# Kusama Treasury - Polkascan Foundation (Social) Contract
This document is written by Emiel Sebastiaan. Emiel has been developing the notion of a multi-chain block explorer since 2016. Emiel has been involved in the Polkadot & Substrate ecosystems since the very early days and is working on the Polkascan project. Polkascan is a multi-chain exploration and data analytic platform for the broader Polkadot and Substrate ecosystems. Through Web3 Foundation grant work Polkascan has provided the ecosystems with an open-source block explorer from day one.

Polkascan has been an elected member of the Kusama Council since the very first council term. Polkascan will especially focus its council membership on having a powerful active and opininated council grounded in shared core-values. Additionally Polkascan aims to focus on sustainable treasury management enabling sustainable growth and adoption of a prospering ecosystem and its key infrastructure.

## 1. Context
At Polkascan we believe that a public block explorer is part of critical ecosystem infrastructure. We believe that on-chain governance and on-chain treasuries are key instruments in sustainably financing public infrastructure (such as block explorers). In [Relay Chain Podcast Episode 5](https://relaychain.fm/5-polkascan-open-source-block-explorer), Emiel discusses 'the roadmap to paid services' and 'DAOs as customers' with the show's hosts Joe Petrowski and Nicole Zhu.

## 2. Problem statement
There are a number of problems we try to address and aim to solve with this document and its proposed next steps. The following list cover non-exhaustive set of problems we have been thinking about over the past year.

1. Financial considerations
a. What is the operational cost of a multi-chain explorer?
b. How can we sustainably fund a multi-chain explorer?
2. Legal considerations
a. Can you have a contract with a Blockchain, Treasury or DAO?
b. Is it legal to receive funds from a Blockchain, Treasury or DAO?
3. Moral cosiderations
a. How should we deal with taxes?
b. Can we have a reciprocal trust-relationship a Blockchain, Treasury or DAO?
4. Practial considerations
a. How do we deal with illiquid assets?
b. How would we receive funds from a Blockchain, Treasury or DAO?

## 3. Objectives
The objective of this document and the proposed next steps is simple:
> Arrange a situation in which the Kusama Treasury can sustainably fund the services it requires on [polkascan.io](https://polkascan.io).

This document's key contribution is twofold:
1. Provide a solution to sustainably fund a Blockchain's, Treasury's or DAO's ecosystem service provider, taking financial, legal, moral and practical considerations of the relationship into account.
2. Create a process to develop and mature a (social) contract for the reciprocal relationship between a Blockchain, Treasury or DAO and its ecosystem service provider.

## 4. Proposal
### 4.1. Polkascan Foundation
In January 2020 the founders of Polkascan started Polkascan Foundation, a Dutch not-for-profit organization. Polkascan Foundation's mission is twofold:
1. Servicing the public multi-chain block explorer: [polkascan.io](https://polkascan.io).
2. Having an active role in governance of public blockchain networks.

### 4.2. Operational expenses for Kusama on polkascan.io
Our current ball-park figure for operational expenses for the Kusama components of [polkascan.io](https://polkascan.io) are 500,00 EUR per month. What are we offering in return:
1. A functioning block explorer with support for Kusama on [polkascan.io](https://polkascan.io).
2. Best-effort incident & problem management
3. Redundant implementation setup which allows for continuity, seamless upgrades and basic disaster recovery & contingency management.
4. Approximately one runtime upgrade per month.

### 4.3. Funding request from the Kusama Treasury
We will make a funding request to the Kusama Treasury:
1. A one-off backdated funding of operational expenses since the launch of Kusama.
Staring with Kusama CC1 launched in September 2019. We are asking for coverage of 8 months which totals to 4000 EUR.
2. A recurrent three month pre-paid funding of operational expenses.
We are asking for a 3 month term pre-paid coverage for the months May 2020 - July 2020 which totals to 1500 EUR.

We will use our Polkascan Council seat to initiate two Treasury Proposals for the KSM amount that reflects the EUR amounts in this section. We sincerely hope that the Council will approve these Spending Proposals. If a Council Member is not willing to approve the Proposals, we hope to be given an opportunity to defend our position. We refer to section 6 of this document.

Lastly we would like to stress that with this (social) contract we are trying to bootstrap a novel and original funding method for public ecosystem services. This novel funding method is by no means unique to our situation and can and should be applied by other ecosystem service providers. We hope to be given the opportunity to continue to develop and mature this funding method to address the current and new challenges we face.

### 4.4. Payment conditions
#### Exchange rate EUR/KSM
Price snapshot was taken on the day of the publication of this Social Contract. [CMC](https://coinmarketcap.com/currencies/kusama/historical-data/) lists the following data points on 22 April 2020: Open: 3.28 USD/KSM; High: 4.03 USD/KSM; Low: 3.,23 USD/KSM; Close 3.93 USD/KSM. CMC does not list an average trading price. We therefore take the average of the High and Low as average trading price: 3.63 USD/KSM. [EUR|USD](https://www.exchangerates.org.uk/EUR-USD-22_04_2020-exchange-rate-history.html) conversion rate on 22 April 2020: 1.0823 USD/EUR. This provides the KSM exchange rate of: 3.35 EUR/KSM.

#### 1. Treasury Spending Proposal
Services: 4000.00 EUR
21% VAT: 840.00 EUR
-------------------- +
Total Services: 4840.00 EUR
Total Services: 1444.78 KSM
Slippage Surplus: 0% - 0.00 KSM (zero due to 12 month vesting)
-------------------- +
Total Treasury Spending Proposal: 1444.78 KSM

#### 2. Treasury Spending Proposal
Services: 1500.00 EUR
21% VAT: 315.00 EUR
-------------------- +
Total Services: 1815.00 EUR
Total Services: 541.79 KSM
Slippage Surplus: 15% - 81.27 KSM
-------------------- +
Total Treasury Spending Proposal: 623.06 KSM

## 5. Next steps
One of the conclusions we have reached is that it is really hard to have a contract with an entity such as a Blockchain, Treasury or DAO. There are all sorts of difficulties to reach a form of concensus on the content of such contract. In addition to the financial, legal, moral and practical difficulties, our use-case has a number of additional difficulties we will need to find creative solutions for. Some of those difficulties are addressed in section 6. In general would like to use our future relationship to follow a path of continuousv improvement.

Our best answer is that we take the proposal in section 4 as a baseline and collectively as a Kusama Community/Council and Polkascan Foundation start drafting a (social) contract between the two entities. We suggest to start with a collection of questions and answers in section 6. We look forward to your contributions.

## 6 Questions and answers
In general we feel that our proposal addresses the financial, legal, moral and practical difficulties we face. We invite the Community and the Council to contribute to this section by adding questions. We will try to answer those questions to the best of our ability.

Q1. Why is Polkascan Foundation asking for recurring pre-payment?
A1. Pre-payment allows Polkascan Foundation to pay for out-of-pocket expenses needed to operate a public block explorer.

Q2. Why is Polkascan Foundation asking for one-off backdated payment?
A2. Polkascan.io has been operational since the launch of Kusama CC1 and has been a valuable resource for the ecosystem since then. We have made substantial non-negligible out-of-pocket expenses without any form of funding. We are an independent organization in the ecosystem and not affiliated in any way with either Web3 Foundation or Parity Technologies. We have been recipient of Web3 Foundation grants, but those funds have been spent on the development activities of the platform. Polkascan will commit to reserving the KSM sum of the backdated expenses. It will not be sold on exchanges for at least 12 month. It will be used for on-chain activities, such as: nominating, voting or elections. Longer term it could be used as a buffer for unexpected expenses.

The feedback we have received leads me to believe that this back-dated payment may actually be the only controversial part of this document.
I will make serveral arguments why I believe we can justify the back-dated payment:
1. Added value argument: We have provided the polkascan.io service at our own non-negligible expenses for eight months for a Canary network (with tradeable value). We believe that the polkascan.io service has had substantial added value for this community. Permalinked reference on the communication channels, github and exchanges are testament to that. Additionally because we service polkascan.io and we have our hot databases we have been able to contribute to key events like runtime upgrades and storage database migrations and been able to 'save the day' on more than one occasion. Backdated payment is justified because of this argument.
2. Timing argument: We have had this document lying on the shelf for a few months. We have been discussing treasury funding for our operational expenses for over a year (Relay Chain Podcast recorded Arpil 2019) and have been in dialogue with Parity Technolgies' management team members for a while to discuss how to approach this. We have had some legal considerations and wanted to approach this the right way, resulting in founding Polkascan Foundation in January 2020. Additionally I strongly feel that the Council was not up to the task of having a discussion on this topic up to this week (21 April 2020). Timing is now right to start a dialogue on on sustainably funding ecosystem service providers. Backdated payment is justified because of this argument.
3. Core-value alignment argument: I have personally been a long-time public advocate of sustainable funding methods for ecosystem service providers. I have been advocating this on the record in Griff Green's 'Open Block Explorers Now' channel since before the existence of the Polkadot & Substrate ecosystems. Those ecosystems have on-chain governance and on-chain treasuries as a mechanism to sustainably fund the ecosystem development and ecosystem service providers even after steward organizations (like Web3 Foundation) deplete their funds. Backdated payment is justified because of this argument.
4. Relational argument: We are trying to prove to this Community and Council that we are here to stay. We want to build a reciprocal relationship between the Kusama Council/Community and Polkascan Foundation. Such a relationship should be grounded in some level of trust. We feel that we have earned that trust. Polkascan does not aspire to have a transactional relationship with the Kusama Council/Community. We aim to use this (social) contract to improve and mature our services. It is a game of give and take. Backdated payment is justified because of this argument.
5. Money-grab argument: We are no asking for a back-dated KSM valuation for the back-dated payment.

Q3. How wil Polkascan Foundation deal with other networks on its multi-chain platform?
A3. The solution we propose for the (social) contract for the relationship between Kusama and Polkascan Foundation could be equally applied to other Blockchains. That would be dealt with in a similar but separate (social) contract.

Q4. What factors give downward pressure on future operational expenses?
A4. Getting other Blockchains (Canary Networks or Mainnets) on board with a (social) contract with Polkascan Foundation could give some downward pressure on the operational expenses of this (social) contract related to economies of scale. That said, the bulk of the cost drivers of our multi-chain stack can be attributed to network-specific components. We would like to use our future relationship to increasingly provide more transparency and accountability on cost-drivers and cost-attribution. Another factor that has downward pressure on future operational expenses relate to maturing technology in the ecosystem (CI automation, stability of clients, etc).

Q5. What factors give upward pressure on future operational expenses?
A5. Variable cost factors are our primary concern for an upward pressure on future operational expenses (storage, traffic, risk-appetite, redundancy, etc). We expect this to happen when Blockchains gain in adoption. In general we do not expect this to be a problem. We expect Treasury funding to equally scale with adoption. We would like to use our future relationship to increasingly provide more transparency and accountability on cost-drivers and cost-attribution.

Q6. How does Polkascan Foundation intend to determine the KSM price?
A6. In our initial Spending Proposals we will determine KSM price on a case-by-case basis. In general we will look at KSM price on major exchanges, take trading-slippage into account by adding a surplus, and add a surplus for taxes owed by Polkascan Foundation.

Q7. Polkascan.io is a centralized service
A7. Yes correct. Although we share many of the values in the broader blockchain industry, a block explorer use-case such as Polkascan.io is only possible with a large centralized database. We have tried to take the broader values into consideration by providing the ecosystem with an open-source block explorer from day one. We have spent a significant effort in providing the ecosystem with the means to independently run our stack and verify our data. We have seen alternate block explorers in the ecosystem mimicking and copying our process and product and even re-using components of our stack. Additionally we have put a significant effort in founding the Polkascan Foundation, which is a non-commercial, not-for-profit organization to service (social) contracts such as this one. Polkascan Foundation's services provide a convenience for the broader ecosystem to not have to run and service the block explorer itself.

Q8. I don't very much like the methods we currently use for "recurring prepayment" (repeated treasury proposals, which are manual, stressful) - and would really like to trial using either the scheduler (when it's in, pretty soon hopefully) or vested_transfer (different usecases - scheduler can be canceled, vested_transfer is more for "Hey, thanks, but stick with us.") to fund obvious public-goods like block explorers and (decentralized) infrastructure providers. Would polkascan be amenable to taking funding in this manner, presumably for future payments? (No concerns about the first two payments detailed in this proposal.
A8. Our use-case would indeed benefit from an on-chain scheduler as described. That said, it does not yet exist and there is no reason execution of this proposal should be dependent on such a scheduler. A scheduler would perhaps make things easier; we will see. I suppose we would need a stable-coin payment scheduler to make it work for our use-case. Three month intervals provide a right balance between pragmatism, trust and overhead in my opinion. Polkascan Foundation is not running off with this money. There could be a justifiable concern any other cases, but not in ours I would argue.

Q9. Will this have "chilling effects" on the block explorer community in the Polkadot ecosystem? Might this be construed as a semi-official endorsement of one block explorer over the others? Under what criteria can other block explorers request similar funding?
A9. This has been addressed in the final paragraph of section 4.3.
> Lastly we would like to stress that with this (social) contract we are trying to bootstrap a novel and original funding method for public ecosystem services. This novel funding method is by no means unique to our situation and can and should be applied by other ecosystem service providers.

It is up to other service providers to collaborate with the Community and Council to draft their (social) contract (and get it approved). We are simply leading by example with an original idea.

Q10. What will the backdated operational expenses be used for? Will it be put towards future operational expenses or used for increasing voting power?
A10. Polkascan will commit to reserving the KSM sum of the backdated expenses. It will not be sold on exchanges for at least 12 months. It will be used for on-chain activities, such as: nominating, voting or elections. Longer term it could be used as a buffer for unexpected expenses. I have revised Q2 to better justify why we are asking for this back-payment.

Q11. What do operational expenses include? (infrastructure, man hours, etc).
A11. The operational expenses are for the activities described in section 4.2. We operate a sophisticated stack of software components and collection of service management activities. I am not specifying it because the exact configuration tends to change over time. Rearrangement has to do with finding optimal trade-off of our configuration to allow it to scale in our envisioned multi-chain future. That said, we curently have a redundant (duplicate) setup a rather heavy dedicated server. We run a dockerize stack of nodes, harvester application, database server, explorer api and explorer gui. Additionally we service management tools for monitoring. Runtime upgrades in particular require node-upgrades, type-registry updates and deployments.

## Motivation of the Author
This document is written by Emiel Sebastiaan. Emiel has been involved in the Polkadot & Substrate ecosystems since the very early days and is working on the Polkascan project.

Polkascan supports the bold vision layed out by Web3 Foundation and aims to contribute to make Polkadot a success. Through Web3 Foundation grant work Polkascan has provided the ecosystem with an open-source block explorer from day one.

Polkascan has been an elected member of the Kusama Council since the very first council term. At Polkascan we believe that a public block explorer is part of critical ecosystem infrastructure. We believe that on-chain governance and on-chain treasuries are key instruments in financing public infrastructure (such as block explorers) in a sustainable way.

Polkascan will especially focus its council membership on having a powerful active and opininated council grounded in shared core-values. Additionally we aim to focus on sustainable treasury management that will enable sustainable growth and adoption of a prospering ecosystem and its key infrastructure.