[PART TWO OF THREE - Point-by-Point Responses]
Transparency: We would like to see transparency that communicates unalienated answers and details regarding things such as: Compensation such as total employee and founder compensation, including vested token agreements.
We have already been reporting aggregate monthly expenditures on FTE salaries (which are paid in USD), as well as monthly expenditures on contractor payments. Contractor payments could be broken down further by type of services rendered. There are substantial privacy concerns with providing greater detail than this. We have not been reporting individual token vesting agreements. This is an open point of consideration.
* A total budget prepared by the Foundation with the costs it expects to incur during the year with a breakdown for how these costs are allocated.
As expressed on this week’s call, budgeting during these market conditions is not an easy task (though one we do embrace as part of our responsibilities). Overall the approach seems straightforward - accumulate reserves during good times while aggressively identifying growth opportunities; strategically cut back and reorganize (but also deploy new resources) during harder times. We’ve successfully done both, managing treasury responsibly during the recent bull trend of 2021 and now helping “do more with less” across the ecosystem in 2022.
Inputs to budgeting include: available resources (acknowledging volatility of SCRT price), current and projected expenses, current and projected scope, larger strategic considerations (including high-cost but high-reward opportunities for network growth). We always want sufficient slack to be able to act on opportunities and also provide shelter from crises, but we can’t usually foresee those moments in advance (such as the collapse of a L1 ecosystem, explosive growth in a network dApp, limited-time awareness opportunities, and so on).
A few things have been clarified that allow our budget for the next 12 months to be better defined:
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Market conditions: it seems obvious given macro factors that we won’t see an explosive growth period for crypto rivaling 2021 in this year, so we won’t plan for aggressive new deployment of capital.
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Treasury management: we try to keep a relative balance between our SCRT and non-SCRT holdings, and market conditions are currently such that we’re somewhat indifferent between deploying USD or SCRT reserves (whereas before we had a strong preference for SCRT-denominated costs).
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Tax considerations: our tax obligations for 2021 and 2022 are not currently known. We obviously want to minimize this and be able to deploy the maximum amount towards network growth and supporting organizations sharing that mission and mandate. However, we have a somewhat clearer idea of what these obligations might be and strategies for mitigating them. Still, complications arise from the volatility of SCRT and the fact that we have substantial SCRT income from the network at well above SCRT current market value. (Please note that the NPO status question will be addressed further down and is not a solution for this problem.)
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New investments: we have made clear our determination to directly support Secret Agents as a critical network process, taking over funding from the on-chain pool and combining our internal resources with the Agents Leads and Coordinators to provide a stronger user education experience. This is consistent with what I’ve said above should be our highest priority: success of the network - its growth, its technologies, its applications, its brand, and the strength and cohesion of its community.
We’re working internally on a projected budget for the next 12 months and hope to have this available in short order. Please understand that many developments are unforeseeable and we want to stay nimble enough to act on any and all opportunities that can aid network and community growth, so this budget is precisely that - a projection.
Detailed financial statements in a timely manner each quarter. This should show the costs incurred by the Foundation by type as well as the assets held by the Foundation. Together with a budget, this will set a firm ground to understand how the community can effectively fund the Foundation without overly taxing. Additionally, this should be comprehensive enough to cover details regarding departments and specific initiatives carried out that are within the foundations scope.
We acknowledge that to this point there has been limited transparency as to the current net holdings of the foundation. We aim to improve this by providing more detailed reporting that takes into account potential and current obligations (including tax, as mentioned) so as to give a more complete picture of the financial health of the organization. To this point in time, we have already been reporting all inflows and outflows (in SCRT and USD equivalents) and will continue to do so in aggregate.
We also acknowledge that great trust has been placed in the Foundation to make sensible determinations about the deployment of human and financial capital. We don’t take that responsibility lightly. We will respond to that responsibility by increasing our detailed transparency on expenditures going forward - though not at the risk of compromising the privacy of private businesses or individuals. We are open for feedback on which details are most critical to disclose and on the use of funds, but we will continue to use our expert discretion in making decisions on the deployment of capital within our scope.
Public list of what the foundation considers inside their scope, and associated KPIs for each function within scope of foundation. This should include KPIs for VC relationships, exchange onboarding, any secret agency activities, etc.
This question of scope has been critical. Secret Foundation does not determine its scope in a vacuum. It is impacted by many other network stakeholders and initiatives - SCRT Labs, Secret Agents, chain-funded committees, validators, new initiatives like Secret University, and so on. The most important thing, from my perspective, is that every critical function in the network has a clear and obvious owner who is supported and respected by the broader set of stakeholders. The answer to the Foundation’s scope results from resolving that question.
The Foundation could be a very large organization, taking on substantial scope such as: owning and managing VC relationships; owning and managing developer relations and documentation; owning and managing business development opportunities with L1s, dApps, and enterprises. My question is whether this would be the best organization of our ecosystem on a relative basis - i.e. if it’s best given reasonable and achievable alternatives. These could all be independent functions funded directly by the chain, internalized functions at SCRT Labs, functions owned by individual validators or for-profit companies. Different L1 ecosystems have reached different answers.
Right now, given our current internal expertise and funding, I see the scope of Secret Foundation’s ownership including, but not limited to:
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Marketing and branding of the network
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Internal and external communications
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Community management and growth
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Intra-ecosystem coordination
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Cross-ecosystem collaboration (such as other IBC networks)
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Social channel management
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Educational content creation from the network’s point of view
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Managing press and influencer opportunities
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Events (online and offline)
As a larger organization - meaning more hires, more overhead, but potentially more efficiency and efficacy - Foundation scope could increase. Again, this may or may not be better than the available alternatives. As a smaller organization, we would be losing the owners of these critical functions without having ready replacements. That is strongly negative for future growth potential as well as short-term retention.
KPIs are being developed actively for all the items in scope above and will be transparently communicated. Secret Agents will contribute substantially to forming and achieving these KPIs, but as the program is still under development, I don’t see Agents owning these specific network-wide functions (yet). They will own other functions, of course (especially amplifying the voice of the community and onboarding users into the network and its applications.) It is very possible that if Agents are successful, they can take even more ownership. This goes for any organization in the network.
A more important question remains - is there clarity on ultimate ownership for those other functions mentioned (such as VC relationships, business development, developer onboarding and education)? With our scope better established, I hope community focus can turn towards resolving those critical questions, otherwise it is unlikely we will make substantial progress in those areas.
Audits performed on a schedule of some sort, such as annually. If other points regarding making key hires are achieved, then this can happen on a rolling basis without exception even during turbulent or vital times to focus elsewhere.The community should be able to use such information to measure success, efficiency, and community ROI on the investment made by tax paying stakers. The community should be able to use such information to measure success, efficiency, and community ROI on the investment made by tax paying stakers.
Audits, especially thorough ones, are not insignificant undertakings. There are time costs and capital costs. Our goal is to have our regular transparency reporting (such as our quarterly summaries) provide sufficient clarity to the community as to our financial health, inflows and outflows, progress on KPIs, and other critical pieces of Foundation operations.
Given our other immediate priorities - improving reporting, establishing budget expectations, communicating KPIs, assisting with the Agents transition, continuing our regular operations - an audit is not a priority. Our financials are already regularly reviewed by our very qualified CPAs (Gordon Law Group) and prepared for tax reporting each year. I am not also sure everyone in the community has the same idea of what an “audit” actually entails, and it’s not concretely defined in this petition. However, this can become a point of emphasis for us when our other immediate priorities are resolved.