SNF Quarterly Report January 2024 - Q&A

Secret Governance
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:question: How much of the event budget from 2023 was part of co-sponsorships with other constellation partners?

Answer: SNF did a co-sponsored event with Fhenix in Toronto (ETHToronto), which we split costs for. Our sponsorship cost was $5k and the hackathon prizes were $4000.

We also ran co-sponsored events with Oasis, Akash, Nym, Zama, Noble, KYVE, Axelar, Agoric, Cheqd, Halborn and UPA, among others. A rough estimate is that these co-sponsorships made up about 25% of the total events budget.

:question: How was conversion tracked with respect to engagement with people at events? I’m curious what KPI is used.

Answer: We tracked leads generated at each conference and followed up with them with our email campaigns. The total number of leads we collected from Q3 and Q4 was over 12,000. After marketing qualification, this number reduces to 7800.

Regarding conversions, we have several we’re tracking against, including devs signing up for hackathons (432), devs going on to build projects on Secret (33), and partnerships closed. Our events in Q4 saw a higher conversion rate, due to the things we learned in Q3. Our 2024 events are already performing better than the 2023 events, and it’s still early.

Our events budget for 2024 is around $150K.

:question: Would other board members be joining Otonomos Inc.?

Answer: SNF is a non-member organization with a nominee director (Otonomos) who takes guidance from a supervisory group. (We sometimes refer to the supervisory group as a board.) Otonomos is a separate Cayman entity that provides director services to other companies. The supervisory group will not be part of Otonomos.

:question: I noticed it said: “For tax compliance, the majority of these funds [~$500k USD + 1M SCRT] will need to be spent in 2024” - curious to learn more about this

Answer: Our tax accountants have advised us that this is the best method of proceeding, and we are following their guidance. The goals of both SFI and SNF are to maximize the resources available to grow the Secret ecosystem.

:question: How much is developer onboarding / dApp development a SNF KPI?

Answer: This is an important KPI. Our primary goal is to grow the Secret ecosystem through partnerships and by growing our dev community.

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Specifically, some of SeanRad, Patrick and AlexH’s biggest KPIs for this quarter are:

  • Hold weekly developer calls and monthly developer workshops
  • Host regular successful hackathons
  • Shared goals with SLABS Q1 PaaS goals EVM tooling including
    • Random Number Generation
    • Confidential Voting
    • Sealed Bid Auctions
    • Confidential NFTs, contracts + documentation.
  • Support the winners of the first cohort for the new grants program to complete their milestones

:question: I noticed the announcement of Constellation was listed as a big win - do we have an update on the constellation? Has been largely quiet since the summer.

Answer: Behind the scenes progress is being made on the Constellation - we are talking to potential partners, but we cannot share anything just yet.

:question: What’s Otonomos Inc?

Answer: Otonomos an entity that provides director services for other entities. Otonomos is the nominee director for SNF, which is a Cayman entity.

:question: How are many of these KPIs measured?

Answer: KPIs are tracked using standard methods - we leverage our experience in marketing and customer relationship management to get a clear picture of our ROI for every campaign, and add some useful shortcuts we’ve learned from running campaigns in both big corporations and startups.

We recently revamped our performance tracking methods internally, and now issue quarterly KPI’s for each contributor that will be discussed and measured each quarter (and periodically throughout the quarter).

:question: Can you also elaborate on the nature of the contract(s) with SFI? What exactly is being provided to SFI by SNF for these funds?

Answer: SNF has a contract to provide services to SFI. SNF’s statement of work encompasses growing the Secret ecosystem through education, marketing, dev relations, and thought leadership.

:question: I’d like to know more on the tokenomics research for the inflation reduction. What did you guys find wrt to the before and after?

Answer: It is still too early to draw any statistically significant conclusions about the effect of the inflation reduction. Typically it takes 6-12 months of data to detect a trend with any degree of confidence. This is why we decided to do the inflation change ahead of the research - it will allow us to assess the effect in the future and will contribute additional information to the tokenomics research.

SNF and Labs have started the tokenomics research with an external consultant. The research will include some analysis, comparisons with other chains and also recommendations for the future.

:question: Wondering about our constellation partner as well. It seems like we want them part of Secret constellation but they don’t recognize Secret as part of theirs.

Answer: While the constellation development is still relatively new, we do see it as a partnership where all members contribute value to each other through co-marketing and collaborations. We should see this cooperation become more obvious over the coming months.

At ETHDenver, we will be co-sponsoring the Constellation booth with Fhenix as well as participating as invited guests in Fhenix’s Encryption Day. Fhenix is promoting Secret in the email blasts around this event as well.

:question: Also wondering how the board gets compensated. And by who?

Answer: Details of board compensation are not finalized, including whether any compensation is offered and if so, where the funds come from. These questions are timely, and we should have more insight by the end of March.

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Hey guys, upon having some time to reflect on the 3Q23 and 4Q23 transparency updates provided by Secret Network Foundation, I just wanted to ask some more questions.

  1. There is a comment in the report that says the majority of revenue earned from the service contract with SFI has to be used within 2024. For 1H24, this has been estimated at $500k in USD and 1.0m $SCRT. As at Jan-24, that was worth approximately $990k. I would assume that the amount for 2H24 will also be material but we can estimate that SNF will receive at least $1.5m from SFI throughout 2024.

    This appears to be a much elevated amount of spending relative to past spending so I would like to understand whether this spending has been planned or whether SNF will be spending funds just because it has to (as per the advice received from tax advisers).

  2. Would it be possible to provide the community with data on FTEs by department contributing to Secret Network Foundation? By taking just Nov-23 and Dec-23’s payroll data (where contributors were constant), we get an annualised payroll cost of c.$829k.

    This will inherently place a large amount of strain on the reserves held by SNF as with an estimated $536k at Jan-24 (taking close of 2023 prices) and the above $1.5m that will be accrued by Secret Network Foundation, c.41% of those funds are already allocated towards payroll.

  3. I think the above should also be important when considering the state of the Board. My understanding is that Guy Z. and two members chosen by Guy Z. will form the initial board for three years. Based on the above spending levels, one would assume that SNF will be out of funds and need a tax without zero community oversight.

  4. Would it be possible to clarify the economic relationship between SNF and SCRT Labs? Where some projects or initiatives involve both parties, how are costs apportioned?

    My initial thoughts gravitate towards Snakepath, a product that has been in development by a member of SNF. However, this appears to be a product that would form part of SCRT Labs’ development roadmap for 2024.

    From looking at the quarterly report, it would appear that a review of delegations would also fall under this category. I am very supportive of SCRT Labs and SNF working more tightly together, but I would be lying if I said that this didn’t feel like the community’s tax contributions to the past Foundation (and thus present Foundation) are being used to pay for work that SCRT Labs are requesting.

  5. When may we gain some insight into the tokenomics research that is currently being undertaken? Will a future quarterly report provide insight into the cost of this initiative? Do you also think that the Foundation should provide notice in advance when undertaking initiatives above a threshold cost (not suggesting that this will have made it)?

    I am pessimistic towards the impact of hiring a consultant for this purpose but I hope you can share the output so that the community can digest this information together.

From my outside opinion, it feels like Secret Network Foundation is spending at breakneck speed and we’re going to reach a point fairly soon where a tax is required.

There have been comments about price/rank as a KPI and while I don’t care to opine on that topic, I think it is extremely important to consider price/rank within the scope of this conversation. Without material increases in the price of $SCRT, it is extremely unlikely that the community will be able to support the Foundation at implied spending rates.

Note that at current prices, there is c.$10.3m in SCRT emitted each year to stakers through inflation. I’m sure you can appreciate the material impact on stakers based on the above spending levels.

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Hi everyone - we have put together a response from SNF and Labs that addresses all of these questions to the best of our ability. Although there are a lot of assumptions in the questions, it’s understandable that the author would draw incorrect conclusions in the absence of complete knowledge. Therefore, we’ve tried to stick to providing useful information in our response.

  1. There is a comment in the report that says the majority of revenue earned from the service contract with SFI has to be used within 2024. For 1H24, this has been estimated at $500k in USD and 1.0m $SCRT. As at Jan-24, that was worth approximately $990k. I would assume that the amount for 2H24 will also be material but we can estimate that SNF will receive at least $1.5m from SFI throughout 2024.
    This appears to be a much elevated amount of spending relative to past spending so I would like to understand whether this spending has been planned or whether SNF will be spending funds just because it has to (as per the advice received from tax advisers).

We’ve cut the budget down significantly from last year, and will continue to optimize our spend and reduce our burn rate. It may be obvious, but it’s worth mentioning that SNF absorbed both SFI and the Secret Agency, and is now responsible for the missions of both of those entities. Our spend will be intentionally earmarked for our top KPI’s: bringing in more developers to the ecosystem, adding more partnerships, and increasing SCRT’s overall position in the market.

  1. Would it be possible to provide the community with data on FTEs by department contributing to Secret Network Foundation? By taking just Nov-23 and Dec-23’s payroll data (where contributors were constant), we get an annualised payroll cost of c.$829k.
    This will inherently place a large amount of strain on the reserves held by SNF as with an estimated $536k at Jan-24 (taking close of 2023 prices) and the above $1.5m that will be accrued by Secret Network Foundation, c.41% of those funds are already allocated towards payroll.

During the transition period of Q3 and Q4, there was a higher need placed on external contractors to execute pre-committed conferences and administrative tasks. Q1 and Q2 reports this year should help be a better indication of what the annual total for payroll should look like. Spoiler: will be significantly lower than the estimates above.

  1. I think the above should also be important when considering the state of the Board. My understanding is that Guy Z. and two members chosen by Guy Z. will form the initial board for three years. Based on the above spending levels, one would assume that SNF will be out of funds and need a tax without zero community oversight.

SNF’s charter specifies that Labs will choose the board for the first two years, and then the community has the ability to make changes after two years. Since the terms go for 3 years, those board members would likely continue to serve for an extra year before the seat comes up for re-election by the community. We are currently recruiting for the two additional seats that are open.

As mentioned in the Quarterly presentation, our goal is to set a strong strategy for the rest of 2024. This will likely shape the way SNF comes to the community later in the year for a funding proposal. We wish to bring success in reaching our goals, so we can further the mission into 2025. We look forward to the next quarterly reports where we can shine a light on the fantastic, ecosystem-growing work the team is doing. I hope their hard work is seen by the community. It will definitely be felt in Secret’s greater success as a network.

  1. Would it be possible to clarify the economic relationship between SNF and SCRT Labs? Where some projects or initiatives involve both parties, how are costs apportioned?
    My initial thoughts gravitate towards Snakepath, a product that has been in development by a member of SNF. However, this appears to be a product that would form part of SCRT Labs’ development roadmap for 2024.
    From looking at the quarterly report, it would appear that a review of delegations would also fall under this category. I am very supportive of SCRT Labs and SNF working more tightly together, but I would be lying if I said that this didn’t feel like the community’s tax contributions to the past Foundation (and thus present Foundation) are being used to pay for work that SCRT Labs are requesting.

The economic relationship is one of flexibility and professionalism. We share relevant costs fairly on a case-by-case basis. If there are initiatives involving both parties we discuss and decide together how to support them and/or fund them. Some examples that can fall into this bucket are software subscriptions, documentation, bug fixing, delegations, grants, and partner integrations.

  1. When may we gain some insight into the tokenomics research that is currently being undertaken? Will a future quarterly report provide insight into the cost of this initiative? Do you also think that the Foundation should provide notice in advance when undertaking initiatives above a threshold cost (not suggesting that this will have made it)?
    I am pessimistic towards the impact of hiring a consultant for this purpose but I hope you can share the output so that the community can digest this information together.

The tokenomics research is being undertaken by Labs primarily, but SNF is providing input and feedback to the task group. We expect the report to be ready in late Q1/early Q2. As to the cost of the initiative, SNF’s quarterly reports will only include SNF expenses, not those undertaken by Labs like this one.

To conclude, thank you for the questions! We’ll continue to share updates with you as we develop our shared goals.

Lisa Loud & Alex Zaidelson

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Wow. Didn’t know SNF officially took over agency. That was a mega grift from the beginning.

Lisa, we appreciate all the efforts to eliminate the grifting. Secret Network must’ve had the highest number of people earning full time salaries based on our rank when sni, agents were around.

Cut the pork❤️