[RFC] Engage Authereum Labs as Service Provider

Since the launch of Hop DAO, the role of Authereum Labs (DBA Hop Labs pending) has changed significantly. Hop DAO is now fully operational and Authereum Labs is one of multiple contributors working towards Hop DAO’s shared mission.

In this vein, Authereum Labs hopes to establish a formal service provider relationship with Hop DAO along with an accompanying budget for operations. Should the budget be accepted, the scope of services can be adjusted at any point via the full Hop governance process.

Scope of Services

  • Research and development of the Hop Protocol roadmap as directed by Hop DAO.
  • Day-to-day operation, development, and improvement of the Hop frontend currently hosted at hop.exchange.
  • Open ended research related to trustless cross-chain infrastructure and other technologies that may be relevant to Hop.

Budget

A budget of $115,000/month ($1.38m/year) will cover Authereum Labs’s costs for providing these services and allow Authereum Labs to bring on two additional team members to help with the workload.

While costs vary month to month, this a rough breakdown of expected costs:

Item Cost (monthly)
Employee expenses $80,000
Office $4,000
Legal $6,000
Software and web services $10,000
Security Audits $12,000
Miscellaneous $3,000
Total $115,000

Accountability

Authereum Labs will provide quarterly written updates for Hop DAO detailing our contributions over the previous quarter as well as providing guidance around upcoming deliverables, potential blockers, or unknowns. We will also provide more granular updates and make ourselves available for questions and feedback on Hop Community Calls currently run at a biweekly cadence. Lastly, we will continue to solicit feedback and buy-in from the DAO for changes or new developments in the product roadmap.

We reserve the right to manage our internal structure and costs within the budget granted by Hop DAO but want to provide transparency into these decisions while respecting individual privacy. We also reserve the right to conduct open-ended research that can be presented to the DAO as a possible future direction for the protocol as we have done with the Hop Core Messenger and v2 roadmap.

Execution

Should this proposal be accepted via the full governance process, the Hop Foundation will be empowered to enter into a standard service provider agreement (SPA) with Authereum Labs on behalf of Hop DAO. In addition to the payment terms above, the SPA would provide for customary mutual indemnity clauses, and all intellectual property developed under the SPA would belong to Hop DAO.

Monthly payments should be made in stablecoins at the end of each month starting with January. Should Hop DAO not have stablecoins, payment can be defered until they are available for use in payment. All payments should be made from the Community Multisig when possible. The Community Multisig should hold approximately 4 months of expenses, refilled via on-chain governance vote every other month.

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I think it is great that the relationships with service providers are given visibility and cemented through the DAO. Thanks for sharing it.

Because I lack proper understanding of Authereum Labs operations, I can’t judge the fairness of the costs and I trust Hop team is doing that due diligence.

I would suggest though that the Authereum Labs shares periodic updates with the community on progress done.

In terms of compensation, I would also suggest that part of it is done in HOP tokens as a good practice to have aligned incentives for the mid/long term (including vesting).

Just to clarify a bit Authereum Labs is the legal name of the company that launched Hop and employs the original Hop team. All team members (myself included) currently have have service-dependent vesting HOP positions. Authereum Labs also retained HOP for future team members as well.

So with this in mind, I don’t think additional HOP is not needed but think it’s a great suggestion barring this information and would love to see more attention given to long term alignment among Hop’s participants in general.

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Hey, @cwhinfrey thanks for your contributions to date - and for outlining this proposal.

A few questions, as it seems public info is scarcely available about Authereum Labs:

  1. How many full-time team members work at Authereum Labs?

  2. How do you intend to source these stable coins? via HOP?

Thanks!

Authereum Labs currently has 4 full-time team members but we’d like to grow the team to 6. We also expect audit costs to be front heavy this year which this budget will help cover while hires are being made.

From our standpoint, the DAOs best option is a treasury diversification in the form of a block sale with a lockup. We hope to propose something soon.

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Thanks for that clarification. Makes perfect sense then.

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Very reasonable! Can you shed some light on the progress on the block sale? I presume Authereum Labs will be holding these talks and update the community

Hey Chris! Thanks for the post. Formally engaging Authereum Labs as a service provider definitely makes sense.

Could we get a breakdown of employee costs in a bit more detail?
Also it would make sense to split out legal and security audits to yearly amount and explain what you expect it to be for.

A small explanation on misc but especially on software and web services would also be appreciated. As I am not sure what apart the web server costs you would have and 10k/month sounds a bit too much.

Hey Lefteris, Great questions.

Employee expenses cover salaries, contractor costs, payroll taxes, insurance, materials such as a laptop, and other payroll costs. This is not meant to be an exact representation of our budget each month though. It’s a breakdown of how we see things averaging out over time. (Like I said above, audit costs will likely be front-heavy while employee expenses are lower at first)

For software/web services this is predominantly RPC providers and AWS costs with a longer tail of SASS services that are core to our operations. We’re constantly optimizing RPC costs but its always a trade-off with dev time.

And lastly misc. covers expenses that come up that don’t fit into the other buckets such as a bill from our accounting firm, various taxes and fees, an expensive set of contract deployments, the cost of our bookkeeper, etc.

Overall, we’d like to provide updates to the DAO and to be held accountable by the DAO in terms of the value we provide and what we work on while being transparent about the team and expenses related to these services.

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This is a significant step to formalizing these contributions, and we generally support fair compensation for work done.

It is essential for Authereum Labs to remain accountable to the community; for this reason, we would suggest quarterly updates that would be measured against KPIs that will be set after the Hop Protocol Roadmap is officially finalized, this way we can measure the progress being made by Authereum Labs as a Service Provider.

@cwhinfrey would it be possible for this proposal could include development targets for the Hop Protocol Roadmap and a commitment to quarterly updates to the community?

I think quarterly updates make a lot of sense and are what we have in mind as well. We can add this to the proposal so that it’s explicit.

Regarding development targets, I agree with the sentiment here but would like to add a different perspective. I think the accountability development targets bring is great but also think development targets are not always the best gauge of progress for this type of engagement. IMHO, development targets are ideal for greenfield projects where the scope is tightly defined and software is delivered in a completed form at the end of the engagement.

Currently, a lot of our time is spent on maintenance, smaller feature requests, security improvements, technical support, improving documentation, etc. which is all important but not seen as progress on the roadmap. We also want to make ourselves available to the DAO when technical needs come up for things like reward distributions, adding support for a new network or asset, etc.

Ideally, we can provide guidance on the completion of targets, share our current priorities and progress, and solicit feedback from the DAO on an ongoing basis. If priorities have shifted since our last update, we’ll explain our thought process and update our guidance.

This would allow us to retain some discretion over day-to-day priorities but still allow the DAO to hold us accountable if we are not making meaningful contributions or choosing priorities in the interest of the DAO. We’d also love to provide more granular updates and guidance and make ourselves available for questions on the bi-weekly community calls.

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Would love to hear your thoughts and anyone else’s on the addition of this section @Kene_StableNode.

Accountability

Authereum Labs will provide quarterly written updates for Hop DAO detailing our contributions over the previous quarter as well as providing guidance around upcoming deliverables, potential blockers, or unknowns. We will also provide more granular updates and make ourselves available for questions and feedback on Hop Community Calls currently run at a biweekly cadence. Lastly, we will continue to solicit feedback and buy-in from the DAO for changes or new developments in the product roadmap.

We reserve the right to manage our internal structure and costs within the budget granted by Hop DAO but want to provide transparency into these decisions while respecting individual privacy. We also reserve the right to conduct open-ended research that can be presented to the DAO as a possible future direction for the protocol as we have done with the Hop Core Messenger and v2 roadmap.

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Glad to see this happen; here are some thoughts about how to provide more clarity.

Domain

Listing Authereum Labs under the domain “Development” would be helpful. It helps provide clarity to any newcomers on what Authereum Labs does in Hop DAO.

Future SPs can also categorize themselves into domains; Growth, Community, Marketing etc. It will help DAO paint a better picture of what service Hop DAO might be lacking.

Transparency

We want to respect individual privacy. A fair middle ground might be to provide insight into the team composition but no specific salaries. i.e.

3 devs, 1 designer, etc. Who are you expecting to hire?

Updates

Quarterly updates are suitable since monthly will be too frequent and become time-consuming for yourselves, but we would appreciate any major updates as they come.

I think your additional “accountability” section is ideal, and I broke it down into a template:

  1. Update
  2. Plan for next quarter (guidance)
  3. Budget
    • Forecasted
    • Actual

I agree with this as well. It’s a tough situation, but I do think having a few more details is important.

Regarding the stablecoins in the treasury for these payments, @cwhinfrey can you clarify how you see this happening? It seems like there was some confusion around that

Also the vote for this is up: Snapshot

I like this section and agree with @Bobbay that monthly would be too much.

Employee expenses cover salaries, contractor costs, payroll taxes, insurance, materials such as a laptop, and other payroll costs. This is not meant to be an exact representation of our budget each month though. It’s a breakdown of how we see things averaging out over time. (Like I said above, audit costs will likely be front-heavy while employee expenses are lower at first)

Would still love more details on budget per person average. So how much you spend for an average FTE.

But this is something we can get perhaps in the first quarterly update?

For now I will vote YES as it’s fine to formalize the relationship between DAO and the team that builds the protocol even if some reporting details could be improved.

Voted yes. A few things we like are the service provider relationship and the investment in the team and security.

The service provider status is a strong step towards decentralizing the development of the protocol by leaving room for other organizations to complement or step in for Hop Labs should they ever need additional help or be unable to continue this work entirely.

With respect to investment in human capital, we broadly support increased investment. The success of Hop hinges on both its UX and its security. Hop’s UI is among, if not the, strongest in the space. We anticipate this only improving with time and see investment as the core means of achieving this. Furthermore, bridges are a notorious security challenge. Excluding other programs like bug bounties or additional one-off audits, $144K might even be lower than we would like to see, particularly as this expense is likely to be front heavy as @cwhinfrey mentioned.

An area for improvement could be issuing this security budget as a lump sum annually rather than monthly as these costs seem unlikely to be so cleanly divisible.

I voted yes to this proposal. The value of contributions made by the Team to Hop so far is clear. I think quarterly updates is a great idea, and could eventually help fine-tune these numbers down the road, if needed.

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