ParaNotes - a dynamic and fully on-chain mechanism for kickstarting collectives, driving adoption of parachain blockspace and diversifying public treasuries.
(view and comment directly on full proposal here).
Network services: Decent Partners (Subscan) w/ VacuumLabs
Contact: @lightbulbwelsh:decent.modular.im (element)
Date: January 2023
Short description: ParaNotes recompose existing and underutilised ecosystem resources to create a novel process, mechanism and product that utilises novel forms of ecosystem native collateral to align the long term interests of on-chain collectives, parachains and public treasuries, building shared value together.
Requested KSM: 11,706 KSM
Budget: View spreadsheet.
Introducing ParaNotes
ParaNotes aim to introduce a new grass-roots and fully on-chain mechanism, process and product that aims to align the long term incentives of:
- An on-chain collective looking to get funding from treasury to develop activities and initiatives that drive a parachain use case.
- A parachain/thread that has secured a slot and has empty blockspace, some price discovery and a highly illiquid token.
- Relay (system) chain with funding for projects, but currently no stake in the projects it funds.
You can think of a ParaNote a little like a mortgage for a self-build home - the NFTs and associated media are the plans for the house, the parachain tokens representing a pledge of blockspace are the deposit and Kusama/Polkadot is the bank.
ParaNotes are principally coordinated by collectives based on the Polkadot system chain structured as a shokunin style optimistic time delayed pure proxy.
These network agents set a vision, assemble required talent and negotiate proposals that are voted on by the governance of their respective parachain and public treasuries respectively utilising XCM and the bridge hub that will connect KSM to DOT.
Rather than just requesting a grant from the treasury, the collective structures a ParaNote - a convertible asset backed loan (similar to a convertible note).
Collateral is made up of their concept (represented as upgradeable NFTs) and some illiquid parachain tokens which have some nominal value reflecting unused blockspace.
When a ParaNote is created a derivative token is created with 1 KSM = 1 Parachain token.
If KAB price moves positively compared to KSM, then KSM holders get a good deal and vice versa.
The convertible aspect of the instrument enables a ParaNote to be converted by relay governance, with the collateral diversifying the treasury and forming a new model of network native value accrual.
In return, the collective’s ongoing funding is secured in a manner similar to The Fellowship or the Kappa Sigma Mu society, with treasury funding hardwired into the protocol through a runtime upgrade.
In this way, we establish a fully on-chain governed and mandated development pathway for ecosystem teams that demonstrate success over three stages:
- Public (Gov2) grant proposals - initial work
- ParaNotes - more focused development
- Hard wired support - unlocking sustained funding
ParaNotes offer a chance to address the issue of which teams and projects can/can’t request and receive treasury funding using a fully on-chain process that remains open and flexible but definitive in its ability to establish via on-chain governance the will of the protocol.
In the same way the Web3 set out to morph DOT from a security to software, so the ParaNote process can aid us to make clear the current political state of parachains, establishing objectively via on-chain governance whether a parachain is a system, common good or free market design - or indeed part of a new class we call Network Public Parachains (NPP).
Given current industry headwinds, we believe ParaNotes can demonstrate that a more rational, and regenerative crypto economy is possible, allocating resources already within the ecosystem more efficiently and providing more focused onramps for external capital into projects that are designed to create real world impact through the development, implementation and scaleup of [network] public services.
Comments (2)
Hi Rich,
I have read the proposal two times and I am still not able to fully understand the proposal and what is trying to achieve. At the moment it feels like a long discussion thrown into the document (sorry for not being able to find a better description). I believe (and I could be wrong) that proposal is not very clear or concise and that may be the reason for the lack of the feedback or community engagement since this was published one month ago.
The parts of the proposal I am particularity struggling with:
Apologies if I made the wrong assumptions from the proposal but I tried my best trying to understand the provided materials.
This is a very difficult proposal to process.
11,706 KSM is 2.7% of the Kusama treasury. 40% of that you'd like to pay, primarily yourself, for previous and even further research and development of this concept.
This concept may have legs but in writing, as a philosophy, it is extremely abstract and difficult to believe in.
If i can have a crack at the concept (and i don't think the 60h of budgeted governance is going to the token holders trying to understand this proposal) This is a mechanism to take out loans from the relay chain treasuries against "Cultural Collateral" minted as an NFT and parachain tokens (which may or may not have a market value). And all this is governed by additional oversight resources on the relay chain side.
Cultural Collateral appears to me like a very loose concept. In the real world, IP takes years and major investment to become valuable, and much of that is driven by its exclusive ownership, where as here it is open to all.
Token prices are highly volatile, usurped by speculation, and only over very long timelines reflect utility.
This is to suggest that these Notes are high risk and uncertain for relay chain token holders in practice. Besides adding risk, it introduces additional points of oversight for relay chain tokenholders.
Speaking of high risk, it is not until half way through the proposal that we discover the concept will be validated with a loan to Kabocha, your own parachain. While Kabocha has beautiful art, a nice website, and lots of philosophy, it hasn't produced anything tangible -- not a community, not a clear definition of it's purpose.
The proposed note is calculated by assuming KAB's value to be the same as its parent EDG... but even that chain is quiet. Unless i'm looking in the wrong place, just 8 accounts are contributing 2 or more posts in the governance forums per month. (I actually assume I must be wrong, but can't find anything to the contrary).
I could go on, but I don't have time! I can only suggest that instead of pages and pages (and pages and pages) of ideas (again much of this budget is to fund even more pages), the team follow almost all other teams and individuals applying for treasury funds by producing some working MVPs to test concepts, experiment, and help people understand what's happening through practical application. Ideas are the easiest part of building.
Please consider the Kusama treasury is to fund early stage experimentation and proving concepts with funded action. Once the team and idea is established in this way, it could be funded more sustainably via polkadot leaving the Kusama treasury for other teams looking to experiment.
Alternatively, parachain teams could easily gain access to treasury funds by building applications for the common good such as InvArch's Saturn project.