TL;DR
As part of discussions with projects who plan to launch SNSes later this year several questions were raised with respect to the precise mechanics of the Community fund (CF) contribution. Below we have summarized some of these questions & answers to make sure that everybody is on the same page. After the syndication in the forum this information will be stored on the IC wiki.
Background - Determining the size of participation of the Community fund
As per the design of the Community fund (CF), the size of the participation in a particular SNS is determined as follows.
Pro-rata allocation
The CF participation amount, let’s call it X, is part of the SNS proposal. At the time of the proposal submission, the amount X is converted to a relative number determined via the calculation r% = X/(total amount of maturity available in the CF). The idea is that each CF neuron participates with a proportion r% of its maturity.
Adjustment for changes in the CF size
If CF neurons opt out of the CF whilst an SNS proposal is open for voting, then the ICP amount the CF was proposed to make is reduced proportionally. If neurons opt in when an SNS proposal is open for voting, the ICP amount the CF invests in an SNS remains the same, but each CF neuron will participate with less maturity (proportionally decreased).
Checking for maximum and minimum participation
When the SNS proposal is approved, for each CF neuron, r% of its maturity is compared against the maximum and minimum participation amount. If r%*maturity is above the maximum participation amount, the participation amount of that CF neuron is capped at the maximum participation amount. If r%*maturity is below the minimum participation amount, that CF neuron is excluded. In both cases the overall CF participation is reduced.
Frequently asked questions
Question: What happens if CF neurons opt out of the CF whilst an SNS swap proposal is open for voting?
Answer: If CF neurons opt out of the CF whilst an SNS swap proposal is open for voting, then the ICP amount the CF was proposed to make is reduced proportionally.
Example: Let’s assume that 3M of funds are available in the CF and that an SNS proposal suggests a CF contribution of 300K. Let’s further assume that during the voting period several CF neurons opt out of the CF reducing the available funds of the CF to 2M. Then the CF contribution to the SNS would be reduced proportionally from 300K to 200K.
Question: What happens if CF neurons opt in the CF whilst an SNS proposal is open for voting?
Answer: If neurons opt in when an SNS proposal is open for voting, the ICP amount the CF invests in an SNS remains the same, but each CF neuron will participate with less maturity (proportionally decreased).
Question: Could it be the case that the CF contributes nothing to a particular launch although the SNS proposal specified a positive amount ?
Answer: Yes. In case that all CF neurons opt out of the CF during the SNS proposal, then the CF would contribute nothing to the particular launch.
Question: Is there any guidance on the size of the contribution of the CF ?
Answer: The SNS framework is still new and thus views are still evolving. As per these suggested standards, the current view is: To facilitate CF participation in various projects, the CF contribution to a single project should not exceed 10% of the total maturity of the CF at the time of submission.
To facilitate a contribution from direct participants and the CF, the CF contribution should not exceed 33% of the max funding target of the SNS. Also, the CF contribution should be well below the minimum funding target (two thirds of the minimum funding target).