Introducing an alternative financing strategy, structure and partnership for maximising the potency of Kusama's treasury

The below is a high level introduction, all elements are subject to change.


The following outlines established and emerging issues within the governance and treasury management of Kusama and introduces a new financing strategy, structure and partnership with ABO Digital who have extensive experience in providing flexible, innovative and compliant financing for publicly listed companies.

This financing is especially useful in highly experimental and R&D heavy domains - for example bio-tech - where listed entities prefer consistent and patient capital allocation structured as a facility that can be drawn down as and when required and timing in line with positive news flow, rather than committing to more expensive capital when shares may be underpriced.

We believe the model and the strategy and structuring that it brings can address many of the recurring issues within the ecosystem, better aligning the collective interests of the network in a way that has so far proved impossible and providing the necessary stable foundations for Kusama to deliver on its long promised mandate to create chaos.


Currently venture capital investors seed projects at the earliest stages in a manner comparable to startups and benefit from a quick path to liquidity through token listings, where opaque exchange operations, market makers and trading expertise offer them a comparative advantage over retail investors drawn into initial hype who then act as exit liquidity for early investors.

These investors benefit primarily from the first wave of hype where massive returns mean they can deliver huge returns to their LPs before any meaningful network adoption, creating a short term mindset that flips profits from project to project, taking advantage of a lack of regulatory oversight.

As the relative adoption of crypto-networks attests, taking stake in a network through singular large ticket events ahead of launch, works well for returning investors capital quickly, but not for growing highly complex, experimental and R&D focused public networks that require consistent, patient and committed capital allocation over many years.

Current challenges

Kusama and Polkadot’s crowdloan marketing mechanics and the resulting independent parachain economies are products of this same speculative cycle and therefore face the same challenges as the wider crypto industry when it comes to delivering meaningful adoption:

  • Even though the treasuries may control millions when valued in fiat terms, their actual spending power is constrained by the requirement of funded teams to sell KSM/DOT for working capital on an ad hoc basis, which creates sell pressure, thus reducing the available capital over time in unpredictable ways.

  • Without a consistent baseline, each team prices and values their contributions independently, before proposing and receiving funds whose relative value varies widely on receipt of payments and then further upon inconsistent and inefficient disposal to stablecoins leading to spectacular variations in funds eventually received by teams.

  • Proposed solutions to getting proposers stablecoins include an Asset Hub exchange pallet (statemint DEX) that does not address the ad hoc nature of fund disposal into working capital and is not an efficient way to dispose of large amounts of a network token since the treasury is likely the primary LP.

  • To further complicate the picture, the lack of any corporate entity or clear governance structures associated to DAO treasuries or the collectives that would shape the future of the network opens up members to potential legal peril and ensures large holders prefer to vote anonymously or abstain from interaction all together, leaving network’s adrift with low participation rates and a lack of oversight. Given regulatory headwinds, the worst case scenario is much of this capital may become increasingly unspendable as the risks of not being compliant mount.

Issues that steadily degrade culture

Considered together, this fragmented approach to network governance, treasury management and project funding inevitably leads to circular and irreconcilable arguments between token holders and contributors who operate under constantly shifting conditions which makes long or even medium term strategic planning impossible.

The arrival of the HACN activist token holders who are collectively blocking treasury spending for proposals without any perceived strategic foundations has shone a light on a number of issues with scattergun spending.

However whilst voting Nay offers some general policy guidelines and gives the community pause for consideration, it does not offer a definitive path forward - leaving things in limbo.

On-chain decision making in its current form is an incredibly blunt instrument - referendums are either yes or no, therefore at the core of developing new strategies to resolve tensions must be an understanding of the primary mechanism to consistently and predictably align interests in a network of adversaries:

How the structure works

Given the highly volatile and organic development of public blockchains through market cycles, it makes more sense to have access to a guaranteed draw-down facility that can be tapped as and when it is required, ensuring tokens are sold at optimal moments.

Rather than selling tokens in one transaction, a pre-agreed funding facility (c. $10m for Kusama) is agreed and then tokens are delegated to a proxy of the treasury and are sold at the discretion of a group of stewards who retain the right, but not the obligation to sell to the investor in a series of tranches of c. $1m that is received directly into a series of treasury accounts.

Importantly these accounts are spendable without changing existing governance processes and will not impact the continuing accrual of KSM to the core treasury account.

Curators experienced in capital management, regulation and financing represent the best interests of the network and are incentivised through transparent mechanisms aligned to the best interests of token holders.

These curators establish and manage regulatory compliant processes through a legal vehicle, sign legal agreements with the investor and dictate timing of token sales based on optimising for market conditions and network development within a commitment period of c. 36 months.

This approach has the further benefit of evolving scattergun treasury funding across domains into focused tranches established to pursue more considered directions.

This allows more structured budgeting as the collective’s attention and talent are coordinated towards developing more strategic and less reactive innovation initiatives whose impact can be assessed across an evolving strata of qualitative and quantitative measures.

This approach addresses many issues with current treasury operations:

  • more strategic, accountable and patient approach to network financing
  • removes uncertainty for teams in terms of the funds they eventually receives
  • addresses tax and invoicing issues for teams when interfacing with the treasury.
  • removes inconsistent and sub-optimal sell pressure as teams convert network tokens into working capital
  • sets a more consistent baseline for assessing future ROI of treasury spending.
  • establishes compliant processes by marrying on and off-chain governance structures to ensure these are not enforced by courts.

Political power remains with the collective

All of this is conceived to not take control away from the collective, but to establish some basic oversight, compliance, administration and strategic foundation.

In the end, when these funds are deployed and for what purposes will remain at the ultimate discretion of the voting public.

Overview of the process

The below gives a high level outline of the process - this is subject to change.

Benefits of the model include:

  • A firm commitment from the investor to purchase tokens allowing curators to sell token as funds on an as-and-when basis.
  • Curators maintain control over the timing and the number of tokens that are sold to the Investor, enabling it to determine when capital will be raised and at what price.
  • Lower cost of capital than other forms of fund raising, as the investor bears less risk – the structure can be a steady source of cash that can be used to fund ongoing working cap needs, avoiding raising capital up front at an unfavourable valuation.
  • A quick and efficient way of taking advantage of positive news flow and momentum in the tokens to raise cash that is tried and tested in public markets.
  • Investors will be hedging their position by selling borrowed tokens but doing so only at a slight discount to the TWAP to remain “in-the-money” as well as keeping its daily volume participation close to 10%. This results in minimal selling pressure.
  • The increase in trading from this facility as well as the announcement will help boost liquidity. Execution and custodian provider can also provide market-making services to help boost liquidity further and guarantees best execution at the TWAP.

Why this matters now

A phased approach

Though the concept is relatively simple on paper, the move from a purely off-chain structure to a hybrid on/off-chain structure makes this is a highly complex process without precedent as far as we are aware.

As a result we will be breaking down the project into a series of stages to ensure continuing transparency, accountability and compliance for all involved.

This staggered approach will also enable the wider community to learn, contribute and have their voices heard.

With treasury spending politics absorbing a huge amount of the ecosystem’s attention, it is also worth noting that this is just one type of funding, over time we expect that a more fluid and balanced innovation process will evolve, allowing ideas and talent to be supported through a more structured cycle that addresses current issues with the sustainable financing of public goods more generally.

A collective endeavour

We are bringing together a collective of well known ecosystem participants and new faces to bring this initiative together

Decent Partners have worked previously with ABO Digital’s parent company Alpha Blue Ocean and have extensive experience in project financing, network development, capital markets, fund management and legal and compliance.

Next steps

We will be hosting an introduction to the initiative with the team and ABO Digital in the following weeks as part of Chaos Sessions.

This introduction will allow us to outline our current approach to the phases involved, the challenges and issues to address and the opportunities for members to meaningfully contribute to what we hope will set a new standard for DAO financing across the industry and provide much needed foundations for the ecosystem to deliver on its next phase of focused innovation.

In the mean time, please share any questions here and we will fold them into the discussions.

Related reading

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Pretty concerned about this proposal as it seems to be a lot of words for yet hides the two main points:

  1. Selling treasury tokens to an investment company called ABO Digital
  2. Having a pool of stables q be managed by a council.

Seems like a major shift towards centralization. Remember, Dotsama’s strength is in decentralization and community-led decisions. Let’s discuss and find a way to secure financing without compromising those principles.

These are both huge decisions on their own and should be taken as seperate conversations in my opinion.

There is also the open question on why have a partner pre-chosen, rather than opening a RFP for treasury deals? Looking forward to hearing more details.

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Thanks for comment - it’s a long post and there’s lots to dig into, so hopefully a lot of this will become clearer as we progress the conversations, its natural for there to be concerns given the early stage of this discussion.

ABO Digital are mentioned in the opening paragraph.

Having a pool of stables q be managed by a council.

This is not correct:

  • USDT is sent from the investor to Kusama treasury accounts that are spendable via the exact same governance processes that currently exists. A proposing team just selects to receive from these pots rather than KSM, nothing changes.
  • The only difference to the current process is that each of these treasury accounts now contains $1m (or whatever size of tranches that are eventually decided).

  • The only role of the curators (council) is to optimise the timing of the sales of KSM → USDT and to sign legal agreements, which will massively improve the efficiency of KSM disposals, compared to the current approach where each team sells at their discretion.

  • The introduction of a legal entity associated to the DAO treasury is something we either choose to do now, or we have enforced on us under unfavourable conditions at a later date by courts. It is better to get ahead of the regulatory curve, rather than be behind it. The adminstrators of this legal entity would not have powers over funds, other than for the express purposes established by the community. This gives the community far more oversight and accountability than it has right now and ultimately puts those in these positions with actual legal responsibilities.

Absolutely - but to have a workable RFP you need a number of competing offers.

I would encourage those with relationships to develop a comparable / competitive approach that seeks to address the same issues faced by Kusama currently.

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Hi guys,

I want to join the conversation by trying to contribute some points quickly, hot off the press.

In the beginning, I think it has to be recognized that we are in an issue that is closely interconnected with many others in Web3. Each of them is moving rapidly by factors of its own. I don’t think we can come to a universally correct conclusion. We can, however, frame the problem and define a direction for multiple iterations.

The central issue is that there are infinite gray themes for each type of DAO and DAO-adjacent concept. There is no single solution, and many of the solutions used today are precarious. For an excellent summary of the approaches followed so far, it is this: Assimilating the BORG: A New Framework for CryptoLaw Entities | by Delphi Labs | Medium

Regarding the legal nature of Kusama’s DAO, I think it is an interesting topic that can’t be really postponed.

I favor this direction of the solution for the following reasons:

  • It is opt-in. No one is forced to use this entity. Web3 users who don’t need compliance, taxation coverage, and legal status can stay in an exclusively on-chain world.
  • It does not mean centralizing the system. The governance process is the on-chain process. The legal entity simply intervenes for those who choose it. I would argue that maintaining the system as it is actually encourages centralization. This is because it limits both the quantity and quality of operators who can effectively participate in the ecosystem. If I understand correctly, the idea in general is to have an administrative legal entity. It has no decision-making power, but simply reflects the will of the DAO.
  • It solves a pragmatic problem of significant importance. receiving funding in tokens that primarily need to be spent on paying contractors, employees, and resources in FIAT has always been a serious issue.
  • It is reversible and capable of being limited. The DAO has the power to reverse and limit this direction and experiment. They retain absolute control. It seems that the DAO also determines the duration and terms of commitment, as far as I understood.

After briefly reading these lines, my two cents is that this type of solution enhances Web3 instead of restricting it.
There are many aspects to discuss and details, but in principle, this direction is worthy and sensible.

I am curious if others see it differently and why. When I have more time, I am happy to contribute more, including offering more accurate briefs along with my team.

What are the main objections to this direction of solution?



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Thanks @ale - here is a high level visualisation of the structure, I’ve also added it into the main post.

When considering the full governance stack that would complete the Kusama protocol, we need to also include the Collective (the voting public in aggregate) and a Kusama Foundation entity which exists as you say as an administrative function to execute the will of the Collective through compliant legal processes.

As you say, this changes nothing if proposers wish to continue to propose / vote without interfacing with this administrative entity, but it creates assurances and compliance for those who require it, which allows for greater access to the tools, services and resources of the network.

As part of this work, we need to step through every aspect of Kusama’s operating functions (the organs in legalese) and establish definitions that will then be represented in the legal entities Articles of Association, essentially giving legal grounding, coherence and protections to on-chain decision-making.

This process will have the vital benefit of helping the community interrogate and define in more nuanced and objective terms what we mean when we say ‘Kusama’ in varying contexts and relations for examples:

  • Kusama ‘members’
  • Kusama ‘contributors’
  • Kusama ‘collective’
  • Kusama proejcts
  • Kusama funding
  • Kusama software
  • Kusama network
  • Kusama treasury
  • Kusama assets
  • Kusama ecosystem
  • Kusama contracts
  • Kusama entities

The same obviously applies to ‘Polkadot’ - and then again in terms of the relations between Kusama and Polkadot.

What is sovereign, what is co-dependent, what is unified?

Pulling these threads naturally leads to other questions - one example relates to Trademarks.

Currently Web3 Foundation holds two separate agreements for US trademarks related to the use of the Kusama name - in general liceenses relate primarily to the ‘software’ aspects of the stack.

I’m unsure if they hold trademarks in other territories - UK, Europe, Asia etc.

These trademarks primarily address the ‘software’ layer of the stack - but do not cover other areas related to a more complete view of protocol governance.

Ahh, I had misunderstood the point of the council then. This makes way more sense.

I would definitely be interested in pushing this forward!

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Will be confirming introductory call to outline the plan with ABO Digital in the next couple of days.

Wanted to introduce @faschim and @Derek01 to the thread and the community.

@faschim - Frode Aschim has worked with ABO structuring previous financing deals and raised money through a similar model for a Norwegian listed company he was on the board of. He is the Founder of Ether Capital, active with blockchain projects since 2014. He has been involved in many relevant projects including a listed company’s token issuance, a large scale mining operation, fintech software, liquidity providing and other development. He used to run the hedgefund Range Capital for almost 10 years and has in addition to blockchain a varied financial experience including being a CF27 with the FCA in a regulated function.

@Derek01 - Derek Gannon has 20 years of commercial main board experience as Chair, CEO and COO in global media brands and digital start-ups responsible for multi million pound operational and capital budgets. He is the former Managing Director of Virgin Unite, Richard Branson’s philanthropic foundation, COO of Guardian Media Group and of Comic Relief. He has spent his career in stakeholder management, having worked with Government, foundations, philanthropists, and entrepreneurs.

Looking forward to introducing them fully in the next few days.

Introductory session with ABO Digital - Friday 5pm GMT+1

For those interested we will be introducing more detail on this treasury financing initiative as well as introducing Jeremy and Amine from ABO Digital this Friday alongside @faschim and @Derek01 from Decent Partners.

It will also be a chance for other community members with expertise to share their thoughts on the legal and regulatory grounding, for technically proficient members to understand the on-chain processes we are attempting to engineer and for more general interest members to ask questions and learn more.

The session will be hosted and recorded on Crowdcast - you can signup to the session here.

We’re also working on embedding the stream into Discourse so hopefully community members will be able to view it without leaving the forum.

This marks the beginning of a process that may well take a few months and will require input from across the community - the final structure will bridge on and off-chain processes, require the establishment of an administrative entity and will ultimately require the token holders’ mandate to proceed.

Four phase approach

We’re working with an evolving four phase approach - allowing us to consolidate feedback, address issues and communicate the process as we go:

  1. This forum post sets context for the deal and sets out the current legal / compliance gaps - namely the lack of a legal entity representing the treasury. This will be updated over time.

  2. R&D phase - where we fix the outstanding legal, compliance and tax issues that will enable us to bridge ABO and the Kusama DAO - this is part of an education process for all parties.

  3. Implementation phase - we take outcomes of the R&D and likely establish an administrative entity such as a trust representing the voice of the Kusama collective.

  4. Deal phase - executing a deal between ABO Digital and Kusama’s DAO, unlocking USDT/C in tranches that are spendable via existing governance processes at the will of the collective.

An experimental approach

Despite this model of financing being relatively well known in public markets, this is as far as we’re aware a first of its kind deal in this form, Our hope is that it can provide a new template for how institutional capital can engage and advance the interests of DAO treasuries.

We are all learning as we go, we don’t know what we don’t know, we’re excited to push this forward into the unknown.


Chaos Sessons - Treasury Financing.

The aim is to introduce the concept, some of the team at Decent Partners and at ABO Digital.

The discussion will give some background, strategy, legal structures, compliance and all sorts of other sexy stuff.

You can enjoy the stream here, skip to 15 mins in.

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Question for ABO Digital: What is the minimum amount that such a deal would be interesting for you?

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Good question. We’re pooling feedback and other comments and working on scope for this first stage R&D.