[Proposal] BalancerDAO Compensation Evolution

This is a proposal by the Ops subDAO, specifically Solarcurve, Mog, and mkflow.

Introduction

As part of the Balancer subDAO formation proposal, the Ops subDAO was delegated the power of compensation. It is our responsibility to set clear and uniform guidelines for fair compensation across the DAO. Inspired by the recent Yearn compensation overhaul, Ops has been considering what an effective compensation system might look like for Balancer DAO. The following section will outline our proposed plan and we intend to open the discussion up to the wider community to gather feedback before committing to the new structure in the next quarter.

The primary benefits that this proposal delivers are the following:

  • Reduces sell pressure on BAL from DAO compensation
  • Helps the DAO’s most active contributors build voting power at an accelerated rate
  • Allows each contributor to tailor their compensation to fit their needs

Note: This only addresses fixed monthly salaries or “balleries”. Coordinape and one time grants from the grants subDAO are outside the scope of this plan and will continue as is.

Specification

There will be no more half or full balleries or 60/40 liquid/vesting split. Instead, base compensation will be in fully liquid stablecoins paid monthly. These funds would come from the DAO’s 25% cut of revenues under the veBAL system. The base compensation for a full time contributor will be fixed to $5,000 per month. Each contributor has the option to convert some or all of their stablecoins to locked veBAL at a sliding discount according to the following:

bal_discount = weeks_locked * 0.010416

Lock Duration Discount
3 months 12.5%
6 months 25%
9 months 37.5%
12 months (max) 50%

The max amount of BAL a contributor can purchase can be calculated by the following:

max_bal: maximum amount of BAL that can be purchased by this contributor this month
comp: contributor compensation in stables this month
bal_price: current BAL price in USD

max_bal = comp / (1 - bal_discount) * bal_price

Example: You are a full time contributor and your base compensation is $5,000. BAL price is $20. You plan to lock in veBAL for 6 months (30 weeks). Your bal_discount is 25%. If you convert your entire compensation to veBAL, you’d get a max_bal of 333.33 BAL. You decide to only convert half of your compensation to veBAL and take the other half in stables.

You receive 2,500 in stables and 166.67 BAL to be locked in veBAL for 6 months.

Note that for now locking BAL into veBAL will be a manual process that each contributor is responsible for doing. You’ll need to single asset deposit to BAL/WETH then lock into veBAL. Gas for these transactions will not be reimbursed, so factor this into your decision. Proof of these transactions must be provided to a signer of Ops before the next compensation disbursement.

Only one address per contributor is allowed. It will not be possible to choose to lock for 6 months then the next month choose to lock for two months as each address can only have one lock. If you want to fully cash out you would simply let your lock expire and if you choose to use your discount it would get progressively smaller as the months go by, until you fully unlock.

Old Vesting Contracts

Any existing vesting contracts will remain in effect and unchanged. They are immutable by design so there is unfortunately no way to retire them. Ops does not plan to use them again in the future.

Peer Reviews & Self Assessment

As we continue to iterate on effective methods of accountability, Ops would like to introduce a trial run of peer reviews across all DAO contributors. For those attached to one or multiple subDAO’s/working groups, you will be asked to evaluate the contributions and behavior of your fellow members. For everyone else, you would submit peer reviews on whoever you’ve interacted with in the course of your contributions.

You will also be asked to assess your own contributions and engagement over the past month. For example, if you have not spent much time contributing during the month you might select a “Low” level of engagement, which would translate into a lower fixed salary. Next month if things change and you contribute a lot, you might select a “High” level of engagement and you would receive a higher fixed salary, up to a maximum of $5,000.

These will not be anonymous but the results will only be shared with the signers of Ops and held in the strictest of confidence. In the final week of each month, a google form will be provided to all contributors earning a fixed salary or who have been awarded GIVE on Coordinape. This form is expected to take no longer than 30 minutes to complete and must be submitted before your compensation for that month will be distributed.

SubDAO/Working Group Leaders

We recognize that some subDAO’s have coalesced around a single leader and we have considered formally recognizing these positions in the form of clear expectations and increased compensation. In the spirit of decentralization, it is important that we do not become too reliant on single individuals. There should always be the opportunity for leaders to emerge organically without needing the blessing of Ops. Anyone at any time can be a leader and in some situations no clear leader is even necessary.

Rewarding leaders for stepping up is important because we want to encourage good leadership in the DAO. We think Coordinape represents an elegant solution here - fellow contributors will recognize good leadership and are empowered to reward it on their own. With this in mind and the wide support Coordinape has received over the past two month trial period, Ops plans to increase the budget for this initiative going forward.

Mandatory KPI’s

Transitioning compensation to stables protects against BAL volatility and offers more security for core contributors. As part of this initiative, Ops will be asking each subDAO/working group to provide 1-3 KPI’s (key performance indicators) that can be used to measure their performance over each quarter. This not only provides another input for Ops to judge fair and adequate compensation but also shows token holders how all of us are adding value to the Balancer Protocol.

Examples:

Partnerships subDAO sets a KPI of 5 projects bribing at least $500k/week in the BAL Wars by the end of the quarter

Marketing subDAO sets a KPI of growing @Balancer twitter to 10k followers by the end of the quarter

Ops subDAO sets a KPI of onboarding three new contributors (paid at least one month) by the end of the quarter

Treasury subDAO sets a KPI of adding at least $3M of Protocol Owned Liquidity by the end of the quarter

Conclusion

This proposal introduces several changes and should be carefully considered by all contributors. Ops is keen to hear input and iterate as needed. Overall this puts the DAO on a more sustainable compensation trajectory, adds more structure, and increases accountability. Ops believes these are all positive steps towards a better DAO for everyone.

A yes vote would put this new system in place starting in Q2. A no vote keeps us on the existing system for another quarter.

Appendix - Projection of Salary Change Impact

If we take March base compensation and assume an average of 75% engagement with no veBAL discount participation, you get (5000 * 0.75) * 17 contributors on fixed salary = $63,750 per month in compensation. This compares to $74,800 per month under the existing system, assuming $11 BAL.

If we assume half of total contributors choose to max lock discounted veBAL, you get (5000 * 0.75) * 8.5 + (5000 * 0.75) * 8.5 * 2 = $95,625 per month in compensation, with $31,875 paid in stables and $63,750 paid in BAL at a 50% discount, locked for one year.

Based on the most recent revenue projections from Treasury subDAO, if we assume $95,625 per month in compensation expense that comes to $1,147,500 per year. That is an increase of $267,516 from the current projected compensation expense, which would reduce the DAO’s expected yearly profit from ~$1.3M to ~$1.1M.

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https://snapshot.org/#/balancer.eth/proposal/0xd0d95dadb0537914ad724e95082ebb456cf6ad1aa4eff3915fefc5377caf530c