The DAO: Incognito Community Governance

The Decentralization of the Incognito DAO


Preface
In the past year, Incognito has experienced rapid growth. The platform offers invaluable services that are important especially in today’s anti-privacy methodology.

One of the primary goals of Incognito is to bring back privacy to the individual. With cryptocurrency going mainstream, it’s important to have a solution that allows people to gain the same anonymity online, that cash previously offered.

Unfortunately in today’s age, many institutions and government entities would like nothing more then to take away your right to privacy. Because of this, Incognito, and many other platforms alike, have giant targets on their backs. One of the most powerful tools generated from the Crypto-Currency movement is decentralization. Utilizing this technology affords us the capability of contentious growth without the worry of being shut down.


The Incognito DAO

In it’s present state, Incognito currently suffers from a targetable weakness, the lack of DAO decentralization. If for example, the core team were to disappear, progress on the Incognito platform would come to an abrupt halt. To kickstart DAO V.2, and the next iterations of the DAO, we need to come up with clean transparent solutions in order to combat this problem.

The fact is, with Incognito having a Market Cap just shy of $50 Million, the community is directly funding the continuation of the platform. We need to put the Incognito DAO directly into the hands of the community, strengthening the platforms stability and increasing it’s fortitude against possible 3rd party intervention. As this is a community driven ecosystem, it’s imperative for the community to have a say on what features need to be developed and how the funds should be distributed to achieve those goals.


Requirements
In it’s current state, the Incognito DAO is very poorly designed. In order to bring Trust, Transparency, and Decentralization to the DAO, there will need to be some major changes that will help in facilitating the expansion of the platform.

-The balance of the DAO needs to be completely transparent.
-All movements of funds need to be public and agreed upon before execution.
-We need proper accounting of all money flow and revenue generated.

These things can be achieved with view keys and a DAO website that pulls all transactional data from the blockchain.

No one person should be in control of the DAO wallet. Each member of the DAO committee should have a multi-signature private key that allows the signing of transactions that were previously agreed upon.


DAO Comitte Structure
I have a few ideas on how we could structure the DAO, and as I refine them, I will post them so we can discuss. For now I just wanted to kickstart the discussion about Decentralizing, as it’s significantly important. If you have any ideas on how we should proceed, please comment them below. This post is meant to be a discussion about how we should move forward with structuring the DAO. Obviously as we progress we will have to utilize some sort of voting system. If you have any ideas on the best way to achieve this, please don’t hesitate to voice your opinion.

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I wish to thank you @Revolve for beginning this much needed thread to the conversations being held within the community…this being a critical one and much needed one for indeed the overall governance of the project needs to be planned out and phased in for true decentralization to take place. The governance of the project is something that is not unique to this project…most if not all decentralized projects in the cryptoverse have had to implement some form of self governance apparatus the question before this community is which and how will Incognito’s self governance model look like…I look forward to seeing what of response and ideas are posted in this thread…but once again Revolve for starting this conversation with this thread and posting… :sunglasses:

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Hey, @Revolve thank you for this initiative. Looking forward to knowing more ideas and opinions in this direction.

Regarding funding
Incognito projects are self-funded since day 1, we haven’t raised any funds and haven’t accepted any investments, neither from the community, neither from private investors.

Could you please bring more clarity on why you’ve made this statement?

Regarding DAO
Let’s find solutions to:

  • decentralize decision making
  • decide development priorities
  • eliminate bad actors that are looking for short term benefits
  • eliminate possible fraud
  • spread voting rights according to the contribution to the project and not according to the weight of your PRV portfolio
  • etc

We have a chance to make implement the best practices or define a completely new way of operating DAO.

Looking forward to your ideas.

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This is true up to a certain extent, from the information I gathered, only $1M was raised through personal funding.

Correct me if i'm wrong, but I imagine that $1M was used to kickstart liquidity for PRV. Or maybe it was just a fixed sale.

It is my understanding that the core team get’s paid in PRV? If this is currently the case, then yes, the community currently funds a majority of development costs. PRV retains it’s value from users providing liquidity to the platform and utilizing the coin. The value increase of PRV directly comes from the pockets of the community members. As more people supply liquidity and utilize PRV, the value Increases which subsequently Increases the value of Incognito DAO. When PRV get’s liquidated by developers to fund projects, it is the community that suffers from PRV price decrease.

Think of it this way, the core team bought 5Mill PRV at the fixed price of $0.20 each. The PRV getting paid as development costs are obviously not getting liquidated at that $0.20 price. These profits come directly from the community/free market, which we are happy to pay. We just deserve representation as we are funding the continued development. If it is the case that the development costs for the core team come directly from the initial 5Mill PRV and not from the Incognito DAO, then at the very least, the community definitely deserves full control over the DAO as they are the ones funding it. In my opinion it would have been better for core team salary funds/devlopment costs to come from the DAO, and not through private sale as continued work would be guaranteed, but it is what it is. (A dump would be the main concern here)

Extra

This can be shown by the data generated in regards to the release of the funds from builder rewards. When a lot of PRV got released to developers, they would liquidate because of development costs, and the price of PRV would fall.


So no, the Incognito Core Team never asked or raised capital from 3rd parties or the community, however, whenever PRV is liquidated for development costs, the community is directly impacted.

It is true that a lot of this burden is negated, with arbitrage opportunity and the demand for staking PRV. However, it is still the communities, and private investors who are burdened with paying for the development costs with their cash stack.

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IMHO there is a lot more PRV that needs transparent accounting than just the pre-mined 5MM PRV. Just over half of the circulating supply can be influenced by the Core Team. Much can be accounted for though the numbers are spread throughout the forum, across multiple posts, across multiple months and requires making assumptions just to approach a basic accounting. This needs to be collected into a single place, clearly presented (spreadsheets!) and updated regularly – quarterly, if not monthly.

But let’s dive in with the info available.

TEAM INFLUENCED FUNDS

The team and the DAO have the following tranches under their control:

  1. Pre-mine of 5MM PRV. Released yearly in 1MM tranches.
  1. The DAO received 10% of every block reward in the first year (Oct 2019 - Oct 2020). 350 blocks/epoch * 6 epochs/day * 365 days/year = 766,500 blocks per year. The block reward in year one was 1.386666. The DAO’s cut for every block is 1.386666 * 10% = .1386666 PRV.
  • Therefore for the first year, the DAO received 766,500 blocks * .1386666 PRV/block * 8 shards = ~850,303 PRV.
  1. The Core Dev Team operates 176 fixed validators to ensure 2/3 consensus. Each of these 176 validator nodes participates in every epoch committee. The average reward per epoch the first year was 10.92 PRV.
  • Thus operating these fixed validators generated 10.92 PRV/epoch * 176 fixed validators * 6 epochs/day * 365 days/year = ~4,209,005 PRV.
  1. The Core Dev Team operates the 8 beacon nodes which coordinate the shard assignments, etc. The beacon nodes receive part of the block reward too.
  • Therefore the beacon reward is calculated as 1.386666 block reward * 90% validator reward (sans DAO cut) * 20% beacon cut = 0.2496 PRV/block. 766,500 blocks/year * 0.2496 beacon reward/block * 8 beacon nodes = ~1,530,547 PRV.

1 YEAR TOTALS

In the first year the Core Dev Team controlled, had access to, and/or received:

DESCRIPTION AMOUNT
Pre-mine tranche 1,000,000 PRV
DAO funding via block rewards 850,303 PRV
Fixed validators, block rewards 4,209,005 PRV
Beacon nodes, block rewards 1,530,547 PRV
7,589,855 PRV

The circulating supply of PRV at the end of the first year of mainnet was ~13,700,000 PRV. The Core Dev Team controlled/had access to just over half of the circulating supply at the end of the first year.

YEAR ONE to Q2

The genesis block was mined on 10/29/2019. The first year, noted above, ended on 10/29/2020. That means the end of next month will be the end of Q2: 10/29/2020 to 4/29/2021 = 6 months. Thus we can multiply the above quantities by 150% to estimate them to end of next month.

DESCRIPTION AMOUNT Y1+Q2 AMOUNT
Pre-mine tranche 1,000,000 PRV 1,500,000 PRV
DAO funding via block rewards 850,303 PRV 1,275,454 PRV
Fixed validators, block rewards 4,209,005 PRV 6,313,507 PRV
Beacon nodes, block rewards 1,530,547 PRV 2,295,820PRV
7,589,855 PRV 11,384,781 PRV

1,850,303 PRV in the first year (2,775,454 PRV through the end of next month) should have been used for “salaries, server costs, operational expenses, and marketing activities” and “fund[ing] protocol development and network growth”.

THE REMAINDER

But what of the other 5,739,552 (8,609,327) PRV?

A substantial portion of the PRV side of each liquidity pool in Provide must be sourced from this tranche of PRV.

According to this post today:

$21,635,572 / $2.85 (today’s PRV price) = 7,591,428 PRV in the top 5 Provide liquidity pools.

To bring the above Q2 estimate in line with the above figures, let’s make the following adjustment to the validator + beacon total. Today is ~80% of the way through the first two quarters therefore 8,609,327 * 80% = 6,887,461 PRV has been earned by the fixed validators + beacon nodes to date.

However this also means the Provide liquidity pools exceed the amount of validator + beacon PRV tranches by ~704,000 PRV (7,591,428 PRV - 6,887,461 PRV).

ANOTHER PRV SOURCE

PRV staked in Provide is used for two purposes:

At the beginning of November 2020 there was 1MM PRV in Provide:

This would mean ~400,000 PRV was used to stake ~228 vNodes at that time.

Currently there is:

Of the PRV staked in Provide, 1MM is locked in 571 vNodes, a 250% increase since November 2020. If the above percentages still hold, that should mean about 2,500,000 PRV is currently staked in Provide. This would leave 1,500,000 to match liquidity pairs. Therefore Provide could have a surplus of ~796,000 PRV.

The smaller liquidity pools such as LTC, ZEC and DASH currently in Provide are not represented in that table. LTC is the largest of those and:

This would only account for ~70,200 PRV, just ~9% of that surplus.

However in the words of Michael Bolton:

Do not take these numbers as impeccable. Decimals may have been missed and assumptions were made. However this should be a reasonably close accounting of PRV flowing through the Core Team/DAO.

CONCLUSIONS

As noted in the outset, these numbers and figures are spread far and wide across this forum. Assumptions had to be made because there is not a single post, thread or webpage with all of the necessary data collected and presented, nor regular updates of any kind.

It is absolutely incumbent on the Core Team to provide transparent accounting of the PRV under their control, with regular and frequent updates. Fracturing this information across the forum is not acceptable and invites misinformation to form in its place.

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@Mike_Wagner, I was very much leading to this point, thank you for typing all that out and doing all the math publicly.

Before we can even start to discuss decentralization with the Incognito DAO, we need proper accounting of the funds that are currently available in the DAO. With the implementation of View Keys, these funds and the transactions of these funds should have already been public knowledge upon initial release.

Unfortunately with the current circumstances, we do not know how much funds are in the DAO, where the funds were spent, or any sort of accounting information that is needed for “Transparency”. Unless meticulous logs were created (which if there were, they should be publicly published, and I’m not sure why they weren’t in the first place), I bet any accounting information about the DAO will be lost an unavailable. To be honest, if this is the case, there is nothing we can do about it due to the privacy nature of the platform.

If we are serious about Decentralization, and Transparency, accounting logs of the Incognito DAO are a prerequisite in continuing the endeavor. Otherwise in my opinion it’s a lost cause.

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What a great post

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@Mike_Wagner :woozy_face:
Krasavich! You opened my eyes to the project!!! Their goal is to fill their pockets with dollars and euros! They have no goal of decentralizing only money on their mind! Hey incognito team your goal is the same-at the expense of us to make yourself rich!

Not so much. While they may influence the above funds, the vast majority are used in a public way, even if the transparent accounting is lacking. The team does not directly profit from over 90% of those funds.

The only funds they directly profit from are the 5MM pre-mine. And that is time-locked to be distributed in 1MM tranches annually. It’s not clear how many people paid into that initial fund nor in what percentage each. 1MM divided by say 10 or 15 (??) team members annually is nice nest egg, but certainly not making multi-millionaires overnight. And even that is conjecture – the structure of that funding and time-release of PRV is completely unknown. It may be split among many more folks, substantially diluting the per capita profit. The intent of the pre-mine was to fund the project, so “profit” may be highly relative and nowhere near the amount we might imagine it to be.

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For this reason, Incognito having it’s own smart contract implementation would be very useful.

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Thank you @Mike_Wagner for the very detailed and thorough evaluation on the status of monies within the project to the best of your estimation based on facts that are available so far…it is this estimation that shows why indeed transparency and a audit of the project needs to be done for without them it will create further speculation of the project and any possible motives by the core team, and if there be any nefarious motives for that matter, for I do not believe that there be any but once again that is why an accounting and audit needs doing and along with the further decentralization of the project and the governance of the project thru the DAO it will strengthen the project and community overall…One final point I do notice up to this point in this thread I only see the posts by @andrey and it makes me wonder why have not other members of the core team not chimed in and posted some kind of comment one way or the other about this topic…hmmm… :thinking: :face_with_raised_eyebrow::sunglasses:

So early conclusion. If they perform a scam exit, you would be right. However, up to now, there is no indication on that side.

On the other hand, you are right to have such claims in your mind by taking the crypto philosophy into the account. The current setup is trusted but they will get rid of it as soon as possible. I hope we will have a trustless setup within this year.

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What he said :point_up:

Can someone point to the lines of source code that show this in the protocol on the github? If it’s not coded it isn’t true

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With no access via the closed source nature of this project and tight lipped team, they can certainly be profiting off the funds held (90 percent of them)

It seems this project is poorly managed, is there a way to hire or elect a new leader? I think @Revolve would do great as a project lead. No offense to andrey but he doesn’t seem cut out for it on a business, professional level, and interpersonal communication skills.

We need a leader who can spell check at the very least, hire people that don’t shout panty sniffing, and someone who can accept responsibility for shortcomings. It seems we have lost a lot of community members and it is very much due to the tactics the leader from the top down imposes by being inept, childish, and lacking experience. There have been many members with dissenting opinions who have been shouted over and banned instead of listened to in a professional manner which really worries me.

How do we start a process to hire a new leader ?

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Flattering but definitely premature. I started this discussion to figure out how to decentralize and give control of the decision making process to the community. First we need to design and architect a transparent system that allows us to effectively delegate responsibilities in a trustworthy manner.

In order for us to start this process, I think we need more Transparency from the Core Team in regards to the current DAO structure, as well as the proper accounting logs and balance sheets associated. In my opinion, without this information, it makes structuring community control an impossible task.

I’m sure @andrey can chime in on this topic to help settle some details and mitigate the concern expressed in this thread.

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Well I certainly agree transparency needs to be disclosed financially asap including who is paid what… the premine funds are one thing but the dao expenditures need to be disclosed (including salary)

Honestly this all seems like community concerns originally brought upon by Matt and cust.eth , and it’s ironic after the leaders of the project bad mouth them daily and ban them, we are now following steps taken to address all the concerns that they voiced.

I think the organization that is incognito has to do some serious soul searching and forgiveness to one’s they have cast out… as clearly those individuals who had dissenting opinions were silenced and this tactic was not only welcomed but encouraged. It’s toxic and no new community members that onboard will ever stay around with such unprofessional behavior exhibited from team leaders

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I have been following incognito on and off for they last year. The main reason for that is because i never felt comfortable enough with the decision process and control of the project as it is today.
I really enjoy the project, the team and the community but being close in the Governance process of other DAO, i can state that incognito has room for improvement.
For the protocol to achieve it’s full potential i would recommend setting up a pilot committee. This pilot league committee would be chosen/voted by all prv token holders on users that step up for the roles.
Usually the pilot committee should be eclectic (devs/communication/accounting…) So that after the pilot league trial period ends, the community has a better understanding of it’s real needs.
From reading previous posts here this DAO can be a great opportunity to heal, strength and make the community come together.

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Welcome back to the community @Pedro and thank you for the input… :sunglasses:

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Thanks for the write up… This is eye opening… I guess investing substancial amounts at this time is extremely risky?