Monetary Allowance Working Group Synopsis #1

Issue Introduction

On June 16, 2022, a binding governance proposal “For Decentraland Daily Active Users: MANA incentives for USDC-ICE LP” passed by a slim margin, with approximately 6M VP (56%, 151 votes) in favor and 5M VP (44%, 40 votes) against. The proposal called for allocation of “$1mm USD worth of MANA to provide rewards for the ICE-USDC liquidity pool on QuickSwap.” The proposal — both during its voting period and after its passage — sparked significant debate within the community.

Opponents of the proposal allege that appropriation of funds outside of the established Grants Framework is illegitimate and susceptible to corruption, as there are no oversight mechanisms or limitations on how much, how frequently, or to what ends funds can be requested. Proponents of the proposal suggest that in this instance appropriated funds will be used to benefit the Decentraland community and increase platform traffic, and could not be accommodated by the existing grants framework. In response to this issue, a community Pre-Proposal Poll passed on July 27, 2022, calling to “Limit monetary allowances to Grant proposals.” The poll received 5M VP in support (96%, 56 votes) and no opposing votes.

Following passage of the pre-proposal poll, the Decentraland DAO Facilitation Team opened a working group in the DAO Discord to build community consensus around a potential solution. The Facilitation Team is a technocratic unit of the Decentraland DAO and has no vested interest in the outcome, other than finding a practical and implementable solution that has the greatest amount of community support as possible.

This document is the first working group deliverable, and provides an overview of the issue, background/contextual information, an assessment of prevailing opinions, and explores initial implementation pathways. This report draws on working group discussions held over past weeks in July and August 2022, as well as from past governance proposals.

Background

This is the first instance funds have been appropriated through a binding governance proposal outside of the existing Grants Framework. This framework — which was first established in May 2021 and later expanded in October 2022 — comprises six (6) grant tiers, ranging from $1,500 USD in MANA to $240,000 USD in stable coin, with increasing voting power thresholds for each successive grant tier (with the highest tier grant requiring 8M VP to pass). To allow for greater DAO oversight, grants over $60,000 USD (Tiers 4–6) are distributed via a six (6) month vesting contract, with a one (1) month cliff period. A proposal establishing a procedure for the DAO to revoke grants in outstanding circumstances when a grantee fails to deliver — or demonstrate due effort to deliver — on their grant, is currently under consideration.

When comparing the pathway Decentral Games (DG) used to acquire $1mm to the established Grants Framework, DG passed all three stages of the formal governance process, with the final vote receiving just over 6M VP, reaching the required threshold of a Binding Governance Proposal. The highest tier grant, however, requires 8M VP for $240K USD, is received over 6 months, and requires monthly updates provided by the grantee on progress of the grant.

Additional Considerations

The funds available to grantees can be insufficient for fiscal or general project needs. In addition to the current Grant Framework’s monetary limitations, the six-month vesting contract is not always feasible for projects or opportunities requiring immediate lump-sum payments. Situations like the Blender Development Fund exemplify how requests can be affected. In this situation, the grant went through the established grants framework, however, an exception was made and a single distribution made instead of a six month vesting contract.

Additionally, there is widespread consensus that Decentral Games (DG) — the submitting party of the $1mm fund appropriation proposal — had no nefarious intent with the submission of the proposal. DG is heavily invested in Decentraland and is believed to have the best interests of the community in mind. The concern amongst opposing parties is that this appropriation sets a dangerous precedent for the future, and provides more funds for less VP, without oversight when compared to the established Grants Framework. As a result, the precedent of appropriating funds through binding governance proposals has potential to undermine Decentraland’s established governing apparatus over the long term, and this “loophole” should be fixed.

Proposed Solutions

The following section outlines several proposed solutions shared by community members through asynchronous discussions in the Monetary Allowance Working Group. Solutions focus explicitly on the appropriations process, not a response to the specific instance of DG’s $1mm appropriation. There are additional complexities surrounding this situation, e.g. the disproportionate power of Whales in the voting process, that are currently being discussed in other forums at this time. Proposed solutions include:

• Dynamic Grant Denominations. A flexible grant tier that accounts for special requests that exceed existing tiered funding and timeline. The process could be gatekept by pre-requisite DAO committee (or specific Grants Committee) approval before submission of the grant proposal. As this idea is applied, other forms of accountability and oversight in the application and grant fulfillment process could simultaneously develop.
• Prevent Binding Governance Proposals from Distributing Funds. Restrict all fund appropriations from the DAO to the established Grants Framework, specifically prohibiting the use of binding governance proposals as a means to receive DAO project funding.
• DAO Treasury Management. Establish a DAO Treasury Management unit/body that can make financial decisions based on community consensus when presented with proposals or initiatives outside the framework of the current grants process. These decisions should/could be communicated by Polls, Forum Posts, and Discord Working Groups.

Pathways Forward

Based on initial analysis of opinions and implementation pathways discussed in the Monetary Allowance Working Group, the DAO Facilitation Team sees two predominant pathways forward toward a Draft Proposal:

1. Enactment of a stop-gap measure that prohibits the single issue of fund appropriations outside the framework of the grant process.
2. Monetary Allowance Working Group holds a collaborative workshop/roundtable discussion in order to expand the Grants Framework so that it accounts for the need for flexible funding parameters in some circumstances. This should involve consultation with and inclusion of the Grants Support Team and DAO Committee.

Next Steps

The DAO Facilitation Team will take the following next steps:

1. Publish this working group assessment on the recently established Decentraland DAO Mirror Page.
2. Share this assessment with the Monetary Allowance Working Group
3. Announce date for working group round table discussion of this assessment
4. Determine if any other discussions/consultations with Decentraland Community or Decentraland DAO stakeholders are necessary, and if so, facilitate these engagements.
5. Determine who will author/co-author Draft Governance Proposal, what pathway forward will be pursued, and what support is needed from the Facilitation Team.
6. Support writing and submission of a Draft Governance Proposal if community determines the issue should be promoted to the second stage of the three-stage governance process.

This assessment was drafted by the Decentraland DAO Facilitation Team comprising @Matimio, @Jetty, and @Fractilians. Please join the conversation in the Decentraland DAO Discord Server or contact the DAO Facilitation Team Lead, Matimio, with any questions or comments (Discord: Matimio; Email: Matimio@Decentraland.org)