Milestone-Based Payouts at Scale: De-risking the Treasury

Background and Motivation

Scheduled payouts, though technically feasible and beneficial to the ecosystem, remain underutilized in referenda.

Currently most proposals are one of the following types:

1. Full up-front Proposals (Most common)

2. Retroactive Proposals

3. Milestone Proposals with each milestone split into a separate proposal

All 3 types have significant trade-offs (see Appendix 1) that create inefficiencies and wastage with the treasury.

A minority of referenda (e.g., #1425, #1439, #1497, #1667) are starting to make use of scheduled spends but since we currently lack tooling to track milestones and scheduled payouts post OpenGov approval, voters are reluctant to approve these type of proposals. Reason being that scheduled spends are currently likely not being tracked post approval (noone is incentivised to).

Problem

Despite the vast benefits of scheduled payout referenda over any of the other proposal types (see Appendix 2), they are still underutilized in OpenGov. No tools currently exist to efficiently track the scheduled payout referenda post approval and intervene if need be.

The Solution

This proposal seeks funding from the Polkadot Treasury to grow the use of milestone-based scheduled-payouts referenda in the Polkadot community in order to enhance the Treasury's efficiency and oversight.

We will continue to develop specialized tooling to further grow the use of milestone-based scheduled-payouts referenda, spearhead the necessary community discussions around the topic and drive any educational efforts; all while closely working with existing OpenGov Teams (UIs, agents etc.) and proposers to improve our governance systems.

The Tool: Treasury Guardian

Treasury Guardian is a web-based tool (MVP already live at https://www.treasury-guardian.app/) designed to address the tracking issue by empowering a decentralized network of "Treasury Guardians" to monitor projects, track expenditures, and propose interventions if need be. With the treasury guardian incentivising milestone tracking, we have the tooling and oversight where voters can approve scheduled payout referenda in OpenGov at scale with peace of mind. This reduces risk for the treasury by ensuring that payouts are tied to milestone delivery, provides transparency, and rewards guardians tracking projects and protecting the treasury—all without additional cost to the Treasury.

Key Features (MVP Already Built)

- Decentralized Monitoring: Incentivizes users to oversee projects, track scheduled spends, and flag missed milestones.

- Transparency and Automation: Offers a dashboard for viewing payout schedules and auto-generates referenda for delays or cancellations.

- Risk Mitigation: Ensures automatic payouts only for projects meeting milestones, protecting the Treasury from exposure.

- Rewards System: Successful interventions deduct a small percentage (2% for delays, 5% for cancellations) from the affected payout to reward the Guardian, while saving funds for the Treasury.

- Integration and Accessibility: Supports Polkadot wallets for referendum submission; mobile and desktop friendly.

How It Works (Example Scenario)

1. A project has a milestone due today, with a payout scheduled in 1.5 months (providing time for review, voting, and execution).

2. A Treasury Guardian (e.g., "Bob") notices a delay and contacts the team for clarification.

3. If confirmed, Bob uses the tool to generate a "Delay Spend Referendum" batch:

- Cancel the original scheduled payout.

- Reschedule it later (e.g., +4 weeks), reduced by 2%.

- Reward Bob with the 2% if approved.

4. The referendum is submitted to OpenGov for voting. Bob will provide his evidence and the team can of course also respond and submit their own evidence to refute the allegations. Token holders have final say.

5. If passed, execution occurs automatically.

For cancellations (e.g., abandoned projects), the Guardian receives 5% as a reward and 95% is retained in the Treasury.

Read more here

Watch a demo: https://www.youtube.com/watch?v=tW674JeLOgw&feature=youtu.be

Planned Improvements and Initiatives

Funding will enable:

- UI/UX Enhancements: Tracking of delay/cancel referenda, and "action window" alerts (e.g., 28+ days before payouts).

- Leaderboard: Rank top Guardians by successful interventions to boost engagement.

- Educational Initiatives: Facilitate discussions on platforms like X, Polkadot Forum, Polkassembly, and Subsquare about milestone-based scheduled-payouts norms (pros/cons, standards). Collaborate with OpenGov teams, proposal UIs, and proposers for integration and documentation.

- Outreach Initiatives: Launch campaigns to onboard new Guardians, promote earning opportunities, and foster community involvement.

Benefits to the Polkadot Ecosystem

- Reduced Risk: Payments are tied to verifiable delivery, safeguarding Treasury funds.

- Decentralized Oversight: Encourages widespread participation in governance through incentives.

- Fewer Referenda: Bundles several milestone payments into one referendum to reduce OpenGov congestion.

- Improved Communication: Penalties motivate proactive project updates; on-time deliveries receive automatic funds.

- Scalability: Supports milestone funding for more projects without centralized effort.

- No Downside for Strong Projects: Reliable payouts for those that deliver.

Demo on Kusama

To prove viability, we first demonstrated on Kusama (Polkadot's canary network):

1. Submitted a referendum with a small scheduled payout (1 KSM) (done).

2. Used Treasury Guardian to propose a delay to the 1 KSM spend (voting).

3. Propose a cancellation of the delayed spend from step 2 (pending).

We encourage community support for these Kusama referenda to validate the tool before Polkadot rollout.

Team and Transparency

- Developer: An experienced Polkadot builder with prior contributions to the ecosystem.

- MVP: Available at https://www.treasury-guardian.app/.

- Updates: Follow us on X at @TreasuryEff for progress reports. Feedback is welcome!

- Accountability: All milestones are verifiable via public demos, site updates, and community discussions. We commit to weekly progress updates and incentivizing community input to shape the product.

Budget and Milestone-Based Funding Request

This proposal itself serves as an example of how milestone-based scheduled-payout funding can be effectively implemented. This proposal requests no upfront funds. Instead, it schedules payouts via the Treasury pallet's scheduled spends, tied to milestones.

Total requested: 83.6k USD in USDC, spread across milestones that are delayable or cancellable by anyone using Treasury Guardian.

In this proposal some milestones are more specific while others are more vague (later ones). This is done deliberately in order to demonstrate how proposers can still maintain flexibility around their milestones. Things change fast in the ecosystem and work might not always be delivered as initially laid out. Our goal is to establish norms and guidelines for community and proposers on how best to navigate changes in roadmaps. Here too we aim to be an examplary project (we have to be if we don't want payouts canceled) showcasing how a project can work together with the community to adjust its milestones post approval and still meet token holder expectations to ensure payout.

This approach aligns our interests with token holders, reduces Treasury risk, and ensures payment only for delivered value. Payouts are scheduled 1.5 months after each milestone due date (with a 1.5 month buffer for review (14 days) and possible intervention (28 days OpenGov voting on cancel/delay referenda)).

Milestone 1: Fully Functioning Site with Kusama Demo (Delivery on Approval)

- Deliverables: Open-source MVP code; successful live demo on Kusama (delay/cancel referenda passed and exectued).

- Verification: GitHub repo link; public demo video; community review on Polkassembly/Subsquare; live site features.

- Payout: 26.6k USDC (35 FTE hours * 8 hours/day * $95/hour), scheduled at block ~X (approval block + 1.5 months equivalent (2 weeks for review + 1 month for intervention)).

Milestone 2: UI/UX Improvements (Deliver 1 Month Post-Approval)

- Deliverables: Updated site with cancel/delay referendum tracking, and action alerts.

- Verification: Public demo video; weekly updates on Polkassembly/Subsquare.

- Payout: 11.4k USDC (20 FTE hours * 6 hours/day * $95/hour), scheduled 1 month after Milestone 1 payout (with buffer).

Milestone 3: Onboarding + Educational Initiatives (Deliver 2 Months Post-Approval)

- Deliverables: Discussions on milestone scheduled-payouts norms; campaigns to onboard Guardians; education on Treasury Guardianship; collaborations for integration guidance.

- Verification: Links to discussions; Guardian stats; pull requests/integrations (if applicable).

- Payout: 11.4k USDC (20 FTE hours * 6 hours/day * $95/hour), scheduled 1 month after Milestone 2 payout (with buffer).

Milestone 4: Outreach and Leaderboard (Deliver 3 Months Post-Approval)

- Deliverables: Increase in milestone-based referenda; implement leaderboard for interventions.

- Verification: Verifiable OpenGov data; live leaderboard.

- Payout: 11.4k USDC (20 FTE hours * 6 hours/day * $95/hour), scheduled 1 month after Milestone 3 (with buffer).

Milestones 5-6: Ongoing Build-Out and Scaling (Monthly)

- Deliverables: Additional features and refinements based on feedback; exact details to be confirmed in a flexible roadmap accounting for ecosystem changes.

- Verification: Iterative updates; community feedback threads.

- Payout: 11.4k USDC each (20 FTE hours * 6 hours/day * $95/hour), scheduled monthly after Milestone 4 (with buffers).

If milestones are missed, unnecessary, or underwhelming, any Guardian can propose delays or cancellations. The Treasury pays only for useful, delivered work.

Total if all milestones meet expectations: 83.6k USDC.

Appendix

Appendix 1: Drawbacks of Treasury Proposal Types

Full Up-Front Proposals

- Treasury carries all risk: The treasury funds the entire project upfront, with no guarantee of delivery or success, potentially leading to wasted resources if the proposer fails to deliver.

- Harder to get approved: Due to the high risk and large initial investment, these proposals face greater scrutiny and resistance from governance, often requiring more justification and trust in the proposer.

- Lack of accountability mechanisms: Without milestones or checkpoints, monitoring progress or holding proposers accountable until project completion is challenging.

- Potential for misuse of funds: Proposers might mismanage or misallocate funds without delivering promised outcomes, as there’s no incremental oversight.

- Inflexibility for changes: Adjusting the scope or funding is difficult once the full amount is disbursed if project requirements or circumstances change.

Retroactive Proposals

- Uncertainty for proposers: Proposers bear the financial risk by funding the project themselves initially, with no guarantee of reimbursement, which may deter smaller or less financially secure teams.

- Makes treasury budgeting harder: The treasury must allocate funds for unpredictable retroactive requests, complicating long-term financial planning and potentially leading to insufficient funds for other priorities.

- Delayed reward structure: Proposers may face long delays before receiving funds, straining their resources and discouraging participation in future proposals.

- Potential for lower-quality proposals: The uncertainty of approval may discourage proposers from investing significant effort upfront, potentially reducing the overall quality of submissions.

Milestones Split into Separate Proposals

- Drawbacks of up-front payments: Each milestone requires its own funding, inheriting the risks of full up-front proposals, such as potential non-delivery for that phase.

- Clogs up governance with multiple referenda: Submitting separate proposals for each milestone increases the governance workload, leading to voter fatigue and slower decision-making processes.

- Uncertain to get future milestones approved: There’s no guarantee that subsequent milestones will be funded, creating uncertainty for proposers and potentially stalling multi-phase projects.

- Increased administrative overhead: Proposers must prepare and submit multiple proposals, increasing their workload and the complexity of tracking project progress.

- Fragmented project oversight: Splitting a project into multiple proposals can make it harder for the treasury and governance to maintain a cohesive understanding of the project’s overall progress and impact.

- Potential for inconsistent funding: If one milestone is approved but later ones are not, the project may be left incomplete, wasting resources already invested.

Appendix 2: Benefits of Scheduled Payout Referenda

Scheduled payout referenda, where a single referendum includes multiple scheduled payouts that can be canceled or delayed, offer several advantages over traditional treasury proposal models like full up-front, retroactive, or milestone-based proposals.

Reduced Governance Overhead

- Single referendum for multiple payouts: By consolidating all payouts into one referendum, the governance process is streamlined, reducing the number of separate proposals and referenda that need to be voted on compared to milestone-based proposals.

- Less voter fatigue: Fewer referenda mean less decision-making burden on the community, encouraging sustained participation in governance without overwhelming voters.

Improved Accountability and Flexibility

- Ability to cancel or delay payouts: If a proposer fails to meet milestones or project requirements change, the treasury can pause or cancel future payouts, reducing financial risk compared to full up-front proposals.

- Incremental oversight: Scheduled payouts act as checkpoints, allowing the treasury and governance to monitor progress and ensure funds are used appropriately before releasing subsequent payments.

Lower Risk for the Treasury

- Risk distribution over time: Unlike full up-front proposals, funds are disbursed gradually, minimizing the treasury’s exposure to loss if a project underperforms or fails.

- Conditional funding: Payouts can be tied to verifiable milestones or deliverables, ensuring funds are only released when progress is demonstrated, unlike the all-or-nothing approach of up-front funding.

Increased Certainty for Proposers

- Predictable funding schedule: Compared to retroactive proposals, proposers have greater clarity on when funds will be received, assuming milestones are met, reducing financial uncertainty and planning difficulties.

- Single approval process: Once the referendum is approved, proposers don’t need to repeatedly seek governance approval for each milestone, unlike milestone-based proposals, providing more stability for long-term projects.

Enhanced Budgeting and Planning

- Predictable treasury outflows: Scheduled payouts allow the treasury to plan disbursements over time, improving financial forecasting and resource allocation compared to the unpredictability of retroactive proposals.

- Adaptability to changing circumstances: The ability to delay or cancel payouts provides flexibility to adjust funding based on the treasury’s financial health or shifting priorities, without locking in the full amount upfront.

Streamlined Project Execution

- Reduced administrative burden for proposers: Proposers submit one comprehensive proposal rather than multiple smaller ones, lowering the time and effort required to navigate the governance process compared to milestone-based proposals.

- Cohesive project oversight: A single referendum provides a clear framework for tracking the project’s overall progress, avoiding the fragmented oversight issues of separate milestone proposals.

Encourages High-Quality Proposals

- Balanced incentives: The combination of scheduled payouts and the ability to cancel/delay ensures proposers are motivated to deliver quality work to secure funding, while the treasury retains control to mitigate risk.

- Attracts diverse proposers: The reduced uncertainty and administrative burden compared to retroactive or milestone-based proposals can encourage participation from smaller or less-established teams, fostering inclusivity.

Scalability for Complex Projects

- Supports multi-phase initiatives: Scheduled payouts are well-suited for long-term or complex projects, as they allow funding to be spread across phases without requiring separate referenda for each stage.

- Minimizes project stalls: The certainty of scheduled payouts (if milestones are met) reduces the risk of projects stalling due to funding delays, unlike milestone-based proposals where future approvals are uncertain.