Rethinking the burn - optimising the Kusama funding system beyond KappaSigmaMu

There is no waste in nature, everything is recycled - David Suzuki

Within the current design of Kusama and Polkadot protocols there exists a treasury and a burn mechanism, designed to incentivise the spending of accrued funds.

In the current 7 day spend period on Kusama 1000 KSM / $27k will be burned unless it is utilised via spending proposals.

Currently 99.8% of that spend is unused, 0.2% is redirected to the Kappa Sigma Mu society.

This current design is hardwired into the pallets, and cannot be tweaked via OpenGov or the previous generation of calls - instead it requires a runtime upgrade.

Within Polkadot, this waste is even more pronounced - in the next spending period 403.76K DOT will be burned, equating to $2.18m in old numbers.

So far this mechanism has been presented as a stick used to beat voters into releasing funds, however it has not had the desired outcome, so perhaps we could rethink its purpose, as a bootstrapping budget, to demonstrate that a lot can be achieved through a little.

Burn -> Ignite

Rather than burning money, we can see it as a streaming fund, that can ignite ideas at the lowest possible levels, into grass-roots initiatives that are themselves also designed to ensure the steady flow of funding, rather than drip fed proposals.

We propose redirecting Ignite into initiatives such as the OpenGov Incubator where the money can be better utilised to kickstart research, development and experimentation for on-chain organisations.

We would aim to scale using the same approach on Polkadot.

This can then be seen as the upstream proving ground for more experimental projects that may then return for larger funding from Kusama and Polkadot treasuries.

KappaSigmaMu - where does the experiment go from here?

Currently the continued treasury benefits received by KSM Collective are from a hardwired runtime upgrade, rather than through more well known forms of on-chain governance. The spend is still mandated by holders given it required approval of a runtime upgrade, but that does not mean funding cannot be overturned through a new PR.

Four potential next steps:

1. Kappa Sigma Mu is presented as a noble experiment, but one that has ultimately failed in its goals of driving adoption of artistic communities and should therefore not benefit from perpetual, unchallenged funding.

Outcome: A PR is submitted to remove the funding via a runtime upgrade and the 0.2% is burned (for real).

2. Kappa Sigma Mu is presented as a noble experiment that hasn't had the impact it was designed to, but the mechanism has value.

Outcome: A PR is presented to redirect funds to a new address and organisation who submits their candidacy for a stab at delivering on the experimental mantle.

3. Kappa Sigma Mu is presented as a noble experiment that is still early in its journey and given all of that ink splattered about, there is some literal skin-in-the-game with the motivation to make the society work over longer time horizons.

Outcome: Funding to KappaSigmaMu continues but is subject to some annual review that requires a report of activities and experiments - it doesn't need to hit concrete deliverables, other than delivering on its promise of fostering innovation.

4. Kappa Sigma Mu is presented as a noble experiment that is still early in its journey and the potential to work over longer time horizons. In this way, we are trusting that something will happen. Given this faith - we can present a parallel execution of the KappaSigmaMu experiment that benefits from the same 0.2% burn mechanism to sustain its experimentation and R&D, but does so with different onboarding, membership and indeed perspectives.

Outcome: A PR is submitted for a runtime upgrade that both increases the burn to 0.4% of the treasury and redirects the new 0.2% to a new on-chain R&D focused organisation.

A way to bootstrap R&D collectives

If we assume 4 is perhaps the preferred and fairest outcome for all (ink or no ink), then we can see the burn model in Kusama as the pre-ignition phase for on-chain collectives of resolutely anti-disciplinary teams, able to develop their experiments with some basic creative income, before presenting the output of their adventures in more formalised forms to the less mobile forms of on-chain governance.

Currently Polkadot burns 1% of treasury each spend period - given Kusama's chaotic credentials, there is no reason why we cannot progressively invert the current incentives, moving up to 1% of the treasury to match Polkadot and enabling 5 independent research collectives each receiving 0.2% of the burn, or indeed beyond that to 10% of Kusama's supply per period, on the road to incubating up to 50 on-chain collectives.

This ratcheting of incentives not only frees up funding for experimentation - it also begins pressing holders to spend funds a little more adventurously.

At this stage in the network's history and development, the danger of not taking risks should be there for all to see.

Final thought

In general, the issue with large treasuries denominated in a highly volatile native network token, is they create unexpected incentives that tends towards protective and conservative spending, creating bipartisan divides between proposers (want funding) and voters (defend the treasury).

Since Substrate networks are in effect sovereign social networks sitting atop a baked in money printing machine, the relative value of this treasury is constantly in flux, and really against the current economic environment, the opportunity is for us to move away from a hodling mindset - itself a meme born to secure the bags of those already holding, towards driving real economic activity - measuring progress within DotSama by flow of money, not just price, and in turn considering more interesting narratives for what backs this money.

If there is one thing crypto is famous for it is profligacy and waste, by addressing one of the basic issues in our current system, we can begin the process of questioning the basic design parameters and incentives of the current system, optimising towards a more regenerative and resourceful approach that aligns better with Web3's stated intentions.