Tangle Community Treasury “Year in Review” — Part 4: What Can an Active Treasury Do?!? The Future Ahead!

TLDR:

In October 2023 the Tangle Community Treasury framework was revised to allow the committee to become active rather than passive. Since then the TCT has supported such active supportive grants as,

• Take ownership of the Layer-Zero bridge to prevent delays
• Support the DEFI liquidity pools on all DEXs fairly which was greatly needed, and, earn the community treasury yield to support more grant funding.
• Integrate Shimmer and IOTA (layer one and layer two) with Tax solutions that our community greatly needs.
• Partnered with Akkodis to provide developer support treasury and community projects fairly.

This was only within three months of being active. The next term will support many more community-supportive integrations such as DEFI portfolio management, more tax solutions, Quadratic Funding with Gitcoin grants aided with a proof-of-humanity solution, more web3 community empowerment Airdrop programs for community content creators and community developers, and treasury swaps with a vesting release schedule. This is just what the committee is focused on today, but there is so much more.

Tangle Community Treasury is now Active!

One of the main issues the Treasury faced during the first six months was that we didn’t receive grants focused on solving challenges with our ecosystem. We had a few good ones, but most focused on revenue-generating projects. Even though the program lead was spending his time simply focusing and analyzing how to support the ecosystem and discussing this with the committee reviewers, and even though we dedicated ourselves to finding what can support the community, the framework prevented us from being ‘ACTIVE.’

What does ‘ACTIVE’ mean? It means spending time getting consensus from the community on what is needed. Or we are seeing a challenge and offering a solution. Highlighting challenges that grant receivers face and methods to support and overcome such challenges. Even when we created Request For Proposals (RFPs), we still needed substantive submissions. Part of this is due to a lack of attention; potentially, the IOTA Foundation can promote the Treasury RFPs in the future. However, until then, we were stuck.

In October of 2023, the framework revision was approved, allowing the committee to become active. This allowed us to see challenges such as:

• Strong developers with knowledge of the Tangle for grant receivers.
• Technical developer consultant for the Treasury.
• Lack of liquidity in the markets.
• Tooling to support our community to participate in the EVM.

We addressed these challenges one at a time and actively found solutions.

• Developer and technical support
• Limited liquidity for the DEFI ecosystem
• Tax support for the IOTA & Shimmer layer 1 and 2
• Web3 integration for an innovative treasury
• Quadratic funding and the future of governance, Identity solved

The ability to be active will iterate and innovate the community treasury to new heights!

Developer & Technical Support

Over the past year, it has become apparent that the treasury committee can use technical consultation, grant receivers, and projects within our eco-space. There were very few responses after reaching out for months and posting an RFP to build a technical database of community developer consultants. When this was unsuccessful, we moved to contacting companies offering developer teams as a service and giving them a Request for Quotation (RFQ). After reviewing three RFQs, the committee agreed to partner with Akkodis (https://www.akkodis.com/). Akkodis not only has a dedicated developer team that offers:

• Front End
• Back End
• UI/UX Designers
• Solidity Devs

The Akkodis team specializes in building on the Tangle! Their team has not only been building on the IOTA and Shimmer Tangle for the past five years but is also very invested in many projects within our space. They are not just developers; they are community members! They understand our ecosystem and are perfect for supporting community projects and the Treasury regarding technical review.

The Akkodis team will offer contract services to support the community and the treasury committee. The services they will support include,

• Proposal technical and cost review
• Milestone and Project deliverable review
• Treasury developer support
• Community project developer support

After a cost analysis from the past year, we believe that with Akkodis services, the cost savings the Treasury will incur will outweigh the cost of approved grants. What does this mean? As the Treasury doesn’t have the funds to salary a full-time developer or hire a reviewer at a developer rate, the committee can get the technical review on a contract basis only when needed. The reviewers are not developers, and thus, trying to analyze the cost of a grant is unrealistic. A team from Akkodis could not only review a technical license four times faster than a committee (i.e., cost savings), but they would also be able to analyze the budget of the grant request. There is no doubt that the committee has approved high-developer grants. This will mitigate this, and the savings from grant payouts will outweigh the minimal costs of covering the Akkodis cost.

The same analysis was applied when looking at costs incurred with direct funding for content creator grants. The community airdrop empowerment not only created cost savings by minimizing reviewer time but also lowered the cost per engagement when spreading content within our community.

Limited Liquidity For the DEFI Ecosystem

Liquidity, liquidity, liquidity!!! Yield, Yield, Yield!!!

Liquidity and yield are the critical components of any DEFI ecosystem. After researching and investigating how the community can support the launch of Shimmer EVM, we expected community leaders and project owners to discuss a Dapp we can fund or some infrastructure we can cover. However, the primary response was, ‘We need liquidity’! After months of discussion and deep analysis, we focused on supporting LP pools that would support the DEFI ecosystem and those that would be safe for the treasury and support grant payouts with impermanent loss.

Our focus was supporting safe DEFI LPs such as SMR|wBTC, SMR|sIOTA, SMR|wETH, SMR|USDT, and USDT|USDC. Users will want to see stable trading rates and minimal slippage in these main LP pools. Note that the only way to have stable trading rates and low slippage is to have ‘LIQUIDITY.’ The framework revision and the ability to be active with the unused tokens allowed the Treasury to support liquidity pools in each DEFI project.

That isn’t all, though! By supporting LP pools, the Treasury not only endorsed the DEFI ecosystem, but we were also able to liquidate without making any red candles or putting any selling pressure on the market. Though how is this possible?!?

By using the UniSwap V3 (Tangle Swap) and Trader Joe’s (AMM Model), the Treasury can put this in action. See the flow chart below.

Throughout this process, the Treasury only supports the pool with liquidity. If market buyers were trying to buy $SMR and there was no shimmer in the pool, then the $SMR price would go up 4x. Now, is this a good thing? Would people stay in such a volatile DEFI space or buy $SMR on an exchange? They would go to a business because deals have market makers who provide the liquidity. When the Treasury’s liquidity experiences an impermanent loss, the pool transfers the $SMR to $USDT. This is not a trade and thus does not create any red candles on the price charts. Further, when in a wBTC or wETH pool, the Treasury pulls out wBTC and wETH, bridges the asset out of Shimmer, swaps BTC / ETH to USDT, and then bridges it back into Shimmer and deposits it into our multisig.

Tax support for the IOTA & Shimmer layer 1 and 2

It was a surprise to many when, after the Shimmer EVM launched, the ecosystem only saw a small percentage of layer-1 shimmer move to layer-2 to engage in the GameFi and DEFI ecosystem. While the Tangle Community Treasury supported the DEFI space, we looked to do more. After asking projects and community members if anything could help, many thought the German tax regulations and our large German community deterred holders from creating an address transfer (layer-1 to layer-2).

In Germany, if a resident holds investment profits for up to a year, they do not have to pay any capital gains or taxes on their earnings. This means that if a German holder moves their $SMR from layer-1 to layer-2 (regardless of it being the same asset), it could trigger a taxable event and incur a tax payout. The problem is there needs to be more clarity, and tracking all layer-1 and layer-2 transactions on the Shimmer and IOTA Tangles is difficult.

The Treasury thought, and with the community’s help, we all started reaching out to some crypto tax solutions that not only support global districts but primarily a tax solution that supports the German and other European tax jurisdictions.

Due to the community showing massive support and interest in becoming customers, Cointracking.Info and Blockpit.io responded very quickly to the TCT requests to support the integration of Shimmer and IOTA in the layer-1 and layer-2 networks.

Being active allows the treasury committee to see what the community needs and then act and move quickly! The crypto market is a high-speed moving industry, and our community needs to stay up-to-date if they are still out of current events.

Web3 Integration for an Innovative Treasury

After meeting with Hedgey, the finance team of the Treasury was impressed with their open-source services and integration that can bring the Tangle Community Treasury more into the Web3 space. Though the TCT manages good fiscal management and liquidation processes, we cannot control how a grant receiver liquidates $SMR tokens if given them as a grant payment. Further, if the Treasury decides to do OTC treasury swaps, there is a risk of market sell pressure. Not only that, but this also requires extensive contract writing, which incurs time costs for the treasury committee.

What we found is a potential in which Hedgey.Finance, particularly with their Treasury Swap integration, will allow the Treasury to swap $SMR tokens only to release them with a vesting unlock schedule. What became interesting was how the TCT will overcome the challenge of the legal requirement that any receiver of funds from the Treasury is required to KYC.

The Hedgey team discussed the ability to integrate permissioned users who could only take advantage of the treasury swap feature if they had a soul-bound NFT — further, the grant receiver Audit.One has been looking to build such a use case. The idea we are looking to develop is that a user must KYC with Audit.One thus receives a soul-bound NFT, allowing them to conduct a treasury swap with the TCT only receiving $SMR tokens on a vesting unlock schedule.

What does this Web3 integration do?

• This automates the process, thus saving the Treasury hourly wage costs
• This integration can be built into the Tangle Treasury website for frictionless engagement
• This offers a fully legal (yet Web3) process

Not only does it save cost and create a frictionless experience, but it will show the true nature of Web3!

Keep an eye out for more details!!!

Quadratic Funding and the Future of Governance

WHY ARE WE HERE?!?

Are we here to get rich? Are we here to bring an old traditional corporate system to a new, innovative, futuristic frontier in the digital world? NO!

The majority of us are here to create a new digital world! A world where there are no dictators or central authority. A world where data is not siloed and controlled by global elite corporations and governments. We are here for a new, open, decentralized, and transparent future.

One thing is sure: at the end of the day, power corrupts cultural movements. This is a digitized culture leading to a new way of life. To protect this, we need a fair and non-corruptable voting system. One token, one vote, offers a lot of benefits, but it needs to be more equitable in its entirety. Quadratic funding and voting mitigated the imbalance between the massive token holders and the poorest holders. A larger token holder gets less voting power through mathematical algorithms, while a token holder with fewer tokens gets more voting weight. The attack vector here is Identity manipulation! In simple terms, a large token holder can split their tickets into thousands of identities, thus multiplying their voting power by multitudes. Quadratic voting is essentially the holy grail of fair governance; however, Identity has always been a block that can only be overcome now! The criticism is it can’t be done. However, if we simply stopped at the first resistance due to a challenge, we would never see decentralized networks and particularly would not see the Tangle.

There are no problems, only solutions! (Eric Hop)

Gitcoin’s Passport has made extreme advancements through its proof-of-humanity badge system and is implementing on-chain data analytics. After meeting with the team and project director, I was impressed with the data analytics provided. A collaboration is being discussed between the Gitcoin Passport team, The Tangle Community Treasury developer consultant (Akkodis), and Tangle Identity experts (Impierce Technologies) to see if we can bring Quadratic Funding with an identity solution to the Shimmer and IOTA ecosystem. The passport implementation has badges specific to our ecosystem and chain data analytics for the Shimner and IOTA layers.

Some will say it isn’t possible; it can’t be done, and it will be gamed. However, didn’t everyone say that at the thought of a feeless decentralized network? Was a network without miners thought of as impossible? Yet here we are on the precipice of seeing a decentralized network based on Mana. It is not based on mining conglomerates or proof-of-stake whales, but instead, a network where you are rewarded with bandwidth access if you support the network! The same passion and strive to overcome an insurmountable challenge should be applied to decentralized governance!!! Let’s Go!

The next term will bring a strategy of more community empowerment programs specifically directed toward developers now that Akkodis is here to support the Treasury. Other focuses will be to decentralize the Treasury more and have more Web3 integrations. This can be done with Hedgey.Finance integrations, automated NFT KYC, and creating a Gitcoin Passport (proof-of-humanity) specifically for the Shimmer & IOTA networks. It’s time to scale things, support more positive grants, and give more empowerment to the ecosystem!

Part 1: Fiscal Analysis
Part 2: Governance Update
Part 3: Success Metrics
Part 4: New Year with an Active Treasury (Coming out soon).

Treasury Donation Wallet: 0xDac6c2470fc3058BBf7E3093B03794996558f164
Website: www.TangleTreasury.org