SIP 0019 - Exchequer Committee 2021 Budget

The Exchequer Committee has approved the following budget through the end of the calendar year which will be paid from Sovryn’s Treasury to accelerate the development and growth of the application in alignment with the Sovryn Roadmap published in the Black Paper in January 2021.

Exchequer Committee 2021 Budget

Ask any questions or raise any issues you have in the forum thread, and @maxshapiro23 , @Armando , and @yago will do their best to answer them, after which @light will prepare the pull request on github which will enable the vote to be deployed in the governance dapp.

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Toward the end of the document it says:

Conservatively speaking, Sovryn’s treasury (excluding SOV considerations) would provide for 2+ years of runway which the Exchequer Committee believes is sufficient in order to fully develop the platform broadly in accordance with the Black Paper.

Do I interpret this to mean that the current strategy is to spend down the treasury funds to a zero balance, with current runway being approximately 2 years, as opposed to an evergreen strategy that would try to live off the treasury balance forever?

Following on that question, does Exchequer have any thoughts they can share about how they think about financial sustainability for Sovryn i.e. how will the protocol be financing development, adoption, customer support, etc, 5, 10, 20 years from now, in particular, given that there’s currently a supply cap on SOV and all protocol fees are currently going directly to Bitocracy stakers with none retained by the treasury?

Also, in SIP-0015 it said:

Due to the immediate necessity of availability of the funds outlined in this SIP, it is proposed that the Exchequer Committee have one month to present a 12 month budget for approval, and in the interim period, the Exchequer Committee will have the mandate to utilize up to 10 BTC from the Sovryn treasury for ongoing expenses. A full accounting of these expenses will be presented as part of the overall budget.

I note first that the budget took two months to produce, one month longer than was approved in the above-quoted section of SIP-0015. This isn’t unreasonably long overdue, however for transparency could Exchequer comment on why the budget proposal is overdue by one month and what, if anything, Exchequer will do to stay within its self-imposed limits in the future?

Second, when will Exchequer make the full accounting of recent expenses available, which as quoted above SIP-0015 says “will be presented as part of the budget”?

@maxshapiro23 @Armando @yago

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As this is the only budget document that the Bitocracy will approve for a year I think it needs to be fleshed out a little more and give and overview of available reserves / burn through.

Given that we are just about to close out the 5th month of FY21, I think it would be better to present the budget as Q1 actual and then Q2-Q4 as budget to generate the budget for the year. In the original SIP15 it stated that detailed quarterly expense reports & would be presented with transcripts so I presume one is available for Q1.

It would also be good to have the total $ budget for the year rather than a theoretical annualised budget as this annualised figure is not representative of the costs that will be incurred this year as we are already 5 months in.

Contributors Active

  • Annual budget of $395k x 12 = $4.74m. Given new team members have been on boarding and not present for the full year the costs for Q1 and part of Q2 may be lower.

Open Positions

  • Annual Budget of $205k x 12 = $2.46m. Again as these positions are open as at today this should be as a maximum 7/12 (balance months of year) so $1.44m.

Recurring Expenses

  • $272k x 12 = $3.26m

One Time Expenses

  • $1.34m

Total for FY21
Contributors Active - $4.74m
Open Positions - $1.44m (Balance of year)
Recurring Expenses - $3.26m
One time Expenses - $1.34m
Total - $10.78m

Per the treasury comment in the budget and assuming the lowest value of $15m held in BTC means that 72% treasury funding will be used in in FY21 (using my $10.78m figure) leaving $4.22m for FY22 vs monthly expected running costs of $872k. In effect this means that the BTC in the treasury could be 100% depleted in by the end of May 2022 and only provide a runway of 12 months from today. Note this could also be shorter if there are further one off costs incurred.

I know the treasury has access to SOV to generate further funding and we all expect (or hope!) that BTC will increase in value in the next 12 months but if a comment is being made in the budget that there is 2+ years runway then we should be clear on how this is being calculated.

None of the above is a criticism and I know you are recruiting for a CFO and probably time pressed, but I think that as the spending is being delegated to the Exchequer committee and the Bitocracy is only voting once a year it should be more formal and have more detail.

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In regards to your first inquiry, the strategy is evergreen. Your interpretation was incorrect, the runway assuming no application engagement was simply being highlighted.

In regards to your second inquiry, it should be partially answered by the response to your first inquiry. That being said and as outlined explicitly throughout the wiki documents, the different Sovryn funds will and can be used to continue to fund expenses.

Lastly, the EC has been working around the clock on a number of different items including but not limited to the budget. Going forward, the EC will do everything they can do to stay within the allotted times as approved by Bitocracy. As far as accounting, the level of detail provided is fully representative of where funds are being allocated. The detail that was provided outlines funds being spent by circle and whether those funds are being used for contributors or other expenses. If the funds are being used for other expenses, we also outlined whether those costs are recurring or not.

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Thank you for your detailed comments @Walker377 . The EC will take these points into consideration and we will revert as soon as possible.

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Exchequer Meeting notes are published on the wiki, for those who want to maintain oversight:

https://wiki.sovryn.app/en/governance/treasury-committee-meeting-notes

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I interpreted the quoted section of SIP-0015 to mean that a full accounting of how the 10 BTC interim budget was spent would be provided, however re-reading I can see that the “full accounting” may be referring instead to the 12 month budget. Perhaps @yago (SIP-0015 author) could clarify what the intention was here?

Due to the immediate necessity of availability of the funds outlined in this SIP, it is proposed that the Exchequer Committee have one month to present a 12 month budget for approval, and in the interim period, the Exchequer Committee will have the mandate to utilize up to 10 BTC from the Sovryn treasury for ongoing expenses. A full accounting of these expenses will be presented as part of the overall budget.