| Proponent | Autonomous Projects — 16MVQPFt325pJ74bYpCGUWjyANFDZFZP3efYyV6XReAd1Sq1 |
| Beneficiary | Multisig — 14KLXHiEGWviNK1QWtkJgQ1SwjWW4LnGkVWBZWjw2kp7DVYe (Signers: Autonomous Projects, Actum Node, Integral Labs) |
| Requested DOT | $600,000 (approximately 88,000 DOT using the 7-day average price of $6.82) |
| Short description | Establish the Polkadot Community Foundation, a Cayman Islands Foundation company to represent Polkadot tokenholder interests off-chain. The Foundation is designed to carry out activites delegated to it by OpenGov proposals, giving Polkadot governance a way to manage off-chain assets, enter into legal contracts, make fiat payments, engage service providers, diversify the treasury, enforce IP, and expanding the ways in which the treasury can be used to benefit the ecosystem. This proposal requests funding to incorporate the foundation and operate it for one year. |
The Polkadot Community Foundation (the “Foundation”) is a proposed Foundation Company incorporated in the Cayman Islands whose activities will be directed by DOT holders via Polkadot OpenGov.
Members of the Polkadot community engaged Actum Node LLC, a consultancy that has been active in the ecosystem and working closely with Parity leadership for the past two years, to design a legal entity that could serve as a real-world extension of the existing on-chain Polkadot governance process. Together with a team of community members, legal and industry advisors, Actum Node explored a range of possible legal, governance, and operational factors to design and propose this Foundation.
The work has already been done to design the governance, draft the bylaws, recruit the staff and directors, and refine the plans with some active members of the community. Barring any significant feedback, the Foundation can incorporate and begin operations immediately following the vote and enactment period.
Approving this proposal would extend the types of proposals that Polkadot governance is able to enact beyond purely on-chain actions to include “real world” activities that require human actions, legal identity, and/or analog assets to execute.
Unlike many other blockchain foundations, the Polkadot treasury will remain on-chain under the direction of OpenGov, and will not be subsumed by the Foundation. This proposal requests only enough DOT to incorporate the Foundation and operate it with a minimal scope for 12 months. As the community thinks about how it would like to utilize the Foundation, it can vote on future treasury proposals to expand the scope and fund those activities.
Decentralized protocols and organizations increasingly require a bridge between the analog, centralized world and a more fully digital and decentralized future, while complying with applicable laws and regulations.
In the past, there has been a large reliance on the Web3 Foundation and Parity Technologies to advance the ecosystem off-chain. While those organizations are philosophically aligned to the health and growth of Polkadot, their corporate governance structures offer no formal role or rights to DOT holders (nor are they in a good position to do so).
As Polkadot evolves to further decentralize governance, and as Parity and the Web3 Foundation look to turn over critical functions to the community, it will benefit from a legal entity to effectuate Polkadot community governance in the “real world.”
The Polkadot Community Foundation is designed to explicitly represent and serve DOT holders’ interests off-chain. Its governing documents grant DOT holders permanent, irrevocable rights to guide its activities and oversee significant matters through the existing on-chain Polkadot OpenGov system.
The Foundation will take on activities delegated to it by Polkadot governance. The community will likely discover and evolve its thinking over time about which activities are best delegated to the Foundation, but as a rule of thumb, any activity that is best served with a legal contract, that requires fiat payments or physical presence, or that requires active project management is appropriate for the Foundation to execute on the community’s behalf.
Initially, the Foundation will have a minimal scope to:
Additional activities that require additional resources for project management, capital expenditures, business development, technical development, etc., will likely require incremental budget, staff, and/or legal design, which can be provisioned through subsequent line-item OpenGov treasury proposals. This allows the Foundation to adapt and grow to suit the community’s directives as they become concrete.
Some hypothetical future activities that the community may consider delegating to the Foundation can include:
As the community gains interest in various use cases, it can direct the Foundation to explore them in greater depth and report on how it might be able to execute them.
The proposed structure incorporates several features designed to optimize across trust, risk, and efficiency. It balances community representation with professional robustness, minimizes the treasury assets at risk, maximizes ability to adjust and evolve over time, and allows each proposed activity to be evaluated on its merits.
Cayman Islands foundation companies offer a unique way to assign important rights to a broader stakeholder pool beyond traditional shareholders, directors, and employees. This proposal uses that feature to give DOT holders significant oversight and important powers to ensure that the Foundation carries out its business appropriately.
Memberless: There are no members or shareholders who hold an economic claim over the Foundation. This eliminates a common source of conflict between legal entities and the communities they serve.
Supervisor: There is a supervisor role, whose primary purpose is to oversee the Board of Directors and ensure that the Foundation’s governing documents are upheld. The supervisor holds legal standing to act on behalf of the foundation in the event that directors diverge from their commitments or fail in their fiduciary duties. Given that the governing documents specifically instruct the directors to respect tokenholder preferences, provide adequate transparency, and not dilute the rights given to tokenholders, the Supervisor acts as a direct safeguard for tokenholder interests.
Directors: The Foundation will have a five member Board of Directors, divided between:
Staff & Administration: Day-to-day administration will be outsourced to a Cayman Islands based professional services firm, reporting to the Board of Directors. These needs may fluctuate over time depending on the scope of activities delegated to the Foundation, and the Foundation will maintain flexibility to add to, modify, and redirect the administrative staff as needed. The administrator’s duties include: -
DOT Holder Rights:. The Foundation’s bylaws ensure special voting rights and protections for DOT tokenholders, including: - Polkadot OpenGov treasury proposals are the Foundation’s funding source, so DOT holders can choose to withhold future funding to cover basic operating expenses if they are unhappy with the Foundation.
Here are full drafts of the Foundation’s governance documents, which will be used to incorporate the Polkadot Community Foundation if this proposal passes.
Actum Node interviewed several candidates for each role, including referrals from the above-mentioned law firms, and members of the Polkadot community, and selected the following to propose as the initial office holders.
Please note that some of the candidates requested that their names and backgrounds be partially redacted in public internet posts to prevent spam and phishing vectors that could compromise themselves or the Foundation. We extended the same level of privacy to all of the candidates for the same reasons.
Supervisor:
J. Bain is a career fiduciary services professional. He has a regulatory background, having previously worked at the Cayman Islands Monetary Authority, and he has significant experience overseeing DAO foundations, other crypto-related entities, and traditional investment fund entities. Mr. Bain was introduced by our Cayman Islands counsel and recommended by the CEO of a crypto investment firm that he governs.
Directors:
G. Kennedy is an experienced governance professional. He has a legal background, having served as General Counsel and outside counsel to several Cayman and European investment funds, and he sits on the board of several blockchain-related companies and foundations. Mr. Kennedy was introduced by our Cayman Islands counsel and strongly recommended by the General Counsel of an L1 development company and the CEO of a decentralized identity protocol where he also serves.
M. Shaw is an experienced governance professional. He is a serial finance entrepreneur, having founded a DeFi protocol, a digital asset management company, and a data analytics company, among others. He has a finance background with a focus on global markets. Mr. Shaw was introduced by the proposed Supervisor J Bain and strongly recommended by the Managing Director of a crypto investment firm where he holds a director seat.
E. Noyons is an experienced governance professional. He has an accounting background from a “big four” firm and is a member of the Cayman Islands Institute of Professional Accountants. Mr. Noyons was introduced by our Cayman Islands counsel and strongly recommended by the COO of an NFT Gaming company where he holds a director seat.
Two vacant seats, which Polkadot governance and only Polkadot governance can vote to fill at any time.
Administrator:
Autonomous Projects is a team of professionals based in the Cayman Islands with a collective 30+ years of web3 industry experience spanning legal, regulatory, finance, operations and investment management. This includes working with clients across the asset management and web3 spectrum including Layer 1’s, Layer 2’s and other scaling solutions, DeFi, infrastructure, gaming and NFTs across multiple different blockchains where we support our clients in the development, implementation, maintenance, support and upgrade of their day-to-day operations layered with a keen understanding of the Cayman Islands legal and regulatory landscape.
After a competitive process, Autonomous was selected for their previous experience working with the Polkadot ecosystem, their emphasis on sound financial & back office management, and their flexibility to adapt as the Foundation’s operations evolve.
For the scope outlined above including establishment of the Foundation and one year of base operations, the requested budget is $600,000.
| Staff & administrative services | |
| Administration | $196,200 |
| Directors & corporate services | |
| Directors (x5) | $175,000 |
| Supervisor | $7,500 |
| Corporate Secretary | $3,500 |
| Registered Office | $2,500 |
| General & Administrative | |
| Legal | $120,000 |
| AML Compliance | $10,000 |
| Filings & Audits | $2,000 |
| Insurance | $40,000 |
| Software & Web Hosting | $5,000 |
| Miscellaneous | $38,300 |
| Project-specific expenses | TBD by future treasury proposals |
| 12 MONTHS BUDGET REQUEST | $600,000 |
All of the necessary documents have been drafted and the team is in place to incorporate the Foundation immediately following the vote and enactment period.
The requested funds will be released to a “transition team” multisig. Once established, the Foundation will share relevant documents and information with the community to verify that the foundation was set up appropriately, and the funds will be released from the transition team to the Foundation’s control.
Why a Cayman Foundation Company and not a Swiss Foundation?
A Swiss Foundation structure is a valid option for this entity, but the Cayman structure offers greater operational ease and flexibility. Swiss Foundations are subject to income tax by default unless government authorities explicitly grant exceptions, which come with certain requirements. In contrast, Cayman Foundation Companies are tax exempt by default.
Can this Foundation service Kusama as well?
As the Foundation reserves certain rights and powers for tokenholders, it is unclear how the combination of DOT and KSM holders, with differing governance instances, can jointly indicate their preferences.
After gathering input from key members of the Polkadot community and legal counsel, we suggest moving forward with a Foundation to serve only DOT holders initially. Later as a separate initiative we can consider creating a similar but separate foundation to serve KSM holders, and perhaps even help facilitate the creation of similar foundations for any parachain or DAO in the Polkadot ecosystem.
Can we reduce the budget?
We believe the proposed budget is as close to a bare minimum as possible, while governance and operations are compliant, redundant, and professional-quality. Some other foundations are set up with a single director and no administrator, but we don’t believe that setup would be suitable for this Foundation’s goals.
How does this foundation shield tokenholders and governance participants from liability?
If someone were to make a legal claim that an Polkadot OpenGov action harmed them in some way, everyone who participated in governance may be liable. However, if the action was taken by a legal entity with limited liability, like the Polkadot Community Foundation, then it may be held liable but it absorbs the risk and shields the liability of governance participants and tokenholders. This is an advantage of routing activities through the Foundation.
How will tokenholders know if the foundation is doing what it’s supposed to?
Tokenholders can appoint 2 of the 5 directors and the supervisor. The idea is that this lets them choose known people who share their values and are committed to Polkadot to gain full access to everything happening inside the foundation, and ability to represent the tokenholders in all decisions.
The bylaws also require quarterly public transparency reports. Over time that can mature to become robust real-time reporting if a) the foundation team does that proactively, b) if tokenholders provide additional funding and explicit instructions to enable real-time reporting, or c) if tokenholders vote to amend the bylaws to require real-time reporting.
How do we avoid service providers or directors turning passive or amassing power over time?
Any service provider, director, or supervisor can be removed by a vote of tokenholders at any time. In the future, the community could decide to implement a seat rotation, term limits, or other measures to reduce the risk of bureaucratic power. These are not provisioned in the current proposal but can be decided via a proposal on the Polkadot OpenGov General Admin track at any time.
Can a director just spend the foundation’s money however they want?
No. This will depend somewhat on the operating policies the foundation team puts into place, like how many people have to approve/sign any expenditures, if small expenditures are pre-authorized, etc. As with any traditional company, it is technically possible for someone to spend money they’re not supposed to. But ultimately, there are several types of recourse if this were to happen.
If a service provider spends money in a way that wasn’t authorized by the directors, then the service provider is likely in breach of their contract and subject to legal actions. If a director spends money that wasn’t properly authorized by the board, then the other directors or the supervisor can take action. If they don’t, then the tokenholders can replace them with someone who will.
Finally, the design of this Foundation as an option, with funding coming only as-needed, minimizes the funds at risk and ensures the Foundation stays reliant on community trust.
What if there’s a bad actor?
We built redundant checks and balances into the governance system. No one person, and no one layer of governance is immune. In addition, we selected professional governance professionals for each role, whose businesses rely heavily on maintaining a good reputation.Ultimately, all trails end with the tokenholders’ ability to fire people, withhold budget, or dissolve the foundation in case of any extreme events.
Who can fire a director?
The bylaws allow two ways for a director to be fired. By a director vote, or by a tokenholder vote via the OpenGov General Admin track.What if the directors collude?
Colluding directors would have to do so in full sight of the tokenholder-appointed directors and the supervisor. If all of those people were colluding, then the tokenholders could remove them all, withhold budget, or dissolve the foundation.
Who can appoint a Cayman Professional director after one has been removed?
The 3 director seats that are not tokenholder-appointed are filled by a director vote, meaning all the seats that are currently filled including both those appointed by tokenholders and those who are not. If for some reason there are ever no active directors then the supervisor can appoint one as a backstop.
Technically, these seats that are not tokenholder-appointed do not always have to be filled by Cayman professionals, but the advice we received is that having a majority based in the Cayman Islands is an important tax and regulatory consideration.
Can the tokenholders sue?
Potentially, but coordination to prove those bringing suit represent “the tokenholders” as a class would likely be difficult, costly, and require doxing themselves.
However, the supervisor is a unique role in Cayman Foundation Companies with legal standing to sue directors who violate the Foundation’s governing documents. Those documents instruct the directors to respect tokenholder preferences. If tokenholders ever feel that the supervisor is not acting appropriately, they can remove and replace the supervisor at any time by approving a proposal to do so on Polkadot OpenGov’s General Admin track.
Make agreements with services providers or good to use with DOT
Create a debit card in that island with local banks using DOT
Hey everyone,
I’m voting NAY on the proposal for the Polkadot Community Foundation, and here’s why:
Polkadot and its OpenGov model aim to avoid centralized control. This Foundation setup feels like it's adding a middleman, which goes against everything we stand for regarding decentralization. While it’s cool that DOT holders can appoint and remove two DOT Directors, their influence seems pretty limited compared to the overall power of the directors. This imbalance is a red flag because it sidelines the community’s voice. The Articles give a lot of power to directors and supervisors. Directors can remove a DOT Director “for cause” with a supermajority vote, but what does “for cause” even mean? If it’s up to the directors’ interpretation, it could be used unfairly against DOT holders’ interests.
The Articles allow directors to hold other offices or profit from the Foundation. This could lead to conflicts of interest that aren’t always transparent or in the community's best interest. Directors are allowed to vote on contracts or arrangements in which they have a direct or indirect interest, which might lead to decisions that benefit individual directors rather than the Foundation or the broader community. The Articles explicitly state that there will be no subsequent admission of members, which could prevent a broader participation of community members in the governance and oversight of the Foundation.
**DOT holders must be represented by the majority in the Directors Board; now, it's the opposite. **
The Articles do not ensure adequate transparency and reporting to the community. Although supervisors have rights to access information and require reports, the extent and frequency of such disclosures to the broader community are not clearly defined, potentially leading to a lack of transparency. The broad indemnification of directors and supervisors against most actions, except dishonesty, willful default, or fraud, might lead to a lack of accountability for poor governance or mismanagement. The Articles allow the directors to appoint auditors, but the process and standards for financial reporting and audit transparency to DOT shareholders and the community are not clearly outlined. Finally, the Articles of Association focus on administrative and governance structures without clearly defining how these structures will support and promote the decentralized objectives and community-driven projects of the Polkadot ecosystem.
Now, let's check some other elements.
Limited public information is available about Actum Node's and Autonomous Projects' past performance and credibility in managing similar initiatives. The proposal mentions that Actum Node has been active in the ecosystem and has worked closely with Parity leadership. Still, no specific examples of past projects or verifiable achievements are provided. Similarly, the credentials and specific achievements of Autonomous
Projects are not detailed beyond general statements about their experience.
Potential conflicts of interest could arise from the dual roles played by these entities. Autonomous Projects is both a proponent of the proposal and a beneficiary through their role in the multisig wallet and as the proposed administrator of the Foundation. This dual role might lead to questions about impartiality and the prioritization of the Foundation's best interests. The governance structure and mechanisms for holding Actum Node and Autonomous Projects accountable are not fully transparent. While the proposal outlines a supervisory structure, the actual checks and balances on Actum Node and Autonomous Projects' operations and decisions are not thoroughly detailed. The effectiveness of these mechanisms in practice remains uncertain. The proposal indicates that these organizations have engaged with community members but does not specify the breadth and depth of this engagement. Understanding whether a wide and diverse segment of the Polkadot community supports their involvement and trusts their leadership is crucial from my perspective.
I also have concerns about the initial personnel. The provided descriptions of the initial personnel are brief and lack specific details about their career achievements, competencies, and past successes. While general qualifications and professional backgrounds are mentioned, the absence of concrete examples of their previous work, specific projects they have led, or measurable outcomes they have achieved makes it challenging to fully assess their competence and suitability for their roles in the Foundation. Effective governance and operational execution often leverage industry connections, strategic partnerships, and influential networks. The lack of information on how well-connected these individuals are within the relevant sectors raises questions about their ability to navigate complex industry landscapes and drive the Foundation’s goals. There is insufficient information to assess whether the selected individuals are the best fit for their respective roles, considering the unique needs of a blockchain-based foundation. While valuable, the candidates' experience in traditional finance, legal, and accounting roles may not fully align with the specific challenges and dynamic nature of managing a decentralized blockchain foundation. Detailed examples of their work within the blockchain space, particularly in roles that mirror the responsibilities they will assume, must be presented to provide greater confidence in their fit for the Foundation. Given the Foundation’s role in representing DOT holders and executing community-driven initiatives, expertise in decentralized governance, community engagement, and blockchain-specific legal and regulatory issues is essential. The proposal should include detailed accounts of the candidates' experience and success in these areas.
Finally, there is no mention of how the performance of these individuals will be monitored and evaluated, nor how accountability will be ensured. Clear performance metrics and accountability mechanisms are necessary to ensure that the directors and the supervisor act in the Foundation's and its stakeholders' best interest. The proposal should outline how the performance of these initial personnel will be assessed and what measures will be in place to address underperformance or conflicts of interest.
In conclusion, the proposal fails to ensure a balanced, transparent, and accountable structure that aligns with Polkadot's decentralized principles. Significant concerns are the potential for conflicts of interest, insufficient community representation, and lack of detailed oversight mechanisms. Therefore, I am voting NAY on this proposal to safeguard the integrity and decentralized vision of the Polkadot ecosystem.