Polkadot Community Foundation
The Polkadot Community Foundation (PCF) is a foundation company incorporated in the Cayman Islands whose activities are directed by DOT holders via Polkadot’s OpenGov.
The PCF is an optional off-chain vehicle for OpenGov to execute tasks such as signing commercial contracts, making fiat payments, enforcing intellectual property, and contracting third-party service providers like consultants. Unlike typical companies, the PCF has no shareholders, members, trustees, or beneficiaries whose interests could conflict with those of the token holders. See more about PCF in the original OpenGov proposal.
Role of the Polkadot Community Foundation
The PCF is a real-world extension of the existing on-chain Polkadot governance process. It is an unopinionated entity with no agenda, roadmap, or business purpose except to take actions directed to it via OpenGov referenda.
In cases where token holders are interested in proposing treasury expenditures or other actions that could benefit from a real-world legal presence, off-chain accounts, accountable management, and community ownership, they may author their proposals to include directions for the PCF to fulfill these functions. The PCF’s functions are fulfilled by a 3rd party foundation administrator.
So long as the PCF receives sufficient detail, funding, and authority to carry out its directions, the PCF administrators will do so within the confines of any legal, regulatory, and contractual obligations.
PCF Background
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 significant 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 decentralize governance further, 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 PCF is designed to represent and explicitly 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.
PCF Activities
The PCF 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:
- Create and maintain a compliant off-chain organization capable of acting on directives from the community,
- Taking custody of accounts, logins, keys, and assets as a form of community ownership,
- Executing contract agreements with partners, vendors, and service providers.
Additional activities that require additional resources for project management, capital expenditures, business development, technical development, etc., will likely require incremental budget, staff, and 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:
- Retail marketing activities, e.g., social ad campaigns targeting developers
- Educational programs, e.g. Polkadot Blockchain Academy
- Complex grants programs, e.g., tranched or actively managed awards tied to milestones
- Community events, e.g., contracting with venues and service providers for physical gatherings
- Code management, e.g., maintain the polkadot-js GitHub repo
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 can execute them.
PCF Entity Design
The proposed structure incorporates several features to optimize trust, risk, and efficiency. It balances community representation with professional robustness, minimizes the treasury assets at risk, maximizes the ability to adjust and evolve, and allows each proposed activity to be evaluated on its merits.
PCF Corporate Structure
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 if directors diverge from their commitments or fail in their fiduciary duties. Given that the governing documents specifically instruct the directors to respect token holder preferences, provide adequate transparency, and not dilute the rights given to token holders, the Supervisor acts as a direct safeguard for token holder interests.
Directors: The Foundation will have a five-member Board of Directors, divided between:
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A three-director majority served by Cayman resident professional governance service providers to ensure the Foundation is sufficiently independent of other entities in the Polkadot ecosystem and to comply with the Cayman Islands economic substance requirements.
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Two seats reserved for future directors to be appointed by Polkadot governance to ensure token holder interests are fully represented and considered in all matters.
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, modify, and redirect the administrative staff as needed. The administrator’s duties include:
- Operational support and project management
- Engaging and managing corporate service providers, including legal and bookkeeping
- Actively engaging and collaborating with the community to help craft, review, and execute governance proposals for Foundation activities
- Maintaining appropriate documentation and transparency reports and
- Ensuring legal and regulatory compliance under applicable law
DOT Holder Rights: The Foundation’s bylaws ensure special voting rights and protections for DOT token holders, 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.
- Delegating specific activities to the Foundation. These activities will be approved as referenda through on-chain Polkadot governance via OpenGov, using any track with adequate spending permissions. If approved, the Foundation’s Directors will review approved referenda, and if they are appropriate and actionable, then the Foundation will execute the requested activities. The token holder-appointed Directors have full access to represent tokenholders’ interests in all matters and may notify the Supervisor and/or the community of any improprieties.
- Token holders can vote via Polkadot OpenGov’s General Admin track to remove the Supervisor or Directors who are not serving appropriately.
- Token holders can vote via Polkadot OpenGov’s General Admin track to amend the Foundation’s bylaws.
- A requirement that the Foundation cannot agree to any deliverables, responsibilities, or payments to third parties unless they have been pre-approved by tokenholders.
- A requirement that the Foundation make public transparency reports detailing the Foundation’s activities, including but not limited to transactions, proposal status, and ongoing efforts to carry out approved proposals.
- Token holders can vote via Polkadot OpenGov’s General Admin track to wind up the Foundation or instruct it to transfer some or all of its assets to another charitable object.
PCF Initial Personnel
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 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 that 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.
How to use the PCF
To execute a proposal, the PCF needs clear, detailed instructions to ensure it acts in the community's best interest. Because not all OpenGov proposals involve the PCF, the PCF requires that proposers adopt certain requirements to identify what is and is not intended for PCF action.
There are two types of Proposals: Foundation Funding Proposals and Foundation Resolution Proposals.
Foundation Funding Proposals
Foundation Funding Proposals are funding requests from the Polkadot treasury, specifying the amount in the preimage's value field according to the level of spend required, and setting the beneficiary to the PCF multisig wallet address. The Proposal must also include the intended use of funds in a comment on the Polkassembly website and begin with “[Polkadot Community Foundation]” in its name. The referenda can use any OpenGov origin with sufficient spending permission.
Examples of Foundation Funding Proposals:
- Request funding for developing a Mobile App
- Request funding for growing the network's awareness through event attendance
- Request funding for a Polkadot-branded clothing line
- Request funding for a Polkadot-related advertisement campaign
- Request funding for developing a Web3 game on Polkadot utilizing a 3rd party game developer
- Request funding to diversify a portion of the Polkadot treasury into real-world asset investments
- Propose funding to run a Polkadot-branded competition
Ensure that the track selected aligns with the funding requested, according to the DOT amount allocated per track.
Wallet Addresses
DOT requested on the relay chain
13ECX4PUNHTdnpXX6KNeyd2qQHmruX6LE42iHuXcaBWVjz3e
USDT requested on Polkadot Asset Hub
167tDhLwaQ6kmqau1zwWx48Ux7CS1rxC9jW5kn8PeRZWAVUy
Please be aware that any proposals approved for funding by the foundation will require all recipients of those funds to undergo the necessary Know Your Customer (KYC) and/or Know Your Business (KYB) checks. This process may involve submitting personal information and supporting documentation. Proposals that do not meet these requirements or fail to provide the necessary documentation may be subject to rejection by the directors to avoid legal risk to the PCF and its other activities.
Foundation Resolution Proposals
Foundation Resolution Proposals indicate token holders' wishes for the foundation without requiring funding. These must be of the type system.remark, with the remark text starting with “[Polkadot Community Foundation]” and submitted using the Wish For Change submission track.
Examples of Foundation Resolution Proposals (Wish for Change)
- Propose a change to the Foundation’s Bylaws
- Propose the foundation not utilize certain 3rd party service providers.
- Propose to remove/change a supervisor
- Propose to remove/change a director
- Propose the PCF transfer all or some of its assets to a charitable entity
- Propose to wind up the foundation
How to Write a Funding Proposal to PCF
When determining the amount of funding to request for the PCF to execute a proposal, the author must consider the PCF’s costs to execute. If the instructions are unambiguous and actionable, require no further refinement, exploration, or discretion, and require minimal project management, then no overhead is required. Otherwise, the PCF will engage consultants and 3rd party service providers for specialized expertise or external support needed to fulfill its objectives, execute specific tasks, or manage complex projects that exceed the capacity or knowledge of its internal team. As the PCF sometimes incurs legal or operational costs to execute a proposal, we suggest including a greater than 5% overhead cost or $5,000 above the original funding request as a line item for PCF overhead to avoid any unforeseen issues. The PCF will always carry out its directives cost-efficiently and return any unspent budget to the treasury. Still, if a proposal has insufficient funding, the PCF may be forced to request additional follow-on funding or, in extreme cases, reject a proposal for unviability.
When consultants or 3rd party service providers for specialized expertise or external support are needed, there are three approaches a proposal author may consider:
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Submitting a proposal with fully actionable implementation instructions for the PCF, with provisions for activities outside its remit.
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Submitting a proposal directing the PCF to conduct a consulting or advisory project to create a feasibility study and implementation plan for an idea and share its findings. The community could review the findings and then create a second proposal to execute the project according to the suggested implementation plan.
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Submitting a single proposal that combines both steps in the second approach, directing the PCF to conduct a consulting or advisory project to create an implementation plan, and then the discretion to proceed immediately into execution.
For assistance in deciding the best option, the PCF team is happy to discuss and offer proposal assessments to advise on sufficient budget, clarity, and structure. [email protected]
The PCF’s directors’ roles include ensuring that The Foundation’s actions do not create undue risk for the foundation or the Polkadot community. Following the approval of a proposal via OpenGov, the directors can potentially reject it, if they determine that implementing it would compromise their fiduciary duties, violate the foundation governing documents, the Polkadot community governance process, or any applicable laws or regulations, cause harm to the PCF or breach existing contracts. They can also reject proposals that lack sufficient detail, are too vague for implementation, or lack adequate funding. This is an action the PCF wants to avoid as much as possible; therefore, submitted proposals must be as detailed and researched as possible to have a greater chance of approval.
PCF FAQ
PCF General FAQ
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 specific 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 token holders, 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.
How does this foundation shield token holders and governance participants from liability?
If someone were to make a legal claim that a Polkadot OpenGov action harmed them somehow, everyone who participated in governance may be liable. However, suppose the action was taken by a legal entity with limited liability, like the Polkadot Community Foundation. In that case, it may be held liable, but it absorbs the risk and shields the liability of governance participants and token holders. This is an advantage of routing activities through the Foundation.
How will token holders know if the foundation is doing what it’s supposed to?
Token holders can appoint 2 of the five 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 the ability to represent the token holders in all decisions.
The bylaws also require quarterly public transparency reports. Over time, that can mature to become robust real-time reporting if:
- the foundation team does that proactively,
- if token holders provide additional funding and explicit instructions to enable real-time reporting, or
- 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?
A vote of token holders can remove any service provider, director, or supervisor 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 spend the foundation’s money however they want?
No. This depends 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 the directors didn’t authorize, the service provider is likely in breach of their contract and subject to legal action. If a director spends money that is not properly authorized by the board, the other directors or the supervisor can act. If they don’t, the token holders 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 token holder 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 those people colluded, the tokenholders could remove them, withhold the budget, or dissolve the foundation.
Who can appoint a Cayman Professional director after one has been removed?
The three director seats not tokenholder-appointed are filled by a director vote, meaning all the currently filled seats include both those appointed by tokenholders and those not. The supervisor can appoint one as a backstop if there are no active directors.
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 token holders” as a class would likely be difficult, costly, and require doxing themselves.
However, the supervisor has 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. Suppose tokenholders ever feel that the supervisor is not acting appropriately. In that case, they can remove and replace the supervisor at any time by approving a proposal to do so on Polkadot OpenGov’s General Admin track.
PCF Proposal FAQ
Who can submit a proposal to the PCF?
Any token holder who has a valid and actionable idea that aligns with the goals and vision of the Polkadot ecosystem can submit a proposal.
How do I ensure my proposal is appropriately funded?
Provide a detailed budget breakdown in your proposal, including all anticipated costs. It’s crucial to account for all phases of the project, potential contingencies, and any third-party costs, such as contractor, consulting, and legal fees.
Where can I find referenda creation guidelines?
This can be found on the Polkassembly docs website, or Polkadot-JS guides.
What happens if the proposal isn’t sufficiently funded during the execution phase?
If additional funding is needed during the execution phase, you must submit a supplemental funding request. This request will be evaluated similarly to your original proposal, and additional funds will be allocated if approved.
What happens to any funds remaining after a proposal has been executed?
Any remaining funds after the successful completion of a project should be returned to the Polkadot community treasury unless otherwise agreed upon in the initial proposal.
Are there any specific requirements for proposals that involve third parties?
Yes, any proposals that require the PCF to engage with third parties (contractors, etc.) must include funding for contractor fees, onboarding processes, such as background checks and MSA reviews.
Where is the foundation incorporated?
The Polkadot Community Foundation is incorporated in the Cayman Islands.
Are there any Cayman Islands-specific considerations I need to be aware of?
Yes, proposals must comply with Cayman Islands laws and regulations. Activities prohibited in the Cayman Islands, such as certain financial transactions or business practices, cannot be funded or executed. E.g., Activities involving money laundering or gambling.
Who are the signers on the PCF beneficiary multi-sig?
The signers controlling these addresses are experienced, competent, and well-known individuals within the Polkadot ecosystem.
Can I get feedback if my proposal is rejected?
Yes, we provide feedback on rejected proposals to help you understand the reasons and improve future submissions.
Who can I contact for more information or assistance?
For any questions or assistance, please get in touch with the PCF team at [email protected]
What does the PCF not do?
The PCF will not enact any proposals that create undue risk for the foundation or the Polkadot community, compromise their fiduciary duties, violate foundation governing documents, the Polkadot community governance process, or any applicable laws or regulations, cause harm to the PCF or breach existing contracts. The foundation will not enact proposals that are too broad and require discretion/opinion from the PCF.
PCF Supporting Material
The supporting material listed below is temporary. Final versions will be uploaded in due time.