Community Asks from Secret Foundation - Petition Proposal

Who are we and what is our motive? We are a diverse group of stakeholders working together from the community who want to see the Secret Network thrive. We recognize all the good the foundation does along with where performance has fallen short. Considering experience gathered In the two years the Secret Foundation has been operating, we’ve identified asks that once addressed, we believe will create more network alignment on a larger collective shared mission as a network.

Community Asks & Requests from Secret Foundation

  • ● 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.

    • 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.

    • 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.

    • 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.

    • 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.

  • ● Foundation needs assistance : A commitment to, within a reasonable amount of time, hire someone who can fill the gaps for things Foundation doesn’t have the bandwidth for. These things may include

    • Ensuring continuity of transparency. No matter what is going on in the ecosystem, the foundation should have the capacity to deliver on one of their original core promises, transparency.

    • Previously, The foundation had assistance to run the actual business of the foundation, perform company compliance and tax duties, conducting research of NPO viability, etc. An operations person could potentially cover this as well.

    • Community Coordination and Alignment : Build better alignment with network stakeholders, mend bridges, strengthen relationships, improve alignment. As an extension of this, we also recommend vital network calls such as governance, are attended when requested by the community. This would ensure conversations don’t stall due to lack of foundation participation with other leadership and community.

  • NPO Status : We are requesting that the research into becoming an NPO be published within a publicly communicated amount of time and without impact on any other current initiatives.

Voting Yes is signing your support of these community asks.

Voting No is signaling your non-approval of these community asks.

Voting Abstain is signaling you do not wish to sign the petition.

14 Likes

I would not support quarterly financial statements. Quarterly financials creates an attractive opportunity for OTC counterparties to negotiate superior terms at the expense of the network.

More specifically, Foundation’s income is in $SCRT but it has some expenses in $USD, so there will always be a limited amount of time before it must engage in another OTC transaction.

As an alternative, I would suggest annually audited financial statements published within 3 months of each year-end, consistent with the reporting requirements of a ‘Smaller Reporting Company’ in the US.

Although smaller reporting companies typically also produce quarterly financials (Form 10-Q), I believe that the nature of Foundation’s $SCRT exposure makes this impractical.

3 Likes

From experience, it’s best to do quarterly financials, but I think it’s reasonable to only report once or twice a year (with an audit).

I agree publicly reporting each quarter and auditing is too much. Even 10Qs don’t really get fully audited, just reviewed.

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Agreed, but I would hope that the accounts have significantly more detail than what is currently present. That doesn’t mean I want line entries but it would be nice to have a proper P&L, Balance Sheet, Cash Flow with a breakdown for any material amounts.

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I appreciate how this has already brought together people from the community with mutual goals but historically fragile ties to one another, and strongly support this bipartisan community effort.

Additionally, an update to the draft is being worked on by network participants. The update will be posted within a couple days and all normal governance rules will be abided by. We are confident the proposal will go out as planned next Wednesday before the governance call.

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A budget, a roadmap, KPIs and a transparency report with audited numbers would be the minimum expected, and easily providable by any well-run shop of the foundation’s size.

I am sure this would be enough to align the Foundation with the Community’s desire of transparency, representation and trust.

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Trust from community can be strengthened with better transparency from the foundation. This transparency is not only to make sure that good practices are in motion but leaders must show by example that they are able to hear their community and their feedback on what the foundation is lacking. Based on the petition, I am more than happy to support.

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[PART ONE OF THREE - Context]

Thanks to everyone who contributed the hard work into drafting and presenting this petition. I appreciate its thoughtfulness, its presentation, and the open discussion around its consideration. Thanks also for those who attended this week’s open governance call in Discord for discussion.

To the points in the original post, I would like to share my thoughts below and hope to see them reflected in whatever final draft of the petition is intended to be submitted to the chain. For things like this petition to be actionable and successful, I always believe it’s best to build broad cross-ecosystem support on all points before looking to encode via the governance module - including support from the people (here, Foundation employees) who will be doing the work of implementing new processes and reporting.

A petition with multiple points - up to 10 as currently written - allows for great flexibility during discussion, but doesn’t allow much room for nuance at vote. As an independent stakeholder in the network, I would not want to be forced to vote “Yes” to a petition where I did not agree with some individual terms, nor would I want to be forced to vote “No” if I still agreed with the majority of the terms. While anyone is welcome to make proposals to the network under the norms of network governance, we will always have challenges with enforcement and efficacy when dealing with signaling proposals vs. governing on-chain parameters.

That is why in my opinion - for the sake of community cohesion, efficacy, and a lasting commitment - Foundation employees and those who have not been party to this process up to this point should have their voices reflected in the continued drafting of this document before it moves to a vote. This opinion is shared by many other governance stakeholders who place great value on continued community cohesion, especially during a bear market that threatens to drive us apart.

One last note before my point-by-responses, since many stakeholders who will be involved in either voting on or submitting this proposal may have only joined the network in the last 12 months:

I have personally been involved in the growth of the project from its earliest stages in 2017. I’ve staked my reputation and career behind it, and I believe strongly in both the need for and the future of Secret Network. I have consistently placed the success of Secret above all other priorities in my life, sometimes to my personal detriment (as have many others in this network). This is because we believe so strongly in our mission.

Secret Foundation as a stewarding entity has always strived to work in the best long-term interest of the network and the entire Secret community, doing our best to manage both financial and human capital. When I started working to set up and scale the Foundation in mid-2020 (alongside @JXR50), I took no salary for the first six months of its operation. We started with $25,000 of USD alongside our SCRT-based seed funding (which was not liquid). The ecosystem has grown substantially in ebbs and flows since then, and we have tried our best to meet the demands of that ecosystem despite volatility, distractions, and all manners of existential threats and opportunities.

As the Foundation is entirely funded in SCRT and functions to serve only Secret Network, our alignment has always been strong. Placing SCRT Labs aside, this currently makes us unique amongst network participants, many of whom operate validators that run on multiple blockchains, build dApps that integrate multiple networks, or are general community members of many different projects. This obviously does not delegitimize the participation of any of these parties in network governance - they are critical stakeholders, as governance participation only requires you stake SCRT (not that you be a maximalist). But during the difficult process of finding community consensus on complex issues that affect all network participants, it is important to remember that all of us have motivations and conflicts of interest. What is most important, above all else, is the success of the network - its growth, its technologies, its applications, its brand, and the strength and cohesion of its community. Our shared enemy is always the death of the network: the end, slow or quick, of its growth or relevance. This is the aligning factor that should guide all of us in this conversation, not personal grudges or individual aspirations. With this context given, below in Part 2 are my point-by-point responses to the current draft of the petition.

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[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:

  1. 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.

  2. 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).

  3. 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.)

  4. 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:

  • Marketing and branding of the network

  • Internal and external communications

  • Community management and growth

  • Intra-ecosystem coordination

  • Cross-ecosystem collaboration (such as other IBC networks)

  • Social channel management

  • Educational content creation from the network’s point of view

  • Managing press and influencer opportunities

  • 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.

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Anyone is free to contribute feedback to this list of community asks and recommendations, including foundation employees.

As with the network code of conduct, we have decided to proceed with 1 proposal. Anyone who wishes to not support it is free to do so, but early feedback in our bipartisan community group has near zero pushback on any singular issue.

Thank you for your feedback Tor. Please give any other thoughts you have.

3 Likes

[PART THREE OF THREE - Point-by-Point Responses, cont.]

Foundation needs assistance : A commitment to, within a reasonable amount of time, hire someone who can fill the gaps for things Foundation doesn’t have the bandwidth for. These things may include: Ensuring continuity of transparency. No matter what is going on in the ecosystem, the foundation should have the capacity to deliver on one of their original core promises, transparency. Previously, The foundation had assistance to run the actual business of the foundation, perform company compliance and tax duties, conducting research of NPO viability, etc. An operations person could potentially cover this as well.

I agree fully and we must resolve this ASAP. Earlier this year we had two employees (of four) transition out of the organization and into new roles in the ecosystem. They had previously worked together to lead our reporting. One was our director of business operations, who had substantially more responsibility in addition to reporting. This transition also coincided with a wider market downturn, complicating our ability to fill these positions.

Currently, @patrick and myself are leading our transparency reporting, picking up that responsibility alongside our others. This is not sustainable and I agree not acceptable long term. We would very much appreciate referrals of qualified candidates (US-based) who can help strengthen our internal processes around reporting, HR, compliance, and other critical responsibilities. Hiring for these types of responsibilities is very hard and time-intensive, especially in these market conditions.

Community Coordination and Alignment : Build better alignment with network stakeholders, mend bridges, strengthen relationships, improve alignment. As an extension of this, we also recommend vital network calls such as governance, are attended when requested by the community. This would ensure conversations don’t stall due to lack of foundation participation with other leadership and community.

The Foundation has been a regular participant in governance meetings and a leader for other network-wide calls. Especially when requested by the governance lead, I always make an effort to be present on a weekly basis. We’re also individually and collectively very visible in the community. I believe we do a far better job of this than many other network stakeholders - but of course, we have the strongest obligation to do so.

I’ve also proposed hosting a Foundation-specific “open hours” on a bi-weekly basis specifically for questions around Foundation priorities, operations, and transparency (separate from network governance issues). We will be scheduling this based on community feedback.

We consider ownership of community coordination and alignment within the Foundation’s scope, especially based on our other responsibilities. We know this is trust placed in us, and trust that must constantly be re-earned. We will try harder to keep and build this trust with every network participant who shares our mandate of supporting network growth and sustainability. Very often in the network’s history, the Foundation has played the role of peacemaker and led conflict resolution (though some current stakeholders may not have been around to observe it). We would like to keep ownership of community coordination and keep the trust required to maintain this role. We still believe we are best positioned in the network to own and fulfill this role, and we believe that it is a critical function for the network. (Separately, we very much appreciate the role of the governance lead - @pmuecke currently - in supporting this function as well, especially for conflict resolution and governance communications.)

NPO Status : We are requesting that the research into becoming an NPO be published within a publicly communicated amount of time and without impact on any other current initiatives.

As written this is somewhat vague, so I have no problem with reporting our research or setting timelines, but I need some time to communicate this. Again, this is a lower priority than the other immediate critical asks.

I have calls now but will interact here more as needed. I would love any and all community feedback on these points, which are nuanced but critical.

10 Likes

The framing of the community group as “bipartisan” is not accurate. There are not two distinct sides here and framing it as such is misleading to those not in the conversation. We should avoid using that type of “us vs. them” language since everyone wants what’s best for the network. This is a group of community members discussing what they would like to see in the foundation. While there may not be much pushback on the proposal in its current form, there isn’t consensus on all the points.

I’d prefer to see several proposals so we can deal with the nuances of each key point. For example, given a transparent foundation, I wouldn’t care much about NPO status. I would be okay with a lower degree of transparency if there were a board of directors. I trust Tor, but am not fond of the idea that the community needs to place 100% trust in a single person.

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Thank you Tor, these posts must have taken you a considerable amount of time and I appreciate your openness and responsiveness both in the Governance call and here on the forums.

I’m a strong supporter of having your feedback incorporated into the proposal, hopefully, to a point it can be more than a petition. That is not to say a petition is a bad thing. It is simply speeding things up, and letting us stop moving around in circles if all parties are on the same page. I was not part of the group that created the original post, I hope they will see the value in creating something beyond a petition and work together with you on this.

I think there is nothing in our code of conduct about ‘proceeding with 1 proposal’,
also the bipartisan approach that was first mentioned in the Governance call means that the foundation and the group represented by OP here work together to ensure the proposal can be elevated to a working document.

Your intonation, reasoning, and negative framing for the better part of half an hour regarding this bipartisan approach during last Wednesday’s call make me believe you think in camps. Me and They, Good and Bad, Foundation and Community. I believe such framing continues to spiral us into unnecessary long and negative discussions and truly hope you can step over whatever history has you react as you do.

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I’ll echo some of the comments from the people above. Thank you Alex for posting this very reasonable petition proposal, thank you Tor for your detailed response from SF, and thank you to those that have joined the discussion in here and on the Governance call this past Wednesday.

Now that the feedback / input from SF is known the discussion can take on it’s next phase. In the past Governance call (full notes: Gov Agenda/Notes 2022/07/13 - Google Docs) the main points left to discuss seemed to be the compensation breakdown, balance sheets, and budgets. Any other points are of course open for discussion as well, and if you would for example prefer a few seperate proposals instead of one single proposal, this is the time to let that be known in this forum thread.

As always please stay on-topic and keep the discussions friendly, constructive, and actionable. We all want what is best for the network.

4 Likes

Thanks for the comprehensive response Tor. I genuinely am pleased with the majority of your response hopefully means that the community will be able to unite as one and drive the Network forward.

I do think we should work collectively on what we want to see going forward. There isn’t an immediate rush to get this somewhere by next week, so let’s break it down point by point if we have to.

Make ten different forum posts with each point and let people comment on each one directly if need be.

6 Likes

Thank you for the detailed breakdown @tor. I am confused on a couple of your points, and I am hoping you can clarify them for me. You mention in response post 2 section 2 part 3:
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.

You later state in post 2 section 5:
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.

Additionally, you stated on the governance call on July 13 that the foundation does not currently have anyone reviewing your financials for the above started reason that auditing is not a priority.

Could you please clarify these statements for us? I feel like you have now told us 3 substantially different things, and I now don’t understand the current situation.

5 Likes

Foundation needs to find a replacement for Jordan immediately, this should be one of the biggest priorities. Not having backfilled his position yet is/was a big mistake.

Once thats done, then this new individual should be delegated on to complete the following:

  • Increase the level of detail on the transparency reports.

  • Be the responsible party in ensuring these reports are ready without delay.

  • Establish a succession plan that ensures the Foundation ultimately goes back to the community in case of any conflict.

When it comes to things like audits, I think they are necessary at least once a year, but I think it would be possible to reach a compromise should the above be addressed. The problem is so far it hasn’t, and I think it’s time to show results on that front.

Re: NPO - I think it’s a waste of time if the above is addressed.
Re: “Bipartisan” - Stop it with the us vs them mentality.

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I am not sure what you mean. We have CPAs we currently work with for tax strategies and they review our financials. They are not currently preparing an audit for public consumption. Those are pretty consistent statements and I don’t think I’ve deviated on these points.

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I acknowledge all of this and take personal responsibility for this dragging on. I welcome any guidance on how to remedy this as fast as possible. Hiring in itself for this position is likely a full time job at this point in time, and we have been overwhelmed with operational priorities (as well as hiring for other roles and functions in our org). This is probably the biggest leverage point for community contribution at this stage - helping us identify a prospective person or organization to have this function, even if they initially work in a contract capacity.

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I think I wasn’t clear with my original post, so I apologize for that.

My questions stem from the below items:

  • You have stated you cannot have someone review your financials because you don’t have time or bandwidth for an audit, yet your post said that you DO have someone regularly reviewing your financials.
  • You have stated you cannot provide a short or long term firm or rough budget for your company, in part due to not knowing your tax burden for multiple years. However you have also stated that you have a firm regularly reviewing and preparing your taxes.
  • You have now stated that you do NOT have someone preparing your taxes, they are simply providing tax strategies.

Could you please clarify the above points? To be clear, I am not asking about an audit, I am simply trying to understand the current state of affairs as you now have shared 4 different versions.

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