PNF 2023 Budget and 2022 Accounts

[Dermot (Dermot O'Riordan)]

Please see here for a link to the Foundation’s budget for 2023, PNF’s finalised balance sheet as of 31 December 2022 and PNF’s P&L for 2022.

What is the philosophy behind the budget?

There is a quote - sometimes attributed to Ann Winblad - that is apt when it comes to resource allocation, “you are always going to be short of people, always short of money; always short something of value, so you have to find leverage points”.

Our immediate call to action at PNF is to execute the mandate set out in our “Foundation for the Future” post to establish “a credibly neutral entity who can support [Pocket Network’s] stakeholders and bolster the efforts of the DAO”.

In other words, we believe that Pocket’s community is the point of maximum leverage in the Pocket Network ecosystem. And, everything in PNF’s budget for 2023 - outside of mandatory administrative and compliance costs and essential infrastructure like Copper Custody fees - is intended to answer the question of what investments we can make that will maximally leverage Pocket’s community.

As you will see from the budget, these investments primarily consist of forming a team of leaders that can work with the community to unlock them and amplify their efforts via grants and direct support.

These investments into our team and the community will set us up for successfully executing our public roadmap, which we plan to share next week.

How do we plan to keep ourselves accountable?

It is vital that we engage in two-way conversations around problems and opportunities in the ecosystem and keep everyone up to date with the latest in our roadmap.

We will work with the community to develop a set of metrics to hold ourselves accountable. This workstream will take place immediately after the initial phases of Project DNA are completed in the coming weeks.

Additionally, we will release our first quarterly transparency update before the end of this April and quarterly thereafter. And we will seek DAO consent for any “special transactions” or any spending that falls outside the budget’s remit.

@JackALaing will share more details soon on our strategy for ensuring we effectively make ourselves available to the community. In the short term, we will engage with the community via the foundation category here on Pocket’s forum, Discord, and the community Telegram channels. We are open to feedback from the community on how best to do this, and we welcome ideas for any other communication mediums the community would find beneficial.

As a reminder, as stated in our conversations with the community before the proposal on the new PNF went to vote:

@Dermot

PNF will need financial support from the DAO in the future to continue its mandate, so it will be a crucial priority for those leading PNF to showcase to the community exactly how we are deserving of current funding and what we plan to do in the future to deserve any more.

Next steps

Please review our budget, and feel free to ask us if you have any questions. In addition, you will see some commentary included directly in the spreadsheet on a separate tab under various relevant headings.

We are excited to get going and invest in Pocket’s future!

Dermot, Jack, Nelson, Ben, Ming

[poktblade (Blade)]

Hi @Dermot

Thanks for posting this transparent P&L of PNF expenses.

I see that last year, PNF spent a total of below on R&D costs.

PNI Payments - Stables	5,828,615
PNI Payments - POKT	1,520,115
Total R&D costs	$7,348,730

Who authorized this funding on PNF’s behalf? it would beneficial if the directors can comment on this expense and give us retrospective thoughts about the PNF to PNI expense, the outputs (did the expense meet expectations, were there any success criteria?), and what the directors are looking to change for 2023. I know there’s been a couple of conversations about extending this to other community members to work on projects and receive similar R&D grants - hence why I’m asking.

In the 2023 Budget, I don’t see a budget for PNI, only the “community” (which is inclusive of PNI, I assume). Is this correct - and all of the R&D will be paid in POKT?

Community expenses	$ p/a	POKT p/a
Community Programs	$50,000.00	0 POKT
Grants	$0.00	4,000,000 POKT
Conference & Travel Expenses	$40,000.00	0
Total community expenses	$90,000.00	4,000,000 POKT

[Bfishgambo (Brent)]

I don’t think we should be giving salaries to part timers. It’s to hard to moderate. What is 80% of a persons time anyway? I support the full time salaries but cannot rationalize giving anyone a part time salary. Especially at the price we are paying

[Bfishgambo (Brent)]

It seems like a manipulation of dao funds to meet directors needs when it should be the other way around

[nelson]

HI @poktblade, happy to add some context on the PNI payments. These payments were authorized by the previous PNF directors, Stephane and me. PNF has had a service agreement with PNI since the launch of the network to perform v0 protocol development, v1 protocol research, portal development, maintain the altruist network and collaborate with the foundation on everything from ecosystem events to marketing.

In hindsight, I would say we spent more on PNI payments than we should have, given the current market environment and declines in the value of the foundation POKT treasury over the past 12 months. The expenses did grow beyond our initial expectations as the PNI team scaled. In terms of measuring the success of the service agreement, there are certain areas where things could have been handled better and in leaner, more efficient ways, but overall a lot of great progress has been made. Going forward with the recent changes to the foundation and the passing of PIP-26, we want to shift to being more community-facing and scaling through the community.

In regards to the budget for PNI, that is correct. We have not made any commitments to PNI Budget for 2023 and will focus our funding efforts in 2023 on the community.

[JackALaing (Jack Laing)]

Following up on Nelson’s post, I can provide more detail on the 2023 budget.

The budget available to the community is not only those specified under Community expenses. The Contractors & Bounties line item further up in the spreadsheet includes bounties that PNF may put up for specific R&D work. We’ll also look to move quickly and hire part-time contractors as needed to deliver on any projects we’re leading. This means we will have the capacity to spend up to $150k USD on DAO contributors, in addition to the POKT allocated.

We’re also going to launch a structured grants program in the coming weeks, which will allocate POKT to specific areas to 1) provide a seed grant to help builders bootstrap projects without the friction of a PEP (e.g. SendNodes when they first started their work on a browser wallet, Poktfund when you first started work on the mobile wallet) and to 2) retroactively fund public goods that community members are maintaining on behalf of the wider ecosystem at their own expense (e.g. Poktscan, RPCmeter, Node Pilot). Our plan is to spin this program up in a lean experimental fashion, with the discretion of our own funds, then when the program is proven to work we can scale it up with the help of more POKT from the DAO treasury.

You are correct that there is no budget for PNI. To be clear, PNI could be eligible to receive funds through the Contractors & Bounties and Grants line items, but they will have to play by the same rules as every other contributor. We anticipate PNI becoming self-sufficient and, therefore, in an ideal world, all of this budget will be going to other contributors.

[poktblade (Blade)]

@nelson

I would say we spent more on PNI payments than we should have,

@nelson

In regards to the budget for PNI, that is correct. We have not made any commitments to PNI Budget for 2023 and will focus our funding efforts in 2023 on the community.

This would’ve been great - if there were funds left for the large scaled community we have now today. I hate to dwell on the past, but the recent past affects the present and the future. PNF paid PNI nearly $7M in assets in 2022, and in 2023 today we are now moving forward with $190K and 6M/POKT as a starting budget for the entire community, which has grown just as much as PNI did!

There was an amplitude of time to make the decision to diversify and adjust to invest more into the community soon after it was clearly obvious PNI was bottlenecked in v0, lacked direction (RE: the shift of engineers and execs leaving), the vision to do proper infrastructure management for the Portal, etc that burned so much $USD. I am not disagreeing the funding helped Pocket grow, but I also think it is possibly one of the many reasons why they are in the position they are today, thanks to how much was subsidized from PNF (i.e infra cost and staffing). How does one justify this expense if the goal is to be a credible neutral entity that represents Pokt Network? To be frank, I did not even know about this until very recently - so I am starting to really question where was PNF the entire time as I do not recall any of the directors (Stephane and Nelson) being present at all in any of the community discussions.

To be clear, I’m not here to dwell on the past entirely. I feel confident moving forward that the PNI is on the right path forward, and the new PNF team is laser-focused on being a credible neutral entity. However, thanks to these decisions, PNF is now operating on a much lower budget for 2023 while the community and the DAO (to a certain extent) feel dependent on PNI now due to how much was funneled to them. If it was you and Stephane who authorized these decisions and had the power to change course and did not, at what point do we draw the line if you are actually acting in the best interest of POKT?

[ethen]

I think Nelson should resign. I’d like to see Cryptocorn in his place if he has the time and is up for it.

And if Nelson brings skills to the directors that the other directors are lacking, then the foundation can contract someone from the DAO who is capable.

[Caesar]

Been following this since the beginning, here are a few thoughts:

a) PNF should be analogous to an independent board in the trad world.

b) However with better transparency, representativeness, checks and balances and trustlessness.

c) “Credible neutrality” should be ensured & enforced within PNF first before being a guardian outside- MOST IMPORTANT POINT!

d) And if visible conflicts arise (possible even unintentionally at times), those should be immediately removed. Can’t be “trust me bro”.

e) Org should be lean, flat and straightforward without the need for explanations and justifications. Such as 80% of his/her time, part-timer with salary, 2.8 Vs 2, etc are bound to raise questions.

f) Overheads in the budget should be few, straightforward and self-explanatory.

g) Large expenses (could agree on a threshold) should be up for DAO voting. Nothing is so critical that it can’t wait.

h) There should be quarterly reviews, provision for changes and nothing should be locked for a year.

i) Referring to #b, should avoid becoming a cosy club of the elites. They need to be visible, available, contributing, grinding like everyone else, have very clear accountabilities.

j) There is no business case for perpetuating 100% of the old guards in the new structure other than convenience. Could explore adding some fresh blood and diversity- have builders, community representatives.

All probably won’t make sense, hopefully a few will.

Would let fellow community members talk about 2022, as those wouldn’t be my original thoughts.

[nelson]

Our initial vision for the foundation was that it should be run as a lean entity with no one on the payroll (not even directors). It was just Stephane and I as directors. In line with this thinking, we agreed at the time that the foundation would keep its operations to a highly narrow operational focus, meaning that we would not run nodes and focussed only on negotiating and funding ecosystem costs - such as exchange listings, custody integrations, and market maker fees - and core protocol development.

When the need for a lean client was first identified in March last year, PNF should have been in a position to immediately bounty this work rather than requiring a PEP via DAO. And the R&D budget from that point forward could have included payments to Poktfund et al. for delivering LeanPocket.

But hindsight is 20/20. At the time, PNF wasn’t an active entity, didn’t have the needed systems in place, and PNI (until 2022) was the only contributor to core products like the protocol and the Portal. LeanPocket was truly a first for our ecosystem (the first major protocol contribution from someone other than PNI). It’s these lessons from the last year that are informing the work we’re doing now to establish the systems that we were missing.

This leads to the relevant line items in the budget for this year:

Contractors & Bounties: $150k USD + 2M POKT

Grants: 4M POKT

From the establishment of the foundation, it was expected that initiatives would be funded by the DAO, not the foundation. And to help nudge things along in this direction, I made a proposal - PEP-15 - recommending that the DAO sell some POKT for stables so as to have funds set aside for ongoing community grants funding, which the community was ultimately strongly opposed to.

To remain neutral as an organisation, we largely tried not to weigh in on public discussions, claim a vote in the DAO or be seen steering things in one direction or another. Over time we began to see the DAO becoming quite risk-averse, limiting this source of community funding, which was why we felt there was a need for the foundation to expand beyond core protocol funding. This led to PIP-26 and the new vision for the foundation, including bringing on Jack, Dermot, Ben and Ming to allow us to take a more hands-on role and ultimately be facilitators to the community.

You are right to say that PNF overspent in 2022, and in hindsight, we should have raised more capital when prices were higher. However, our goal was to remain aligned with the community and only sell the minimal amount of POKT necessary to provide ongoing funding for core protocol development. Unfortunately, the market for POKT dried up in the second half of last year, and the foundation hasn’t received any additional stablecoins since the token sale to investors in January 2022. The foundation still has a substantial budget to make a significant impact on the community this year. Given PNF’s much smaller treasury of POKT holdings when compared to the DAO, the DAO will always be the natural funder of choice for any large POKT grant. And it is a key priority for us in the coming year to make it faster and easier to fund contributors, whether or not that funding comes from PNF or the DAO.

[poktblade (Blade)]

@nelson

it should be run as a lean entity with no one on the payroll (not even directors).

@nelson

At the time, PNF wasn’t an active entity, didn’t have the needed systems in place,

I’m confusing timelines here - as to what PNF was before and after PIP-26. Thanks for the reminder.

@nelson

Over time we began to see the DAO becoming quite risk-averse, limiting this source of community funding, which was why we felt there was a need for the foundation to expand beyond core protocol funding. This led to PIP-26 and the new vision for the foundation, including bringing on Jack, Dermot, Ben and Ming to allow us to take a more hands-on role and ultimately be facilitators to the community.

Okay, this timeline makes a lot more sense now. Thanks for walking me through it.

@nelson

I made a proposal - PEP-15 - recommending that the DAO sell some POKT for stables so as to have funds set aside for ongoing community grants funding, which the community was ultimately strongly opposed to.

Yep, hindsight is 20/20. Given the lack of Stable diversification right now and how “dry” we are on that end (in comparison to last year), what’s PNF’s strategy to raise capital to deploy and fund more community grants that require stablecoins, i.e protocol development, similar developments spent in 2022, and a strategy to maintain sustainable moving into for i.e next year’s budget. From the looks of it, PNF only has a one-year runway for stables, unless they sell their tokens.

I would also push the PNF budget more for the community projects, raising it to 10M POKT which leaves PNF with approx 5M POKT left in the treasury. This can also be reimbursed from the DAO later on once everything is proven to work. This gives more flexibility and lucrativeness for PNF and community members to participate and scales more with the number of organizations that are interested today

[Bfishgambo (Brent)]

Adding more directors and providing salaries just pushes the dao towards centralization. We have a proposal and voting system in place. I don’t understand having directors at all, let alone salaried directors.

[Dermot (Dermot O'Riordan)]

Hey @poktblade

Thanks for all the interest and input so far. From my perspective, it’s exciting to see all the energy flowing through the DAO at the moment. This year feels like a real crucible moment for Pocket, and there is a clear shared interest and passion for making things better and, ultimately, delivering huge value across the Pocket ecosystem this year. Although I think the Project DNA workstream will be crucial for translating this interest and passion into some tangible metrics and values that the whole community can align themselves behind, particularly as we expect the community to grow both in volume as well as the diversity of output this year.

@poktblade

what’s PNF’s strategy to raise capital to deploy and fund more community grants that require stablecoins, i.e protocol development, similar developments spent in 2022, and a strategy to maintain sustainable moving into for i.e next year’s budget. From the looks of it, PNF only has a one-year runway for stables, unless they sell their tokens.

We included the following in the commentary section of the budget:

The budget and projected runway doesn’t take into account our ability to use our POKT treasury balance once the market for POKT improves or any additional revenue sources we potentially have available to us, such as DAO grants, staking validators, and donations from PNI or any other aligned individuals or entities that appreciate our value to the ecosystem.

In short, if we execute our mandate and deliver the value to the community that we set out to achieve, our funding position will become a lot easier. And we believe can deliver a lot of this value in the coming weeks and months, well in advance of March next year when our stablecoin runway currently lasts until. This point is definitely on our minds, and we appreciate you caring about us hanging around for a little longer! We’ll share more detail on some of these strategies in the coming months.

@poktblade

I would also push the PNF budget more for the community projects, raising it to 10M POKT which leaves PNF with approx 5M POKT left in the treasury. This can also be reimbursed from the DAO later on once everything is proven to work. This gives more flexibility and lucrativeness for PNF and community members to participate and scales more with the number of organizations that are interested today

This is a great point, but as @b3n is in the middle of finalising the spec for the new PNF grants program, I think it will be a more productive conversation if we wait to pick this point up again after he shares the proposal with everyone. We can then discuss how best to fund PNF’s grant programs, ie how much from the DAO and how much to top up (or not) from PNF’s current treasury of POKT.

[Bfishgambo (Brent)]

Also I will add that if we are going to add operational talent then I would suggest finding people that have operating experience. Ex lawyers and VC managers do not have operational experience. I don’t think we should have to pay for that learning curve

[Bfishgambo (Brent)]

Adding PTE’s with salaries already shows our lack of operational capability

[ethen]

This!

Been wondering myself on this whole PNF budget thing.

@nelson

focussed only on negotiating and funding ecosystem costs - such as exchange listings, custody integrations, and market maker fees

this makes sense.

@nelson

and core protocol development.

PNF should not be focused on core protocol development. That work should be lead by PNI with help from community enginerring talent. PNI doesn’t seem to work well with others, they need to get better this.

Ritesh and I recently did a mockup of the portal landing page, PNI reached out for a “partnership” and asked what our hourly rate was. So essentially they look at us as a sub contractor. So a private entity hired by PNF to complete V1 is essentially a subcontractor trying to hire subcontractors.

I work for the DAO and the community. Always!

@nelson

PNF should have been in a position to immediately bounty this work rather than requiring a PEP via DAO.

PNF shouldn’t be managing development work. Let’s leave it to the community to put up proposals, debate said proposals, and then put it to a vote. This is what governance is for. The only dev work I think PNF needs is a site with relevant information.

@nelson

I made a proposal - PEP-15 - recommending that the DAO sell some POKT for stables so as to have funds set aside for ongoing community grants funding, which the community was ultimately strongly opposed to.

Read this yesterday. Obviously we should have sold 10% of the treasury.

To anyone working for the DAO and submitting proposals — you should all be requesting reimbursements in POKT price as of the date its submitted. If you request 20k/pokt/month for 5 months and price jumps from 7 cents to 20 cents, you still have the same amount of pokt. If you request $1500 and price pumps, you’re share of DAO proceeds has just went from 21,248 $Pokt at $.07 to 7,500 $Pokt at $.20. Especially if the price is down. If price is up, then I’d tread more carefully.

The efforts we all put in as a community directly affect the price, whether it be a reddit post, a translation, or upgrading the protocol.

Looking forward to the spec for the PNF grants program that b3n is working on.

[Bfishgambo (Brent)]

I want a salary for 27.649% of my time. Literally makes zero sense

[ethen]

[ethen]

LOL!!!

[JackALaing (Jack Laing)]

Yes, this absence is part of why we had to have Dermot appointed as Stephane’s alternate director just prior to PIP-26.