Hey all,
Some thoughts regarding the SNS, and what should be required of projects applying to decentralize – so that they can run as true decentralized protocols that are really part of the blockchain, with their own micro-economy. Not only can this mechanism decentralize projects, allowing them to fully tokenize, and gain access to viral growth dynamics, but it can bring in much needed funding from the decentralized ecosystem. This is sorely needed today.
Before saying more, I want to say two important things.
Firstly, I have been an entrepreneur for decades, and I understand the need to raise funding. In past lives, I’ve personally experienced pulling my hair out trying to pay bills while trying to raise relatively tiny amounts of money for very good startup propositions. I’ve gone from VC to VC in Europe, finding it impossible to explain technology and opportunities that they couldn’t understand. I’ve had VCs offer funding but only with some hideous liquidation preference in the terms. I’ve bootstrapped startups from nothing, then used funds accumulated over years of backbreaking work to fund new ventures, gambling what I accumulated and also selling all my cherished possessions to pay for TV advertising in a high stakes roll of the dice (that worked, I’m pleased to say). I’ve been to hell and back many times. I fully understand the difficulties and frustrations involved in raising funding, as well as the need for funding.
Secondly, the current blockchain economy sucks, and doesn’t work in ways that favor us. Venture capital firms have become corrupted by profiting from the pump cycle of new chains. Big firms made fortunes riding ICP then sunk new funds into ecosystems where they are now heavily underwater, then doubling down on their bets, while hating on ICP because it threatens the future success of those investments. New chains like Sui, raised hundreds of millions with negligible technology, and before mainnet launch, have created vast “communities” by offering tokens through ambassador programs that add hundreds of thousands of likes to their tweets.
Those same projects are now using funds raised to pay developers to build on their chains, to create new paid (some would say fake) ecosystems of developers, which will draw in more money, which they can then spend on paying more developers to build there, in Ponziesque schemes. Hilariously, these new chains are now successfully bribing developers from the Solana ecosystem to come to them – while Solana, under the leadership of SBF, and the Silicon Valley VCs he played Pied Piper too, first pioneered the system by investing billions to pay developers to build using funds stolen from FTX. Today, the crypto press remains owned by people invested into this broken and crooked wheel, and plays cheerleader, while mostly refusing to report on the Internet Computer and its projects at all. The true power of a blockchain’s technology, vision and its potential long-term impact aren’t really concerns in this broken economy, and many that might otherwise invest into ICP projects lack signal from the press and social media that would allow the market to function correctly. It sucks, it sucks, it sucks.
DFINITY and the Internet Computer ecosystem will not be deterred however. We continue relentlessly driving forward the technological capabilities of the network using unparalleled and unmatched R&D capabilities. We have delivered the World Computer paradigm where blockchain can act as a crypto cloud upon which smart contracts can be used to build end-to-end decentralized and tokenized servics that run under the control of communities. This is the future. We believe that markets return to rationality eventually, and we are working behind the scenes to make that happen, and expect success, despite the nature of the obstacles facing us.
Moreover, we look to the fundamental principles of decentralization, and enabling projects to raise money in automated ways from the ecosystem. Namely, we have made it possible for projects running on-chain to ask the Network Nervous System to assign them to a sub-DAO, called an SNS, which takes full control, allowing them to run in a fully decentralized way as protocols and really become part of the ICP blockchain, while being driven by their own on-chain micro-economies. And, through chain key cryptography, we are integrating with Bitcoin and Ethereum, such that soon, digital twins of tokens from these projects can also be created on Ethereum, where they can be used in DeFi systems like Uniswap, exposing them to the full depth of crypto liquidity available. But, it remains the case today – in the here and now – that there is a painful funding shortfall.
Today, the DFINITY Foundation helps in the earliest stages of projects through grants, and the ecosystem also has visionary investors that help with seed and early funding. But, while a project is on its way to being something appropriate for full decentralization via SNS functionality, which will allow it to raise money into its DAO, and create its own token economy, providing for future development, there is a major gap. This would normally be filled by VCs, in Silicon Valley, and other places. However, as explained, those same investors are up to their necks in investments in technology-short ecosystems that we threaten, and have been brainwashed by disinformation. Many still believe ICP was a rug pull. They think our technology must be fake, and dismiss it. The big VCs, who slavishly followed SBF, who they saw him as a financial genius and the next Silicon Valley wunderkind who could simply dictate success with his influence and capital, act as leaders to medium and lower-tier VCs, who always aim to follow in their wake. They are often now similarly invested and want us to fail too. This is shitty. Very shitty. Read Crypto Leaks if you are interested in seeing how things worked Crypto Leaks | Why Sam routinely manipulated token prices using FTX and Alameda
This means there is a funding gap between grants and seed funding, and the SNS. It has to be addressed, and urgently, because projects are hurting. For this reasons, there is a lot of chatter about creating a VC-SNS, a bit like The DAO from 2016, but done properly, which can fund projects passing through this middle phase. This is sorely needed, and people are working on it. This is good. Very good. The power of crypto networks, and the power of technology provides the way not only to a fairer economy, but also one that eventually allocates capital more efficiently.
Why? Algorithms and systems win. For example: Back in the mid 1990s, the Yahoo Directory had 300 people maintaining a taxonomy of the web, and it was worth billions and seemed indomitable. But when search engines appeared, which used algorithms to help people find what they wanted just by entering keywords, it got rekt within a couple of years. That is why we must create automated economic rails, which allow projects to get exposure to the full weight of the global economic system from anywhere in the world, in a more meritocratic system. Once this better system gets moving, it will draw unbelievable amounts of funding and talent into the Internet Computer ecosystem. But we are just getting started, and projects need funding now.
So now to my core million-dollar question! What should be the bar for a project proposing that the NNS fully decentralize it by assigning it to a new SNS sub-DAO that then runs a decentralization swap to distribute its governance tokens and fund its treasury, which project members might then draw on?
For anyone building a Web3 project on the Internet Computer, this should be a goal. And we can see that it works! Open Chat raised $5-6m, and its governance tokens now have a substantial token market cap in the tens of millions, and we are waiting to see how its community deploys its capital to grow and take on the world.
However, there should be a high bar for projects taking this step. Some substantial level of maturity is required. Here are the reasons as I see them:
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An SNS is meant to govern a functioning decentralized service, allowing it to function as a protocol. This involves its technology being fairly well developed and reasonably fully functioning, the presence of a real user base that can drive its economy, and teams of developers who will stand behind the project and drive it forwards. It doesn’t make sense for a very nascent service to be run this way, because the overhead of SNS governance will just slow down its development. Moreover, when things go wrong, they may call on the NNS to help fix what is meant to be running as a protocol that is part of the chain. We don’t want to see dead SNS projects. These are things that are meant to be fairly established.
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The NNS “Community Fund” deploys scarce capital, which is supplied by the community for use taking projects to the next stage with full decentralization. The community has every right to expect that projects its capital is deployed into projects that are fairly mature, in the sense that they have viable plans, working technology, emerging but significant communities of users, and viable teams helping develop them. Even though community fund neuron owners can temporarily deactivate to avoid participating in a particular SNS decentralization swap, in practice, if the quality of projects is too low, in the end, the Community Fund will fail to attract new capital.
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More generally, if unsuitable SNS projects fail and stumble, especially as the SNS framework is just emerging, it will undermine its reputation and slow its adoption, in turn slowing down the development of the ICP economy, reducing the capital available for mature projects, and depriving important future projects of access to decentralized funding. If early SNS projects become rug pulls, it would be even more harmful, especially since the framework is designed to prevent that happening, and replace the largely failed ICO paradigm.
We are the custodians of the future decentralized economy that can democratize access to the tech economy and deliver huge positive impact around the world, especially in places where venture capital growth funding is very hard to come by. Despite the widespread and urgent needs of projects seeking funding today, we must tread carefully, and not use the SNS to fill the gaps that might better be filled by a VC-SNS, say. We must hold the line, go slow and steady, and build a sustainable economy that is a beacon to the decentralized world, and not throw it away with missteps under pressure. The plan will work, and we must not risk the future.
With all that in mind, here are criteria we need to think about with respect to the assigning projects to an SNS and running decentralization swaps:
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Technology. What is already running? Is it something we can see is compelling, because we can actually try it out!? Is this something with legs, which we would be proud to have running in a fully decentralized way as part of the Internet Computer blockchain in the mode of a protocol?
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Real users. Does the project already have some reasonable number of users that helps prove its value? There are many projects on the Internet Computer that have significant numbers of users to choose from. Users provide proof that a project is viable and ready for the next stage.
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Tokenomics. Projects that are fully decentralized require sustainable tokenomics. This is what will drive their micro-economies, bringing in new users, and helping them grow over the long-term. It is non-trivial to create working tokenomics. At the least, the project should be able to explain clearly the tokenomics that could be created using SNS governance tokens.
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Team. Who are the engineers/entrepreneurs behind the project? What are their capabilities? Where can we actually see what they have built, because that’s the only real way of knowing they are capable of. Generally speaking, in the years I have been an entrepreneur, I have seen team after team that is convinced that if they were provided funding they could build something great, then falling on their face when they received funding. Building is hard. People give up or start arguing. They flame out. For these reasons, in my view, projects and teams should show they can build, and that they have the relentless determination required. People can build in their spare time. Single-minded developers and entrepreneurs get shit done one way or another, often without any funding at all, running on empty, and fueled with pure determination. These are the projects that become winning bets when afforded funding because it just helps them accelerate what is already working. This is something we need to require if we want to create a thriving decentralized economy that lights the way for the rest of crypto and Web3. Riskier bets should be the domain of grants, seed funding and VC (or VC-SNS) funding.
The SNS provides an incredibly powerful new tool for projects that are growing and wish to run as open internet services. It is revolutionary. But, we need guidelines and standards.
and could possibly fund the developer & project if structured creatively 
Love what you do dom keep going