APGP 15: Kava Grant distribution proposal

APGP 15: Kava Grant distribution proposal

Summary:

Proposition for Kava Grant repartition

Context:

KavaLabs recently proposed to deploy APWine on Kava Network to join the Rise Incentive program, and the vote snapshot passed with 100% in favor, with 29% participation rate.

The Rise program incentivizes projects to grow the Kava ecosystem with $KAVA tokens distributed each month. The amount is decided with the following formula: (APWine Total TVL on DefiLlama / Kava Total TVL) * 4M KAVA distributed each month.

The amount of KAVA is calculated at the end of each month, and distributed in the following month.

With the current TVLs and token price, the current distribution would be 79715 KAVA, so 141900$/month at the time of writing but different parameters can modify these numbers such as the APWine total TVL, the Kava Network total TVL and the KAVA price.

We note that those numbers can fluctuate considerably depending on the mentioned variables.

Rationale:

This proposal is about the grant split.

  • â…” of the monthly grant for DAO treasury

    • 25% of which would be allocated for LM
    • 70% of which would be allocated for treasury reserves (stablecoins, POL, strategics assets and bounties)
    • 5% for veAPW stakers
  • â…“ of the monthly grant allocated to team for operational costs (including additional devs, deployment/integrations & maintenance)

If approved, a few sub proposals will be posted to vote about the DAO sub categories specifications.

Means

Dev & operational work

Governance work (Kava IBTs research and APIRs)

Technical implementation

Deploy APWine on Kava

Deploy a multisig to handle the grant (no gnosis yet)

Deploy the Kava first IBTs pools

Handle maintenance of the protocol on the network

Others implementation which will be mentioned in the sub proposals

  • Yes, validate the global budget
  • No, rework the proposal
  • Abstain

0 voters

3 Likes

Really excited about the DAO allocation part, however @Gaspard I’m wondering why does the team needs a recurring part of the grant allocation?
Deployment, integration is a one shot job isn’t it? Maintenance should not be that big of a deal either in time perspective, is it?
And also how did you come up with 1/3 of if? Seems a lot!
Could you please fully describe in numbers the details of that portion?

3 Likes

Hi @Enerow.eth, thank you for your comment!

  • As the grant allocation evolves each month depending on a lot of variables, it is hard to get “final estimates” of the repartition of total amount if we don’t do the % each month (the first month could bring more KAVA than the second etc and the other way around).

  • On top of the previous point, it actually isn’t a one shot cost as most of the bandwidth and expenses needed there are for operational and management costs (deployment of smart contracts being just the first step). As much as integrating new networks is part of our goals, we will be scaling the team atm to be able to cover that axis of expansion more efficiently, but that’s also why we include this in the costs. Note that to this date, APWine Companies are sponsoring all the expenses relative to the protocol which include a team working on maintaining the protocol, deploying all the pools at each winelisting, working on the next iterations of the protocol while handling the new deployment chains such as Arbitrum, Kava and others in the future. In addition to the team, APWine Companies also handle the marketing, the events and other diverses costs, and will continue to do so until the DAO can become self-sustainable. This allocation of the grant would help to support part of the expenses.

  • We have to consider that the operations side will commit on expenses that will rely on highly variable rewards on the other hand (and will have to manage those expenses dynamically because of that aspect). While we hope for the best and will be able to scale up if the grants appear to be profitable (which would directly benefit the protocol and the DAO) , it’s harder to limit those expenses without losing on the general efficiency of the current focus if the numbers doesnt go in that direction.

Happy to chat more about those points, and thank you again for the comment!

Thank you very much for your detailed answer @Gaspard!

At what point (minimum split percentage) would it no longer be interesting for the team to carry out this development?

I’m thinking that maybe we should consider letting the DAO vote and decide the split percentage (with a minimum threshold) between the team and the DAO.

2 Likes

Re @Enerow.eth – I understand the reasoning behind the proposal, but the company is not planning on making net profit from this atm, apart from scaling the operations on the dev side to cover the costs and be more efficient on those integrations. As mentioned in the previous post, there are a lot of variables in the rewards of those grants that are currently changing a lot, hence making a more detailed estimation very difficult. The 1/3 2/3 split was made by evaluating those risks, and would therefore be hard to spread over different repartition levels. Finally, I have also to point out that in any case, given the current growth phase, the devs have aligned interests in allocating the resources to the current focus (in terms of integrations and iteration of the protocol).

1 Like

I have the same opinion as @Enerow.eth , the DAO would like to know what this distribution is based on and more details on how the team will use 1/3 of the allocation, how much you will spend and why.
+Do you need this part because you have exhausted the team’s funds?

This is not an attack on the team, I want to make that clear.

Also, I thought @Dydymoon was going to post a proposal on distribution, he did a great job with the DAO Paraswap budget, so I would have thought a more complete proposal like he usually does

3 Likes

Hey @Starny,
The teams manage dynamically its funds (which are not exhausted at all) towards the different focus defined for the dev of the protocol and its ecosystem. The distribution of the grant is simply done evaluating the additional expenses needed for the integration & maintenance with the associated risk on the fluctuations of the rewards, please check what was previously stated for the how much and why:

“On top of the previous point, it actually isn’t a one shot cost as most of the bandwidth and expenses needed there are for operational and management costs (deployment of smart contracts being just the first step). As much as integrating new networks is part of our goals, we will be scaling the team atm to be able to cover that axis of expansion more efficiently, but that’s also why we include this in the costs. Note that to this date, APWine Companies are sponsoring all the expenses relative to the protocol which include a team working on maintaining the protocol, deploying all the pools at each winelisting, working on the next iterations of the protocol while handling the new deployment chains such as Arbitrum, Kava and others in the future. In addition to the team, APWine Companies also handle the marketing, the events and other diverse costs, and will continue to do so until the DAO can become self-sustainable. This allocation of the grant would help to support part of the expenses.”

and

“the company is not planning on making net profit from this atm, apart from scaling the operations on the dev side to cover the costs and be more efficient on those integrations. As mentioned in the previous post, there are a lot of variables in the rewards of those grants that are currently changing a lot, hence making a more detailed estimation very difficult.”

“Also, I thought @Dydymoon was going to post a proposal on distribution, he did a great job with the DAO Paraswap budget, so I would have thought a more complete proposal like he usually does”
→ We worked with him on that proposal. We decided to move the vote of the repartition of the DAO treasury reserves to another proposal to be able to discuss more in depth on this subject (avoid rushing the budget of that part of the allocation for now, while still being able to move forward on the Kava deployment).

Since the team’s funds are not exhausted, I don’t see the point of the team taking 1/3

Also, I was waiting for more details on the amount that you want to spend for dev or other expenses… ?

To judge if the 1/3 is appropriate or not

1 Like

Hello @Starny!

Reading this thread I am also confused about what this 33% distribution is necessary for. From my understanding, the team should have enough resources and $APW to sell (if needed) to keep the development and expansion of the protocol going. $APW should be the team’s main value driver; any movement away from that is cause for concern. What @Gaspard is proposing seems to look exactly like drifting away from this thinking; making Kava sales a sizable value draw for the company.

Just like what Starny said earlier, none of this is an attack on the dev team, but we wouldn’t be doing a good job as a DAO if we weren’t scrutinizing value draws of this size.

So my question is: @Gaspard why would the team need 1/3 of the distribution of $KAVA to additionally develop $APW on that chain? That’s roughly ~25 eth per month for the team to use which is not a small amount of money. I understand you need to protect your infosec, but it is still possible to share semi-specific numbers without being completely outright with them.

3 Likes

I’ll try to transcribe the consensus idea that came out of this monday night weekly community call.

The Team is working for the DAO and not the other way around, and it’s the DAO’s mission to ensure that the Team have everything they need to be able to build and grow APWine.

Giving away a percentage of the grant directly to the team doesn’t make sense, why 33%, not 20% or 40%, it is not a matter of “this is too big” or “too small” but the DAO needs the detailed right amount that the Team needs to integrate and maintain APWine on the KAVA network (which is the purpose of the KAVA Grant), and it looks like the team is not able at this moment to provide a clear detailed budget.

What would make much more sense would be that the team asks for a fixed budget in $ or ETH for each detailed needs. 100% of the grant would go to the DAO and then the team would write detailed proposals, for example: requesting XX fixed amount of ETH for doing YY during ZZ duration.

One idea to lower part of the volatility could be to swap (liked already proposed on the DAO part of the split) some KAVA to stablecoins and/or eth for Team budget.

Unfortunately no Team member spoke during this community call, please @CoolGuy @Starny @Dydymoon add up to that post if I omitted important information on what came out during the call.

4 Likes

Hi @CoolGuy and @Enerow.eth. I’d like to thank you first for your questions and constructive comments. Following our discussions, I completely understand the lack of information in the initial proposal, and why those points are necessary for the community to make an educated decision.

Hence here is my attempt to bring more clarity to the proposed repartition, estimated budget, and constraints that we might have.

At the core of it, we completely agree with @Enerow.eth point. Ideally the DAO collects grants, increases its treasury, and can then allocate different budgets to necessary expenses voted through different proposals. This will be possible

  1. when the DAO will have better structure (legally and technically in terms of decentralisation)
  2. when the DAO will have enough budget to be able to commit on $ expenses in advance

For the 1), this is very much work in progress, we are working on that aspect and this is also why in the meantime the team took upon itself to cover all expenses related to its activity (or as a matter of fact, took on repaid some user losses due to some bugs, governance actions that did not completed properly etc). We are working on different proposals and a concrete timeline describing the steps and structure enabling this.

Regarding the 2), being sustainable and generating revenues is a core focus that will be brought in the next iterations of the protocol, but also something that will be enabled by grants like this one.

For this integration, we estimated different costs (direct and indirect), that would 1) help scaling the operations to be able to support those type of deployments & the maintenance it represents, 2) represents a participation on the expenses that are engaged for the protocol & the growth of its ecosystem in general, which will be benefiting the kava integration directly 3) need to be covered for the team to be able to efficiently continue its works on the others main focuses.

The budget is set yearly as most of those elements cannot be efficiently engaged on a smaller time frame:

  • 250k$ for 2 dev (full stack + solidity)
  • 25k$ of participations for events & marketing
  • 140k$ of participations for audits et bounties
  • 5k$ for the infrastructure

Representing ~420k$ yearly, for an estimated of ~520k$ of grants for the same period (if we take the current plotted rewards as a basis for the estimations with 33% for the team).

We still estimate that the margin is very tight compared to fluctuation & risks (rewards are computed on a monthly basis). We would like to point out that it is also very easy to scale the budget up, but harder to scale it down depending on the outcomes of the grants.

We are proposing to go forward with a 33% repartition for the teams set at the beginning for the following reasons as well:

  • The DAO would not be able to commit that $ budget given the current conditions & we would prefer not taking anything from the DAO at this stage for previously mentioned reasons).
  • Kava labs would allocate that part directly to the team, and do the same for the DAO reserve.
  • The grant would hopefully cover the costs previously mentioned (this allocation would most probably be secured in stable at receival, and is not intended as speculative means)
  • This would still leave the most part for the DAO to kickstart a more diverse treasury and incentivize de liquidity on the kava network (c.f. aspects mentioned in the original proposal), while continuing to grow in terms of decentralisation & revenues.

Let me know if there are any points on which I can bring more clarity. Thank you again for the constructive remarks and let’s continue that discussion all together!

4 Likes

Thank you @Gaspard for this detailed answer and additional transparency.

To be able to vote, I think you need to clarify few more points:

  1. You mention that 1/3 of the budget is set YEARLY, does this mean that the DAO will receive 100% of the grant after the 1st Year? as the KAVA grant is planned for 4 years and DAO’s legal structure and Treasury will be able to operate by then.

  2. What about potential future grants received like Optimism, Arbitrum, or else for example?

  3. Who will be the signers of the multisig deployed by the team to manage the grant?

3 Likes

Hi @Enerow.eth!

Thank you for your questions:

  1. Estimates are yearly indeed, I believe it would be relevant to do another grant distribution proposal by then, as we would have more insights on the deployment and the grant to make a more educated decision.

  2. Depending on the success of this one, the resources allocated for the dev could strongly reduce the overhead costs of deploying to new chains in general. We will be able to make separate proposals for each one in any cases.

  3. The same ones than for the DAO, which is essentially the core team for now as we are still working on progressively on decentralising its execution.

Let me know if you have any other questions!

@Gaspard I understand that you are saying that, at this current time, the legal status of the DAO doesn’t allow APWine Company to receive money from the APWine DAO and that’s why we are trying to solve that issue by potentially doing an EXCEPTION on the way the APWine DAO should normally operate and how this KAVA grant should normally be distributed.

It is the role of the APWine DAO to ensure the growth and success of the APWine Protocol, so spending part of the KAVA grant to accelerate the development could indeed be a good idea, but it has to be framed by the APWine DAO and acknowledge by the APWine Core Team that it is APWine DAO’s grant and not the other way around. As a reminder APWine Company have sold tokens, raised money multiple times and have their own budgets for its expenses.

If this proposal gets a YES, then the 1/3 (Company) - 2/3 (DAO) split must be a ONE TIME AND ONLY EXCEPTION, and that’s not what your answers to the 3 questions hints.

Next year, APWine DAO with the work in progress (as you said), will have a legal structure and it’s own budget, so there’s no reason why the KAVA grant shouldn’t be by then 100% distributed directly to the APWine DAO, once again that’s the NORMAL way to operate and it should be endorsed now on this proposal.

Also, in the event that APWine get the KAVA grant distribution, in any case multisig signers shouldn’t be Core Team Members only, and this from the very start.

3 Likes

Hi @Enerow.eth, thank you for the follow up. Just to clarify something, the team never implied that the grant is ours at all. The purpose of the split is only to be able to find the most fair distribution between the DAO for treasury reserves and incentives on the one side, and the team with expenses engaged toward that integration the other.

I completely agree that ideally the DAO would receive everything and then allocate its budget on its own (chosing the amount of $ to allocate on what etc). The purpose of this proposal is to propose a distribution while the DAO doesn’t have the capacity to commit on the expenses (as it doesn’t have much stable treasury, even though the grant should kickstart that aspect).

The distribution is voted for a year, we will be able to make a new budget by the end of it (again the goal here is then to have the DAO receiving everything and then relocating on the expenses).

As for the signers, DAO and admin roles are currently handled by a 3 of 5 multisig including the 4 core team members and bneiluj.eth. This is not a final structure, only a necessary one until we build progressively a more autonomous and decentralised setup. We are working on a timeline for this that we will publish soon.

1 Like

Hi everyone!

The vote ended this weekend, with “No, rework the proposal” as the most voted choice (Snapshot). From the discussions that we had previously here, it seems that the point causing the most frictions is the fact that we proposed an “initial split” rather than a budget of paid expenses (as the DAO doesn’t really have the capacity yet to refund). We’d be very open to continue that discussion reworking the proposal or waiting on the DAO to have a better structure & treasury. Let us know your thoughts!

We do note that the proposal had a very low participation as well (note that team members decided to stay out of the vote given the nature of the stakes of its outcome). We are reorganising the governance coordination atm to facilitate exchanges and discussions within the community & with the core team, which should improve that aspect in the very near future!

I’d like to thank all community members here for the active discussions that are engaged around those topics already!