This post builds on points raised in All metrics are imperfect, but many are useful. Let’s make them more available and the in voting GMI Crypto Media Podcast proposal which aims to use differentiated original media initiatives, strategic distribution and wallet-less onboarding to drive new and active addresses on Kusama and beyond.
It also builds on experience gained developing, structuring and managing over 30 on-chain proposals / teams, developing the Kabocha parachain from scratch via fully on-chain processes with no external capital or legal entity, cofounding Copa90 and corporate innovation at Nike, The Guardian, BBC and Channel 4.
Rn there are about 22,000 active addresses in the ecosystem, though actual numbers are likely a lot less given most people / teams operate multiple addresses.
Currently there is no basic agreement on how to calculate the most basic metrics that define the relative adoption and activity of substrate based chains.
At the same time investors and the retail that follows are reaching for credible approaches to assessing fair value of crypto-networks - with daily transation volumes (fiat / units of value) x number of active users being used as a proxy to value networks.
In general, crypto has been bootstrapped on the incentives of legacy social media, with the whole industry developing in lockstep with the data monopolies and influencer economies of Google, Meta and TikTok. As ICOs and crowdloans have proved, a highly active discord, Twitter or YouTube is a good way to assess initial hype, but a very poor proxy for maintaining sustained activity and adoption through anything other than financial speculation.
Edgeware, Polkadot and Kusama treasuries exist to drive adoption of the underlying technology and yet for the most part marketing spend (and spend in general) does not have a clear focus on the return on investment (ROI) to token holders.
Since treasuries are denominated in the native token of the network, their relative valuations are something of a mirage. Right now the Polkadot treasury has c.$270m to spend, however this fiat denominated total is not all it seems, since if there is no sustained adoption that closes the gap between valuations and network adoption, these treasuries will disappear as fast as they appeared.
To make things even more complex, treasury spending to teams creates natural sell pressure as they need working capital to deliver projects that provide a path to the next wave of adoption - so in effect, if funds are deployed by the treasury to builders, this may result in a steady devaluation of the native token, and its reserves, which results in more conservatism from token holders who react negatively to this perceived ‘loss’ - basing their expectations for growth of the network valuation on today’s parity, plus 10x etc.
The resulting contradictions - high valuations, low adoption, large treasuries, natural sell pressure and the political machinery of majority rule creates frictions that are likely irreconcilable without rethinking some of the basic governance, funding and organisational structures that represent current orthodoxy.
Only by accepting the current state of affairs and understanding the conflicting incentives that are locking up the resources and talent within the ecosystem, can we begin to pick our way through what are highly complex and interdependent issues.
Areas of improvement
This is a non-exhaustive list, feel free to add any thoughts.
Standardising basic metrics
Per All metrics are imperfect, but many are useful. Let’s make them more available we need to standardise the measurement of basic on-chain metrics such as new and active addresses to provide consistent and trusted data for teams, proposers and external parties.
Valuing treasury spend
We need to move towards assessing. valuing and rewarding treasury spending using key performance indicators (KPIs) and return on investment (ROI) related to driving new and active addresses (aka engaged users) of Kusama and Polkadot in the first instance - and from there towards driving utility of parachains.
This doesn’t mean curtailing existing education initatives, but it does mean beginning to value performance over just activity and hard work. Busy ≠ effective even if it sometimes can feel that way - we can work smarter.
Trustless mechanisms for performance related proposals, spending and rewards
We need to then define ways to establish trusted (trustless) on-chain mechanisms to track spending and the effectiveness of that spend, then play that back into the spending process in a way that avoids the requirement for a council, or some other assessment body to ensure payout based performance. This may be required in the first instance - e.g. Bounty / curator type structures, but there needs to be a roadmap towards this being automated and therefore more scalable.
Diversifying funding sources
We need to diversify funding - taking the pressure off the treasuries to solely fund ecosystem innovation, but requiring them to be the first money at the table.
The first money is always the hardest to find, then you tend to find that this de-risks the decision of others - in venture capital its known as leading a round. The treasuries need to be seen through this lens.
This is analogous to taking the role of a novel crypto academic/political/technical institution such as MIT who seeded the MIT Media Lab, which then moved towards a model where external organisations (tech/fashion/governments/consumer electronics) paid membership fees to support specific research initiatives and could in return access the talent and license free IP / tech developed.
Membership, available in several different options, provides a unique opportunity for corporations to have access to a valuable resource for conducting research that is too costly or too “far out” to be accommodated within a corporate environment. It is also an opportunity for corporations to bring their business challenges and concerns to the Lab to see the solutions our researchers present. Membership levels - MIT Media Lab.
The recently developed Crypto Patronage app by Shokunin is a very basic version of what can become far more effectively crypto-native machinery for connecting external patrons with adventurous on-chain collectives and radical forms of public R&D, of the sort that is chronically underfunded and ultimately inaccessible to most people who do not have the ability to access or contribute in existing forms of academia.
Smoothing the innovation process
Currently teams approach network treasuries and voters with a discussion post that may be interated a few times, before putting forward an on-chain proposal that requests funding of some amount.
In the current process, this proposal is assessed by:
An expert body such as a council.
Limitations of this model
- a single council of c 10 people cannot possibly assess all proposals and domains well
- due to the sheer administrative weight, this is not a scalable solution.
- we can add more members to a council, but then we introduce coordination issues.
- Currenly rank weighted voting such as that presented by The Fellowship attempt to square this circle, giving more experienced members of the collective greater decision-making weight. This is an interesting solution, but also introduces potential issues over time with concentration of power and a reduction in the collective’s ability to make radical leaps of imagination that is the hallmark of more chaotic and open systems.
Or a binary yes/no vote that is decided through token weight.
The challenges of this model are well known - low voter turnout, whales driving decisions and majority rule leading to reduced innovation as familiar ideas are funded, since on the surface they make more sense, than ideas that may be seen as more abstract, experimental or expensive.
We need expert bodies, but we also need to sustain a democratic and open mission that stays in line with the principles, rather than just the slogans of Web3 - is there a way to square this circle, and also leverage the emerging capabilities of OpenGov and agile delegation?
Proposals as organically evolving governance delegates
The ability for token holders to delegate their votes to addresses (on-chain organisations) is a fasinating capability of the Polkadot system, especially within OpenGov’s framework of agile delegation.
If we begin to see proposals as a potential pre-formation process for project teams and R&D collectives, rather than an end point to be voted on, we can radically rethink the user journey of treasury proposals.
How this could work in practice:
A proposal is presented in its most abstract form within a new governance system - it could be the length of a tweet, or a novel, it might be primarily represented as written text, code, or visually - sketches, diagrams or moving image.
From the moment it is published - no matter its form or perceived completeness it becomes a governance delegate - anyone can pledge their votes to this proposal.
In addition, we allow anyone, anywhere to comment, contribute and develop on the first iteration of the idea - they can even fork the proposition, into a new proposal delegate should they wish.
From this moment on, every proposal is an emerging experiment in co-creation, collaboration and coordination, where those who contribute meaningfully become part of an emerging collective endeavour - that can in turn offer them economic upside in the future income of the group. It might begin as a small group, but who is to say this collective won’t eventually launch a new parachain?
When we apply this model to existing social media, we can see there is a path to onboarding values aligned creators with pre-existing fan-bases, and gradually transitioning their followers, into collaborators, with stake in the creative direction and economic upside of the initiative.
With each collective emerging organically - we can begin to communicate their stories, and naturally as their work becomes less abstract, and more understandable, they should receive more governance delegations from holders who will each understand and relate to the relative merits of each proposal in their own time.
If we partner the concept of fluid proposals with on-chain ROI and more diversifed funding models we can begin to drive more radical innovation in the ecosystem from grass-roots - discovering more interesting and effective approaches than will emerge from the current structures.
You can read more on this alternative approach here.
We still need to address the funding issues for the instigators of these atomic ideas when they at their most delicate - providing some sort of initial funding that can enable groups to persist with their exploratory work ahead of gaining the votes they need through agile delegation.
Historically this R&D has come from the Web3 Foundation Grants, however their resources are limited, their time is scarce (same scaling issues as council) and their mandate is generally towards purely technical areas, rather than a more experimental entity that aims to push beyond the boundaries of existing domain expertise.
We can think of this phase of R&D funding akin to the artists and representation (A&R) work that has been historically done in record labels - finding raw talent and then helping them develop over years, before presenting their work to a more general audience who would not have recognised potential that early.
Establishing a Polkadot Innovation Bounty
A potential way we can bootstrap this R&D funding ahead of making a fully fledged MIT Media Lab work would be to create an evolving Polkadot Innovation Bounty with a set of curators with a track record at pushing forward novel concept, projects and approaches, dedicated to kickstarting ideas that can demonstrate success in the aforementioned areas:
- Standardising on-chain metrics
- Demonstrating more effective treasury spend ROI when related to on-chain metrics
- Trustless mechanisms for performance related proposals, spending and rewards
- Diversifying funding sources by onboarding external public innovation patrons
- Smoothing the innovation process
- Seeding talent and their ideas at their most delicate
- Kickstarting agile delegation to emergent proposals