Name: Launch a Community Ecosystem Fund
Status: Final - Accepted
Scope: Launch a Community Ecosystem Fund governed by the Ren community, financed by RenVM fees, used for investing in the Ren ecosystem
The proposal builds on the discussions held here: https://forum.renproject.io/t/rfc-000-016-launch-a-community-ecosystem-fund/596
We propose to empower the Ren community to start growing the Ren ecosystem without the core team’s direct involvement, through the launch of a Community Ecosystem Fund. This fund would be governed and managed by the Ren community, and could be used for anything Ren related that the community deems important. The goal of the Community Ecosystem Fund should be to further the growth of the Ren ecosystem, such as promoting or sponsoring the development of integrations of RenVM or Ren-wrapped assets.
The funding for the Community Ecosystem Fund would come from the fees generated by RenVM, incentivizing the community to govern the Ecosystem Fund wisely such that it may grow the Ren ecosystem and hence increase the volume through RenVM. The target should be to over time return more than the funds spent on ecosystem growth, by influencing increased volume for RenVM, which increases the rewards to RenVM / the Darknode operators. In that way the Community Ecosystem Fund would over time start funding itself indirectly.
Currently, there is no community treasury to fund Ren ecosystem development. The most common way other crypto organisations fund ecosystem development, is through token inflation, or through fees. Given that all REN tokens are circulating, and that there are no plans to introduce inflation as it would affect the security design of RenVM, the way to finance a Community Ecosystem Fund would naturally be through claiming a small portion of the rewards being generated by the RenVM network. For instance, Yearn Finance has a 2% management fee on all vaults, and a 20% performance fee that is taken out of all the profits [source]. These go to the Yearn treasury, which pays for developer wages, audits, etc.
Note that this proposal does not suggest that these rewards would go to the Ren team, or that the Ren team should receive grants from the Community Ecosystem Fund, given that the Ren team already is funded, and can in the future also be funded by setting up Darknodes. The proposed Community Ecosystem Fund that will be financed by RenVM would be managed by the Ren community, which in turn should invest using the Fund in the Ren ecosystem, ultimately increasing the volume through RenVM, which benefits the Ren community and Darknode operators, and other ecosystem participants as well. These funds can be spent however deemed fit by the community (described below), but should not be spent on core protocol development, as this is already funded by the Ren core development team.
A new fee tracking program is being written (directly into RenVM) that, among other upgrades, includes a governable parameter for setting how much of the rewards could go to a Community Fund (this can be set at 0%). This parameter would be governable by the Ren community, and could be changed anytime through a proposal. We propose to initially set the reward percentage going to the Community Ecosystem Fund at 5%, for reasons discussed in the corresponding RFC thread, although in the Snapshot vote that is coming out after feedback has been received can and will include other options as well. Also keep in mind that any funds going to the Community Ecosystem Fund could be sent back to the Darknode operators if the community wishes to do so, through a proposal.
Custody of the rewards can be held by RenVM itself, which saves us the trouble of setting up a multisig (at least for the time being). Given that RenVM is in the process of decentralizing, the custody risk will diminish over time just as the custody risk for all assets held by RenVM will diminish over time.
We suggest to measure community sentiment for which proposals should get funding through Snapshot (or alternatively through Scattershot which is a 1:1 fork of Snapshot and allows distributing one’s voting power amongst multiple choices, which is also already live), which since RIP-004 is the official voting mechanism for community governance. The Snapshot/Scattershot tool only takes into account voting power from Darknodes, and squares the voting weight by how long a Darknode operating address has been registered.
We suggest to initially structure the grant-distributing activities of the Community Ecosystem Fund in a Gitcoin-like fashion, in this case with advertised funding rounds that occur quarterly (how often these rounds occur are governable by the community). In this way, the community gets time to come up with multiple good ideas and proposals before a funding round takes place, and then every Darknode operator has a chance to weighs-in on and together filter which proposals are the best of the best, using the quadratic funding model similarly to Gitcoin (we recommend reading Vitalik Buterin’s take on it: https://vitalik.ca/general/2019/12/07/quadratic.html). We believe this to be a fair mechanism which lets everyone have a say, without taking up much of everyone’s times, while also being less centralized than a committee.
After the funding round votes have taken place, the payments would flow from RenVM directly.
The exact details of how many proposals get to take part in the funding rounds, how to filter out spam or obviously bad/harmful proposals, and the duration and frequency of the funding rounds, are still to be decided by the community, but the proposal on the Community Ecosystem Fund itself can still go ahead before that.
In short, this is our proposed initial structure:
- Funding is according to the quadratic funding model, i.e. multiple proposals compete for funding at once and funding success is determined by the voting distribution square rooted
- Funding occurs quarterly
- Funding requests must specify an Ethereum (or other supported chain) address to which RenVM will send funds
- Funding requests must specify a target amount. If less than the target amount ends up being allocated to the request (in accordance with the quadratic funding), then the funds are returned and used for next quarter. If more than 200% of the target amount ends up being allocated to the request, any excess is returned and used for next quarter
Note that if the community wishes to change anything about this structure later or wishes to propose a vote that leverages capital in the Fund irrespective of these kinds of Gitcoin-like funding rounds, that is all possible through the regular governance process, i.e. by creating a proposal.
- Vote on the proposal
- Develop, test, and audit the new fee tracking program, and then migrate the Darknodes to it [wip]
- Plan and organize the first funding period [todo]