Since Kwenta's inception, after detachment from the Synthetix development, the intention of the protocol and its Core Contributors has been to bring the protocol to an organized organization based on the wishes and preferences of the community at its base.
This will is reflected in one strong action, which is to move towards a DAO for protocol management and managing. The Kwenta DAO has formed, is active, and is seeing developments, including the most recent addition of the Grants Council, which will see its first epoch of operation on 01 February 2023 at 01.00 UTC.
But let's see how the Kwenta DAO is organized and how the Grants Council could play a key role for Kwenta.
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What is Kwenta
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Kwenta DAO overview
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Grants Council (a spin-off of the MArketingDAO)
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Grants Council Responsibilities
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Grant Approval Rules / Grants Funds
What is Kwenta
Kwenta is a decentralized exchange built on top of the Synthetix protocol.
Kwenta allows users to trade synthetic assets in two ways:
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Exchange: a basic function that allows users to interact with Synthetix smart contracts in order to make swaps between Synthetix Synths or for other assets in general through external integrations.
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Perpetual: derivatives that have no expiration date and are settled in cryptocurrency. These synthetic assets are designed to mimic the price movements of traditional assets such as stocks, commodities, and currencies. Kwenta also offers up to 25x leverage, which means that users can trade with large amounts of capital relative to the amount they have deposited (This can magnify both gains and losses). The exchange utilizes deep liquidity from the Synthetix Protocol to ensure efficient trading and low slippage.
Read more also about the latest Perps v2 integration updates Here.
A bit of history behind Kwenta
Kwenta saw its beginnings when on 2021-08-13, in SIP-179, was proposed to separate Synthetix.Exchange, which originated as a project from Synthetix DAO, from Synthetix, on which it is based.
It was born as a Synths trading exchange made by the Synthetix Core Contributors for the purpose of showcasing the utility of the Synthetix Protocol.
The Core Contributors of Sythetix created Kwenta with the aim of separating their brand from Synthetix, making Kwenta an independent project with its own resources to implement projects, meet user demands, and innovate to compete with other trading tools in the DeFi ecosystem.
Kwenta DAO overview
The Kwenta DAO's governance framework, introduced with KIP-2, includes multiple semi-independent governing bodies, each with its own goals and operational structure.
In the meantime, let’s emphasize that users who stake $Kwenta tokens will gain voting power and have the ability to vote in elections, proposals, and Community Kwenta Improvement Proposals (CKIPs).
The Kwenta DAO is divided into several sub-DAOs and components:
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Elite Council which token holders vote on every 6 months to operate, is responsible for voting on Kwenta Improvement Proposals (KIPs) that anyone in the community can create and lobby for. When the Elite Council makes decisions on KIPs, the Core Contributors execute the decisions made by the Elite Council.
The Elite Council elected a President, responsible for the strategic direction of the protocol,
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TreasuryDAO controls the treasury, investment, and growth funds for the Kwenta DAO. This sub-DAO (outlined in SIP-177) controls the treasury, investment, and growth funds for the Kwenta DAO, working with the Core Contributors and Elite Council to use funds for bootstrapping the protocol and ensuring long-term sustainability. The treasuryDAO is composed of three anonymous community members. They manage choices in a public way through KTRs,
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AdminDAO is a subDAO within Kwenta that follow several policies described Here,
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DevDAO promotes the development of open communities whose different roles are described here. (Join the
#commmunity-devchannel on the Kwenta Discord to participate in the devDAO). -
MarketingDAO is a community-driven marketing branch of the DAO that focuses on marketing initiatives for Kwenta. This group is led by a council of 3 individuals that have demonstrated their expertise and knowledge of both marketing and the Kwenta ecosystem and are voted into the position by the Kwenta community.
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Grants Council as part of the MarketingDAO with the aim of facilitating contribution from the community. Grants Council members are responsible for rewarding grants and allocating the Grants Council funds.
Grants Council (a spin-off of the MarketingDAO)
With the approval of KIP-44, proposed on 25 November 2022, the Kwenta DAO through the Elite Council vote decided to start the first Grants Council epoch.
The main choice comes from the evidence that this model works well, deriving in fact from Lyra and Synthetix. Is estimated that the implementation of the same model within the Kwenta protocol can generate a virtuous circle of innovation from the community, and together with the launch of the Kwenta token (which took place some time ago) provides a new source of funding that directly rewards community contributors with the ability to stake and vote, it is the correct time to establish this new Grants body.
At the time of writing this article (30/01/2023, 12 UTC) the Grants Council elections are live!
At Snapshot’s “GrantsDAO Election - 1**” proposal page, $KWENTA tokens holders are voting to elect the three GrantsDAO members. The choice is based on the Pitches the council candidates have created, contained in the following Kwenta Blog Article:
Voting will end at 01.00 UTC on 01 February 2023, from then on you will be able to see the results of the election on the same Snapshot page.
KIP-44 proposes the Grants Council as part of the MarketingDAO as a pilot programme.
A three-person body will form a sub-DAO responsible for financing and managing marketing, business development and community-building initiatives.
More precisely, the documents and publications that Kwenta provides state that:
The Grants Council will be the organisation responsible for empowering the community to drive Kwenta's growth and development.
Grants Council will be an independent body. While news and updates will be shared through Kwenta’s social media channels, and core contributors will offer support, communication and interaction with the community will ultimately be led by the new Grants Council. The new Grants Council will release information relevant to the community as it becomes available.
Once the infrastructure is set up that can place Grants Council assets under the collective control of the Grants Council, AdminDAO will be responsible for fulfilling any funding mandates outlined in the original KIP.
Grant Council Responsibilities
Along with the proposed creation of the council, a list of council responsibilities was also proposed, let's see them together:
Draft and propose a Grants Council self-mandate detailing the ongoing rights and responsibilities of the Grants Council moving forward.
Having clearly delineated rights and responsibilities is a fundamental point for a board, especially when it comes to collaboration between entities that do not know each other in the real world, but are based on their online reputation. Having a mandate means that this becomes law between the parties, so that there is no need for arguments in the event of failure on the part of one or more of the parties, but is based on a pact established a priori.
According to the logic of decentralization and publicity on which the DAO concept is based, this mandate must be drawn up by the Grants Council in a public manner and always taking into account the thoughts and opinions of the community on the one hand, and of the other DAO bodies on the other.
Propose and request an ongoing funding source. Work with the appropriate governing body to secure this funding, e.g., the Treasury Council to secure regular funding from the Treasury.
A constant source of funding and a regular budget, are the basis for a sustainable grants programme. Having a specific budget allows funds to be managed sparingly and with more emphasis on quality rather than quantity. Funding for grants can come from various sources, with the Treasury of the Kwenta DAO itself certainly being the first source of funding. At the same time, however, it is possible to find third-party funding for the Grants programme, such as receiving grants in turn or finding fundraising models or donation incentives (e.g. Ecosystem Support Grants system led by the Ethereum Foundation, the Optimism Grants Proposal, the Gitcoin’s quadratic funding model allocates, The DAO-first approach brought initiatives such as Open Grants, MolochDAO, and MetaCartel).
Propose and implement a system for managing funds and making payments to grants recipients, such as a Gnosis safe or similar infrastructure.
Based on the above, on the concept of collaboration between entities that do not know each other in the real world, but rely on their online reputation, there is a trust issue in the management of funds allocated to the Grants council.
The best current method for managing the above funds is to use a decentralised custody protocol and collective asset management such as Gnosis Safe.This is a shared management solution for a smart contract address, which allows the operability of the address to be limited to a rule given by the number of signatures required to approve the operation, so it will only be possible to carry out operations if there are the number of signatures decided in the Safe's settings.
Specifically, given the Multichain nature of the Kwenta protocol (Ethereum / Optimism and in the future with the Multichain version of Synthetix other chains are expected) it would be appropriate to create multiple "Safe" (at least one for Optimism and one for Ethereum at the beginning) in order to be able to collect funds within it, regardless of the source.
These must be set to ensure that:
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The Grants Council can move the funds within it, but if all three are ill-intentioned, they cannot escape with the loot,
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Guarantees the movement of funds even in the event that one or more members of the Grants Council are unable to sign,
To meet the two prerogatives mentioned above, a good solution might be to also make the addresses of the Elite Council participants and the MarketingDAO PM address owners of the Grants Council Safe. Therefore, a good solution (at least for the first era of the Grants Council) might be to have a Safe 4/9 where in order to manage funds and make payments, the signature of the MarketingDAO PM or one of the Elites is also required. In special cases, the Marketing PM together with three of the Elites can manage the Safe.
Propose and implement a system for grants applications, a bounty board, terms for retroactive distributions, or other infrastructure enabling the community to interact with the Grants Council.
Having a Grants programme without a user-friendly and intuitive way for the community to participate would be a failure. This is why there is a need for a platform, a dApp that can allow contributors to participate, describe their Grant request, project their idea and being able to point out the value it has for Kwenta. Not only that, but the community also needs constant support in the activities they want to carry out or propose to carry out, which is why they will need to have dedicated chats, if not a dedicated discord server.
A good starting point is to take a look at the other platforms we have around us. A good use case is the Synthetix grantsDAO system.
but like these, there are many other examples to consider. It is also necessary to give guidelines on the grants to be submitted but also on possible.
As a product manager in web3, I would like to propose to the future Grants Council a tool that I find very useful and which is very well suited to remote grant projects:
, or
which allows the management of Jira-style tasks, thus enabling a timeline of grants to be created based on results over time rather than a one-off grant. This would make grants more efficient.
Establish criteria for evaluating grant proposals, awarding grants or bounties for completed projects, and managing disputes.
It is necessary to have a method for evaluating and scoring applicants, having an analysis of the different evaluation methodologies would help in establishing evaluation criteria.
But undoubtedly the points to be addressed should be:
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Establish principles for reviewing grant proposals. Some guidelines that we see consistently used as review resources are confidentiality, fairness, excellence, efficiency and transparency.
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Build a detailed review rubric to evaluate grants. This helps the evaluators but also the evaluated to arrive ready, it streamlines the analysis phase.
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Using a numerical strategy to find projects for funding. Mathematics is not an opinion, basing the evaluation method on a mathematical statistical method would break down walls of decision disputes between councillors.
These are certainly trivial points, I'm sure great suggestions will come from both the Kwenta community and EC members such as JVK with his many epochs of experience in the Synthetix GC.
Establish regular meetings or communication channels with core contributors to assess Kwenta’s needs and ensure Grants Council is aware of the immediate needs of the Kwenta DAO and working in harmony with contributors.
In the first phase, the future Grants Council will have the task of creating the basis for an organisation with a solid foundation. This means that meetings and a lot of teamwork will be needed to start the engine of the machine.
I probably see the need and I suggest a daily call during the first period in order to establish the initial responsibilities of the board members. During the first period, the tasks to be carried out are well-defined and the time schedule is well-established. After an initial settling-in phase, a couple of weekly calls may be sufficient to maintain the rhythm, with a monthly 'retrospective analysis' to review the work done, what went well and what did not, and how it can be improved.
As the board consists of three people, the organisation should be quite smooth.
Provide funding, high level management, and evaluate projects completed by community members.
It falls under basic tasks.
Coordinate with DevDAO to propose tickets which contribute to GrantsDAO projects, or synchronize MarketingDAO efforts with the Kwenta exchange.
Acting as project manager for the different projects that are financed is important in order to steer their implementation in the right direction.
The first Grants Council should demonstrate their effectiveness by managing the implementation of two specific projects described in this proposal, or by recommending and implementing alternative projects.
For this purpose, two specific projects were also outlined in KIP-44 that the Grants Council will have to work on in the immediate future (I personally believe as soon as the foundations of the organisation have been laid). These are:
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Community Growth Project: Grants Council will expand the use of the Kwentize PFP modifier throughout Discord and Twitter, improving its design, implementation, and connection to the Kwenta product. This project should help improve brand recognition, word of mouth growth, bolster social media activity, and help retain users in social media channels and on the product itself. Grants Council will develop KPIs to measure success when possible.
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Platform usage incentive project: Grants Council will oversee the design and implementation of a trading competition or series of trading competitions. This project should directly encourage participants in the trading competition to make more frequent trades, reach higher volume targets, and trade a wider variety of assets. Grants Council will develop KPIs to measure the success of trading competitions under their management. This project should specifically demonstrate Grants Council's ability to coordinate closely with CCs and governance.
“Grants Council activities should not be limited to these projects, but should make evaluating the feasibility of these projects and presenting their progress to the community a priority”.
Grant Approval Rules / Grant Funds
Rules
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Elected Granst Council members will be issued an NFT from the AdminDAO allowing them to vote on grant proposals for the epoch following each election.
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Grant will be approved if at least 2 Grants Council members vote in favour of funding a specified grant, and must be funded by the end of the epoch they are approved. Grant not funded by the end of a council epoch requires a new vote in the subsequent epoch.
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For the first Grants Council epoch only, the MarketingDAO PM may choose to replace the vote of a single council member. This mechanism allows the MarketingDAO PM to influence the outcome of votes only in situations where a unanimous decision is not reached by the Grants Council.
Funding
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Grants Council will be funded with 2,000 SNX.
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The source of this funding should first come from the existing MarketingDAO budget. Any additional SNX needed to make a sum of 2,000 should be provided by AdminDAO.
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A sum of 500 $KWENTA should be earmarked for Grants Council. This $KWENTA will be taken from the 15% of inflation currently earmarked for future trading incentive use. Treasury will distribute this $KWENTA as locked $KWENTA at the direction and discretion of the Grants Council during the first epoch. Any $KWENTA remaining unused at the end of the epoch may be clawed back by the treasury.
This funding will only be allocated for the first Grants Council epoch. Any additional funding or funding for subsequent epochs will require a new proposal.
Conclusions
The Grants Council for the Kwenta DAO is an experiment set up that could give a big boost to the project, in general, thanks to activities and projects from the community itself that strongly push the adoption and growth of the protocol.
Allocating budgets to grants is a move known to be respectful and a sign of courage, but above all trust towards the DAO itself and the community. Indeed, in a market moment as delicate as the one we are in, it is an investment that could have strong repercussions (positive/negative) on the project and the DAO.
By making sensible decisions and working hard as a team towards adoption and growth, we know we can have amazing results.
The future Grants Council participants will have a great responsibility in their hands, on their side they have very good guides in the DAO who will help them towards excellent management of the council and the different projects.