[Discussion] Delegate Compensation

Author: Bobbay_StableNode

This post will generate a discussion around delegate compensation. Dependent on the community response and feedback we will see whether this should become a future proposal.

Motivation

Balancer has a delegate system, which is ideal for VeBal holders to trust individuals or groups to act on their behalf. We believe it is time for VeBal delegates to receive some form of monetary reward. It is unsustainable for delegates to continuously support the DAO as their contributions increase without receiving payment.

Introducing service providers mean that VeBal holders will decide who will work for the DAO. Service providers must adhere to specific accountability mechanisms to keep the community updated. However, VeBal holders are more responsible for staying updated on the DAO and service providers.

Delegates would be expected to contribute to the DAO in various ways such as; (i) forum discussion, (ii) voter participation, and (iii) updating their delegate thread with transparent votes. Bi-weekly or monthly delegate meetings could also be a possible idea to discuss specific topics within the DAO and identify areas for improvement. We believe that compensating delegates for their contributions not only retains talent but will attract more delegates to contribute.

Risks

  • Delegates could vote without understanding a proposal
  • This extra responsibility could deter current delegates
  • It is hard to quantify the effectiveness of delegates

Discussion points

  1. Should delegates be paid?

  2. Should delegates opt-in to being paid (as it is a more formal commitment - similar to MakerDAOs recognized delegates)

  3. How do we determine how to pay a delegate?

  • Flat-rate
  • Based on tokens
  • Based on contribution
  1. How much from the treasury should be allocated to paying delegates?
  2. What token to pay the delegate?

Our view

  1. It might be a surprise, but we think so :slight_smile:
  2. Delegates should opt-in to being paid as it is a more formal commitment.
  3. We recommend a flat rate as a temporary solution till we can decide on an equation to fairly reward delegates on their delegated tokens and contributions.
  4. We believe that the benefit provided from benefits outweighs the cost, as it brings much-needed security to the protocol.
  5. A stablecoin such as DAI,USDC or USDT.

Disclosure: We are delegates at Balancer

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Personally do not feel that I should be compensated for delegate duties at this time or even in the near future. Things maybe change later down the road, but again for me personally this is a non starter right now.

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Appreciate the response. Do you mind expanding why? It is very common for delegates to be unpaid and this can make it an unattractive role for individuals. Even a small monthly stipend might encourage more delegates and active participation.

Thanks for kickstarting this Bobbay. I’ve been thinking about this and am very much in favor of it.

For context, Maker started compensating delegates and it has paid off very well. They’ve been able to attract top quality individuals or groups such as, Hasu, GFX, Monet and StableNode.
Interest Protocol has also designed their token allocation and protocol with this in mind and I’m in the process of kickstarting the Recognized Delegate Program there as soon as governance is live.

In the context of SPs, I think having a healthy Recognized Delegate Program could be a good system of checks and balances.

In terms of structure, I’d suggest something similar to IP: there should be a minimum amount of delegation needed to become a Recognized Delegate. Compensation would be a function of votes with a boost multiplier based on a function of discussion and initiation.

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Interesting concept and I understand where you are coming from. I personally also don’t feel like getting paid. Just doing my duty to the community.

Let’s first establish the first round of SPs and see how things go. We are in turbulent times.

Kia said it better than I could have. I agree with the system he outlined, primarily because it is extremely important that a transparent dialogue between large voters and the community takes place on a regular basis. Most of Balancer’s history is silent parties pulling the strings and we do not hear from the biggest voters very often, if ever, on the forum.

Creating a financial incentive for these entities to come out of the shadows via a delegate system is vital to a functioning decentralized governance system emerging here imo.

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The initial journey to compensating delegates at MakerDAO took a while and could have done more damage than good by taking such a long time. Since it rolled out, the delegate initiative at MakerDAO has done great so we should take inspiration but also learn from their mistakes to not delay and lose potential talent.

Interest Protocol has also designed their token allocation and protocol with this in mind and I’m in the process of kickstarting the Recognized Delegate Program there as soon as governance is live.

Yeh, we might potentially get involved at IP so I am aware of what is happening there, and as far as I am aware they are taking inspiration from MakerDAOs “Recognized Delegate” program. I agree that there should be a minimum amount of delegation needed + an opt-in mechanism.

The compensation model you suggest is similar to Makers? based on token delegation and contribution metrics correct?

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I think you can do your duty and be fairly compensated for the work.

Also, I agree with turbulent times but that’s why we can also limit the amount paid to delegates because even a small amount is better than nothing. Not only that but governance will be even more important during a bear market and those with conviction in the protocol will stay and contribute. Rewarding those contributors with a share of BAL tokens only seems fair. Similar to your work as a Balancer Maxi contributors deserve a form of compensation even if this delegate program is on a much smaller scale.

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Thanks @solarcurve :pray:

@Bobbay_StableNode, yes!
What I have in mind is structurally similar to what’s outlined below. Although, I haven’t given the numbers much thought so these are just placeholder and approximations.

  • 10bps of veBAL needed to become Recognized. Commanding 100bps of veBAL is the max that would contribute towards a delegate’s compensation
  • 5 BAL/month comp for each basis point of veBAL. Effectively, 50-500 BAL/month as a factor of commanding votes.
  • A number of participation metrics would be monitored via KARMA (posts created, replies, initiating proposals, etc.). Each metric would have a certain number of points associated with it. Points would be capped at 10 per month.
  • Total comp = votesCommanding * 5BAL * (1+points/100). So, if one has 50bps of veBAL delegated to them and was very active and received 10 points then they’d be compensated: 50 * 5 * 1.1 = 275 BAL for that month

Numbers are actually very important here and mine are just examples, so, if folks like this schema, would love to hear any thoughts they’d have on numbers.

Regarding the points system, we should incentivize things like, thoughtful feedback/replies, initiating discussions, initiating proposals that pass, etc.

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Yep, this is a great structure since it is very similar to MakerDAOs and we know it works! I initially suggested a flat rate so we could get stuff going but since you’ve suggested a structure it only makes sense to move forward with this.

Due to the market being all over the place it would be good to have a limit that everyone could agree on as a max compensation for a single delegate so we don’t feel overextended. I am more than happy to work with you @mosayeri on this to go through some numbers so we can get a proposal going. Various options with examples would be a good place to start like you’ve done here.

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Yeah, down to work on that @Bobbay_StableNode.

There’s another thing I wanted to bring up. I’m personally not convinced it’d be the way, but thinking about it and wanted to get everyone’s thoughts on it too.
One way to lean into the idea of checks and balances for SPs is to limit Recognized Delegate Program to those who are not actively involved in any of the SPs.

  • Any address could be a delegate – that’s a snapshot feature.
  • Any one could become a public delegate under the framework that @solarcurve has put into place (which has been a big success btw).
  • But the RDP would be geared towards attracting governance focused and independent contributors through compensating that subset of delegates.

Again, just want to get people’s thoughts on this.

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I’m not against that rule necessarily but I also think it’s fine for someone to be paid as a delegate and paid to work for an SP. That delegate would just abstain from proposals involving that SP.

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I suppose my response was a personal take only. I wasn’t considering using compensation as a draw for other individuals or entities to get involved in governance. I’m personally fine at the moment opining on governance items while being paid elsewhere in the DAO so that is probably an unfair comparison to another party. If others feel that some form of compensation is important in order to get a robust group of active voting power than I can think about it more. I would be curious to what amounts we are talking about due to current market conditions.

I also agree on the point above, if a delegate is in a SP they shouldn’t be voting on that SP, this is why I made a personal post about that a few days ago.

@mosayeri awesome, lets’s connect and start working on it.

I think if we advise that the delegate should abstain from proposals that affect their sp like @solarcurve mentioned and on their delegate thread, they can also write a disclosure mentioning that they work for an SP.

Yeah I think as you @zekraken are being paid elsewhere in the DAO this might be less of a priority for you personally but I believe it would help in attracting and retaining talent. We just need to find a balance between underpaying and more importantly overpaying delegates in these current conditions. Soon we will present a proposal and we can discuss this further and identify any concerning issues about the “recognized delegate program”

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Recognized delegates could also have their own set of responsibilities that we will explore further.

A very interesting discussion and as someone with no skin in the game I won’t opine with a yes/no view here. Just some thoughts on system design:

I think it would be prudent to set a rule/process where delegates cannot vote for how much they will make. I think the dangers there are very clear. Perhaps my point is moot bc the delegate process would just vote those delegates out? But as a best principle I think it would be important to separate those powers.

Would also add a concern about getting paid-per-delegate. It creates incumbency problems and a nasty pay for voters possibility. The incentive becomes “attract delegators” which I am not sure is the same as “add value to the governance process.” Open to discuss this tho

Lastly: Being a delegate is an optional role. That said, it can be a valuable one to the DAO. You want to attract people who believe in the mission, but also offer them upside if they help the protocol succeed. Since we don’t have equities in crypto, how do you do this?

Here is a possible solution:
Delegates work in good faith with a path to compensation ex-post embedded in the treasury process. Process: As part of the quarterly budget process the Treasury subDAO will host a forum post where they share 1) how much is in the budget that COULD go to delegates, 2) an objective list of value-add activities delegates have provided, 3) proposed compensation to delegates. The forum and users can discuss, with zero comp being the expectation (ie you don’t get paid just for showing up). Value added will be compensated. This would be a quarterly vote, so the thinking is you don’t need participation from users all quarter, just show up to the one quarterly mtg :slight_smile:

Hope helpful

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