Well I support the idea and Iām not in a funding proposal pieā¦
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We ourselves have been going through the entire process from a to z for monthsā¦
I am not involved with evaluating any community fund proposals, so I cannot comment on that process in general or your specific experience with that process.
What was the real cause of the application backlogs
The community fund is run and managed by volunteers unaffiliated with NEM Foundation. My understanding is that are only a few active volunteers and they could not keep up with all the applications.
The undemocratic part is that they stopped the existing process at the expense of all other applicants
My understanding is that this was approved by the NCF committee, which is composed of volunteers.
Someone involved with the NCF committee can comment on the correctness of my understanding above.
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Hi @corporal_clegg, i like that idea and iām sure we can look at how we can include it. But there are some practical challenges we need to address in order to incorporate the idea:
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If Nem Ventures has existing obligations and liabilities, and approval were denied, it would essentially result in a vote of no confidence, which is fine for removing the mgmt or stopping the fund, but the obligations and commitments would still exist without anyone in place to manage them, go to board meetings in investment companies, offload equity positions if needs be etc. We could request the trustees to step in but there is a risk that they may not have time right when its needed and it could be a problem for portfolio companies etc. There would need to be some kind of SoP put in place in that instance. Any ideas on how to get around this?
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The trustees would have legal control of the funds, so the vote would be largely symbolic, like a non-binding national referendum. We can write it into the articles at the time of inception and indicate the intent to manage the case in which the community loses faith in the management team, but ultimately if the trustees decided not to accept the vote result, legally its unlikely it would be binding. This one concerns me less as the trustees would impictly be trusted members of the community, so it is likely that similar to a non-binding referendum that the leadership would accept the guidance and enact the communities wishes.
It is a really good idea and we are keen to integrate it, open to ideas if you have any idea on how? We may need to agree in principle in the interim and then seek guidance from the audit/governance advisors planned in Q1 for exactly how we can make it a reality it but happy to discuss further and see if we can come up with something in the next few days.
Its intended to release accounts and progress reports to the trustees quarterly in order to continue operations and continue to secure investment and operational budgets, while an annual audit will be performed, summarised and released to the community as well, which would be a logical addition to a public vote if we can include it in a fitting way with the planned governance structure.
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Kailin?
Hi, well for the first point, there could be an exit plan in the case of a vote of no confidence, so the fund could be reduced only to a few key members who would be kept on salary to manage the investments but without access to future funds to continue to invest.
- This does concern me. I donāt have any faith in politicians haha. How are the trustees to be appointed then? Itās interesting, I was explaining this situation to my wife today (trying to train her on blockchain for MarginX) and she asked me how this is different from EOS consensus. Now I realize she was right on point. You have a typical byzantine generals problem here. With those resources, it would be simple to overwhelm the NEM community and have them agree with any appointments made to the board of trustees. It could even be benevolent at first but get out of hand via human error. Whether it is likely or not based on the character of the people taking the office doesnāt matter, security flaws are security flaws. The fund shouldnāt be open to that risk. I will need to think a bit more on a solution for this, unless you have one already.
An experienced VC fund manager could cost 250k annually and they wouldnāt be willing to leave their job at goldman to run a 10 million crypto fund.
Im kailin, yeah. 
Thatās a good suggestion, and is actually something that is already in place, partly, in the existing governance structure. If the trustees decide that there has been mismanagement of the fund or investments, they have the authority to step in and make the decision to cut back the management team and enforce the winding up of Nem Ventures. In this event, a process would be needed to appoint an administrator (the auditors may be open to this option) either for the mgmt team to hand over to or if appropriate to sit above the mgmt team while they wind it up.
Generally speaking, if the community lose confidence in the management of Nem Ventures, it is highly likely that the trustees would too, have already lost faith in the management team. In this way, it would be expected that the trustees correct the issue long before the community are even aware of any problems internally or have removed or wound up the fund. In the event that public opinion has dropped to the point of a no confidence public vote, it is likely that the trustees have not performed their duties correctly or have possibly become corrupted, in which case a public vote loses its power. I certainly see the value of a public vote, however there are additional issues or short falls with such a system, that should also be addressed and resolved prior to incorporating dependency on a public vote.
With regard to the selection of trustees, there are a number of possible ways in which this can be done, some with more merit than others.
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The current trustees could step into a trustee position given their long standing history as informal trustees. In the case a cosignatory does not wish to become a legal trustee, they could alternatively delegate their position to someone they deem suitable for the position. We currently inherently trust the existing trustees and have done from day one, so this would make sense to also trust them to chose a delegate. In this situation, the selections could optionally be approved by the core devs as a matter of principal.
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The trustees could be selected and approved by core developers. This would also make sense, given the core developers are not only thought leaders in the community, but are also have the most interest in the trustees being honest, integrous and having only the best interests at heart. They have also been around longer than anyone, and have observed the community and interacted with many key and non-key players within the ecosystem, so should be in a strong position to chose wisely. However, the core developers also see the NCF as outside the purview of core devs.
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The foundation could select the trustees. This is an option, but it is counter to the current nature of the community fund. The foundation, as has been noted recently by jaguar, and by design, has not the authority nor mandate to control, manage or disburse the nem community funds account. This would imply that the foundation also does not have the mandate to select the trustees.
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Public vote could be utilized, but this runs the risk of large stake holders colluding in order to sway the vote in their favor. The public vote is useful and mandated in particular situations, such as in the case of this proposal to be awarded the mandate to utilize a portion of NCF in a particular, but it is important that the final governance and legal control in this case be delegated in a very careful manner by those who we know absolutely have only nems best interests at heart. Opening up trustee delegation rights to that of public vote, also opens up the fund to risk of manipulated take over from unknown entities who may hold large sums of XEM. A good example of this may be in the case of the hacker. He would single handedly have the ability to secure the vote in his favor, putting in power trustees he deems fit. This is a risk of manipulation that has historically been tolerated with proposal votes, as the stakes have not been that high relative to the over all size of the NCF, however with this delegation of power of trustee selection, it is probably not a wise move.
The above are listed in our order of preference but absolutely up for debate. Given the community already trusts the co-signatories in this role, it is logical to continue that governance structure - I am one of those co-signatories at present and naturally would not take up a trustee role for obvious reasons! This should be tied in with the approval of the core developers as a second layer of protection and to ensure only the most highly regarded members are chosen as trustees.
There is of course always going to be risk associated with this, however the risk is already present, its just not visible. Currently the funds are distributed to companies upon completion of milestones, which are in many cases near impossible to verify or to retain any oversight on what happens to those funds. We are essentially trusting that the companies not embezzle the funds, which in many cases run into the +500k dollar range, utilize them in unintended ways, or are otherwise abused or misused, or ensure that the project actually do anything at all. There is no financial trail the committee can follow or even legally request given the DAO nature of the fund.
This is an unacceptable level of risk we are maintaining and accepting with existing operations, given the complete inability of the current committee to perform any due diligence into companies or the results that they produce. With this in mind, when we incorporate Nem Ventures and put in place trustees selected from the community by long standing and reputable members, we are reducing the associated risks and concerns dramatically by allowing Nem Ventures to do due diligence and checks on companies while delegating true financial control to the trustees, rather than relying on the good behavior of NCF funded companies.
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Hi willowfoot,
Sorry for not replying sooner, missed your message through the flurry of messages.
You are correct in that the community vote will only be required for the 50-750k tier. This is in place to allow Nem Ventures to consult the community should management not have a clear majority vote in favor or against. It allows Nem Ventures to consult the community in times when there may be some disagreement but not a clear majority one way or the other.
It is also possible that Nem Ventures would utilise a public vote more regularly than is required to maintain a high level of community engagement, in keeping with traditional practices of NCF. However, we wanted to allow flexibility in that there may be times when a company does not want the investment advertised prior to securing the investment, or if the investment is time sensitive and we need to act quickly. This is important to allow companies privacy and expediency when seeking investment, which would not be uncommon if the applicant is in talks with multiple parties.
We have also included a vote allocated to core developers depending on the scale of the proposal in question. Should the proposal be outside the bounds of Nem Ventures allocated investment budget, or should another proposal such as this be put to the trustees, it is possible that the funds be released from the trust pending a majority approval from trustees, but this would require additional sign off from one or two of the core developers depending on the amount of funds requested. This is expected to be a very rare case, but it was important to include in the case a highly valuable and desirable opportunity arises.
The remaining chunk of the NCF funding would be stored, managed and legally controlled by the NCF Trust that will be incorporated as a separate entity as part of the set up process of Nem Ventures. This trust will be the legal owner of Nem Ventures and Nem Ventures will apply to the Trust for funding ongoing - this proposal and vote will act as the first proposal. In future, other projects may also apply to the trust for funding, but these entities would be intended to be key nem infrastructure akin to nem venture type initiatives or akin to the foundation opposed to the type of projects that generally apply to NCF in the past. NCF fund stpe proposals would be expected to apply via Nem Ventures.
Regarding how the trustees would be selected, and how funds are approved and allocated, please see the post here which touches on those points in depth.
Thanks for the constructive questions. Feel free to ask any further questions if needs be.
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Greetings all, my name is Jan and I represent CarbonClick - we currently have a proposal under review with the NCF committee. I hope this feedback comes through in a constructive manner and contributes positively to the discussion.
Firstly, I think we have to acknowledge that a lot of people have put in massive amounts of effort and time on a voluntary basis into this system, which is quite incredible and shows how amazing community DAOās can really be. But this concept and way of doing things is really new and riddled with challenges and I think the NCF is now in a challenging time. In challenging times, I think itās important we really understand the root cause, donāt rush things and make potentially irreversible or harmful decisions.
As a startup founder, one of my key drivers to most things I do is āWill this action increase the chances of success?ā Overall, I think there are many elements in this proposal that indeed increase the chances CarbonClick will succeed. I also think that trading equity for funds, skills, guidance, mentorship, networks, etc. is an often necessary way to grow your business and increase chances of success. So Iād like to point out, we at CarbonClick are willing and open to do an equity trade because it increases chances of succeeding in a world where most startups fail. But it has to be done in the right way with the right partner.
Some other points Iād like to make:
- I agree with most of the problem statement and the current state of things is indeed dire. There is a long backlog of proposals and the volunteers are struggling to keep pace and approve projects that pass the initial guidelines. This is an issue that needs to be fixed.
- I also agree that the current method of funding projects is not the most effective and the benefits to NEM are somewhat constrained without an equity stake. This is one of the reasons why our proposal included an intention to pay back the grant. But equity stakes are only one way to return value to NEM, so I support that more features need to put in place to ensure the project returns expected value to NEM
- This proposal comes as a surprise. I knew there was a backlog of proposals, but I didnāt know much of any other challenges the committee has been experiencing. When managing a DAO and the organisation has challenges, then there should have been posts out to the community months ago informing of the problems/challenges that have arisen. Not only in terms of the backlog, but in terms of the process. Why wasnāt the community kept up to date and consulted?
- Around 3 weeks ago, the committee revised the guidelines for the proposals, a new system for managing proposals was put in place. As a person impacted by these changes, I think the revisions were valid and teased out certain things that would have assisted the community in identifying genuine projects. Itās in all our best interest that funds are spent on genuine projects with signifcant value to NEM. I was under the impression however, that the changes mentioned above would have helped alieviate some of the issues the committte has been experiencing - but seems no time is being given to āwait and seeā?
- To me, this proposal essentially kills the NEM DAO, which seems like it was one pilar feature of NEM and itās certainly an important NEM feature owned by all token holders. I think removing the DAO would be a massive loss to NEM. There are plenty of VC funds out there, but DAOās are scarce. They serve different purposes.
- Finally, it feels like there might be better ways to solve the issue. Here are some off the top of my head:
ā Hire in professionals to manage all/some of the proposals.
ā Hire in professionals to do standardised due diligence, create summary reports, rate proposals based on list of criteria, etc.
ā Pay existing committee members to prioritise getting through the backlog. A decent hourly rate will cause people to reshuffle life priorities to make it happen.
ā Further tighten up the guidelines, additional standardisation will help screen projects.
ā Bring in some expert consultants and have them create a new process within the existing framework.
ā Put new proposals on hold, until the backlog is cleared.
ā Put new proposals on hold, until the bear market is over.
ā Put new proposals on hold, until catapult is released.
ā Lower the funding caps.
ā Start co-funding projects, e.g. tranches to be paid out only once evidence is presented that matching funds have been provided.
ā Identify a chunk of the fund that can be invested in traditional assets and use the returns of the fund to finance particular activities like NEM scholarships. A $10 million investment could yield $1m to projects in perpetuity (although 4-500k is more safe.)
ā Make milestones more stringent and standardised. Make payouts linked to returning value to NEM.
ā Give the fund to an existing crypto VC and give them a specific mandate.
ā Get more people on board. - Finally, I also think such a massive change to a fundamental feature (to me, this is almost on par to changing the consensus mechansim) should be taken to the community in a different way. Not dropped like this, giving us 10 days to provide feedback, scrutinise and do due diligence. Seems all other proposals have followed a 30 day Q&A period, then a 10 day voting period.
In summary:
- I concur that there are issues and something needs to be done
- Iām not yet convinced this is the best solution. Iām open to it though.
- At minimum, Iād add 30 days to the proposal Q&A period. Donāt worry about the proposal queue, just be transparent about it and give people estimated timelines. Weāll understand. The 30 days will allow better discussion and identifcation of the best solution.
Final question! Iām also curious if this proposal has been run past the entire NEM foundation (https://nem.io/about/foundation/) and you have received their endorsement?
Cheers,
Jan
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Thanks @CarbonClick for a well thought out, considered response and it certainly comes through constructively. I have tried to cover the points below but please let me know if they need further information, discussion etc. We want this to be collaborative and as one of the projects in the pipeline you are in a great position to provide a unique perspective so it is good to hear at least partial support and likewise we would welcome working with you assuming this all goes ahead.
I agree, the work that has been done to date as a DAO has been very good an built a great platform to expand from, the committee have done a great job under difficult circumstances and are continuing to do so.
We are glad you see the value in what is proposed from a project perspective and recognise the current issues as something that does need to change. You have hit the nail on the head with why we feel a combination of a investment, support and network would be beneficial for startup teams, the investment returns and NEM generally - especially if we can start to line up with the catapult release.
I think perhaps some of the messaging hasnāt come through fully in the proposal and will try to highlight some of it on your points, on the equity and DAO I think we are coming from similar perspectives particularly:
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Equity is currently viewed as you suggest - one way to return value but not the only way; it is likely to be one of the more common ones to start with. We have included in the guiding principles a concept of āGood NEM Citizenshipā - if a project works to enhance the community, technology, reputation etc then it is a positive return and is factored into discussions. An easy example of that might be that if the technology can be open sourced the investment terms may be reduced in recognition - naturally it still needs to make financial sense, but unlike a traditional VC there is latitude there to account for different rewards. Similarly if it can increase XEM usage in a significant (and auditable way) it will increase XEM price so that can be considered a return. It is likely in these scenarios we would do something like an equity position that reduces one value is realised, or a convertible note that isnāt converted etc, a few options exist but is something we very much have in the model and key reason we donāt view this as a traditional VC fund.
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The DAO approach I agree is scarce, unfortunately one reason for that is that it is simply difficult to account for funding or contract with anonymous groups in most OECD jurisdictions. It is also nearly impossible to take equity positions, pay tax on gains, run payroll etc without an entity - which by virtue of there only being one and being known means it is not a DAO. It is not even possible to sign an NDA for example which has been part of the challenge with speaking to partners for this proposal (I had to sign them personally with my own company). Auditors similarly canāt sign a contract; their insurance prevents them working on it without one and the fund is difficult to govern transparently. This is an area I agree with you on, I like DAOs and would like to see more of them, unfortunately, right now, the traditional world still needs to be bridged at some point and DAOs make it hard right now, hopefully this will change over time. they are obviously far easier to accept from as individuals but in the even to tax audits etc money laundering still needs to be satisfied. If it never hits FIAT accounts or needs to pay bills in anything other than Crypto, is likewise simpler, but for most projects that isnāt really an option. Note I said most - not all jurisdictions here, there are exceptions.
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I apologise that the proposal came as a surprise, we did discuss with various parties before going public and a post was put up a while back to say it was coming, I think the thread started in June from memory. I openly accept the comms on this could have been managed better, particularly for existing applicants and we have been working in collaboration with the NCF Committee and the Foundation to try and rectify this. I accept this criticism fully - we could have done better here and apologise.
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The revised guidelines are much better than before, however they have already caused a couple of problems in reviews and some of the committee have spotted things that in hindsight havenāt quite worked as expected, they would need some additional revisions. I canāt comment on whys and wherefores of this as its not my place but I do see it from your perspective - ideally this proposal could have come before that. The new guidelines are being used to manage the existing approved NCF commitments ongoing (circa $2m) so the change does still have real value to the community though.
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To your suggestions:
All of them are absolutely valid points, unfortunately they donāt resolve the legal entity problem or sustainability of the funds (tied to legal entity). They would certainly make the current approach run slicker and clear backlogs . Without the entity it is very hard to hire services as you canāt contract them.
The investment one is particularly interesting and something that is an option with any budget that is unallocated within NEM Ventures, the return can help cover operating costs etc. Similarly it can happen with the NCF funds outside NEM Ventures - but traditional vehicles need an entity to invest as so a DAO its quite hard. This is a great suggestion and something we will try to work in with the trustees as part of ongoing NCF funds management not under Ventures. Obviously there is an Opportunity Cost to this that if XEM goes up by 2x, you probably would be better holding XEM, but if it goes down, you would be better being invested so a diversified approach would be sensible.
Co-funding is something we have in the models for ventures and several VCs have expressed interest in this - however they all want something they can sign and NDA and partnership agreement with as part of their risk management approaches.
Funding caps we have attempted to model this by creating the NFP trust which will have the ability to issue smaller grants with different criteria to investments, these are likely to be in the size of sabbaticals to work on a project, get something to a PoC prior to investment rounds etc. They wonāt come with the same committed support but will be provided with all the support that they can be.
Timing
This was discussed prior to publication and can still be altered if need be. We have been lucky with the amount of interaction this project has received in comparison to most - generally projects need to go out of their way to get engagement, this one due to its nature obviously fosters engagement more easily.
We are trying to avoid adding even more delays to the current processing but I will take this one on board and have a chat with a few people and get their take on it. My initial thought is 40 days in total is a bit long. We could certainly add a few days if the conversation needs it. Perhaps we revisit toward the end of the weekend and see how it feels to be going?
To your question on the Foundation - it hasnāt been run past the entire foundation, but it has been run past various people in the foundation, some of whom have commented above and some are part of the existing committee. As I said above, I canāt provide names as it is not fair to the individuals, but do hope they will post here through the conversation and welcome input as with any other members of the community. There is a balancing act on this one, the NCF was set up to be deliberately autonomous from the foundation as Jaguar mentioned, however, naturally we value the work done by the foundation and thoughts on this.
Thanks again for your input on this and we look forward to keeping this conversation going, do please come back with any suggestions, questions, thoughts etc they are very welcome
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Somewhat agree with @jrmr92.
If youāre going to take away the community voting for most projects and manage it in a VC capacity, might as well do it right and hire top talent for this fund that has a proven VC track record.
Onboarding some notable VC fund manager would be great PR for NEM as well and could create buzz for the whole NEM ecosystem.
If price explodes and hits dollar figures again, the NCF will be worth 100s of millions.
I appreciate the effort and think this is a step in the right direction as change is needed, but hope this is not pushed through just because.
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Why was this deleted off NEM and Medium? Id love to read it!
https://medium.com/nemofficial/attention-to-pending-candidates-for-nem-community-fund-ncf-8072421cab2b
https://blog.nem.io/attention-to-pending-candidates-for-nem-community-fund-ncf
Oh and I wanted to ask what importance will the vote require? Per guidelines any request over 800k requires 3% and And 65% majority? Youāre asking for 10 million, so I guess that will have to be your goal, right?
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It will require 3% of total NEM Blockchain importance projected at YES address, and a 65% majority in favor.
I actually was mistaken earlier when mentioning the 2%.
Not sure @CarbonClick it was there when I posted the link up and then someone mentioned the page wasnāt available so I took it down again.
I think we should let the NEM fund die. NEM should open source and not move to create any more legal entities. Let the foundation govern as it has but move towards autonomy instead of away from it.
Also I read how people switched to NEM because of its community fund - that is ridiculous. If McDonalds is giving out free hamburgers I might switch from Burger King for the day. Most projects proposed are by young entrepreneurs with little experience. Which is fine and I admire the ambition but the reality is 99% of those projects that got NEM funding will fail. My point is I think a community fund is not what NEM needs to excel and grow. We need more transparency and open-sourceness and community contributions instead of the community taking. I say veto this proposal.
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I do see the logic, if it was a proposal to run a pure VC with only profit as the goal, however it is realise other benefits for the community and solve problems that are causing with the NCF right now while also making profit. This is because the traditional VC profits available likely pale in comparison to the profits that can be made if we drive XEM adoption and resulting price growth through targeted and managed investments.
As was noted by an earlier poster, the fund is currently not that big so attracting the types of profile mentioned is likely to be hard or impossible from the initial conversations we have been having, they are also primarily motivated by pure profit which is not the solution we are proposing.
If XEM hits dollar figures again, the main NCF funds will still be there, this is only about managing approx 1/3 of them as Nembit noted. Assuming the price increase happens - the NCF will already be held in a legal trust so could be invested with a pure VC if that is what the trustees decide in conjunction with the community. However, to do so, there would be a need to incorporate the funds as an entity, which this proposal is covering, so it will actually facilitate that where it is not possible right now.
The flip side is that if the NCF continues as it is - funding for free, the tokens that were distributed would also represent 10s or 100s of millions of dollars if price increases - if they are invested into companies that the fund receives profit share from, the fund benefits as well so compounds the price growth with extra profit.
The two approaches arenāt mutually exclusive, this proposal is a good approach to fix the current issues, help drive NEM adoption via viable projects, contribute to the ecosystem and contribute to XEM growth while benefiting from profit share while helping projects succeed. If the fund grows exponentially due to price change, it will not be under Ventures management it will be under a trust - mandates can change and solutions can change in response to those market factors.
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Thanks Mark. Killing the fund off completely would be another option which would also solve the current issues. However, other technologies exist with funding vehicles so we may find viable projects look to those since the founders still ultimately need help to get going in many cases.
The open source side is close to our own hearts and is why we have included it in the core principles, if projects are taking investment and prepared to open source, we recognise that as a non-financial return for investment and reward it accordingly, we also expect the community will get behind them more as well and we will make plenty of noise to draw attention to those that do.
I completely agree with you that selecting a technology just because a funding mechanism is available is ridiculous, it also makes it likely that they may switch away if another mechanism offers them more elsewhere later. It is, however, appropriate that is is one of the factors in making a business decision to select a solution. Our intended approach is to make it a condition of the investment that it is built on and stays on NEM (unless there is a specific justifiable technical reason why its no longer possible) and part of the screening process will be to thoroughly assess the tech solution being proposed to ensure it is both possible and viable.
Obviously we have a bit of disconnect on the best way to achieve it, but I think we share a lot of common ground in the middle. Your project(s) have done great work open sourcing solutions which are being built on right now, we would like to encourage investments to adopt a similar approach wherever we can.
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hi everyone 
its Nelson here one of the Council Member
our job is to check and make sure everyone is working towards a harmonious pathā¦
i chat with David the other day and checked his references, its confirmed he is a high calibre professionalā¦ iāll get in touch with Kailin so we get to knownthe other team member as well.
I will update this post as I check the other team members tooā¦
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Thanks Nelson! Iāll admit it came as a bit of a surprise as someone who has been talking to projects and mentioning our NCF to potential projects who want to onboard with us.
I agree with a poster above that a venture of this magnitude needs some more time and scrutiny before being voted on, we are all very busy with our other duties and communication lines need to stay open.
Cheers.
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Of course you decide this decision by community voting?
Those who can not read English can not translate documents that can not be copied even if they are uploaded.Are not you thinking about anything?
Please broaden your horizons.
This proposal will be dismissed.