Following up on the above thread, we suggest the following slightly more detailed enhancements of the Neurons’ Fund.
Matched funding
The key proposition is to pivot from a fixed ICP amount in the fund’s contribution to SNS swaps to a more dynamic model that scales with direct participation.
The Matching function, f
We propose to implement this through a matching function f, where the input x represents the amount of direct participation, and the output f(x) denotes the corresponding contribution from the Neurons’ Fund (NF). So far, the discussion has centered around linear functions, such as 1:1 matching (f(x)=x) or 2:1 matching (f(x)= 0.5x).
Suggested Requirements on Properties of the Matching Function
The function f is designed to have three distinct phases and will be a continuous function to ensure a smooth transition between these phases. Importantly, the rules for these phases will be globally consistent, applicable to all SNS launches.
- Initial Lag Phase (I): The function starts at f(0)=0, and grows slowly until it reaches a set threshold. This design encourages projects to accumulate enough direct participation before receiving substantial contributions from the NF.
- Growth Phase (II): After crossing the threshold, the NF’s contribution increases at a faster rate, signifying more significant support for projects that have demonstrated viability through direct participation.
- Saturation Phase (III): Beyond a certain point, f(x) will level off and will not surpass 10% of the NF’s total maturity, which ensures that no single SNS will excessively deplete the NF’s resources.
- Bounding Condition: The matching function f(x) is bounded by g(x)=x, meaning that it will never exceed a 1:1 ratio with x. In practical terms, the NF’s contribution will always be less than or equal to the amount of direct participation.
By adhering to these design principles, we aim to create a fair and sustainable system for allocating NF contributions to various SNS initiatives.
Example
The below graph shows a possible shape for the matching curve, which can be determined by a set of points marked in red. For instance, we could define f(A)=0, f(B)=0.5B, f(C) = C, f(D)=0.5D=10% of NF maturity.
Benefits of matched funding
Better Reflection of Market Signals
The matched funding system is designed to closely align with market sentiment. Specifically, a project that successfully raises more direct contributions will correspondingly receive a greater contribution from the Neurons’ Fund (NF), up to a predetermined threshold.
Simpler Decision-making for NF NNS Neurons
The automated adjustment feature in the NF’s contributions lessens the decision-making burden on NF NNS neurons. As a result, these neurons have fewer instances where they need to opt out, making the process more efficient.
Improved Incentives for Projects
The matching system provides a more compelling incentive structure for projects. Knowing that increased direct funding will be matched (up to a point) by the NF, encourages projects to be more proactive in their fundraising efforts.
Clearer separation of contributions
Feedback from both SNS projects and users has highlighted the need for a clearer separation between contributions from direct participants and those from the NF. This clearer separation would be beneficial in two key areas:
- Proposal Structure
Instead of specifying the overall minimum and maximum funding target, projects should have the ability to set distinct minimum and maximum funding targets specifically for direct participation, which would be the only factor determining whether the swap succeeds. The contribution from the NF would then be added to this base amount, determined by a well-defined model (as per the matching function discussed earlier).
- User Transparency in the SNS Launchpad
During the swap, contributions from direct participants and the NF should be displayed separately for transparency, within the NNS dapp’s SNS launchpad.
Benefits of the clearer separation
- Transparency in Success Metrics: The success of the swap is directly and transparently linked to the amount raised through direct participation.
- More freedom to define funding target range: Projects can set a more flexible range for minimum and maximum funding targets without having to factor in the NF contribution, offering more leeway than in the current system where the NF contribution affects these limit (e.g. because the fixed NF contribution should exceed more than 66% of the minimum funding target).
- User Clarity: Users will be able to easily see the amount of direct participation already collected during the swap, as well as the anticipated NF contribution.
Next steps
After syndication in the forum, we plan to submit an according motion proposal.