The Problem
Until now proposals have largely been funded up-front by the treasury. This has removed financial incentives for teams to deliver their projects and resulted in multiple projects never being delivered, with some teams disappearing in the process.
Proposers need to sell their KSM tokens upon receipt in order to protect their ability to deliver. With treasury payouts happening in one lump sum (sometimes several $100k), proposers reported having difficulty liquidating the KSM to FIAT (Euro, USD etc.) or stable coins.
A sale event of a large amount of tokens puts downward pressure on the KSM price, thus harming token holders.
The Solution: Payout bounties
We need to do better at protecting the treasury, make it easier for proposers to liquidate their funds and limit price impacts of the selling event. All while incentivising continued and effective communication from the proposers to the community along their journey.
The idea of the payout bounty was born in the direction channel as members of the community were brainstorming on a solution to the above mentioned problems (Credits to @Abdulbee).
Through this payout system, funds would move to a bounty holding account, as opposed to the proposer’s address directly, upon referenda approval by the community. These funds would then be paid out gradually by the bounty based on predefined milestones.
How this looks in practice
When creating a referenda, proposers include a preimage. The preimage is the code to be executed when a referenda is approved.Status quo:
Currently this preimage includes one token transfer transaction from the treasury to the proposer’s address.
Payout Bounty:
For proposals to be processed through the payout bounty, this transfer transaction would go to the bounty’s address.
Should a proposer seek to get an upfront payment, they would include two transfer transactions in the preimage. One transaction for the amount paid upfront to their wallet and a transaction for the remainder to the bounty address.
The value of curators
Curators design reporting standards and required tooling. Their focus at every step of the way should be to make communication between projects and token holders more frequent and efficient.
Overall curators are incentivised to ensure the successful completion of all projects moving through it. Ideally they are well connected members in the community that are able to drive collaboration with other ecosystem projects to overcome obstacles for example.
Curators should report to the community on the bounty itself and provide clear overviews on the projects moving through it, which step each project is at, obstacles encountered by projects, funding surplus/deficit etc.
Effects on the different Stakeholders
Advantages for Token Holders
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Risk of approving proposals limited to funds asked up front
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More successful completion of projects
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Reduced downward price pressure through smaller token selloffs
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Frequent reporting on project progress & roadblocks
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More oversight into treasury spends
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More accountability by proposers
Advantages for Proposers
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Smaller payouts = Easier conversion
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Guaranteed USD equivalent payments at each milestone
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Higher chance of proposal approval by token holders
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Support + guidance by curators
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Access to curators networks
A disadvantage of the concept is the trust imposed on the curators. A significant amount of money would be under their control. It is crucial that curators are trustworthy individuals and independent of one another. Furthermore it is vital the community maintain oversight of the bounty and all its operations.
Timeline
The payout bounty is a concept that in a permissionless network can be implemented by anyone and everyone. Competition amongst multiple payout bounties should be encouraged. This gives token holders more choice between different payout bounties with varying value adds and would help us allocate resources more efficiently as a network. Community would guide each proposal to the payout bounty they deem most appropriate for it.
Everyone wishing to express their interest in a candidacy as a curator is invited to do so in this post.