Delegate Compensation [informal poll]

Intro:

In case you haven’t been checking the vote.makerdao pages for fun like me, you’d notice that the first significant delegations have disbursed. Congrats to @planet_x and @paperimperium for topping the leaderboard!! We’ve got a group DM to hash out some of the nuanced topics around delegation and support each other.

The most pressing topic, and probably obvious one, is the amount of time it takes to be informed and vote. What seems clear is: voting takes a 10-20 hour weekly commitment to stay on top of what matters and properly diligence all the proposals, threads, groups, core units, and changes. The subtlety here is that it’s possible to spend almost a full-time commitment on the maker protocol catching some of the blind spots that Core Units and proposals need.

As we can see, Paper and Planet’s diligence has translated into a significant stake of MKR delegated, but that can change on a transaction. From what we can tell, compensating delegates in a fair matter, assuming community consensus, will both attract new ones and retain the top delegate’s performance. We’re hoping for the number of delegates with a significant stake in the system to be around 10. More happy delegates mean better security, improved ideas, better quality assurance on proposals, and generally better discussion and participation. Plus, I mean, just think of the Voltron memes….

Yet, we wanted to poll the community to collate the right information before moving to a formal signal request. We welcome a conversation about compensation, but if we start to go off-topic, as we’re wanton to do, I’ll try to start new threads as they arise. As with all informal polls, this is a conversation starter to hash out details. We’re thrilled to get this topic going.

Questions

Is it reasonable to expect a time commitment between 10-20 hours a week from a delegate?

  • Yes
  • No
  • Abstain

0 voters

Should delegates be compensated for this time?

  • Yes
  • No

0 voters

Suggested delegate pay for a months work:

  • 7k DAI
  • 8k DAI
  • 9k DAI
  • Other ( please respond with suggestion)

0 voters

Should compensation only be for the top 10 delegates with high stake, high vote performance, and high vote communication?

  • Yes
  • No
  • Other (please suggest ideal number of compensated delegates)

0 voters

7 Likes

Regarding setting a cutoff for delegate compensation. I think stake, vote performance and communication are important, but I’m not sure as to how others are envisioning weighting and bringing those 3 things into one metric to construct a top 10.

Additionally I get wanting to set a cutoff for the number of delegates being compensated and think it’s necessary, but im not sure if I like the approach of gatekeeping compensated delegation to an arbitrary number (forgive me if this is not an arbitrary choice). I feel that could also encourage a situation with a more stagnant delegate pool.

I’m not aware of the payroll engineering difficulties behind this, but would it be possible to implement a system with a top 10 who receive significant compensation, and a much more paltry compensation for any recognized delegates who attain a certain stake? In my opinion, this could encourage more entry and participation of small delegates, while still limiting payouts.

2 Likes

To distribute compensation, I’d suggest dividing the total compensation pool by the proportion defined by floor(sqrt(Delegated MKR)). I’m against a hard cut-off because we want to encourage underdog delegates and not permanently enshrine outstanding delegates.

If the function floor((Delegated MKR)^0.5) seems too skewed to the underdogs then we could use a different exponent value like floor((Delegated MKR)^0.75). I guess too much skew to the underdogs risks a sybil attack (a single person controlling many underdogs).

5 Likes

I voted No. I expect at least 40 hours a week :smile:

4 Likes

Oh lord, lol.

A few things to think about:

1

The idea of the protocol rewarding (paying) for voting participation has been considered before and rejected.

MIP49: Staking Rewards would have entitled MKR holders to Dai payments based on how much MKR they staked in the voting contract. However when polled, it was voted down (15.87% for, 84.12% against).

How is paying a delegate for voting participation fundamentally different?

Let’s look at it another way. Say MKR holder 0xabcd holds 8000 MKR and votes regularly. Her interests are aligned with MakerDAO because she has significant MKR exposure, but she is not paid to vote. Should the act of creating a vote delegation contract and depositing her 8000 MKR entitle her to 8k Dai monthly income from the protocol?

2

Delegates are already compensated in the form of voting power.

Normally, if one wanted to increase their voting power they need to buy or borrow MKR, which has a cost. Delegates get increased voting power for free.

3

Delegates are likely to have a lot of power over the protocol. Already the top 3 delegates are not far from having enough MKR to pass an executive vote. Voting on their own pay could be, or at least be seen as a conflict of interest.

4

If anyone, shouldn’t it be those delegating MKR who pay their delegate for the service of voting for them?

A mechanism to do this could be build into a future iteration of the delegate contract. For example, a continuous 5 basis point fee could be charged on delegated MKR.

This avoids MKR holders who already do their own research and pay their own gas needing to additionally subsidize multiple delegates who are not directly serving them.

5

A committed, skin in the game MKR holder who already researches, forms opinions, and votes doesn’t really need to do much, if any more work when others agree with their point of view and track record and choose to delegate to them. They are already spending the necessary time and gas funds.

8 Likes

Delegates are not just voting. They are engaging in discussion. They are guiding us with their insight. They are more like steward executives than mere voters.

As a recognized public delegate, I would say yes. Well, I would compensate proportional a formula that I suggest above. But yes, I think it is interesting to put recognized delegates into a competition to guide the DAO as wisely as possible.

It still costs gas to vote.

No way. They have to earn that trust. To earn that trust, they have to work hard understanding all the details of what is going on in the project.

MKR holders still retain the ultimate say. If a delegate votes against the interest of the most MKR holders then they will find themselves with much less MKR delegated to them as soon as word gets around.

But everybody benefits from wise discussion, not just the holders of the MKR that is delegated. Even if a recognized delegate is on the wrong side of an issue, their well researched and well studied position informs everybody and helps us make the correct decision.

But the stakes are higher now. You have to do more research, form better opinions, and vote extremely consistently to stand out as a guiding light for the DAO. That deserves a bit of reward.

3 Likes

I think delegates needs compensation or the will eventually (soon) burnout. However I immediately also went with my mind to:

Who defined these tasks? Are these activities formally enforced/checked? I don’t think so.

I agree currently delegates are doing most of these, but nothing prevents other delegates NOT doing these activities and yet getting a lot of MKR.
[E.g., it’s not unlikely that one day a popular Youtuber could get a lot of votes without doing much ‘discusson’].

My point is: each delegate acts as they want and within their time/energy/intellectual resources. We should not fix rigid behaviors.

Going back to:

I think one of the main reasons for the rejection, at that time, was indeed the lack of delegation.

Perhaps it is time to re-discuss MKR voters compensation? (Which, implicitly, will include delegates compensation?)

6 Likes

I don’t have the right answers for what the correct compensation for delegates should be — but this is how voters could/can get bribed by larger token holders if we don’t get this Delegate/Governance thing correctly, and set a trend for the entire DeFi ecosystem:

3 Likes

I have not voted in this proposal yet but find it difficult to support at this stage. Maybe I’m in the minority, but I did not assume that being a delegate would be a compensated position (outside of a subsidy to cover gas fees) in the DAO. I would assume that any delegates themselves are sizeable MKR holders and I would think the voting influence from being a delegate with the equity stake would be plenty of financial motivation.

I’ve re-read this proposal three times and still have more questions than answers.

  1. What qualifies a delegate to be compensated? Minimum MKR delegated? Voting frequency?
  2. Why do delegates need to be paid $100-$200 an hour (nearly $1M/year for 10 delegates) to do something that was already being done for free up until this point?
  3. Will delegates be abstaining from voting in this poll and from on chain voting if this proposal makes it on chain?
  4. If this passes, is there then a disincentive for someone to delegate their MKR and we could end up with less delegated MKR? For example, if the minimum threshold for delegate compensation is set to 10K MKR, and as a voter I could push them over the edge to get compensated, I would be disincentivized from doing that as it would take money out of the DAO’s pockets.
  5. How is compensating the delegates different than the DAO’s decision to vote down MIP49 (Staking rewards) which would’ve distributed rewards more equitably?
  6. Active delegates are already being compensated for engaging on the forum through Sourcecred and top contributors are earning $2-3K a month. There was also a recent poll to increase these payments which the majority were in favor of.

With a number of CUs in the pipeline and CU expenses ramping up, I’m not sure how to justify spending 4.2% of the DAO’s annual cash flow run rate on something that was free and supposed to be making a process (voting on chain) easier and more efficient.

To put this in numbers, if I assumed that a delegate spent the minimum amount of hours in the stated range (10), they would become the highest salaried position in the DAO (effectively a $384K/yr salary).

I hate to be the bad guy here, but as part of the RWF CU I feel it is my obligation to look after the bottom line.

16 Likes

If a delegate is earning thousands should they still be allowed to get SourceCred distributions? Like the Core Units, I think the answer should be no.

4 Likes

Let me chime in briefly. I can only speak to my own position, and it may not be appropriate to generalize.

  1. I do think it would be appropriate to remove compensated delegates from SourceCred. That’s an easy one — delegates could choose one or the other.

  2. I typically spend around 2 hours/day on the forums. Beyond that, I engage in extensive off-forum work in other areas at least equal to that, though the mileage on that will vary by delegate and their particular skill sets.

  3. Most delegates are not independently wealthy. If a delegate is clearly uninformed about some basic DAO matter and they’re a volunteer, it’s hard to complain. Alternatively, an hour of serious DAO business — especially the kind not reflected in SourceCred— has to come from some other use of that delegate’s time. Most likely this is familial duties or paying work.

  4. Headhunting is real. Other stablecoins, DeFi projects, and financial firms are paying attention to us here. I can personally attest to being regularly hit with communications from start ups, other protocols, and the like. To date, the only one I’ve accepted or seriously considered is to teach a college course, but there are offers to “match or exceed” large companies that are not us (they know there is nothing to match here).

I am here at Maker for the long haul, but if my wife ever saw some of the things in my inbox on top of the fact that I tabled a proposed CU with a good salary in order to pursue delegation? Yikes on bikes. I can only imagine other delegates will come under similar pressures.

  1. Bribery is being openly integrated into protocols. I don’t think anyone on the current slate would sell a vote for a few thousand dollars, but let’s not assume someone 2 years from now would feel the same.

I don’t know what the right cutoffs are for pay or inclusion, but especially since it is DAI and not MKR being asked for, I think some level of compensation is required. Number 4 is the one that I would stress the most from the above list, since that hits at how much delegate churn we could be exposed to, which would defeat the point of delegation.

ETA:
6) We need to lure in more delegates, even if it is simply to have a “2nd string” who can quickly fill gaps because they already understand most corners of the DAO. It would be nice to convert a couple shadow delegates to recognized as well. But this is simply smart succession planning to have a few folks who are already “halfway there” even if they are not brokering mergers or overseeing political outreach or anything else.

9 Likes

I agree that we need a kind of backstop of governance voters to keep things humming along in the event that recognized delegates stop participating for whatever reason. I am not a shadow delegate but would be all for this benchwarmer type of role.

2 Likes

To be clear, I’m only talking about compensation for public recognized delegates. The extra tasks beyond voting are made visible by GovAlpha and friends. There is the delegate platform. There are the zoom AMAs. There are forum posts explaining positions on various issues. This extra work is what I consider worthy of compensation. We’re not paying for voting, per se. We’re paying to be informed and educated.

Staking is passive, and lacks any mandate to educate and inform.

3 Likes

Whoa, I’m not sure that anybody is advocating for that. Here’s a spreadsheet that we can use to play with the numbers, Delegate reward - Google Sheets

This uses the scheme I proposed above. If you want quadratic funding then change the adjustment exponent to 0.5.

6 Likes

Correct.

Thanks for putting together a sheet! This is awesome.

1 Like

Some excellent considerations are coming out of this.

Cost vs benefits

I empathize with this opinion greatly. You’re not the bad guy at all!! It’s super helpful to frame things in terms of costs/ benefits.

Voting on Compensation

I will. I would advise that we all do and rally other MKR voters to pass it.

This was a primary concern, and it’s why I began this conversation as an informal poll. So we can start to narrow down on the conflicts and best approaches.


MIP 49 rejected

I think MIP49 could be re-introduced? If a MIP is rejected it can be proposed again, it’s not like rejection once equals rejection forever. There is a powerful combination there for voting we can explore.

“people already vote, right? why pay?”

If it was free… was it working? It probably would have been better to say incentivized delegates = passing executives faster, easier, and more secure instead of implying that under “better security.”


What is delegation responsibility anyway?

I’ll drop this right here for you, Meeoh, especially number 7 :wink:

This is well said, and It’s why I think @psychonaut is really on track with thinking through an active & flexible formula for delegation, and then we can vote and possibly encode it ( combining this a bit with @Spidomo thoughts about the delegation contract)


Y’all are already whales, right?

I’ll be tactful here and say I would never assume. I personally am not a size-able holder in any regard for reasons I would prefer to be diplomatic about.

Paper summed this up quite well as “most delegates are not independently wealthy.” I am also committed to seeing this experiment through; I think we can have a really healthy voting ecosystem in a year.

6 Likes

@aes I’m not certain if I have all the right answers are to your questions, but this how I’m thinking about it:

1. What qualifies a delegate to be compensated? Minimum MKR delegated? Voting frequency?

In my opinion, it should be based on Voting Frequency, Participation ( active communication via Meetings, Maker Forum, Rocket Chat, etc.), Active Users that understand the protocol and want it to flourish, but lack sufficient tokens to participate in a serious manner. Active Users that have shown a commitment to MakerDAO, and yes, a history of engagement and community participation. But I also believe some of my fellow Delegatee have a fair view/opinion of such.

2. Why do delegates need to be paid $100-$200 an hour (nearly $1M/year for 10 delegates) to do something that was already being done for free up until this point?

Personally, I spend over 40++ hours engaging in anything and everything related to MakerDAO–so, I doubt I’ll ever spend below 40 hours in this Maker land. For me, my passion is my full-time job. In order to make enough $DAI to live in New York City, I also have to be active in generating investment income (trading, leveraging, and yes, farming/LP mining).

Since I took on the roll of becoming a Delegate, my personal earnings have stagnated because I believe I need to be involved and concentrate 100% more on everything related to this protocol. I also believe it is my responsibility to educate myself beyond MakerDAO and Ethereum, therefore I spend another 10-20 hours learning about other DeFi protocols, learning about the magic behind Layer 2s, upcoming regulations, reading about our competitors, and researching how MakerDAO can benefit from the incoming cross-chain metaverse.

3. Will delegates be abstaining from voting in this poll and from on chain voting if this proposal makes it on chain?

From conversations we have had with @GovAlpha we as Delegates will be able to Vote on such–however, IMO there is enough MKR token holders out there to Vote “No”. I can tell you from my own personal view—I will continue to be a Delegate, compensation, or no compensation. I am committed.

4. If this passes, is there then a disincentive for someone to delegate their MKR and we could end up with less delegated MKR? For example, if the minimum threshold for delegate compensation is set to 10K MKR, and as a voter I could push them over the edge to get compensated, I would be disincentivized from doing that as it would take money out of the DAO’s pockets.

For sure—IMO we need to be careful on how we set the barrier to entry—should a Delegate with 10-100 delegated MKR who has shown commitment to the protocol, expertise in finance, history of engagement, proven long-term alignment with the protocol’s success, proven to have a diversify opinion of the success of the protocol not be compensated?

5. How is compensating the delegates different than the DAO’s decision to vote down MIP49 (Staking rewards) which would’ve distributed rewards more equitably?

This is a good quick read on why many in the community felt MIP49 would not incentivize MKR token holders to Vote: Paradigm

6. Active delegates are already being compensated for engaging on the forum through Sourcecred and top contributors are earning $2-3K a month. There was also a recent poll to increase these payments which the majority were in favor of.

Personally, as much as I have participated in this said Forum, I have never made more than 1,400 DAI/month. Since becoming a Recognized Delegate (Flip Flop Flap Delegate) I have relentlessly made sure I read every post, voiced my opinion, drilled down on subjects I need to educate myself on ( RWA legal structures, optimistic rollups/ZK rollups, etc.) so, I believe this month I might join that Team :wink: but to be honest, embarrassingly—I have no idea how source cred actually works. I’m here because I eat, sleep, and dream MakerDAO–plus this is my passion :slight_smile:

And last but not least, this here :point_down:t4: is :100:

7 Likes

Or, on the contrary, the solution could be to give individual increased SourceCred earnings to delegates instead of fixed compensation. Of course the SourceCred budget should be increased but this has been discussed before.

Since Sourcecred is a “A tool for communities to measure and reward value creation.” let’s use it for what it’s meant to be. This tool should be used to reward delegates prominently for this value creation. Since the delegates communication takes place on the forum anyway, this would definitely provide compensation for their work and also create a kind of competition between them to communicate as much as possible of value to the community and MKR holders.

6 Likes

The way I see it, SourceCred would be a 2nd tier support program that develops talent. As talent graduates to the recognized delegate level, they leave the 2nd tier SourceCred program and receive more predictable and larger income from the delegate compensation fund. A nice side effect of two independent compensation mechanisms is that recognized delegates would not be incentivized to avoid heart’ing forum posts. On the contrary, without hesitation they could freely exercise their judgment and pass that information to the SourceCred algorithm without feeling that their own compensation could be affected.

3 Likes