Delegate Debates | #1 Delegate Compensation


Should MakerDAO’s Recognised Delegates be compensated for their efforts? If so, which delegates should be compensated, and how much?

Join us on Zoom2021-09-14T16:00:00Z to discuss these issues in our inaugural episode of the Delegate Debate series.

For background, check out the initial Delegate Compensation thread and subsequent poll.

This panel discussion/debate will be hosted by @davidutro and feature:
@psychonaut
@Planet_X
@ElProgreso
@twblack88

Please bring your questions, thoughts, and opinions about Delegate Compensation.

If you can’t make it, this recording will be posted on the MakerDAO Youtube Channel.

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Some rough notes up front for the call. Still working on them :slight_smile:

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Aish. Missed it. : (

Can we try pinning these calls a bit before (maybe ~1 day before)?

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This full call is now available for review on the MakerDAO Youtube Channel:

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Editorial Notes

Delegate Debates #01: Delegate Compensation

September 15th, 2021

Agenda

00:10: Intro
03:16: Discussion Context
08:33: Debate
52:48: Outro

Video

https://www.youtube.com/watch?v=ls9HDfE3tgk

Intro

David Utrobin

00:10

  • Welcome to Delegate Debates #01! I am David, the facilitator of GovComms CU at MakerDAO. These call series are in partnership with Content Production, and today’s discussion is about delegate compensation.

Discussion Context

03:16

[Informal Poll] Delegate Compensation - Forum Thread

[Informal poll] Compensating recognized delegates, parameters - Forum Thread

[Informal Poll] Potential Issue with Protocol Paid Delegates - Forum Thread

Debate Questions

Notes

8:33 - David Utrobin: What is the fundamental role of the delegate? Do you agree with the current minimal expectations? Should they be reviewed?

10:04 - David Utrobin: Nobody mentioned fiduciary duty at all in the comments from my reading. Interestingly, you brought that up.

13:35 - Someone (from chat): It is difficult to measure and verify informedness.

15:15 - David Utrobin: Can everyone that agreed to be on the panel introduce themselves?

17:28 - David Utrobin: What do you think is the most important thing to get compensation right? What is the thing that you are the most focused or concerned about?

26:26 - David Utrobin: Before we go through the actual MIP process, it is possible to do a trial to get delegates compensated as soon as possible. Joshua’s proposal can be used as a model.

28:24 - David Utrobin: For the time-limited trial, what would the next step be?

30:14 - David Utrobin: Do we have a commitment on who is going to draft the Signal thread?

31:11 - David Utrobin: One of the most controversial points is how much delegates should get paid. In your opinion, how much should delegates get paid?

37:45 - David Utrobin: Besides voting for Pay as a delegate, are there any other situations where they would be a conflict of interest?

39:46 - David Utrobin: Should delegates continue to get paid by SourceCred, regardless of what their additional compensation would be, versus not getting paid by SourceCred and getting that compensation?

43:47 - David Utrobin: What would be the criteria for awarding this base-pay?

46:25 - David Utrobin: Do you disagree with the idea of having a total cap of Dai or MKR value distributed to delegates? Do you disagree that it should be a cap in terms of how much a delegate gets paid?

47:51 - David Utrobin: There has been no disagreement on a Gas refunds program. Some people think it could be gamed, but it cannot be gamed if it is well-designed. I believe there should be at least a minimal gas compensation.

49:55 - Back to the SourceCred question

Outro

David Utrobin

52:48

  • This was an extremely interesting call. I want to thank all the panelists and everyone who joined the conversation. I am excited to get delegates paid.
    • Andrew Burban: Income is not favorably taxed in some countries. If we have a portion of the compensations covered as expenditures, that is not going to be taxable, and the rest on MKR should be taxed as a capital gain. Whoever might be open to that model of compensation, this would be an interesting tax structure.
  • I would like to see a program where delegates have a choice. Thank you for that ending comment! Have a good day!

Credits

  • @gala
  • Everyone who spoke and presented on the call, listed in the headers.
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Who invited @aburban90? Saboteur!

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SEMI-TRANSCRIPTION SUMMARY

Delegate Debate #01: Delegate Compensation

Agenda

00:10: General Introduction
08:53: Delegate Introduction
17:19: Discussion Question 1
23:16: Discussion Question 2
28:22: Discussion Question 3
31:11: Discussion Question 4
39:45: Discussion Question 5
52:42: Conclusion

Video

https://www.youtube.com/watch?v=ls9HDfE3tgk

General Introduction

David Utrobin

00:10

  • Welcome to the first issue, discussion call on September 14th, 2021. I am David, the facilitator of the Governance Communications Core Unit here at MakerDAO. We are starting a call series in partnership with content production.
  • Today’s discussion is about delegate compensation. As many of you in the community know, about a month ago, delegation was soft-launched. It came with a portal in the voting UI as a different portal that tracks all the various delegate statistics and, on the forum, delegation content has come to be. Each of the recognized delegates, for example, post a delegate platform where they talk through themselves, how they intend to act as delegates, etc.
  • As delegation evolves, grows, and matures, the next big question on the community’s mind is whether or not delegates should get compensated.
  • There have been three discussion threads. Tim Black started the initial one. Over the last month, the conversation has been happening in the forums, and today I will summarize the issue. I prepared some notes; please feel free to check them out.
  • Format of the call: we will go over a brief overview of the topic, and we will have an open-ended discussion at the end with our panelists and delegates.
  • These are the main questions

03:16

  • The overall sentiment is that delegates should get paid.
  • Other pertinent questions are: how quickly should we move? According to Joshua, this might take a while, given the requirement and the right way to get through the issue.
  • What’s the fundamental role of the delegates? Setting expectations for the role. We have an MKR holder’s guide to the delegation and requirements for recognized delegates outlined, but some people in the community believe that the role of a delegate should go above and beyond.
  • Can we set a floor expectation for the delegate, and anything beyond that they can seek compensation elsewhere?
  • What actual metrics define a delegate’s rating. The amount of communication they have? The amount of MKR vote weight that they are assigned? There is a handful of views around that.
  • How many recognized delegates are even enough? We have 7 or 8, and somebody mentioned 20. There was pushback saying 20 is just way too crazy, especially if they will get paid; maybe a top 10 is better. I think there was a vote between eight and 10. I think the sweet spot is between eight and ten, but we can look at the results.
  • Question of conflict of interest: how can delegates vote that include details about their pay and remuneration? There are numerous checks in place to prevent abuse there.
  • Where should delegates get paid from? From the people delegating or from the protocol as a whole? We will come back at the end of the call.
  • General topic: how much delegates get paid? Many people, not just delegates, get paid in source cred right now, which amounts between $500 to $2000 on the top end per month.
  • Should delegates get paid a stipend beyond that? Should they get executive-level salaries of 80k plus a year, 100k plus a year?
  • How should delegates get paid? Dai, MKR, and should it be vested?
  • What smart things can we do to get delegates paid proportionally?
  • Can we have unique pay scales for each delegate based on their performance Vs. should we pay the top 10 a flat rate?
  • Paying MKR voters (staking rewards) vs. Delegates.
  • Can we use SourceCred? It fits under how much delegates should get paid, plus something, or should they opt-out of SourceCred if they obtain a salary or a larger stipend.
  • How can we improve the overall delegate system?
  • What is the fundamental role of the delegate? Do you guys agree with the current minimal expectations being set? Should they be revisited? Feel free to take the floor.

Delegate Introductions

Frank Cruz

08:53

  • I represent FlipFlopFlap delegate LLC, Delaware company. I am also known as @ElProgreso under the forum.
  • I think the responsibility of a delegate is to have a fiduciary duty to MKR token holders and do what is best for the MakerDAO for the protocol. Even if it means going against your own belief, in my opinion, you have to follow what is again the best interest of the protocol.
  • For someone like me, a delegate, I am looking to reiterate what my voting process is, what my thinking is behind, what folks that are delegating to me want to happen but again, the number one priority for me is the fiduciary duty to MKR token holders, that is the way I view it and be interested to see what the other co-peers think about this.
    • David Utrobin: Nobody mentioned fiduciary duty at all in the comments from my reading, so it is interesting that you brought that up.

Mini-discussion

10:32

  • Joshua: As part of the intro, the way I think about delegation for voting is the more informed that voters are, the better results you will get from voting. It is advantageous to compensate delegates because that will motivate them to become informed about the issues and study them, which is critical.
  • If you have a direct democracy and a bunch of people voting, not necessarily at MakerDAO, but that is a concern, people not knowing that they are voting about or do not have a deep understanding of the issues is why you can get bad outcomes. People talk about mob rule, and you can have a community that does not consider the implications of what they are doing. Voters should be as informed as possible; that is what justifies the compensation.
    • David Utrobin: That makes sense and falls in line with what I was reading on the forum as Planet_X said: “governance as a hobby has been stretched quite thin,” and it takes time and effort to ensure a good delegate performance, which in theory should be compensated. It is not easy to measure and verify informedness.
    • When considering paying MKR staker voters as a whole versus delegates, I think that point is difficult to measure and verify, and informedness is the key. If you are paying MKR holders in general, there is no guarantee that these are not mindless votes, and people are just keeping it there for the yield, etc. If, instead, you pay to the seven to ten top-performing delegates, you get a person in the community who is incentivized to be as informed as you wish you were.

Planet_X Intro

15:16

  • I am a delegate for Maker, one of the first ones going for delegation. My introduction is short and sweet.

Tim Black Intro

15:39

  • I am one of our first wave delegates here at MakerDAO, representing Feed Black Loops LLC, Wyoming. Sorry for poking the dragon regarding compensation, but I saw our delegates were working harder than others and harder than most.

Frank Cruz Intro (Continued)

16:14

  • I represent FlipFlopFlap delegate LLC, inspired by Maker, a smart contract language. I have been a community member now since early 2019 and am excited about being a delegate. I have mixed feelings about the compensation structure, but I am willing to work with the community to build future DAOs. There will be many eyes on us, trying to figure out how to get the governance, delegates, and decentralize it.

Discussion

David Utrobin

What is the most important thing that everyone is personally focused on for successful delegation?

17:19

  • Planet_X: The most important thing is that we lay the foundation for further professional being more steadily going the way of professionalization of Maker. When we started, we were hobbyists, free agents, some did that work, and some had day jobs, and as time has progressed, Maker is becoming bigger and taking more time. You can check this in the forums and old discussion threads from a year ago. The threads are longer and have more participants; discussions are more abstract and heavy, impacting delegates’ jobs, becoming more difficult to follow, and taking more time. I would like to see that we agree on what a delegate should do. There is a consumption of time, which needs to be compensated; the major issue is time.
  • Maybe in the next years, we delegates will probably be tired of being a delegate. We will need replacements, and I would like the second wave of delegates to be professional, and these people are required to pay. It will be hard to convince professional people to do anything for free. The question is: what should the delegate do? In general, one needs to spend 10 to 20 hours and get compensated as any professional. There are a few things that prepare you for a crypto job; you have to start somewhere.

I hear you’re increasing the quality of the people working at Maker; can we solidify expectations for this professional delegate role?

21:15

  • Planet_X: That is what I’m hoping, the preferred outcome; there are very few things that prepare you for a crypto job. Why pay professionals? That’s the counter side to this argument, of course, but you have to start somewhere.
  • Frank: Taking the other side of that opinion, you have influencers like Cooper Turley, he is a delegate for all crypto, especially Ethereum, and when you see a young guy like that, posting on Twitter, he’s not only doing this full-time, he’s also getting paid in DAO tokens, governance tokens, I only think about, a lot of young people that are up and coming, that will want to do these delegate facilities going to be just individuals like you.
  • I think that you’re going to see a lot of this happen; right now, there’s a lot of DAOs forming with individuals that are in the grind, and they’re creating these DAOs, NFT DAOs, or some DAO that I can’t yet understand, but it’s happening.
  • When you see people like Cooper tweeting, he’s going to get paid in governance tokens; I don’t know if going to happen with professionals or just everyday people like us.
  • I think you got to give both sides an opportunity, and you have to compensate somehow, in my opinion.

To summarize what you feel is most important, for you, it is more about giving the delegates actual stake in MakerDAO, pay them in governance tokens, not DAI?

23:16

  • Frank: No necessarily; for me, either way, you’re running a delegated company, I’m going to have some expenditures, some of those are going to be obvious, which will be voting, spending some ETH, spending gas.
  • The other things I want to do, some of these great conventions, are coming up, meeting some people, learning the entire community and Ethereum, learning what they’re thinking, and then bringing that back to the Maker community and communicating with them.
  • These are all expenses that I’m going to be inheriting on my own, and I’m cool with that because I’m passionate about this, but as far as your question about whether we should get paid in MKR or DAI, it’s the same thing.
  • Since some of it will be expenses, I would lean more towards DAI because I have a hard time getting rid of MKR. It is easier for me to spend Dai because it is meant to be spent. I think I would need more for DAI, but if I could be like Cooper and hold on to all my tokens, I would.
    • David Utrobin: Let me extend the initial question, of all the things, what do you find to be the most important piece of the issue that have either a strong opinion you want to make sure it gets gotten right, and we’re just free-flowing from whoever’s answer.
  • I guess the most important thing to me is getting to a step one kind of proposal that we all feel reasonably comfortable with, and so we can get delegates to start getting paid. I don’t want to see this dragged out for months and months as we negotiate details.
  • I want a good starting point, but I don’t want to get too hung up, trying to make it perfect from day one.
    • David Utrobin: I hear that desire for sure, and maybe Long can speak to this; on the forum, there’s a couple of different things we could do, so while like the fuller, MIP with the whole formal process going, through like signal requests into like the whole MIP.
    • Before that’s done, It’s possible to do a kind of time-limited trial, and so we would use the formula or a version of the formula that you provided Joshua; we do it all off-chain and manually and get the payments out through a governance vote, and this is kind of like the interim solution to at least get delegates compensated, something as soon as possible.
    • Then, as a more formal proposal comes about, we can sharpen see like where the holes are, and we can use that little pilot program to inform us, so that’s like one option for getting it really off the ground; I’m curious if any is longer anyone wants to color that with more info.
  • Longforwisdom: Yeah, to clarify, I did say we should write the MIP, as well before; we actually might sort of do the trial because it’s important we sort of everyone clearly understands what’s going to happen during the trial.
  • The MIP format is good, making sure you describe each part of the thing how everything’s going to work step by step, better than like a forum before I’m posting.
  • I don’t think we need to like pass on it, but I would like to see one or someone writes something up that actual sort of covers all how we do the transfers, who is eligible, why are they eligible, etc.
    • David Utrobin: I threw in some notes there for the fuller process, pulls like the three different informal pull threads that we’ve seen help with community sentiment.
    • I see everybody is kind of like moving towards a very similar direction, slowly but surely.

What would the next step be would it be like for the time-limited trial? How would somebody try to kick that off?

28:22

  • Longforwisdom: I capped the latest voting thread with the topics and the parameters the sort of need; I think we’ve voted on most of them.
  • I think the next step is really just formalizing it into a MiP and writing it down and then working with Gov Alpha to make sure we didn’t miss any holes and the rest of the community to make sure it’s all covered.
  • Then just being very clear in that language to say this is a trail map for this period for the first stage of this is three months, and then we re-evaluate it, that’s why I have to make it visual I can’t think things through like entirely in 20-page documents, that’s the next step there.
    • Frank: It’s like landing on the moon, you land once, and you don’t just say, hey I go it, you got to keep, you’re iterating right.
    • I think the approach we have here, I’m bold for this three-month trial, here personally, I don’t know how Planet x how you feel about that, I’m not sure if I saw any comments on that from you.
  • Planet x: I think three months is fine.

One of the most controversial of this is how much delegates should get paid?

31:11

  • Tim Black: I would signal request it and defer to the community. They already told us what they want; it is one of those things, you’re writing the MIP, and there’s the placeholder for the ideal amount.
  • Where we got caught or went off in a circle just like how much the time commitment is, and we’ve all learned as delegates from this process that it could be full time, but it wasn’t supposed to be, but it could be, and that’s one of those questions we ask everyone else that’s a hive of my decision.
    • David Utrobin: That’s kind of when I was reading everything, the idea of having like a minimum default delegate and perhaps, can have a bottom of the range compensation package for that person, but then you have people that are way more active like Planet X or PaperImperium, who perhaps can command a higher comp.
  • Longforwisdom: I think from the governor’s point of view we’d be more comfortable starting lower and moving upwards than the reverse right; it’s going to be very difficult for any decrease in delegate payment ever to pass given that the delegates would need to vote for it themselves, I don’t prefer if we start that way rather.
    • David Utrobin: Makes sense, and actually, you just mentioned something that I would love for you to expand upon, and that’s the conflict of interest of voting for your pay, and I know that you wrote out a checklist of natural checks in place to prevent abuse, do you want to talk through that a bit.
  • Longforwisdom: There are a few options; I guess the main of another group that has power then make a DAO that isn’t the delegates is the Core Unit for sales leaders; one option is to say in the MIP, only the facilitators can create proposals to adjust delegates pay, for example, absent some commitment to that in the MIP.
  • I guess Gov Alpha make sure that the actual maker holders are informed when the delegates are trying to adjust their pay in some way, such that they have a chance to block that proposal, which is doable but is potentially a lot of work right because a lot of the people that are delegating don’t want to be involved themselves.
    • David Utrobin: There’s the idea that right if it’s on a formula that’s tied to some automatically tracked metrics, they don’t have to vote on their pay; it’s voting on the formula rather than an individual pay scale.
  • Longforwisdom: Yeah, there’s always going to be input to the formula, can be higher or lower, they’ll be a total which is split between the delegates or base pay, that be input into the formula, always be you the device, or they can change the formula, there’s always a way for the delegates to wear themselves if they want to.
    • David Utrobin: Essentially, Gov Alpha acts as a watchdog over this particular, unavoidable conflict of interest.
  • Longforwisdom: It gets a little tricky because if it comes down to trying to block a proposal that we think is ridiculous, then that causes a bunch of problems, whose metric is ridiculous the delegates, so otherwise wouldn’t be proposing maybe governor thinks it’s too high perhaps, it’s not a big argument.
    • David Utrobin: Sounds like a typical campaign against any proposal that seems bad; it doesn’t maybe even necessarily have to be Alpha right; it can be anybody.
  • Longforwisdom: It’s more just like other community members don’t have any concrete power to stop it right; people can complain and make signal request or not vote on this proposal, there’s nothing to stop, going through at which point the delegates can vote for unchained, and presumably, they have, sort of command to the power to pass any proposal.
    • David Utrobin: Besides voting for your pay as a delegate, are there any vote types, that would be a conflict of interest?
  • Longforwisdom: There’s potentially a lot of stuff, whether just changing the governance structure in any way could potentially be a way to gather themselves more power, there’s a lot of conflict of interest.
    • David Utrobin: There are many things that they could vote on for their benefit versus the benefit of the protocol.

I’m curious about people’s views on whether delegates should continue to get paid by source cred, regardless of what their additional compensation would be, versus not getting paid by source cred and getting that compensation.

39:45

  • Andrew Burban: This is my idea about compensation, just knee-jerk thought like so above some fresh minimum threshold, let’s say you have 50 or 100 Maker delegated to you, qualify some base pay. If you only have too little, maybe you weren’t qualified to be a delegate.
  • Compensation that grows asymptotically with, how much make algorithmically, approaches some like sort of limit on how much compensation you get, I don’t know if it’s a good idea
    • David Utrobin: Joshua put forth a fascinating equation that he and Long went back and iterated.
  • Joshua: The idea inspired by a post from Vitalik a few months or years ago is related to quadratic voting; in this case, you’re taking a square root, it’s like a power of two or power of one half in this case, and then you allocate compensation in proportion to the square root of how much Maker is delegated.
  • There’s if you suppose you have currently we have two delegates 200 Maker delegated and, there probably inst that much difference between those two delegates, were going to put a cap of any maker beyond some threshold.
  • Just treated as the maximum, and that way we can distribute, across more, distribute the compensation across more delegates; that’s pretty much what you, Andrew say about the logarithmic curve, and that square root is similar to logarithmic.
  • Andrew Burban: Yeah, that’s very similar; one of the important things is base pay; you don’t start at zero.
    • David Utrobin: What would be the criteria for awarding this base pay?
  • Andrew Burban: You’re pushing the needle you, somewhat one degree or another, and you’re going to be putting in some amount of work, possibly consistent with everybody else, so everyone above some threshold, make you’re delegated to them should be getting, some base pay.
  • I think most importantly, you start with some base amount for anyone above a threshold. If you’re not above a threshold, maybe you could still be delegated to, and you can still vote. Still, you’re not may be eligible for compensation. You have the delegated amount of Maker and meet some key points and performance points to qualify.
    • David Utrobin: Anybody disagrees with the idea of having a total cap of DAI or MKR value distributed to the delegates, and also, a cap on how many delegates get paid like top 10 versus all of them?
  • Seth: I’m not opposed to the idea of a cap. However, it works out I’d like to see a minimum as well; we don’t want our delegates to worry about the costs associated with voting, how much it is going to cost them, and even if they’re relatively minor delegates, whatever the minimum pay is should be enough that.
    • David Utrobin: Something like a gas rebate program I don’t think anybody has disagreed; the main thing is that people think it will be gamed you can design it so that it’s not game, you’re not going to get reimbursed your gas if you voted with less than half an MKR, there are ways to design a system, I agree at minimum expenses should be compensated.
  • Planet_X: There could be in the relative near future, the staking of MKR and the governance contract could be incentivized; one thing is incentivized in crypto, things tend to happen, so for the delegate to stay at a normal level, there should be some roof on the conversation.
    • David Utrobin: I agree with that view and Longforwisdom in the chat “a maximum per delegate makes sense, having it unlimited encourages centralization.”
  • Seth: it is nice to get Paper’s opinion here, too; he and I have one of the highest SourceCred scores. I think it depends on the pay that was going to get; if we’re getting a snip in of 500 DAI, I think we should keep the source cred, that’s a lot more than that, but I don’t know if you’re able to comment.
    • PaperImperium: I don’t have strong opinions about how the pay is delivered through what program. It’s more about getting paid; I had a call from a protocol about three weeks ago, I was sitting on the call with them, and they’re like, well, what does Maker pay you.
    • I was like, well for this kind of thing, they don’t pay me anything, they’re like well don’t they see the value that you’re delivering, which has got to be more than zero.
    • It was hard to have a response to that; I know whether that comes through source cred or some formal delegate pay is something I’m agnostic about; I will say source cred probably does not capture a lot of the activities that I do off-forum, which, maybe that’s fine? I would say I don’t care what the line items look like; it’s about the bottom line.
    • Also, this week, I’ve had three protocols reach out to see if I was interested in working for them like either, in a part-time, advisory role, everyone has the same time endowment of 24 hours a day so, I’m not going anywhere, I’m here for Maker I do have to like not come home with nothing.

Conclusion

David Utrobin

52:42

  • I hear that, and that’s a great note to end the call on; let me wrap up the call; I have to drop. Unfortunately, this was an extremely interesting call. I want to thank our panelists and the others who chimed in on the conversation, Seth, Andrew, Paper, Long, all of you guys. Thank you so much for engaging in this and discussing it. I’m excited to get delegates paid; that’s my personal view speaking as an MKR holder, but yeah, it’s going to be interesting seeing all the details get hashed out; everyone has a good day!

Credits

  • Andrea Suarez produced this summary.
  • Alejandro Fernandes produced this summary.
  • Artem Gordon produced this summary.
  • David Utrobin produced this summary.
  • Everyone who spoke and presented on the call, listed in the headers​
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