Guidelines on the use of Treasury funds by non-individual on-chain entities.
Hello all. 👋🏿
I am wondering whether there are any guidelines on DOs and DON’Ts regarding the use of Treasury funds by recipients when these are registered as an on-chain entity which is (but not limited to) an organisation, a team, a collective, a 2+person project.
Specifically, I would like to know whether a collective/team/project that received Treasury funds can use these to partake in:
- Staking (including liquid staking)
- DeFi (including Liquidity Provision)
- Democracy (including delegation)
- Crowdloaning (including auctions)
From my perspective, when submitting their proposals, projects request funds that are needed to complete specific milestones. Making use of these funds towards different ends would be, in my view, not only a very risky endeavour that could jeopardise the project’s progress, but it would also create a lot of confusion in the context of Gov 2.0 re: which exact individuals are behind a vote/delegation.
While I do not advocate for a tight moderation on the use of Treasury funds by projects/teams/collectives, I do think that transparency re: bookkeeping entries should become an important part of the reporting process. Afterall, if proponents can take the time to itemise the monies that they need by the hour, they shouldn’t have much trouble detailing how that money was spent at the end of the day, so that the general public can be kept in the loop.
I’m curious to hear from your views on this matter.
Thanks! 🙏🏿
Comments (3)
Great topic, thank you, Anaelle!
From my experience & observation of other entities receiving treasury grants, and also receiving grants for our own company — in addition to direct labor (how much the company will spend on executing the proposal, e.g. if we are talking about developing something, then it's salaries + taxes. However, in addition to the direct labor, proposers usually include at least 2 things — safety buffer (e.g. 5-25% for inaccurate initial estimates/force majeure) and profit buffer (e.g. to cover cash gaps between proposals, to maintain business & grow, etc). That allows companies to be funded completely by Kusama/Pokladot treasuries, bringing value & common good services to the ecosystem by executing the treasury proposals.
Taking this in mind, I personally see nothing wrong in using both for any stated reasons (Staking/Democracy/etc) — the councillors & community agreed with the price stated by the proposer, assuming that the proposer has executed well the proposal (i.e. delivered what was promised & agreed on) — now these funds are in their ownership and basically, they can do whatever they want, and utilizing them within the ecosystem — participating in Staking & network security, voting in Governances for shaping the eco — is one of the best things (in my opinion) what company can do with these funds.
Hi @anaelleltd, thank you for posting this: it is in an interesting discussion.
In my role as "advisor" (if you will?) for teams that aim to submit proposals to treasury, I always mention the fact that funding from treasury needs to be directly related to the development of the deliverables the team has promised to the community: the main goal of any funding from treasury needs to be fulfilling the promise of the team towards the community in due time. If the team does not have a runway in place to use the treasury funds for other goals (as you mentioned: staking, crowdloans, democracy and DeFi) they should make sure to use them to complete any project directly related to the proposals they submitted, to be delivered in due time based on the proposal conditions.
The teams that submit proposals to treasury are also part of the community, and they should be able to participate in the activities mentioned above: but not at the cost of not delivering what they promise to the community. I think if they can complete development while looking for alternative source of funding via staking or DeFi, this should not be an issue. However, I do think that transparency in the use of funds should be part of the reports the team delivers to the community - and most importantly, if a team suffers losses due to price volatility and participation in activities not directly related to their project development (aka. what the community approved) then they should lose their right to request compensation for any difference in the allocation resulting in them participating in staking or DeFi.
For these reasons, it is my belief teams should first ensure a development runway for the proposals they submitted and got approved, to only after engage in alternative activities seeking profit in the ecosystem: a more "conservative" approach, if you will.