Kiota · Community treasury · Decision paper

Whose community earns when a member spends?

The community slice on every transaction can follow the buyer's community or the merchant's community. The choice sets what community operators are paid to do, and it decides whether a new community can fund itself from day one.

Prepared by Willo van der Merwe Date 29 July 2026 Status Decision requested
Draft for discussion, not an approved position

Management summary

Situation. Kiota now runs multiple communities, and a second member community is landing. Each community holds a treasury that receives a percentage slice of transaction value. Today that slice follows the buyer's community of record, signed off by Kyne on 11 July. Once members and merchants sit in different communities, that ruling starts to have real consequences, and the alternative (routing to the merchant's community) was explicitly left open at the time as a possible future slice type.

  1. Buyer side pays for member recruitment. A community earns on its members' spend wherever it happens. It funds a new community from day one, and it matches the treasury's revenue to its liabilities, since campaigns pay members. It gives nobody a reason to recruit merchants.
  2. Merchant side pays for merchant acquisition. A community earns on trade hosted at its merchants, whoever the buyer is. It builds real local trading economies and it aligns operators with letting anyone shop anywhere. It also starves a new community until it has merchants, which is the hardest thing to get first.
  3. Recommendation. Keep the community fund on the buyer side, and add a separate merchant-side slice that funds the platform rather than a community. Merchant density benefits every community equally, so pay for it once, centrally.
The framing

The routing question is really a question about what the treasury is

Every commission structure declares slices by role. One of those slices, historically called the DCO slice, is the community's cut. The mechanics are settled. What is not settled is which community it belongs to once buyer and merchant sit in different ones.

Answering it forces an answer to a prior question: is a community treasury a member welfare fund or a local economy development fund? Look at what it actually pays out today, that is onboarding credits, deposit matches, referral bonuses and top-ups, and the answer is member welfare. Every liability on that fund is denominated in members.

That matters because a fund whose obligations scale with member count, but whose income scales with local trade, can write cheques it cannot cash. The reverse also holds. Whichever side we pick, the fund's income base should track the thing it is obliged to pay for.

Where the community slice lands: a Community B member buys R100 at a Community A merchant

Same transaction, same rate. Only the destination of the community slice changes. Rates shown are illustrative.

Option A · Buyer's community

BUYER Community B R100 MERCHANT Community A net R97 Merchant keeps net slice R3 COMMUNITY B TREASURY Buyer's own community

Community A hosted the trade, supported the merchant and carries the merchant relationship. It receives nothing. Community B, which recruited the member, banks the slice.

Option B · Merchant's community

BUYER Community B R100 MERCHANT Community A net R97 Merchant keeps net slice R3 COMMUNITY A TREASURY Merchant's community

Community B recruited, onboarded, KYC'd and supports the member. It receives nothing from that member's spend. Community A, which built the trading network, banks the slice.

The two options, side by side

What each rule pays operators to do

Whatever the slice follows, community operators will optimise for it and ignore the rest. Both options therefore leave one of the two growth activities unpaid.

Option A: buyer's community

Capitation model · revenue ∝ members × their spend, anywhere

Arguments for
  • Self-seeding. A new community earns from day one. Recruit members, they spend at merchants that already exist anywhere on the network, the treasury fills, campaigns run.
  • Liabilities match income. Campaigns pay members, so a member-denominated income base scales with the obligations it funds. Self-balancing without intervention.
  • Geographically neutral. Money follows people, and people live everywhere. A merchant-scarce community still earns, which makes the fund a redistribution mechanism from where money is spent to where members live.
  • No rate arbitrage. The slice is invisible to buyers and unattached to any choice a merchant can make, so there is nothing for anyone to shop around.
  • Already the signed-off position. No reopening required.
Arguments against
  • Nobody is paid to recruit merchants. Merchant acquisition becomes an unrewarded public good, so it gets undersupplied. Merchant density is the binding constraint on member value; a member with nowhere to spend churns.
  • Operators are set against open spending. An outside shopper consumes local merchant capacity and goodwill, then the commission leaves. The rational operator wants to discourage them, which is the opposite of spend anywhere.
  • Free rider is the member-rich community. It banks slices on spend that another community's merchant network hosted and supports.
  • Needs a single community per member. Multi-community membership requires a primary designation, which becomes a contested asset unless it is immutable.

Option B: merchant's community

Acquiring model · revenue ∝ GMV hosted at your merchants

Arguments for
  • Pays for the scarce side. Operators are rewarded for recruiting merchants, which is the harder job and the one that determines whether the platform is useful at all.
  • Aligned with spend anywhere. Outside shoppers become pure inbound value, so operators actively want them. Operator self-interest and platform openness point the same way.
  • Multi-community membership becomes free. Buyer memberships carry no money consequence, so a member can belong to their home, workplace and church communities with no governance cost and no primary to fight over.
  • Builds real local economies. The fund grows with the community's own commerce, which is arguably what a community fund should be.
  • Door already open. Kyne noted on 11 July that merchant-side elements may follow as a new slice type.
Arguments against
  • Cold start with no seed. A new community earns nothing until merchants trade, but it needs campaign money to attract the members that make merchants want to join. The model provides no way in.
  • Income decouples from liabilities. A member-heavy community carries campaign obligations to every member while earning on a handful of merchants. It cannot self-fund its own incentives.
  • Concentration compounds. Commerce clusters. The hub community earns more, funds bigger merchant incentives, attracts more merchants. Positive feedback with no natural check, and the residential community that did the onboarding stays flat.
  • Invites rate competition. The slice becomes a visible cost of trading somewhere, and a merchant's community is cheap to change. Communities undercut each other for merchants, and community funding races to the bottom.
  • Member acquisition goes unpaid. Onboarding, KYC, education, trust and dispute support are the expensive work, and no community is compensated for it.
Consequence 1: funding a new community

Merchant-side routing has no answer for a community's first year

This is the sharpest practical difference. Buyer-side routing produces treasury income as soon as members spend, and then flattens as the member base matures. Merchant-side routing produces almost nothing until merchants are trading, then compounds if the community becomes a trading hub. For a platform in expansion mode, the early part of that curve is what decides whether a community launch is viable.

Monthly treasury inflow for a newly launched community

Illustrative model showing shape, not measured data. Indexed so that 100 equals a mature community's steady monthly inflow. Assumes the community recruits members steadily from launch and acquires merchants more slowly.

Option A · buyer's community Option B · merchant's community

The consequence is a choice about who carries a new community through its first months. Under buyer-side routing, the model does it. Under merchant-side routing, Kiota's own treasury has to do it explicitly, as seed funding, because nothing else will.

Consequence 2: distribution across communities

Merchant-side routing concentrates; buyer-side routing spreads

Commerce clusters around taxi ranks, high streets and shopping nodes; members are spread across residential areas. So the two rules produce very different distributions of community funding across the same network, even with identical total volume.

Share of total community-fund inflow, by community

Illustrative model showing shape, not measured data. Five communities on one network with equal total transaction volume under both rules. Community A is the trading hub; communities D and E are residential with few merchants.

Option A · buyer's community Option B · merchant's community

Neither distribution is automatically right. If the community fund is a development instrument for the areas members live in, the even spread is the point. If it is meant to reward whoever builds a trading hub, the concentration is the point. What we should not do is pick one and be surprised by the distribution it produces.

Scorecard

Which option wins on each criterion

Read down the criteria, not across the totals. The criteria are not equally weighted, and the weighting is a business call rather than an analytical one.

CriterionWhy it mattersStronger option
Funding a new communityDecides whether a community launch is viable without a subsidyBuyer
Income matches liabilitiesCampaigns pay members, so a member-denominated income base self-balancesBuyer
Pays for merchant acquisitionMerchant density is the binding constraint on member value and retentionMerchant
Pays for member acquisitionOnboarding, KYC, education and support are the expensive, unglamorous workBuyer
Alignment with spend anywhereOpenness only survives if operators benefit from outsiders shopping locallyMerchant
Resists concentrationA compounding hub advantage has no natural check once it startsBuyer
Resists rate arbitrageIf communities set their own rates, the priced side gets shopped aroundBuyer
Cost of multi-community membershipWhichever side carries the money needs a single answer, so that side needs governanceMerchant
Fraud and gaming surfaceRound-tripping is unprofitable under both, since the slice comes out of merchant grossNeither
The obvious compromise, and its price

Splitting the slice is not free

Two slices, one following each side, is how mature payment networks do it; card interchange separates issuer-side and acquirer-side fees, each named to a party. It funds both public goods in proportion to contribution and removes both free-rider problems.

The cost lands in one of two places, and neither is comfortable:

  1. Hold the total take constant and each fund grows at roughly half the rate. The risk is that neither incentive then clears an operator's hurdle rate, so we pay for both behaviours and buy neither.
  2. Raise the total take and merchant net falls. That takes money from the scarce side of the network, which is the worst available source, and it is visible to merchants immediately.

Whether option 1 is survivable is arithmetic, not judgement, and we can settle it from Delft's actual volume. It turns on a number we have not written down yet.

Recommendation

Community fund on the buyer side; merchant density funded centrally

I am not in favour of moving the community slice to the merchant side, and I am not in favour of a straight split either. Rather something like this:

Keep the community treasury on the buyer's community, unchanged from the current ruling. It self-seeds new communities, its income matches the member campaigns it funds, and it keeps the rate out of reach of arbitrage.

Then add a separate merchant-side slice that accrues to Kiota rather than to a community, earmarked for merchant acquisition.

The reasoning is public goods matching: fund each good at the level at which it is actually public. Member welfare benefits one community, so a community fund financed by member spend is correct. Merchant density benefits every community equally, so it is a network utility and should be bought once, centrally, rather than competed over locally.

That buys the merchant-recruitment funding the buyer-side rule undersupplies, without importing any of the merchant-side damage: no compounding hub advantage, no inter-community undercutting, no cold-start trap, and no contested primary membership.

It does imply a division of labour we should say out loud: communities recruit members, the platform recruits merchants. If we would rather operators own merchant acquisition locally, then a community-level merchant slice is the right instrument and concentration is the price, in which case new communities need explicit seed funding from Kiota's treasury, because the model will not provide it.

Decision requested

  1. Confirm what the community treasury is for. Member welfare fund, local economy development fund, or both with a stated split. Everything else follows from this.
  2. Confirm the division of labour. Do communities recruit merchants, or does the platform? If communities do, we need to agree seed funding for new communities in the same decision.
  3. Approve or reject the recommendation above, being buyer-side community fund plus a central merchant-side slice for merchant acquisition.
  4. Note that no reopening of the 11 July ruling is required under the recommendation. A merchant-side slice arrives as a new slice type, which is the path Kyne left open at the time.
[TODO: confirm] The one input this analysis does not have. What monthly treasury inflow does a community operator need for running a community to be worth their time? Without it we cannot say whether a split slice still clears the bar, or whether splitting quietly kills community launches. Derivable from Delft's current volume.