Filling Up The Proposal Fund Instead Of Draining It

about 3 years ago

The Hive proposal fund (DHF) has created some controversy. Without going to deeply into it, many feel we are not getting an adequate return for the monies that are being paid out. Instead, it is viewed that it is the personal ATM for some people, a way to bilk the system for their own gain.

Originally, the fund was designed using the ninja-mined stake to fund development. That was the idea when it was mined from the start, way back when. Of course, as most of us know, Steemit Inc never truly utilized it for that purpose and it ended up being used against the community in a hostile takeover.

When the fork created Hive, the proposal fund was filled using this stake. Thus, it is no longer in the hands of any one individual or group, eliminating an attack vector.

Self funding development is a terrific idea. It is a way to expand the ecosystem without becoming dependent upon venture capital money. This is a positive since VC money ultimately puts the investors at odds with the users. We saw this with the likes of Facebook and Twitter.

Nevertheless, all is not rosy in proposal land. The idea of it being an ATM is not what it was designed for. However, there is an interesting concept that was introduced by @klye in his proposal for Hive Loans.

I won't go into much of the details of the proposal. If interested, which I suggest, you can find it here.

There are a couple points worth noting.

The DHF funding (hopefully) received from this successful proposal offsets the cost deficit created through the hours of coding required to build an application of this undertaking, to the point where the work can be made completely public / open sourcing which unlocks a somewhat as of yet unimplemented methodology of automated lending and escrow services allowing developers on the HIVE platform in the future to access to the underlying architecture.

This is all done in hopes that future developers given access to new ways of designing application architecture are able to come up with even more exotic and innovative blockchain level applications.

Here we see something that is important. This will end up being open-sourced so other developers can use the architecture to build upon and implement into their services. Proposals that are funded should benefit the entire community going forward, not just a small group.

The second point carries even more weight (bold mine):

The completed Hive.Loans v1.0.0 codebase goes into service and goes on to become a staple in the ecosystem, forwarding a sizeable percentage of it's future commissions earnings back towards the DHF in order to replenish the seed capital it was granted by the will of the HIVE stake holders.

As Mel Allen use to say, how about that?

Consider how powerful this concept is. Here is a proposal for development that can not only help the ecosystem by providing some DeFi services yet it also will allow for the covering of the costs.

Of course, we can go one step further to see how this can be a revenue stream ongoing for the proposal fund. A successful app could have a portion of the fees heading back there eternally. This will help to keep the money flowing in an effort to keep growing the ecosystem.

Instead of the fund being one-way, with money flowing out, it can be circular in nature. Projects that receive money decide to provide a certain percentage back to keep replenishing the monies that exited. Obviously, not everything can follow this such as blockchain coding. Nevertheless, many that are going on the second layer, especially those expected to generate revenue, can definitely go this route.

Ultimately, the proposal fund turns into a community owned venture capitalist. It essentially funds projects while looking for a return. There will be many instances where money is lost; that is life in the VC world. However, when a project is a wild success, it can generate a lot of revenue for the DHF, more than compensating for what is paid out.

This will ensure that Hive is able to keep funding projects for years into the future.

Essentially, the fund, and in turn the community, are becoming partners in the application. In return for the seed money, the fund gets a certain percentage of the revenues. This takes the concept of community owned to a new level.

Certainly if one went the private funding route, this would be a requirement. Anyone putting up money would want a piece of the action. Yet this is not what we see with the proposal fund.

As opposed to the VC concept, the fund is now more like the government. It just pays money out with nothing coming back. People take what they are approved for without any obligation back to the fund (and community).

Not according to @klye. This is the response in relation to a comment left by @blocktrades.

He certainly has the right idea. A "partnership" between the community and himself since the fund (community) helped to start it.

The model looks like this:

pay for development
application generates revenue
feed portion of revenue back to fund
rinse and repeat

We have seen the success of DeFi on Ethereum. Thus, this could be an application that has a great deal of success for Hive. If that is the case, the concept expressed by Klye could generate a significant revenue stream for the DAO going forward.

For this reason alone I support it. We need to start thinking in this direction.

Long term, self sustainability needs to be the key. Perhaps this is a proposal that gets the ball rolling.

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