Ideas on how to deploy the Radicle Treasury

[jennyp]

Hey all!

The purpose of this post is to start a discussion and source ideas from the community on things that can be done with the Radicle Treasury.

Throughout the Ethereum ecosystem, we’ve seen projects such as Uniswap, Compound and Aave using their protocol funds to support their communities with grants programs.

To get a better idea of what this really looks like, @abbey and I have decided to start a research project and interview series where we will talk with these teams and others throughout the ecosystem to learn, collaborate and produce some details on our findings with an aim at helping this community understand the ways in which these funds can be impactful and help the project grow.

Thanks for reading, let me know if you have any questions and ideas!

[crypto_carto]

I propose exploring a Balancer Smart Treasury deployment.

Placeholder discussed this here.

From the article:

“Automatic Buyback Machine. By depositing all (or a portion) of the ETH income generated into the pool. Whenever the value of the ETH in the Network Treasury exceeds the 10% index, our Balancer pool will automatically seek to regain balance by selling the excess ETH for TKN in the open market until the 90/10 index is restored. Because the only other token in our pool is TKN, the only way to restore balance is by buying TKN from the market (or adding new TKN to the pool). If there are no sellers, the pool responds with a higher TKN price.”

This doc discusses the capabilities in detail.

From the doc:

“The treasury can also buyback on a schedule by adding liquidity (e.g., depositing reserve currency income), and replenishes the market supply through issuance to producers. Maintaining the treasury as a Balancer pool means the market has guaranteed liquidity through the protocol itself.”

Creating a dynamic treasury leads to further sustainability.

We can reference Idle Finance’s deployment here.

[onur]

I think we should:

1. Develop a funding thesis

First I suggest developing a sound funding thesis in public.
The Thesis should communicate the key areas (categories) for RFPs. Examples:

• Research and Development
• Open-source sustainability
• Social and public good
• Community

Although I prefer to frame it as a thesis, mission and vision statements have served similar purposes.

2. Define funding types

The most basic funding type is a one-off grant. I think there is room for more:

• Grant (Scoped small contributions)
• Service agreements (Core ongoing contributions based on deliverables)
• Investments (Strategic investments)

Each of those serve different purposes. It makes sense to start with a grant and explore if a follow-on service agreement or even investment is a feasible option.

I believe foundations should be involved more to work on a strategic sustainability path while enabling teams to build within their ecosystem.

3. Establish resources and process

Resources

1. Setup funding landing page
2. Setup application form
3. Setup CRM tool to manage

Either a google Spreadsheet or an Airtable should be sufficient to build a solid pipeline for applications (the CRM part).

Process

1. Call for applications
2. Submit application
3. Grant entity review
4. Approval Foundation Council
5. Start project work
6. Fund upon progress

There are a lot of details that need to be figured out regarding the process above. Most importantly scope, budget and timeline need to be specified very well in order to avoid an expectation mismatch.

Additionally there should be a grants manager or a clear responsibility on who owns and builds that process, as well as reviews future applications to make recommendations to the council (if that still exists).

I’d also recommend to stay away from badges (Q1, Q2, etc.) and just implement a fluid/rolling application process.

4. Funding partners / advisor board

I’d also recommend funding partners to build the ecosystem, raise the awareness and get additional experts onboard.
For example the graph, the interchain foundation, and uniswap peers could provide additional reviews after the grant entities review / before the foundation council approval.

I’ve put crypto examples here but there is room for much more and you guys know your core partners the best.

[mlphresearch]

Last year I did some research on the pros and cons of using grants vs. prizes to fund research, development, and innovation. I’ve copied my high-level findings below in case it’s helpful.

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Alongside private investment, grants and prizes are two of the most common ways to fund research and innovation.

Grants are often used in areas where results are highly uncertain and require long-term efforts, or where success criteria are difficult to predefine. This includes fundamental research, engineering projects with considerable upfront costs, as well as coming up with new and promising topics, problems, or areas of experimentation.

Prizes are used to incentivize finding solutions to an already known problem, especially when success criteria can be clearly specified. A prize does not require predefining a solution or technology, only a way to measure success. Prizes incentivize multiple simultaneous attempts to solve a particular problem, and usually reward only the best outcomes.

The choice between grants and prizes is not necessarily binary. Grant programs can have elements of strictly results-based funding, and prize competitions can provide some upfront financial or in-kind support to all eligible participants. Both can be tailored to fit a given objective or task at hand, weighing the following pros and cons:

Grants

Pros:

• Provide stable working conditions for potential innovators.
• Once rewarded, recipients have more flexibility in organizing their work.
• Usually contingent on proof of expertise and past performance. Grants can thus be seen as implicit prizes, even though today’s grants can’t be awarded based on future results.
• More suitable in areas where results are highly uncertain, require expensive long-term effort, and success metrics are difficult to specify.
• Upfront funding comes with lower financial risk for participants than prizes. In return, grant programs can require that all outputs must remain in the public domain.
• Work best when efforts by recipients are easy and cheap to monitor and assess. Based on ongoing assessment, funding can be doled out as “prizes” over time. This also allows for regularly reviewing rules and reporting criteria.
• In the context of product development, results-based grant funding can be made contingent on proven efforts to iterate according to ongoing user feedback.

Cons:

• High-risk for the funding allocator.
• High coordination and reporting overhead.
• Funding tends to be available for professionals only.
• Grant programs rely heavily on the trustworthiness and expertise of their administrators.
• May encourage relationships between grant allocators and recipients that bias past contributors over new and possibly more capable entrants.
• Reward inputs and promised effort, not outputs and actual results. Grants often provide a steady flow of upfront funding with few strings attached which reduces accountability. In some cases, this can be mitigated by doling out funds over time based on predefined deliverables.
• Depending on the metrics used, recurring grants may lead innovators to only partially report their progress to benefit from similar grants in the future.
• Principal-agent problem: funding allocator (principal) has limited options to observe and assess the efforts and abilities of the funding recipient (agent).

Prizes

Pros:

• Encourage competition and community building.
• Offer more prestigious status benefits than grants.
• Strongly contingent on actual performance and results.
• Depending on design, may have lower administrative overhead compared to grants.
• Can be awarded for best contribution, not only for solving a problem completely.
• Winner-take-all prizes provide a particularly strong incentive for potential innovators.
• Can be divided into smaller bits that reward incremental progress.
• Can be used as a “pre-screening” tool for grants. In other words, innovators eligible for grant funding can be identified through small-scale, low-cost prize competitions.
• Funding is available to anyone who can solve a problem, not just experts. This attracts new entrants and encourages a more diverse set of approaches and experiments.
• Encouraging a diversity of approaches helps demonstrate the viability of alternatives. As a result, prizes tend to source more work per $ spent than grants.

Cons:

• High-risk for potential innovators.
• Less suitable for projects where desired results are difficult to specify or measure.
• Don’t provide stable working conditions for potential innovators. This is particularly problematic in areas where results are highly uncertain and require expensive long-term effort.
• Introduce strong barriers to entry in areas with relatively high upfront costs which can greatly limit the number of potential applicants.
• Concrete success metrics may end up biasing certain technical choices over others, including potentially more innovative ones.
• Encouraging multiple teams to work on the same task may result in duplication of effort and inefficient use of resources. If the best team is easy to identify, it may be more appropriate to award a single well-targeted grant instead of forcing multiple teams to invest time and resources into producing outputs that are not necessarily additive.
• Prizes can be less flexible compared to grants when it comes to rule modifications and adaptations, because initial requirements determine early investments by participants.
• To incentivize broader participation, prize administrators may be forced to waive the requirement for outputs to remain in the public domain. This provides participants with more options to privately commercialize technology or intellectual property that result from the investments they must make to participate in the competition.
• Depending on the metrics used, recurring prizes may lead innovators to delay publicizing certain advancements and thereby benefit from similar prizes in the future. In other words, if metrics allow it, participants may “hold back” results to maximize financial gain.

[jennyp]

Hey! Thanks for sharing - this seems like an interesting idea.

Could the existing RAD/USDC pool on Balancer be used as a Smart Treasury in this way?

The part that I am not certain about is where the ETH income would be generated from for the Radicle project?

[jennyp]

Hey! Thanks for this.

I think this seems like a very reasonable and good way to setup a grants program. I am wondering if there are chunks of this that we could do initially and build the rest of a grants project up using this framework.

I would be keen to get something like this rolling - maybe we could tag team fitting this into the current governance process (Temperature Check → Structured Discussion → Formal Review → Governance Proposal)

[jennyp]

Hey! Thanks for your input - what types of research projects were you looking at for your research? Sounds very applicable to protocol ecosystem funding

I like the idea of using prizes and grants together, it sounds like this is a good way to diversify the types of projects that can be explored.

I think getting some more guidance on the types of projects that the Radicle community is keen to support will help strengthen the process that will guide how funds are deployed as well.

[onur]

Cool, I think we can go in order. Start with the funding thesis (1.) and create a proposal for setting up 2-4 using a grant. Do you prefer to continue the temperate check here? The next steps would be to work on the thesis, identify design principles for our funding and specify funding areas.

[mlphresearch]

I was looking generically at “funding R&D and innovation.” Most studies/experience on grants comes from academic, public, and not-for-profit institutions; prizes are less common but have attracted more interest in recent decades thanks to some high-profile innovation competitions. I’d say grants are definitely the norm in the cryptosphere, followed by bounties and hackathons, with prizes relatively underexplored (possibly for a good reason).

[jennyp]

Hey everyone - would be super cool if you want to bring these ideas to the monthly governance working group meeting that will kickoff for the first time tomorrow.

More details → [Discussion] Radicle Governance Working Group - #2 by jennyp