Title: HIP 4 Amendment: Hop Delegate Incentivization Trial
Author(s): GFX Labs (@gfxlabs)
Contributors:
Status: RFC
Date Posted: 2022-12-17
Motivation
An edge case has been identified in how delegates self-report their participation under this trial. When a poll is open during two different reporting periods, it leads to confusion on whether that poll should be first counted for delegate compensation purposes. There has also been interest from delegates in a linear penalty vs a cliff for compensation.
Summary of Amendments
- Clarification that a poll is only counted for participation once that poll has closed (in the “Reporting & Administration” section).
- Removal of the preamble that is no longer relevant (prior the “Motivation” section).
- Inserted a link to a Dune query to help delegates calculate their HOP for a period; removed language stating that a query would be made after HIP 4 was approved (in the “Reporting & Administration” section).
- Added the exact date the delegation trial will sunset now that date is known (in the “Sunset” section).
- Lowered the threshold for minimum participation for delegates to be eligible from 90% to 70% on both voting and communication (in the “Eligibility” section). Added a penalty to delegates with participation or communication of at least 70% but less than 90% (in the “Specifications & Incentives Paid” section).
New Text For HIP 4 In Full (Additions In Bold; Removals In Strike Marks):
This is a request for comment (RFC), in line with current Hop governance processes 6, intended to provide a place for comment and feedback to be incorporated before moving it to a temperature check and requesting a sponsor to create a formal Hop Proposal.
As per the instructions in Phase I (RFC), the question posed is: “Should Hop governance incentivize participation by delegates under this trial program?”
GFX Labs, Flipside Crypto, and Franco Macklis are all under the 1 million HOP threshold to initiate a formal vote if the temperature check is successful.
Motivation
Hop’s governance is new, with a need to decentralize control and oversight of the protocol. This trial program aims to attract and retain both entities and individuals who will actively participate in governance on behalf of HOP token-holders.
Sunset
This program is intended to be a temporary trial and will end after 6 months unless it is extended through a governance vote, which is March 10, 2023.
Eligibility
Minimum Participation Requirement: To remain eligible for delegate incentives, a delegate must maintain at least a 90% 70% participation rate. Participation is measured as voting in any “temperature check” or on-chain governance vote.
Minimum Communication Requirement: To remain eligible for delegate incentives, a delegate must maintain at least a 90% 70% communication rate. Participation is measured as providing for any “temperature check” or on-chain governance vote a summary, voting position, and justification for that position. A missed vote will still require communication to avoid a lower communication rate.
Measurement Period: Both minimum requirements will be measured on a 6-month basis, which is also the intended length of this trial. If this program is renewed, participation and communication requirements will continue to be measured on a rolling 6-month (182-day) basis.
Minimum Delegation Threshold: To remain eligible for delegate incentives, a delegate must maintain at least 90,000 HOP voting weight.
Specifications For Incentives Paid
Delegate incentives increase with the amount of HOP delegated, but in a decreasing fashion. This means that a small delegate will receive a greater incentive per voting weight than a large delegate, but a larger delegate will receive more.
The formula for delegate incentives is:
I = (log(h)-4.55)*3500
I = Incentives to be received
h = lowest level of HOP delegated that month
If the lower of a delegate’s communication or participation metrics are at least 70%, but less than 90%, a penalty is applied to compensation.
The formula for the penalty is:
c = (.9 - p) * 3
c = Penalty to incentives, expressed as a percentage
p = min(participation, communication)
Example: A delegate has 82% participation and 100% communication. They would have been eligible for 100 HOP in compensation. Because their participation was only 82%, a penalty of 24% is applied. A 24% penalty would reduce the 100 HOP compensation to 76 HOP.
This formula targets ~1400 HOP for a delegate at the minimum threshold. At the time of writing, 20 delegates qualify for the minimum eligibility threshold.
For reference, a few benchmarks:
- a delegate holding all 1 billion HOP would receive 12,075 HOP per month.
- 10 million HOP, a delegate would receive 8,575 HOP per month.
- 1 million HOP, a delegate would receive 5,075 HOP per month.
- 100,000 HOP, a delegate would receive 1,575 HOP per month.
This formula’s slope was chosen to provide the targeted levels of minimum and maximum compensation and is open to revision at the close of this trial. In general, it was selected to provide a slower accumulation of incentives for larger delegates than smaller ones, while preserving a noticeable increase at all levels (under the maximum cap) for any delegate that can attract more delegated HOP votes.
This link provides a graph and visualization for those interested.
Reporting & Administration
Delegate compensation will be paid directly to delegate addresses (or their assigned alternative address) by the Community Multi-Sig.
For this trial, delegates must self-report that they have met the 90% participation and 90% communication thresholds each month to receive delegate incentives. Each delegate should also self-report the lowest level of HOP they were delegated that month and the number of incentives they are eligible to receive.
To ease this workload, Flipside Crypto will create a query where delegates can input their address and view an undisputed lowest level of delegated HOP that month.
To ease this workload, a Dune query has been created by @shanefontaine. The query can be found here.
If the delegate wishes the HOP to be sent to an address other than their delegate address, they should also specify that address in their monthly self-reporting. Delegates are reminded that HOP incentive payments will be public and on-chain.
This self-reporting will occur on the Hop Forum 2 under a thread dedicated to reporting delegate eligibility each month. In the event a community member disputes (with evidence) the self-reported metrics of a delegate, it is up to the Community Multisig to determine whether a discrepancy was in bad faith. The Community Multisig is authorized to exclude any delegate from this program for the remainder of the 6-month trial if such a dispute occurs.
For clarity, delegates should self-report using the following formulae:
Vote participation percent = (Number of proposals voted upon Ă· all proposals) * 100
Communication participation percent = Number of proposals referenced with voting position and reasoning for that position Ă· all proposals ) * 100
Proposals include all “temperature check” polls on Snapshot as well as formal on-chain polls. Only submissions after the date of approval of this program – for 6 months – are to be considered for this reporting. Only votes that have concluded are to be included at the time of reporting; any polls still open are not to be included in participation metrics.
Example: A Snapshot poll is open from December 3rd through December 11th, but the reporting period for delegate participation ends on December 10th. Under this amendment, it is intended that delegates would not report their participation in this poll for a period ending on the 10th of December. The poll would be reported in the following period.
If this program is extended in its current or revised form, it is recommended Hop governance advertise an RFP to automate the reporting and tracking functions.