria expressed by the volumes of future relays (proposed by Mike in his vision) and tied to the compensation price levels. This step will show the project’s confidence in the future and its focus on the long term prospects.

B) That part of the proposal where is suggested to increase inflation by 20% has the ambiguous consequence and the questionable impact on the token price. If I caught the course of actions right this step wouldn’t be of any avail for stakers besides dilution because 75% of daily inflation will be directed to DAO. It turns out that the total supply will be 1,7 bln * 1,2 = 2,04 bln, every day 930 000 tokens will be minted and 700 000 of which will be moved to exchanges to fund the further work. Will it create a pressure on price via selling on exchanges? Certainly. This action will be bringing down the price further because this measure violates the economic principle by significantly increasing the number of tokens without providing them with collateral (relays).

So a big contradiction appears: on the one hand, the proposal declares its intention to increase the price of the token, on the other hand, unsecured inflation will bring down the price of the token. In economic terms these additional tokens can be considered as a credit secured by future contracts for relays from AI and other companies. The second important point is how will these tokens be sold if there is no liquidity so as not to collapse the price? In order not to destroy the price of the token, liquidity must be created.

That is why in Mike’s proposal the timeliness of steps is urgently essential. In this sense one of the best scenarios for the development of events may be the following:

1. in 1 month a big contract with AI company should appear (it can be a Memorandum of Understanding or something like that) in order to show that this time the Pocket network forecasts about the volume of the AI relay market are correct and the company is moving in the right direction because the previous bet on the market of regular relays didn’t justify itself (instead of the planned 5 billion, by this time there are only 500 million paid relays);

How to secure such a contract, not yet known but I don’t work at Pocket to answer, the only thing that can be said is that now the main vector of work should be aimed at obtaining such a contract to increase the company’s goodwill.

2. in 2 months T1 exchange listings should be executed using all available resources (acquaintances, business connections, backing VCs etc) to create the necessary liquidity to hold the token price at least at current levels.

Tactic point

That part of proposal dealt with the reduction of minimal stake to 5000 tokens is controversial. Why do new people would like to stake in this project if there is no any comfort in staking? Now for staking a person must perform many actions: go to the project website, then visit TG group and find out about Discord, or visit Discord at once, then enter Node Runnder group, then to choose a Node Runner, to understand APY, then communicate via email or other sources, then send tokens because there isn’t yet truly non-custodial staking etc. Can this be considered as comfortable? Certainly, not.

There needs to be done a lot work with Node Runners related to the quality of the staking service when a person enters the website (it can be comparestakingservices or other website) where all node runners are presented with the clear information about APY, available number of nodes or slots for staking and the most important the possibility to stake and unstake via smart contract when a potential staker doesn’t need to send tokens to address of a node runner and conduct correspondence