Multisig Escrow of Funds
ACCOUNTABILITY: MULTISIG ESCROW OF FUNDS
Projects funded with an ITO (“initial token offering”) are dependent on robust and verifiable methods of assuring their trustworthiness. The Blocknet’s accountability measures are designed to ensure the safeguarding and structured spending of funds. This complements its Proof of Developer review (Coins Source), its appointment of Coin Representatives, and its initial commits to the open source XBridge code repo. Furthermore a list of addresses where funds are held is maintained on the Blocknet’s wiki.
In order for the Blocknet’s funds to be responsibly spent:
- They will be held in a multisig address to prevent any single party controlling them
- Spending further will be authorised by an impartial third party auditor
- All spending will be transparently presented
- Avenues will be open to allow relevant requests or concerns by the public to be represented
There are six distinct functions in a structured escrow service – executive, auditor, recipient, payment platform, representative, and represented party.
These functions are performed, correspondingly, by the Foundation’s Board, CoinGateway, the coin or developer receiving funding, Bitgo, Blocknet Coin Representatives, and the coins’ communities.
FORMAL STRUCTURES IN THE FOUNDATION
To serve these functions, Blocknet Foundation members can either be Coin Representatives or Board Members.
- Liaise with the Foundation on behalf of their coin
- Liaise with the CoinGateway on behalf of their coin
- Serve as a point of contact for their coin’s community to voice Blocknet-related concerns and requests
- Submit proposals for funding to the board
- Are accountable to the Coin Representatives and function to mediate requests and make decisions upon these requests
- Are accountable to the public and are required to publish records of all decisions made
- Review and approve proposals for funding
- Submit their decisions to a third party auditor service (CoinGateway) for authorization
- Cannot spend funds without a majority vote in agreement to spend funds
- Cannot spend funds without the third party auditor’s authorisation to spend funds
THE THIRD PARTY AUDITOR:
- Reviews the Board’s decisions to spend funds
- Is notified of concerns or complaints from Coin Representatives
- Withholds spending authorisation in the event of complaints or concerns
- Cannot spend funds without the Board’s majority vote to spend funds
To implement the above, the following arrangement is proposed, consisting of two multisig transactions in sequence:
1) A raw m-of-n multisig transaction is set up between the Board members such that:
- For a total of n Board members, m is equal to n/2 plus 1% of n, the resulting number rounded up to the nearest integer.
- In English: a majority vote of more than 50% is required for the spending of funds to be approved by the board.
2) The output address of transaction (1) is an input address of a second multisig transaction with the following specification:
- 2-of-3 multisig
- Between the Board’s output address, the third party auditor, and Bitgo (the payment platform).
- Both the third party auditor and the Board’s valid output is required in order to spend funds.
- In the event that any one of the three parties to the multisig transaction (the third party auditor, the board, or Bitgo) lose either their reputation or the ability to spend funds, the remaining two retain the ability to recover the funds. In such an event, a new multisig transaction of identical structure will be set up, with the failed party being replaced by a new entity.
- This ability to create new multisig transactions will also be utilised in the event of a new Board Member replacing an outgoing one.
- The Blocknet’s funding is held at the second multisig address.
- The Board will meet on a weekly/monthly basis to review proposals; meeting times will be published in advance.
- A public review period of 3 days between the Board’s vote and the auditor’s authorisation is required in order for the auditor to consider and concerns or complaints supplied by coin representatives.