The POP Process: Proposal (Stage 1)

The Proposal Stage of the POP is composed of 7 steps with the objective of reaching Stage 2 Assessment.

As Stage 1 is a first version and designed with scale in mind, the expectation is that all POPs will follow the same path of introducing themselves to the Centrifuge community by submitting a proposal to finance RWAs through a Centrifuge Pool.

This stage could change through community governance in later iterations. All Centrifuge community Members and Ecosystem Partners will have (and should take!) the opportunity to voice their opinions and vote via the Forum Polls which will serve as Temperature Checks for POPs to gauge community feedback as they progress through the process.

Ideally this process will be completed in 4 weeks, but could take as long as 7 weeks.

The seven steps will include three moments of evaluation, one of which will be a scoring of the POP, and two of which will be off-chain Forum Polls that will serve as Temperature Checks. These moments are highlighted in the above diagram in green, with 66% serving as the threshold for support for continuing in the Centrifuge POP Process.

With that, let’s dive into details on the seven steps below:

  1. POP Submission
  2. POP Criteria Score
  3. Centrifuge DAO Recommendation(s)
  4. Forum Poll: Pool Party
  5. Pool Party Presentation
  6. Assessment Stage Recommendation(s)
  7. Forum Poll: Assessment Stage

Step 1: POP Submission

The first step is to submit a POP (download template here) through the Centrifuge Forum (POP Template)

This stage should see the POP engage publicly with the community directly through the Forum and answer any questions that community members have regarding the POP. This stage requires the POP to be actively educating and marketing their proposal through the community and maybe even broader DeFi and credit ecosystem(s).

Step 2: POP Criteria Score

While the POP is considered publicly in the Forum, the POP will also be scored against the POP Criteria.

The core team has created the POP criteria as an initial framework to evaluate any and all POPs submitted to Centrifuge. The criteria were selected based on experience and input from institutional-grade partners. These criteria are not binding or authoritative, but for guidance. The criteria are designed to protect the time and signal to potential POPs the level of success and engagement they should hope to receive from underwriters and institutional investors. POPs that do not meet >66% of these criteria should expect minimal (and perhaps zero) engagement from institutional grade investors. Without the buy-in and support of underwriters and investors, a POPs chance of financing RWAs on-chain via DeFi liquidity is greatly diminished.

The POP criteria have been designed to be objective and binary. The score is tallied by simply adding up the number of criteria that are met through the submitted POP. There is no weighting or value placed on one criterion over another.

A POP Criteria Score >66% meets the requirements to continue through the POP process.

A POP Criteria Score <66% does not meet the requirements to continue through the POP process.

  • It is important to note: a POP (<66% Criteria Score) may continue to advocate for their proposal publicly in the Forum and seek a path forward to finance RWAs through Centrifuge. However, a POP should be aware that the other organizations mentioned in the steps below do not have a requirement to engage nor do any of the following steps need to be completed in the event that the POP Criteria Score <66%.

The POP should be scored against criteria within 7 days from submission and posted publicly on the Forum.

Step 3: Centrifuge DAO Recommendation(s)

The Centrifuge DAO is made up of multiple organizations that were originally members of the core team.

As part of that core team, different individuals and organizations from the Centrifuge DAO could write recommendations on any POP that passed the 66% POP Criteria Score from Step 2.

The template and approach for such recommendations will be publicly stated on the Forum, but the exact language and details is still a work in progress.

The recommendation is being written to give the community and the POP direct feedback before the Forum Poll is taken for the Pool Party. This recommendation should give meaningful insight and be part of the holistic narrative that the community considers when voting for the Pool Party.

The DAO recommendations should be posted within 5 days from the POP Criteria Score in Step 2 and at least 2 days before the Forum Poll opens in Step 4.

Step 4: Forum Poll: Pool Party

Following recommendations, the community will then be polled through the Forum via an off-chain Temperature Check.

The question that will be asked: Would you like this POP to present a Pool Party?

A Pool Party is a presentation that is presented publicly to the Centrifuge Community allowing anyone from the public to meet face to face with the POP, ask questions, and dive deeper into the proposal.

If greater than 66% of the Centrifuge community votes YES to the Pool Party Temperature Check via Forum Poll, the POP will be encouraged to continue through the POP process and receive support from members of the Centrifuge DAO for their Pool Party.

The poll will be open for 7 days.and open to all Centrifuge community members.

Step 5: Pool Party Presentation

The POP will then host and present at the Pool Party within 7 days from the vote.

The POP will of course present to the community, but this is also an opportunity for broader DeFi (such as MakerDAO and AAVE), TradFi institutional investors, and potential third party service providers to attend and learn more about the RWAs that will potentially be financed via Centrifuge in the future.

For the POP, it’s a critical moment to introduce themselves, explain their POP, and build excitement and support from the community to continue forward in the process.

Before a Pool Party, the POP will meet with members of the Centrifuge DAO who will help the POP prepare their presentation and use the time most effectively to achieve the best outcome.

The Pool Party should be presented within 7 days from the Forum Poll closing in Step 4.

Step 6: Assessment Recommendation(s)

Within 5 days from the presentation, a public recommendation should be submitted through the Forum stating if and how the POP should enter into Stage 2 of the process: Assessment.

It is intended that the recommendation(s) will be written by highly qualified, institutional-grade underwriters, investors, and/or other third parties that are capable of leading a comprehensive analysis of the risk assessment, due diligence, and structuring of this POP through the Assessment Stage into a potential Centrifuge Pool.

Although the Assessment Stage will be private and protected through NDA between the POP and qualified third parties, the third parties involved and the complete analysis and report of the Assessment Stage will be public.

With at least three weeks of time public on the Forum, It is expected that the POP will have had the chance to meet with and engage these qualified groups through the process through the broader credit ecosystem that surrounds the Centrifuge protocol.

The recommendation(s) should be posted at least 2 days before the Forum Poll is opened in Step 7

Step 7: Forum Poll: Assessment Stage

The final step is a second Forum Poll, which is a temperature check from the community.

The question that will be asked: Would you like this POP to proceed to Stage 2: Assessment?

In the Assessment Stage, POPs will enter private conversations to begin due diligence and risk assessment. This will include extensive legal, risk, and structuring review by qualified third parties. The exact details of what goes into risk assessment is not yet known today.

What is known is that the results of the Assessment Stage, and the objectives of that stage and the third parties participating in that stage will be publicly known to the community.

Most importantly, a public report and analysis will be provided at the completion of the Assessment Stage outlining a comprehensive analysis of this POP and the path forward (if there is one) for launching a Pool through Centrifuge.

To be certain, POPs that desire to launch a Pool must complete the Assessment Stage.

If greater than 66% of the Centrifuge community votes YES, the POP will have completed the Proposal Stage of the POP and proceed to the Assessment Stage.

The poll will be open for 7 days and will be open to all Centrifuge community members to vote.

8 Likes

On Step 2: POP Criteria Score

It is written that a “POP score >66% meets the requirements to continue through the POP process”.

Let’s assume a POP reaches only 50% in Step 2 but the Centrifuge DAO in Step 3 gives the recommendation to continue in the process? Maybe the answer is already given in the post but how binding is this threshold?

Is my understanding correct that the Centrifuge DAO in Step 3 could “overrule” the recommendations made in the previous step of the process?

3 Likes

Hi @Tjure07 yes that’s correct – meeting less than 66% of the qualification criteria doesn’t block any potential pool from progressing in development or advocating for their proposal in the forum. A less than 66% proposal could be recommended by Centrifuge DAO, as you stated.

The real purpose of the 66% hurdle rate is to free contributors responsible for producing the recommendations in Step 3 from having to diligence every single proposal, when many will clearly not meet the qualifying criteria.

5 Likes

Thank you for clarifying all the steps in Stage 1 in a clear and understandable way!

Obviously the most important factor for the parties involved is the 66 % threshold (satisfying 7 out of the 10 criteria) for the proposal to “pass”.

I am just curious what the percentage (roughly) would be, if these 10 criteria were applied to the current pools on Tinlake? In other words, would the current pools on Tinlake score more/less than the 66 % ?

I think that’s a great exercise and one that any community member can do.

I don’t think it’s fair too retroactively apply the criteria, but it could be helpful in understand why the criteria is proposed this way moving forward.

Colin, now you put a bee in his bonnet. :smiley:

I am sure Rhano will apply the criteria on the existing pools just for fun :wink:

Pretty easy to see that a $10m starting point would mean all but 1 of the existing pools would have difficulty qualifying.

1 Like

Perhaps the launch value could be expressed as a calculation based on average asset value. Like 5x or 10x average asset value at launch, so something like that.

Recognizing the CFG wants to see more institutional grade pools, I appreciate the current criteria set. Just may prove challenging as we migrate to a new platform until it’s demonstrated “sea worthiness.”

Good point! As Centrifuge goes through different stages (also moving from Tinlake to Pools on Centrifuge Chain), we are also evolving what we are looking at for asset managers and have come up with the qualifying criteria as such. I believe that most of our current pools would be able to meet 66%+ of the criteria.

The criteria could also evolve as Centrifuge evolves, but what we put forth is what we believe is needed for the protocol currently.

On Step 6:

  • Who is appointing these highly skilled professionals?
  • Is it a requirement that they’re always 3rd parties? (thinking about conflicts of interest).
  • Maybe you can shed some what kind of people you envisage them being - eg is this like asking PWC or EY to do an audit on a company? Or an investment analyst function at an investment group?

The community is likely to listen to the recommendation of this group - I imagine there would need to be a good reason for the community to go against the recommendations of this group. So it makes sense that the community is fully on board with the framework for choosing these 3rd parties and understand exactly why they have been chosen.

IMO this isn’t necessarily a bad thing. Lots of early stage companies / SMEs launched on Tinlake, which was great for both parties (the Issuers and Centrifuge) to learn from each other and figure out product/market fit together. But as Centrifuge matures, so should the scale of the companies launching pools on Centrifuge. That absolutely doesn’t mean Centrifuge should stop working with the earlier pools - we all want to grow together. It just means that Centrifuge community should recognise the scale it’s got to now and be actively choosing larger / more institutional partners for new pools.

1 Like

This is great thinking. Agree with all of your points and I think the eventual answers to all these questions will unfold transparently through the forum and here

I personally don’t have a strong view on whether or not they are third parties.

I’m more interested in the following

  1. Transparent process for how assessment is led
  2. Identity and understanding of groups providing assessment
  3. Public process for evaluation that’s easily understandable by Defi and centrifuge community
  4. Clear outcomes and specific end result through the process of assessment
2 Likes

All the above bullet points are essential for successful formulation, execution and end process. How about inclusion of 'Provision of Quality Assurance ’ after point 2. Meaning once the assessment is provided by expertise panel group, it is evaluated from quality perspective and reassures that the proposal set forth captures all required essentials.

Do you think @ctcunning there is merit in it?

1 Like

Of course. I would also think that this happen in public, transparently on the Forum. It’s important that the outcomes, results, reports be shared publicly (to the extent that it’s possible), be shared with the community.

Hi @ctcunning, really amazing outline, very comprehensible.

I see we created a new category here, which you also mentioned we will subdivide going forward. but i think for now we should stick to the traditional category flow. do you think this qualifies as an announcement or RFC? certain aspects of this are related to future proposals so it could be RFC-ish. but overall, is it an announcement?

cc: @Tjure07

I think this Proposal Stage 1 is in RFC I think.

1 Like

ok, so i’ll go ahead and change this to RFC

Absolutely. The community had enough time to comment on this proposal and plenty of feedback was attached to this proposal

1 Like

How long will this stay in RFC?