Introducing ParaNotes - regenerative defi to advance the paraverse

A ParaNote, is a DotSama native defi instrument that utilises Substrate governance processes to align interests between a relay, a parachain and an on-chain organisation.

They are effectively asset backed loans with a convertible option and multi-chain governance oversight that aim to address fundamental issues for all three parties:

activate under utilised treasury assets

de-risk funding through on-chain oversight

gain exposure to assets of successfully bootstrapped parachains, removing reliance on crowdloans

bootstrap sustainable and predictable funding aligned to long term growth

remove need for VCs or marketing to retail and a race to CEX listings

ability to incubate teams with ideas but no funding who drive narrative, utility and adoption

Leverage their talent and imagination without selling their souls

Receive sustainable and predictable funding aligned to core values

Work within an optimistic framework that reduces administrative burdens

The on-chain organisation is an anonymous time delayed proxy as pioneered by shokunin.

These organisations are established on a parachain for the purpose of coordinating a ParaNote.

We call these Substrate native organisations creative conspiracies.

ParaNotes utilise DotSama's basic financial, governance and organisational super-powers to create a secured loan with a pre-agreed loan to value (LTV) ratio.

ParaNote LTVs are updated in real time, and are reviewed annually, with relay on-chain governance able to writeoff, recall, top up or expand the underlying collateral

Both relay and parachain governance has cancel permissions with appropriate time delays to enable emergency oversight over delegated funds

The structure is designed to be as simple as possible - and can be more easily explained as an asset backed loan with a convertible option.

ParaNotes are simple, but their fluid, transparent and incentives aligned design can offer foundations for more complex financial arrangements enabled by free market parachains.

How a ParaNote works

1. A creative conspiracy is established as an anonymous time delayed proxy account on a parachain.

2. The CC pledges some assets to the proxy representing their idea/s in the form of upgradeable NFTs that are minted on Kusama's common good parachain statemine - we call this cultural collateral.

3. The CC pitches a parachain on their idea and requests funding in the form of their (illiquid or low value) network currency and also adds the parachain as an oversight member to the proxy.

4. If the CC is successful in their pitch to the network they receive parachain tokens to the proxy. The parachain retains permissions to return funds to their treasury if the ParaNote does not complete.

5. The CC then uses the pledged cultural collateral and network tokens to package a ParaNote with a live value to the collateral and a loan to value of 10%*

6. The CC pitches the ParaNote to relay governance.

7. If the CC is successful in their pitch to the network they receive relay tokens to the proxy. The relay retains emergency permissions over the loaned currency.

8. A time delayed transaction is pre-signed to send the pledged assets to the relay treasury account - this transaction is the subject of an annual review.

9. The annual review involves the three parties who negotiate the next year based on the performance, progress and potential of the on-chain agreement.

10. If successful, all parties remain equally incentivised to continue the experiment in perpetuity, growing value together.

Implied mkt cap

Kabocha's price is currently matched to EDG.

Listing on a KSM DEX (karura, basilisk, mangata will give price discovery and the model can be updated)

It is expected that execution and communication of the first KAB:KSM paranote will create positive price action for KAB - benefitting the model at launch

*Staking returns can be used to pay down the loan, added to the ParaNote backing, or sold for working capital