So why set fire to $5m?
Bad day? Bad manners? Bad eyesight?
Well firstly, because its a pretty bold creative act and a newsworthy event that would mark the symbolic death of the Canary and the re-birth of the Phoenix.
For those old enough to care, we’re thinking of doing an homage to this…
Just as the KLF burned money as a statement about creativity, so there is a considered strategic rationale that relates to making the network a more humane home for radical experimentation.
Why network treasuries are a bad idea
On the surface creating a network treasury denominated in a token and priced in fiat sounds sensible.
So sensible in fact that it’s now pretty much crypto-orthodoxy.
Source - DeepDAO
After four years of consistent contribution, research and analysis of on-chain governed networks (Decred, Edgeware/Kabocha and now Kusama/Polkadot) it is clear that in practice the design has unintended but perhaps predictable consequences on decision-making, productivity and community culture.
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The Kusama treasury doesn’t actually have $5m, it has $5m worth of KSM.
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Teams receiving KSM need working capital to complete their work, so sell their tokens.
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They all do this at their own discretion ensuring inefficient and unpredictable disposal.
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In bull markets this sell pressure is diluted by new money coming into the market, ensuring that every KSM spent actually costs less in dollar terms.
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Positive price action tends towards profligate spending as money is cheap.
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Ineffective work from a network adoption perspective is effectively rewarded since everyone looks and feels like a genius when number go up.
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In bear markets the sell pressure is compounded by money leaving the market, ensuring that every KSM spent actually costs more in dollar terms.
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Negative price action results in increasing conservatism as money is expensive.
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In this environment, panicking holders end up killing initiatives that may well be effective, simply because they are caught up in a wave of negative sentiment.
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In both cases whiplash volatility plays havoc with the psychology of proposers and voters across the full life-cycle of proposals.
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Pretty much all historical spending has been detached from direct on-chain impact and therefore highly subjective in terms of its relative effectiveness.
As a result, we end up with spending led by populist agendas that follows the boom and bust cycles, backroom cartels of token holders and established teams who then work together to defend the treasury from perceived grifters.
This process steadily degrades trust, transparency and culture - you might have been getting a little of that vibe recently…
OpenGov
The call to ForceSetBalance the Kusama treasury to 0 uses Root, the most powerful track in the OpenGov system which controls both Kusama and Polkadot.
This requires a 3,333 KSM decision deposit to encourage thoughtful use, since the Root track can only handle 1 referendum at any one time.
To ward of malicious Root referendums, there is also a Referendum Killer track in OpenGov, which enables a faster acting vote to kill a proposal and slash the decision deposit.
You can learn more here.
Yeah nice try, but no one’s gonna be stupid enough to put up the decision deposit
Well yes there is - us.
Referenda 289 is currently in voting and will conclude before the end of Referenda 293.
If this passes we will immediately commit 3333 KSM to the decison deposit for referendum #293.
What’s even more fun, is this then creates an interesting incentive for those currently on the fence or not wanting to see #289 pass, since the community can also vote to slash the decision deposit.
This would have the effect of recouping 1/3 of the requested funds.
In the end, we’re putting our money where our mouth is…
Referendum killers…
The game theory is already underway.
https://twitter.com/AdamSteeber1/status/1715448568239002084
Followed swiftly by referenda 296.
Where this could go next
We’ll have to see how the next two weeks play out, but burning the treasury would the first step in rethinking how Kusama funds innovation.
This would then allow a review of the spending to the society pot and Kappa Sigma Mu which has another huge pot of KSM just sitting idle.
From here we can consider options that take into account a more structured approach to supporting the full lifecycle of innovation.
Upgrading Kusama’s runtime with Pallet_Mint
Kabocha has a small treasury containing the technical steward reward, collators and Edgeware’s recoup - c. 1% of supply that was created via a snapshot of Edgeware’s addresses, however going forward this account will not receive funds in the same manner as other chains.
Instead we have Pallet_mint_with_fee - see here.
The pallet adds functionality to mint a value on an account, and to optionally mint a percentage of this value on another account (as a fee). It also provides an extrinsic to change the percentage value.
The calls have to be from Root, so as a democracy proposal, or as a sudo call.
New tokens are minted when a new proposal is approved.
Summary
If the treasury is set to 0 it will begin to top up again, however this largely symbolic act would offer a fresh start to rethink much of the existing design.
By eliminating the destructive force of a treasury on a network culture, we can move towards more considered approaches to disbursing funds that are themselves aligned more tightly to delivering against objective on-chain metrics and ultimately the generation of coretime revenues.