Hi, Chainalysis.

Firstly, thankyou for continuing to engage with Opengov. I understand it will be a frustrating process if you're not used to it.

To start, I would like to point to the discussion on the previous proposal. It was long, but a lot more to the point than discussions on polkassembly often are. It is worth reviewing those previous discussions because many of the key issues remain live,

In particular: @saxemberg delved deep forensically and their questions seem to have elicited incomplete or unsatisfactory answers https://polkadot.polkassembly.io/referenda/684#0ZBGc3hjVuOEDNJWPeCN

@Max_HIC succintly summarises the fundamental problem with that (and this) proposal, also addressed from another angle by 135ffW8FM9WGDQ4QqeBBzb9isueE7oUkZNJe2CBqfH6A88Kp (also here )

@ChaosDAO raised a number of points which were not really satisfactorily answered.

Though they were all brought up around the last referendum, I can't see that much has changed.

@Chainalysis, I know you won't want to say this out loud, so I will say it for you: The value proposition here is not that Chainalysis are providing a service worth $6.5m in the usual sense of 'worth'. I'm fairly confident that, as an individual developer, I could produce the same product they are offering for about 2% of the price (this is just the code, of course. It excludes the chain-non-specific webinars on crypto risk that they are throwing into the bargain).
The point is that they are a monopoly provider of some kind of service, which I will try to specify (and perhaps @Chainalysis can specify better if I miss something out).

They are saying that there are certain tiers of TradFi which cannot (realistically) be opened to Polkadot without a chainalysis seal of approval. Whether that seal of approval is useful or meaningful in its own sense is irrelevant. The point is that chainalysis are the ones trusted by the regulators and certain forms of regulatory approval will not be forthcoming without their integration of our chain.
Stripping away the politeness and the business-y language, it's a shakedown.

Chainalysis are telling us: 'If you want to move into the big league like Ethereum or Tether, you need to pay us to jump the queue'.

OK. Fine.

There's no need to get emotional about any perceived unfairness of this. That's the deal on offer. Do we take it, or not?

What we can do is analyse the value of giving them what they ask, against what will happen if we don't.

So, firstly - what are the anticipated benefits of paying them for their integration?

We have @Georgi_P telling us that there are BD deals with Spanish banks like BBVA on the horizon, held back by the lack of chainalysis integration. This makes me ask myself: at what stage are these BD deals? Are these banks really on the verge of doing business with Polkadot? Or was the lack of chainalysis just the first (or one of many) obstacles to be cleared? (And what, in fact, is this business tie-up on the horizon? I don't know anything about it. Maybe @Georgi_P can give us more detail about what stage they are at?)

Chainalysis point repeatedly to Tether as a crypto entity that benefited from their integration. But let's remember that Tether, two years ago, was facing being globally financially blacklisted due to compliance concerns and its SEC investigation. They were in a position that they had to pay anyone who would take their money in order to get their reputation with the regulators out of the gutter. Tether, understandably, saw a clear value proposition in the cloak of legitimacy that buddying up with Chainalysis could provide. Arguably, the fact that a crypto has to pay chainalysis to get into bed reflects badly, not well.

Polkadot is in a different position. One of the few L1s which has had positive results actively engaging with regulators including the SEC. Our relay chain and parachain are already well indexed, on open source software that is simple for any mid-level dev to use, let alone a well resourced government. One of our parachains is already contracted by an EU government. If it is legitimacy that chainalysis are selling, we don't need it, thanks. We already have plenty.

And secondly ... what are the costs?
That's at least clear in the proposal - it's $6,500,000. Down from $10,000,000, so at least that's something.
But could we get it cheaper?

As I said, I'll happily code up a bit of chain indexing plus secret sauce for $125,000. But as I hope I established, we're not really paying for the development, servers and, umm, webinars. The value prop is attaching chainalysis's name to polkadot. So can we get that for cheaper?

Yes. We Can.

They will come to us.
They will not only pay from their own account to integrate Polkadot but if they have any sense, they will be liaising with our BD to connect with experienced Polkadot devs to build the thing properly.

If Polkadot gets big enough that regulated entities want to deal with us in such a way that chainalysis's integration or lack of becomes a factor (and I'm fairly positive that this will happen, as I'm sure are @Chainalysis ), then not only will those regulated entities be paying for that integration, and signalling well in advance that they will pay for that integration, but chainalysis will have this on their radar well in advance and will have that integration in place, in advance, ready for their paying customers to take up.

The notion that we as the Polkadot treasury should be paying chainalysis to build their overpriced, closed source, surveillance product and throw us a couple of licenses that we'll be too disorganised to use, just because we have a treasury that's open enough that they can make their grifty proposal at us? .. idk, words fail me.

There is a lot to unpack in this proposal. The word "ETF" is being used a few times in the proposal; can you elaborate more?

If a DOT ETF was guaranteed, then the investment would be justified by the appreciation of the DOT price. However, we would need more information.

"Deliver Chainalysis Ecosystem Intelligence solution to monitor the activity of the DOT token on Relay Chain, Hydration, Moonbeam, Asset Hub, and Astar given that in these parachains is where the majority of the DOT transfer volumes happen."

The services should cover all Parachains at a minimum, as Polkadot is a ecosystem and the requested funds are coming from the community.

This would also prevent backs charges by Chainalysis the future if other chains were to gain popularity of DOT this new market cycle.