It’s time to implement on-chain funding for the Tezos ecosystem.
Most people agree on this much and then all views start to diverge wildly, causing an unproductive paralysis by analysis situation we find ourselves in right now.
The Tezos core developers have released their M proposal, “Mumbai” following the usual cadence of 3-4 proposals per year with 2-3 week breathers in between. This is quite a frenetic pace of protocol development but it’s needed to compete: to release, to get adoption—first, fast—in a field of sharks who’re also building as fast as they can.
One thing is for certain: we will not be able to use protocol governance for both technical upgrades and funding options separately. In order to keep delivering small and manageable (and costly, more on this later) upgrades to L1/L2 tech, we need to inject a few technical proposals per year and there is no time in between for anything else. Things might change but right now things are as they are and we need to work with them as presented.
What makes this Mumbai proposal different is that a member of Tezos core dev repository regulars by the name of Nicolas Ochem has injected a modified Mumbai proposal with a key element added:
- Funding a Tezos Foundation baker with 100K tez
“WHAT THE HECK? WHY IS HE SENDING THE TEZOS FOUNDATION ANOTHER ONE HUNDRED THOUSAND TEZ???!!! 😠”
I agree, the irony is rich on this one but stay with me here, there is a method behind the madness and there is a bigger picture. There is also a future where we need to address the Tezos protocol funding, fully, ourselves, as bakers. First, let’s address some common concerns and questions. Then we can dive deeper into the method behind said madness.
Q: Why are you sending tez to the organization that has more tez than anyone else?
As things stand now, there is no one else in the community who has funded large projects over time, just the Tezos Foundation. They have an established long term strategy to provide grants and evaluate the results on an ongoing basis, with the goal of funding that which they find crucial to the preservation and adoption of the Tezos protocol.
Q: Why don’t you fund a DAO?
That’s an excellent idea but which one? What’s the DAO’s wallet? Who’s standing up the DAO? Who decides whom to fund with DAO funds? What’s the M of N number to send tez? How does the DAO rotate signer keys? (Different M of N or same?) Does the DAO have official rules and processes it abides by? Has the DAO functionally worked to fund anything up until now? As you can see, the logistics are just not there and the wallet is not there, nothing is there.
Q: Why don’t you fund the developers directly?
The developers and the developer organizations have reached a remuneration situation with the Tezos Foundation that all parties find desirable. While protocol funding is indeed the long term funding mechanism, many are not ready to transition just yet. When it comes to accounting, it’s not as simple as creating a wallet and dividing the received funds to your core dev organization. You’re changing from being paid by a known trusted entity to the wild west of crypto funding. It works, it will work but there is work that needs to be done before it can materialize in function.
Q: Why doesn’t the Tezos Foundation fund a DAO out of their own treasury?
Sure, that would be great!
- Someone can utilize the Tezos Foundation proposal grant system and submit a DAO bootstrap proposal along with a fully fleshed out plan to make it work. Heck, the Tezos Foundation board members may wake up one day and decide to put on the front page of their grant website that they’re going to fund all serious DAO funding efforts!
- While we wait for all the events above to somehow materialize, we’re still stuck in a situation where no one and nothing else (just the TF) can fund the building out of the Tezos ecosystem.
- Kicking off the process of building up at least the first DAO or other funding body that can long term fund Tezos public goods and beneficial services is absolutely crucial.
- Whether funding is coming from the Tezos Foundation or from on-chain minting, it’s going to be a hell of a lot easier to justify if this is funding something with a consummate history of successes under its belt.
You will notice that the answer to all these questions is similar. While many have found the current funding system flawed and incomplete, few, if any, have thought up in theory or built up in practice any of the logistical machinery for anything else to work, in practice.
At this time I’m unaware of any efforts to even get funding from the Tezos Foundation to build a DAO that can receive funding in the future. The whole “Pay us to figure it out!” thing might work but it still needs a plan of action and logistics to go along with it. No one is working on that either. (If you are, make yourself known and this post will be updated to reflect the reality of the situation.)
Where does that leave us? We have the Tezos Foundation funding all protocol building efforts and we do not have anyone else doing the same or stepping us to do the same, with expectation of community on-chain funding. But we still have to get there. The Tezos Foundation funds will inevitably run out.
“OK SO WHAT’S YOUR “BRIGHT” PLAN? WHAT’S THIS METHOD BEHIND THE MADNESS?“
- Pass 1st proposal with on-chain funding added (even if it’s just 1 tez) — VOTE for PtMumbaiv
- Build DAOs and self/community-fund them for their first 1-2 success stories
- Seek grants from Tezos Foundation to work on DAO funding (not specifically addressed below)
- Implement web 3.0 “login with Tezos” cafeteria style based way for bakers to signal which DAOs or funding efforts/bodies they would fund in theory
(Notice that all the above steps can be done at the same time, by different people or by the same people, at different times. These are simply all the things we need to do to get to a place where funding on Tezos can function on-chain)
My plan is to take this one step at a time, any step first, by any passionate Tezonian. The problem with most comments is they ask for the finished article or nothing at all, without regard to how these things are built up in practice, especially in a decentralized ecosystem.
Below I will focus specifically on the first two bullet points from above.
No matter whom we fund in a proposal, this work has to get done, the processes have to be figured out and the explanatory blogs have to be published, one at a time, over time, step-by-step. Modifying a proposal is no joke; it doesn’t just happen magically for free in the background. The logistics have to both be well known and well practiced for long term success and everyone has to participate: the core developers and the proposal modifiers.
Passing the modified 100K Mumbai proposal (VOTE for PtMumbaiv by Nicolas Ochem) does the following things for the overall plan:
- No matter how we accomplish community on-chain/DAO funding, core development practices will have to accommodate it. Since the core developers themselves will only take care of the protocol technical details (at this time), we will need them to work with us on a process where we can take their M/N/O/P/etc. proposals, modify them and present them to the community. Then, assuming that the modified proposals pass, we have to work with the core devs yet again, on making sure the software release pipeline works with the changes, smoothly without having to waste hours to figure out stupid things the core developers shouldn’t have to worry about (because it takes away from what they need to do for their main job).
Do you know how to generate a protocol hash so as to not crash the core dev binary naming scheme? Do you know how to generate and inject a modified proposal? Are you aware of the 101 gotchas and loosely agreed upon, somewhat undocumented conventions? Do you now how to properly stand up a testnet with your proposal, to ensure the protocol migration works? Are you going to go out on a limb yourself or as a group and guarantee a sound end result with your protocol migration? All this, the whole thing, has to be done correctly as well, regardless of what we want to fund.
When do we want to work on this aspect specifically? At the exact same time as we implement this magic DAO solution (that doesn’t exist yet) all at once? Surely, even people as smart as ourselves can only handle a few things at a time, so we should wisely break them up into their constituent parts and tackle them separately. If we plan to do everything at the same time, all at once, nothing is ever going to manifest in reality. It’s too much to handle for anyone and no one person is heading the effort. Why would anyone want to deal with this mess all at once anyway?
Paying 100K tez just to have all this figured out, it’s a fair price. - This proposal (or a similar one) will pave the way for future proposals like it. People will no longer have to wonder about how to take a proposal and change it to fund whatever they want. They won’t have to worry about generating the correct hash string to dovetail with the efforts of the core developers (note: it’s A LOT easier to deal with a community proposal when it doesn’t change the binary names). Nicolas Ochem knows his way around the Tezos protocol and development practices, he’s the best case scenario sherpa we can have on our side when it comes to making sure we are able to accomplish on-chain funding while not impeding core dev in a significant way. Meanwhile, this new funding mechanism will indeed even benefit the core devs themselves as it inevitably becomes their primary funding some years from now.
We all want to have additional funding methods but we cannot let the perfect be the enemy of the good or the enemy of any progress. Nicolas Ochem offers to help with the core dev logistics and nothing else, that’s our collective job. It’s also our job to figure out what bakers would fund using on-chain funding.
Passively lobbying for a perfect solution while not contributing to a concrete effort “on the ground,” to enhance Tezos on-chain/DAO funding, will result in nothing being done until it’s absolutely necessary. When the Tezos Foundation funds run out and it’s unavoidable to address funding, it will be the hardest to do so and pivot as needed. If we don’t make progress on it now or soon, we will be paying for it on the other end. I have no doubt we will figure it out anyway, even if that were to happen! But do we have to test our resilience like that and miss out on potential years of solid competition between TF and on-chain funding along the way?
Once it is known how to do on-chain funding safely, there is a precedent, a process and a convention; that’s when the real community funding work can begin. Bakers, delegators and Dapp creators/users will have to go around and get a loose consensus of what 80%+ of bakers are willing to on-chain fund and for how much. Multiple self-organizing DAOs will be stood up on Tezos and will start independently funding what they believe should grow, on Tezos. They will first community raise and self-fund all the tez. One the first on-chain funding proposal passes, the DAOs and independent organizations and well known individuals will be able to put themselves on the on-chain funding cafeteria menu to be agreed upon by the 80% yey majority. The cream will rise to the top and we will be able to craft 3-4 proposals along with each core dev joint tech proposal that incorporates the most popular cafeteria options.
“BUT YOU CAN’T CREATE TEZ OUT OF THIN AIR!!! NO ONE WILL TRUST TEZOS!!! THE INFLATION WILL BE TOO MUCH!!! THE TEZOS FOUNDATION SHOULD JUST…” *DESCRIBES IDEAL SCENARIO WHERE TF INITIATES AND CHAMPIONS ALL THINGS CENTRALLY*
Here are some objective truths:
- Tezos is barely in the top 50 cryptos by market cap and most cryptos that do better have a much higher total inflation number
- Many successful and respectable projects, like Polkadot and Cosmos regularly create tokens for on-chain DAO style distribution by trusted individuals and organizations and they also burn unused amounts.
- At some point in the future, the Tezos Foundation will no longer be able to pay for the Tezos ecosystem development. They will likely focus on funding only essential services or maybe nothing at all and it’s going to be up to on-chain funding to figure out the rest.
- The Tezos Foundation currently funds 80%+ of all development (excluding the NFT area specifically) in the ecosystem.
- Something needs to change funding-wise in the future to keep Tezos ecosystem development going strong.
- We must keep this on-chain funding system from devolving into a payola-type token minting “BRRRR MACHINE” that absolutely would cause the loss of trust by our Tezos protocol users.
The bottom line is simple: we either pivot slightly now and figure out the on-chain funding situation, one step at a time… or we don’t do anything, we squabble and no one does any concrete steps to find a solution. We can hope and pray that the Tezos Foundation “gets it” and does that one thing each one of us secretly hopes that they do, or we can take the bull by the horns and give the Tezos Foundation funding a bit of a break, because we will develop a more efficient on-chain funding strategy that doesn’t just work for the ecosystem. It saves the Tezos Foundation’s own treasury so it can last for much longer.
Say whatever you want, we must thank the Tezos Foundation for, in many ways, ensuring we find ourselves here with this decentralized protocol opportunity (to govern) of a lifetime, in the first place. The vision was to build a technical stack from the ground up, to rival the EVM stack, and that’s exactly what has happened here.
It’s always been on us, not to talk about how others can improve to solve our shared problems (although that certainly helps as well) but to lead the charge in solving these very problems. It takes two open hands, reaching toward each-other for a handshake. If we don’t change anything, we copy-pasta the present into the future. Get engaged, think about effective solutions and get baker consensus! This is your protocol, this is your ecosystem.
On Tezos Governance 
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