In a recent Sub0 2023 session, Agyle, the co-founder of Talisman, unveiled an innovative concept poised to revolutionize Treasury funding in Web3 projects.
This fresh approach aims to redefine and elevate the funding landscape within the blockchain domain by transitioning towards a results-based model.
Agyle explained to the audience that today’s process of funding Web3 projects through treasury proposals resembles airport security, where proposals are scrutinized to ensure the safety of the community. However, he noted that this system has some limitations.
Challenges with treasury funding systems
The co-founder outlined several limitations in the current approach to Treasury proposals. First, he mentioned the cost-plus structure, where Treasury proposals are structured on a Cost-Plus basis, meaning they are based on input costs.
He said that this approach may not work well for projects where the means to achieve outcomes are indefinite.
He added that the success criteria for Web3 projects are often based on completing work items rather than generating the expected value can lead to a focus on completing tasks rather than achieving the intended impact.
The current system also incentivizes spending more resources rather than fewer, as more spending can lead to more Treasury funding.
This can result in unnecessary expenditures, and an emphasis on marketing to secure funding rather than focusing on user needs.
The last challenge he mentioned is existential risk, where teams reliant on Treasury funding may face existential risks if they cannot match their growing cost center with user traction and profits. This can lead to initiatives being cut without a clear path forward.
Incentive Pools — the solution?
He explained that incentive pools are meant to be built on three key components: commission, cash flow, and accountability.
The commission involves rewarding projects for generating results or meeting Key Performance Indicators (KPIs). This aligns incentives with the value created, fostering a positive feedback loop.
Cash flow involves providing funding to projects autonomously, allowing them to focus on results and take calculated risks.
However, he said that it should not exceed the project’s expenses, ensuring a sense of urgency and accountability.
Thirdly, he added that accountability is essential to prevent cheating and ensure that projects act in a manner that generates expected value.
Transparency, vesting periods, and collaboration with curators were among the strategies mentioned to uphold accountability.
Genesis Pool by Talisman
To solve the funding problem, the co-founder said that Talisman has created a referendum for its Genesis incentive pool.
The focus is on the need to fund projects like theirs based on market feedback and user needs rather than on a per-feature basis determined by the Treasury’s vision.
The co-founder suggests having an open discussion about applying this funding system more broadly. He said that the Talisman project also aims to leverage incentive pools to turn Polkadot-curious individuals into DOT stakers.
By simplifying participation and enhancing user engagement, they contribute to the growth and prosperity of the Polkadot network.
He added that supporting projects that want to get funding from its pool, places emphasis on the need for a clear value proposition for the project and how it benefits the Polkadot Network.
Additionally, he noted the importance of defining success metrics, determining the appropriate commission, understanding cash flow requirements, and establishing accountability to prevent cheating.
Agyle believes that incentive pools hold the potential to create a more results-oriented approach, align incentives between the treasury and ecosystem teams, and ultimately drive innovation and value within the blockchain space.
