Below is a summary of revisions that the Shimmer Community Treasury Committee proposes to the community to update The Shimmer Community Grant Committee specification. The specification can be found on GitHub under the document [Exhibit C - V1.md](https://github.com/Tangle-Community-Treasury-DAO/Operation-Agreement/blob/main/Exhibit%20C%20-%20V1.md). The original specification was built by the community in collaboration with the IOTA Foundation and confirmed through a community-wide governance vote. After three months of operating the treasury, the Committee has some proposed updates to support a more efficient and supportive framework. The proposed changes and updates are shown below.

## The Shimmer Community Grant Committee [*Link to Specification*](https://github.com/Tangle-Community-Treasury-DAO/Operation-Agreement/blob/main/Exhibit%20C%20-%20V1.md#the-shimmer-community-grant-committee)


The community chose the name of the specification and the original name of the Committee as the *Shimmer Community Grant Committee*. The initial focus was the Shimmer Community Treasury and to test such a treasury committee framework. The previous three months have shown that not only does a fully transparent treasury grant management specification work, but it can work efficiently and scale.

After the vote, the community later supported a name change to the Tangle Community Treasury and the LLC name in the Republic of the Marshall Islands to be Tangle DAO LLC. This allows should the community to vote to manage the IOTA community treasury funds. If the community chooses this option, this would save hundreds of thousands of dollars in operational costs and offer an efficient grant management system while allowing more funds to fund community projects.

By revising the name of the grant committee to the Tangle Community Treasury, it allows for the ability of an efficient grant management system. The name and website domain (www.TangleTreasury.org) have also developed recognition within the community. This community recognition and social media presence can continue growing.

## Shimmer Community Grant Committee - Operation Specification [*Link to Specification*](https://github.com/Tangle-Community-Treasury-DAO/Operation-Agreement/blob/main/Exhibit%20C%20-%20V1.md#shimmer-community-grant-committee---operation-specification)
The first paragraph in the specification states
> The Shimmer Community Treasury Grant Committee was established in the Governance Votes SGP-005, the committee members got selected in SGP - 001 and SGP - 002 by the Shimmer Token holders. The Committee received a budget of 27.204.307 SMR for one year of operation from the 181.362.051 SMR large Community Treasury. This article contains the operation specification under which the elected committee members operate and steward the received budget.

Particularly the last sentence indicates very clearly that the Committee can only operate and steward the received budget for that year. The problem with such a strict statement is that it hinders the Committee from voting to give additional treasury funds to the Committee throughout the year if a governance vote occurs. This means if the community decides to use community funds for additional funding later in the year, there are certain instances in which these funds may need to go through the Marshall Islands LLC. Additionally, any edits and changes to the specification will cause a revision of the Operational Agreement recorded with the Republic of the Marshall Islands. Constant modifications and updates could cause minor costs to occur.

We recommend rewriting this paragraph as

> The Tangle Treasury grant committee was originally established by the Governance Votes SGP-005, the committee members were selected by the SGP-001 and SGP-002 governance vote in which Shimmer Token holders conducted. The committee receives operational appproval and an annual funding budget through a yearly community governance vote. This article contains the operation specification under which the elected committee members operat and steward the received budget or any additional budgets the community decides to allocate to the Tangle DAO LLC and steward.

This revision offers statements encompassing future community governance votes, *if they so occur*, and allows this specification not to be revised yearly. The revised statement in no way assumes or defines that the Treasury Committee continues longer than the initial term in which the community voted. Further, the above-revised paragraph allows the community to give funds to the Tangle DAO LLC. and steward such funds. This could be some emergency. For example, suppose a bull market occurs, and the price does a quick and extreme increase. In that case, the community may decide to liquidate some Shimmer Community funds into a stable token. Revising this paragraph to state the Committee shall steward allocated funds dictated by the community. Of course, these funds could only be stewarded for the community if it is within the legal standards of the LLC per the Republic of the Marshall Islands. Lastly, it may be that the community supports the treasury committee with additional funding before the end of the year. The foundation of the statement, though, is that the Committee, and thus the LLC, must steward any funds given to them by how the community dictates.

## 4.3 Aplication and Approval Process: [*Link to Specification*](https://github.com/Tangle-Community-Treasury-DAO/Operation-Agreement/blob/main/Exhibit%20C%20-%20V1.md#43-application-and-approval-process)

The current specification breaks down the tier funding into two groups based on the market cap of the $SMR token. The groups are segregated into two groups; low tier and regular tier.

> Funding Tiers and requirements:
>
> As long as the market cap of Shimmer is low, we need to take a considerably more secure approach in the early stages. Therefore, we should define a threshold based on the Shimmer market cap, which will lead to the halt of funding, the start of financing with low tiers, and the switch to regular tiers.
>
> * No grants are given out as long as the Market cap of Shimmer is below 50 Million USD
>
> * Grants will be given out with low Tier values if the market cap of Shimmer is between 50 and 100 million USD
>
> * Grants will be given out with the Regular Tier values if the market cap of Shimmer is above 100 million USD
>
> * Tier 1 - up to 5.000 USD: Two reviewers handle the proposal and approve or decline it within two business days after submission. KYC is required for one member of the project teams (the Grant submitter needs to do KYC and be a signer). The reviewers will decide based on the provided data in the application and especially consider if the submitter has a positive history in our community. As soon as funding is approved, the proposal will be funded within two business days after KYC is completed.
>
> * Tier 2 - Low Tier 5.000 - 25.000 / Regular Tier 5.000 - 50.000 USD: Two reviewers review the proposal. KYC is required for one member of the project teams (the Grant submitter needs to do KYC and be a signer). Projects considered to be approved can be invited to conduct a 1-hour interview with the reviewers of the proposal. A minimum of two milestones will be defined, and payments will happen based on these milestones. After completing the KYC process, the committee can pay up to 50% of the requested funding upfront.
>
> * Tier 3: Low Tier 25.000 - 100.000 / Regular Tier 50.000 - 200.000 USD: Same requirements as the previous tier apply. The Project Team must do KYC (3 members do KYC, including the Grant submitter and Project Team Lead, that will be the signer, and the 3rd Person decided by the Grant Committee Lead). Additionally, applications need approval by the entire grant committee. Projects considered to be approved will be invited to present the idea in an extensive live interview with two grant reviewers and the Program Lead. A minimum of three milestones are defined, and payments happen based on these milestones.
> If the project is accepted, the Program Lead will assign one of the reviewers as a project steward. The steward is responsible for keeping close contact and doing regular (minimum every two weeks) checks with the project team. Milestones are reviewed by the steward and approved by the committee Lead. After completing the KYC process, the Program can pay 30% of the requested funding upfront.
>
> * Tier 4: Low Tier 100.000 - 250.000 / Regular Tier 200.000 - 500.000 USD: The entire grants committee will review those applications—same procedure as in Tier 3. The Project Team must do KYC (3 members do KYC, including the Grant submitter and Project Team Lead, that will be the signer and the 3rd Person decided by the Grant Committee Lead). The final decision if the project receives funding will happen in a vote by all token holders.
>
> * Suppose the grants committee supports that the community shall fund a Tier 4 application; it forwards this application to the community as a proposal in the governance forum and asks for approval by the community in a vote by all Shimmer token holders.
> * The proposal in the governance forum will be submitted by the committee lead and includes the project team's full proposal and a detailed statement by the grant committee on why it recommends funding this proposal. Such a proposal will enter the governance process as a Phase 2 Poll in the Governance Forum.

The idea was great and supported making it more stringent to fund grants if the treasury drops to a low value overall based on the $SMR price. However, the two tiers could be clearer to express and communicate to the public. If you look at the homepage of www.tangletreasury.org, you can see a summary of the Tier grant requirements. Yet this only shows the regular tier. If we were to show both tier grant requirements and explain them, it would convolute the homepage.


The Committee proposes to simplify the specification but just having the regular tier and taking out the low tier. The concept still holds, and it will be up to the program lead and the Committee to manage the fund. If the $SMR price decreases based on market activities, the program lead and the Committee must manage accordingly.

The same goes with simplifying the specification by removing the statement;
> No grants are given out as long as the Market cap of Shimmer is below 50 Million USD

This statement restricts this specification to the Shimmer treasury. "If" the community decided to fund the treasury committee with $MIOTA tokens from the Iota Community Treasury, this specification would need to be updated. Instead, leaving these statements out of the specification allows it to be used for any asset the community deems necessary, which they vote for the Committee to manage.

## 4.4 Application and scoring process *(Grant Evaluation Scoring System) [Link to Specification](https://github.com/Tangle-Community-Treasury-DAO/Operation-Agreement/blob/main/Exhibit%20C%20-%20V1.md#grant-evaluation-scoring-system)*

The below scoring table is used to score grants which become one variable in which a grant is accepted or archived.


This was a tremendous first guidance to help the Committee focus on determining in a quantifiable way whether a grant has value or it doesn't. However, after three months and reviewing over 47 grants, Finanzgoblin has proposed a template that better guides the present and future committees. Also, instead of having defined guidance regarding the particular score, the Committee feels a 0 to 4 rating, or Extremely Low Quality to Oustanding. The below table is a proposed revision.


The above-revised table guides the present and future committee members to think about various guiding questions and then grade a grant based on the results, compared to the original table where committee members must try to find a specific box to fit the grant into. Additionally, there are more specific guiding questions when assessing the financial execution and viability, both the short-term and long-term capabilities of the grants.

**Note:** Regardless if the first grading matrix or revised grading matrix is used, it must be known that the grants grade and questions within the matrix or used as a *guide.* Multiple grants may receive passing grades but not be funded. This depends on the treasury's valuation and short and long-term planning. Except for extreme situations, grants that score positively and meet the approved funding tier in which they submitted, the said grant will be either approved for funding or archived and reassessed at a future time when the treasury is in better financial standings.

## 4.5 The Budget [*Link to Specification*](https://github.com/Tangle-Community-Treasury-DAO/Operation-Agreement/blob/main/Exhibit%20C%20-%20V1.md#45-the-budget)

The current framework specifies how the Committee can use the budget for running costs. This includes salaries, grant payouts, and setting up the Marshall Islands registration.

> Budget for 12 months of operation
>
> * The Budget for the committee spending during 12 months is 15% of the SMR community Treasury tokens currently held in this address.
> * 15% of this 181.362.051 SMR will be 27.204.307 SMR available for the committee to spend on grants and cover all operational costs.
> * The committee will operate a MultiSig Wallet, supplied with fractions/ monthly allocations of SMR tokens from the community wallet (currently operated by TEA) to the Multisig.
> * The committee will pay monthly salary in stablecoin USDT or USDC to the Project Lead and payout compensation to Grant reviewers based on monthly invoices. It will be responsible for handling this efficiently and transparently.
> * Six months of salary required for the Project Lead (67200 USD) will be converted from SMR to USDT at the beginning of the program period and again after the first six months of operation.
> * The committee will convert the potential max compensation for the grant reviewers (24.000 USD if four reviewers do 10 hours a week) from SMR to USDT quarterly.
> * Liquidating those tokens on the exchange shall happen in small amounts controlled by the committee and randomized in time and quantity. (Crypto finance custody potentially an option)
> * Once a project has been approved for funding, the committee will convert the amount of Shimmer tokens approved for this project into USDT so that the financing of this project is guaranteed. Market volatility should not impact project funding and Reviewer compensation.
> * The needed legal costs and expenses around the setup of the Marshal Island DAO LLC and the potential shutdown costs at the end of the program operations will be covered by the Community Treasury.
> * Any excess funds left in the Committee's MultiSig Wallet towards the end of the 12 months will be sent back to the Community Treasury wallet by the committee members in case the community decides not to continue the Program.

The budget statement does not specify certain administrative activities, such as paying for KYC audits for grant receivers, legal documents created by our legal representative such as non-disclosure agreements, terms of use agreements for the website, etc. The point is there will be unknown expenses that we can only sometimes foresee, and we may occasionally require consultants. An example would be when we used a technical consultant to build a bot to update the treasury discord of any safe asset transfers. Considering that the Committee can't simply hire someone, we had to wait for a grant submission. In many cases, we can create an RFP; however, other times, we will need to use an organization like Fiverr or Upwork.

Another limiting factor is also the Committee must refrain from engaging the community. We would love to create a bounty and spend time marketing and publicizing such an event. For example, the Tangle Community Treasury logo was created by the IOTA Foundation. However, what if the community decides and thinks it should be updated? How fun would it be to engage the community with a fun, public, and transparent Bounty where not only anyone can participate but also the community can vote on? We propose having a budget that allows for this to create bounties.

The Committee suggests that at the beginning of the year, the program lead from the previous year will estimate the running costs of the treasury for the following year. They will include all known charges, including but not limited to; salaries, legal fees, website hosting costs, and entity management fees, and then propose an administrative value that the Committee can use for unknown costs and consultants.

The Committee proposes an amount between $25,000 and $50,000 in the annual proposal presented to the community to continue the Tangle Treasury. We also suggest allowing $20,000 USDT for the Committee to use for such activities for this current year. This will mainly focus on seeking a technical consultant to build an automated treasury counter that updates with the token price and legal documents to be developed and used to manage the Tangle DAO LLC.

## The current framework sets a passive requirement for the committee.

The current framework is written in a way that creates and dictates that the Committee takes a passive role. The current Committee must wait passively for grants to come to the Committee. Yet, if the Committee sees a need for grant proposals for something specific that will help the community, the Committee is limited and not allowed to act actively for grants.

Why does this hurt the community? Understand that the Committee weekly and actively are working to complete the vision of the treasury, which is to grow the ecosystem positively. We regularly discuss, research, and analyze what will help the ecosystem. Yet with all that knowledge and time, we are limited from being active.

We propose that the Committee can take an active role in seeking proposals within the community. However, this must be done transparently and fairly. We suggest a process as shown below.

1. The committee can post an RFP (Request For Proposal).
2. The RFP must be open and public for a minimum of 30 days.
3. The committee will post all proposals under review that are submitted to the RFP transparently on the website.
4. The committee must review all proposals submitted for the RFP fairly and unbiasedly.

This process allows the Committee to seek grants and take an active role. However, each step is fully transparent, and all submissions will be reviewed fairly.

## The current framework sets does not allow for the committee to invest and earn yield on the treasury throughout the year.

The current specification does not give any responsibility to the Committee to earn a yield on the treasury funds. As indicated in the previous point, the specification creates a passive role for the members.

This impacts the community negatively because these funds sit there throughout the year, not only not earning yield but also not supporting liquidity pools and the DEFI ecosystem. This certainly brings a few issues that should be looked at and considered.
1. Attempting to earn yield brings risk; how can we risk losing these funds rather than earning yield?
2. Does the Committee have competency in managing such investing?

The current Committee consists of two highly DEFI-experienced individuals. Finanzgoblin - Richard Mediavilla is a seasoned Web3 DEFI consultant and specialist in tokenomics. Kowei has a Ph.D. in Physics and is deeply involved within the DEFI space and multiple ecosystem community representatives, alongside Garret, co-owner of the centralized exchange BitForex who started and managed a DEFI platform. These three, along with Linus and JD Sutton, create a team suitable to manage funds for investing.

> Marcus Aurelius is stated to have said, “*Everything's destiny is to change, to be transformed, to perish. So that new things can be born*.”

No matter what mitigations are put in place, the probability of taking a loss can never be mitigated to zero.

Due to this variable, we propose that the specification be updated to:
1. Allow the Committee to invest 50% of the annual treasury (from the start of the year) within the Shimmer & IOTA DEFI ecosystem.
2. Any fund investing is wholly transparent and shown publicly on the website www.TangleTreasury.org.
3. All investing decisions are made by a committee discussion and vote where a majority is required, with a minimum of 4 members voting with a minimum of 3 votes in favor of the investment proposal.
4. The treasury's quarterly updates include an investing activity summary.

## 4.3 Possible Extra Scoring Points [*Link to Specification*](https://hackmd.io/@turIC_28RG6k6PG4qdRL8A/H1POgoaFn)

The only part of the specification that allows the committee to seek and replenish the Treasury is listed in 4.3 under the paragraph "*Possible Extra Scoring Points*."

> Possible Extra Scoring Points:
> * Projects offer 0,5% of the projects total token supply to go to the community Treasury: one extra point can be granted.
> * Projects offer 1% of the projects total token supply to go to the community Treasury: two extra points can be granted.
> * Projects offer more than 1,5% of the projects total token supply to go to the community Treasury: three extra points can be granted.
> *
> This does not imply that automatically such an offer will lead to granting the extra points. Granting these additional points is decided on a case by case basis.

When the Soon Labs team approached the Treasury, it took some time to see if the specification allowed such a grant. On the one hand, the Soon team had already done a fundraising round but also needed more market liquidity, which limited their access to the funds raised during their NFT sale. Given that Soonaverse made up 80% of the network activity within the community, not supporting them could negatively affect the ecosystem. Yet, we should only give grant funding for something in return due to their previous fundraising activities.

The specification limits the committee from creating creative contracts with terms that help the grant receiver, the community, and the Treasury. After lengthy discussions with the committee and ecosystem projects, we want the freedom to run the Treasury as a fully transparent and supportive VC. What does that mean? The Treasury can support projects, and if those projects want to give back to the Treasury, we can provide loans with contractual terms. We can offer better terms than any other VCs or lenders. Further, while VCs will sell and dump on holders while taking their earned profits out of the ecosystem to the next, the Treasury would not only not dump and hurt the community, but they would also keep all gains within the ecosystem by supporting more community projects. All profits would not only support projects but seek to grow the ecosystem, providing more users and customers to projects that seek support from the Treasury.

After triple checking with both the Treasury's legal representative and the MiDAO, it is affirmed that the Tangle DAO LLC can actively earn profits through any means and as stated by MiDAO's owner;

> The non-profit is allowed to make and spend money in furtherance of its mission, as long as it isn't distributing the money as dividends or otherwise operating to benefit the owners/members as opposed to the mission (which can include indirectly benefiting the owners/members).

The committee suggests adding a paragraph to the specification that gives flexibility to the program lead and committee to structure deals for grants that benefit the community, grant receiver, and Treasury. This in no way indicates only grants will be funded that support such deals or terms, but instead only allows the committee the freedom to structure such deals. The committee will still assess each grant on a case-by-case scenario in which we will either fund a grant entirely on a complete donation basis with no terms or will structure a great in which if the grant receiver succeeds, then so does the community treasury and community at large. We will seek legal verbiage to indicate such flexibility if the community agrees.