Redirect Community pool to SNF

Secret Governance
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Proposal: Redirecting the 2% Community Pool Tax to the Secret Network Foundation

Summary

This proposal aims to redirect the 2% tax currently allocated to the Secret Network community pool, along with the existing ~1M SCRT balance, to the Secret Network Foundation (SNF). Over the past 12 months, the community pool has mainly funded a few initiatives, specifically the testnet committee, support initiatives, and two Hack Secrets, all of which are now managed by SNF. Redirecting the funds to SNF, with its streamlined management processes, will ensure that resources are consistently directed toward advancing network development.

Implementation Plan

  • Tax Allocation Adjustment: Modify the current tax allocation mechanism so that the 2% tax, previously directed to the community pool, is rerouted to SNF.
  • Balance Transfer: Transfer the existing ~1M SCRT balance currently held in the community pool to SNF for ongoing use in network growth and development initiatives.

Addressing Concerns

  • Decentralization Considerations: While some community members may view this shift as reducing decentralized control, SNF’s transparent processes and community engagement mechanisms ensure ongoing participation and oversight.
  • Alternative Approaches: Although some may propose reducing or eliminating the tax altogether, this proposal maintains network funding while ensuring more active and efficient utilization through SNF.

Conclusion

Redirecting the 2% tax and the existing community pool balance to the Secret Network Foundation ensures that funds are actively deployed to support the ongoing growth and sustainability of the Secret Network ecosystem. This proposal reflects the current operational realities and aligns funding with strategic priorities. We invite the community to support this initiative for a more focused and effective management model.

New proposal to move community treasury to SNF
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Does SNF have a grants program? That would be my only concern about eliminating the community pool.

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yes, there are plans to offer small grants for things the community pool may have covered in the past

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was there any other questions, comments, concerns or feedback regarding this? if not then we will be moving forward and putting this on chain soon-ish

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Hi All - as @MrGarbonzo mentioned, we’ve now had a month for discussion on this topic.

The question was raised about whether the pool would be funding grants, and the answer is that SNF is planning to continue to fund grants on an ongoing basis for the community. These are meant to be smaller grants for experimental purposes, rather than commercialized products.

Otherwise, the pool will be used to fund testnet, support, and other essential utilities for the network, most of which have already been moved from community support to SNF funded.

We discussed this topic at the last community meeting which was held as a group call on telegram. I proposed another discussion if there were questions, which there haven’t been to date.

So here’s a heads up that the proposal will go on chain tomorrow!

2 Likes
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Everyone looking at this proposal should consider this reality check for a moment: Lisa has represented Secret Network across Forbes, CNN, TheStreet.com, Yahoo Finance, NBC News, Coindesk TV, and numerous other publications. She brought Phala and other partners to the table for DECC, secured the Messari report on DECC, and obtained speaking opportunities at conferences that kept Secret in relevant. Secret Labs isn’t capable of doing any of this without SNF.

I’m not particularly bullish on things today, but if the community allows SNF to run out of funding, we’re about to discover what Secret looks like with zero visibility and SLABS handling communications alone. Currently, SNF has roughly 6 months of runway remaining…. and that’s with SLABS subsidizing them and assuming SCRT maintains at least $0.20. Lisa will not dispute any of this….

I’ve also heard Shade Protocol wants the entire pool, as others have heard, but if that’s what happens let’s call this what it is…. Shade is currently the most successful app on the network, but they aren’t in an excellent position either. Their protocol revenue doesn’t even bring in enough to support a decent size full time dev team, this would just artificially increase TVL which doesn’t keep secret relevant in any conferences or TEE / Privacy discussions. It does slightly bump secrets TVL but what does that matter if Secret itself lowers SNF runway by not supporting SNF? TVL didn’t help secrets price during surge, and such a small bump is highly unlikely to do anything for secret. So that play just hands some of the final resources to a 3rd party, none of which will look good for Carter or shades reputation once SNF runs out of funds.

Everyone can make their own decisions here, but carefully consider how you want to play what may be the final hand of cards. If SNF runs out of funds, Secret Network will effectively vanish.

4 Likes
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Below is the proposal shared on the last governance call to have SNF deploy clawed back Community Pool (CP) funds into SCRT aligned DeFi opportunities. This proposal was previously shared with SNF before its discussion on the May 21st governance call.

In summary, it is proposed that 900k SCRT (~83% of total CP funds) be deployed from the clawed back CP funds to the following DeFi opportunities and custodied by SNF:

Liquid Stake 250k SCRT:

  • Will receive ~129.2k stkdSCRT
  • 23.1% of total CP funds

Pair 250k sSCRT (assuming price of SCRT @$0.23, ~$54.7k USD) with 129.2k stkdSCRT on ShadeSwap:

  • Will receive $109.2k of sSCRT / stkdSCRT LP tokens
  • Estimated annual yield: ~14-18% APY
  • sSCRT for this LP represents ~23.1% of total CP funds

Lend 400k sSCRT on ShadeX (Money Market):

  • Will receive ~394.9k xsSCRT ($86.4k USD)
  • Estimated annual yield: ~7% APY
  • 37% of total CP funds

In total, ~430k SCRT from from the CP funds will remain as liquid SCRT or sSCRT (~39.9% of total CP funds) if the suggested use cases are adopted.

Benefits to network participants:

Secret Network Foundation (SNF):

  • Funds deployed are yield bearing, which over time increases their effective funding power.
  • If deployed for a year, SNF would likely generate ~98k - 118k additional SCRT (subject to change based on market conditions) relative to simply holding SCRT.

Secret Network (as a whole):

  • Deployments of SCRT in Secret DeFi increase the TVL for the network (+1.7% total TVL; +9.8% SCRT related TVL).
  • The additional TVL increases both spot and leverage market liquidity for SCRT that current and future DeFi app users can more efficiently utilize.

Risks Explained:

In terms of impermanance loss, all suggested deployments (including LPing) only have exposure to SCRT price. If SCRT goes up in USD value, the value of all deployments of SCRT goes up (and goes up more than if just holding SCRT). If SCRT goes down in USD value, the value of all deployments of SCRT goes down (but goes down less than if just holding SCRT).

There are no lockup periods for unbonding liquidity from liquidity pools and there are no lockup periods for withdrawing lent assets.

There is an unbonding period for stkdSCRT (~21 days). While there is sufficient concentrated liquidity for the stkdSCRT to be sold on the open market for sSCRT, stkdSCRT would need to be unbonded if the full redemption value was being sought. stkdSCRT maximally represents 28% of the CP funds suggested to be deployed (~23% of total CP funds).

There is no predefined lockup period for withdrawing lent assets, although withdrawing the full amount of deposits might be restricted depending on the utilization rate of the lent assets. However, if utilization rates hit 100%, interest for borrowers of SCRT would spike to the maximum interest rate (~1300% APR). This interest rate spike would swiftly incentivize additional lending deposits and repayment of debt, which would then open up further withdraws. Lent SCRT (xsSCRT) maximally represents 44% of the CP funds suggested to be deployed (~37% of total CP funds).

  • Ex: Let’s say CP funds make up 100% of lent assets. Someone borrows 5% of the lent funds. Now only 95% of the originally lent funds are available to be withdrawn by the lender because 5% of them were borrowed. If the 95% available for withdraw were pulled at once, then the remaining 5% that was lent will be receiving the max interest rate (~1300%) until new lent assets are provided or borrowers repay debt.

Conclusion:

The deployment, by SNF, of clawed back CP funds into SCRT aligned DeFi opportunities represents a meaningful way to provide additional funding power for SNF, increase TVL for the network, and increase capacity for SCRT use in spot and leverage markets on Secret’s dApp layer.

2 Likes
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Hi All - we are finalizing the proposal to put on chain this week. The delay is due to my travel and the changes in our team, and it seems as though proposal formats may have changed since we last put one up from SNF.

Meanwhile, I wanted to mention that the DeCC report was a joint effort between Labs and SNF, and Labs kept the ball rolling when needed. Labs led the initial discussions with Messari, and started discussion with Phala and some other teams early on. Labs and SNF jointly cooperated to bring more participants to the report, get the agreements executed, collect payments and review multiple drafts of the report to ensure good quality.

Stay tuned for the proposal in the next few days.

1 Like
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If the post above is intended to suggest that Secret Labs significantly contributed to the development of the DeCC report beyond providing technical feedback, or to imply that Secret Labs was instrumental for the Messari report or any relational aspects concerning Phala, I will clarify that such claims are simply not true. Secret Labs’ contribution is limited to verifying technical details related to their own product, and they deserve no credit beyond this scope. As Kent likes to say, teamwork is makes the dream work. Two potential outcomes are likely here: either the Secret Network Foundation receives support, enabling it to continue its operations and initiatives beyond a few more months, or it closes in a few months, which could occur regardless given the rank trend. In the latter case, Secret Labs will absolutely not have the leadership or skillset needed to fill gaps left by SNF’s. The unified front is cute, but voters should not be misled, none of this (non technical / awareness stuff) will meaningfully continue without SNF.

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Proposal is on chain now. This is the first one which changes the community tax and the SNF tax at the same time.

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After talking with the community SNF has decided to go forward with a proposal that will bring the community tax from 2% to 0 and increase the SNF tax from 12 > 20%. this tax will allow SNF to remain sustainable.

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Despite the fact that I disagree with where SNF and SLabs have decided to take Secret Network and would rather see a full dedication to DeFi instead of AI and DeCC so the proposal has my full support, SNF is a good marketing organization, sure it doesn’t go 100% but what it does is more than adequate and above all it is necessary.

Thank you for your service and I hope the motion passes and SNF moves on.
Jiricepelka I AdamantFi