RFC: Renewal of the Hop Delegate Incentivization Trial (3rd Period)

🗳Meta-Governance
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References

Original Delegate Incentivisation Trial 18

Delegate Amendment 11

Renewal of hop delegate incentivization trial

Simple Summary

Over the past year, Hop DAO trialed delegate compensation to participate in Hop DAO Governance actively. This is a proposal to extend the Hop Delegate Incentivization Program for a period of twelve months.

Motivation

Through the delegate incentivisation trial over the past year, delegates have been incentivised to actively participate in Hop DAO Governance by taking part in discussions on the forum, voting on proposals and ensuring to share their rationale for voting a particular way. This program has created a healthy culture of governance-related engagement in the Hop DAO.

Renewing this Hop Delegate Incentivization trial will ensure that the quality of Hop DAO does not decline.

This Incentivisation Program will retain the delegate talent that the Hop DAO has attracted; its continued existence will allow future delegates to join the Hop DAO and allocate resources to improving the Hop Protocol.

How did the program work?

Delegates are required to vote on proposals and communicate their rationale for voting in their delegate thread on the Hop DAO Forum.

Under the current Delegate Compensation Program, delegates are compensated using a formula where 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.

Delegates utilise this Dune Querry 3 to ascertain their lowest level of Hop for that month and use this visualization graph 1 to ascertain the incentives they are due according to their lowest amount of Hop for that month.

Finally, delegates would self-report under a thread dedicated to reporting delegate eligibility each month. The following information would be required of a delegate.

Vote participation percent = (Number of proposals voted upon á all proposals) * 100

Communication participation percentage = Number of proposals referenced with voting position and reasoning for that position á all proposals ) * 100

Lowest Amount of Hop for the period

Incentives to be paid out.

Previous Changes to the Program

Sequel to the feedback provided in the previous proposal, the following changes were implemented in the previous renewal proposal.
There shall be a new formula used to calculate incentives.
Where:
I = Incentives to be received
h = lowest level of HOP delegated that month
M = Multiplier based on consecutive participation periods

To calculate the multiplier (M), we can use the following formula:

M = 1 + (0.1 * P)

Where:
P = Number of consecutive completed 6-month participation periods (capped at a certain value, e.g., 5)

This multiplier starts at 1 for new delegates and increases by 0.1 for each consecutive completed 6-month participation period, capped at a certain value (e.g., 1.5 after five periods).

The Participation rate would be removed; therefore, new delegates who reach the 90,000 threshold could join as delegates at any time.

The incentive formula would be amended to include a Multiplier based on consecutive participation periods.

The primary import of these changes is that new delegates can join Hop Governance at any time, while old delegates are incentivized to continue participating.

There is no opt-in or opt-out mechanism. Delegates will have to self-report to receive compensation.

Specification

This proposal requests for the Hop Delegate Incentivization Program to be renewed for another twelve months; the program will retain all the guidelines and procedures laid down by the original proposal 18, its subsequent amendment 11 and amendment in previous renewal.

Next Steps.

If this proposal passes, the Hop DAO Delegate Incentivization Program will continue for another twelve months.

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Given the drop in price from when this was first formulated, is it not worth increasing the delegate incentives? Compared to other DAOs, I think these incentives are quite low and may be a reason we’ve seen more delegate outflows than inflows.

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Thanks for your comments, fourpoops! That could potentially help the DAO attract and retain talent. Are there any specific DAO’s and/or benchmark delegate incentive ranges that you’ve seen and think could help Hop DAO?

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I’m not familiar with other DAO compensation, but I do know that when the initial delegate compensation was proposed on 8/24/2022, the price was 3.6x higher than it is today. I think starting with that as an anchor for an increase is reasonable as we look into what that would actually imply and do a bit more research. Ideally we should pass something in this renewal rather than spin our wheels forever trying to find the perfect number.

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Following up on this. I looked at the most recent delegate pay for the last three periods and the average payment per delegate per each period was roughly $160 (using today’s, 2/9/24, HOP token price of $.03965). See table below.

With this in mind, it could potentially make sense to double delegate pay to better compensate delegates for their time spent working with the DAO and remain competitive with other DAOs. It would be great to hear from other delegates and community members as well!

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Additionally, I think now is a good time to discuss a gas reimbursement or gas allowance for the on-chain voting costs that delegates have.

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This is why I haven’t voted for the current Tally votes.

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It’s always going to be a tricky discussion when we talk about paying ourselves… trying to be as objective as possible. I think it’s fair to say that decrease in price probably has affected interest, so it’s reasonable to raise it. Especially considering how drastic the price fall has been over the past year. When looking at $USD values, this expense is really pretty low for the treasury.

I also think it’s fair to say that if the objective of paying delegates in HOP is to align action with token price, ‘bailing out’ low token value by boosting payout is counter-intuitive to that. Of course, we can only control so much, but I do think in fairness to the process I wanted to point that out. I bring that up not to say the payout should see 0 increase, but in the sense of if the payout needs to increase 3.8x to be back to the starting point then maybe 1/2 that increase is fairer then just going 3.8x up.

A counter point I suppose is that the payout being in HOP is equally (if not more) and ease of administration issue, and this is an ancillary feature. As well as strictly adhering to a broader ethos in spite of reduction of delegates isn’t a great thing either.

All said, I am with @fourpoops that we don’t want to spin our wheels trying too much with this… 2x feels very reasonable, especially if we start to add in gas rebates. I also don’t think 3x is unreasonable if we are talking about going back to the original proposal period. I’d also imagine (I didn’t actually check) that when considering how many delegates remain active compared to back then versus now, the total cost may be lower even with a bump in payout.

Totally separate of that - is there appetite to make this an automatically recuring thing unless voted down? I know we have the periods for the multiplier, but another factor here is the payout has always been fairly sporadic and having to re-hash this every six months probably doesn’t help the whole situation.

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@Bob-Rossi Totally get where you’re coming from, and I think it’s super important to bring this up!

As someone who participated in different top DAOs in recent years (maybe my opinion will be unpopular), my first impression is pretty clear: there’s gotta be a way to make the time the delegate is putting in financially worthwhile. It’s not just for the sake of compensation but for the value of the work this person is doing here. Hop DAO has/had very high profile delegates the DAO values. In general, it’s a hot topic across all DAOs’ Governance. Arbitrum is leading the pack by focusing on attracting top talent with their approach, which is something we should definitely be inspired by.

For Hop, by revisiting and reinstating the DOLLAR value of incentives as originally proposed, Hop could significantly enhance both the attraction of new participants and the retention of current/old delegates, marking a significant shift in community dynamics.

Why not try this out as an experiment (returning to original payouts, not just increasing it by 2x) for the next term? We could see how it goes and then evaluate the results. It’s a chance to test the waters and see if this approach can really make a difference in how we grow and retain our community. We can treat this as a first step and push it forward with grant programs and other community incentives.

Hope this sparks some more thoughts and discussions. Looking forward to seeing where we can take this!

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Although gas reimbursement will definitely stimulate delegates to participate, especially a small ones, I see this as a nice-to-have feature for all delegates vs a game-changer. In general, I would be in favour of this suggestion and I can see how other DAOs (1, 2, 3, etc) already benefit from this bonus :smile:

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I propose we amend and renew the delegate incentivization program for another 6 months and increase delegate pay by 2.5x while also adding a gas reimbursement fund (capped at $500/month) as an experiment to see if we can attract and retain talent for the DAO. This thread originally asked to renew the program for 12 months but since I’m proposing to increase incentives, I believe 6 months is more prudent. It would be great to see more participation and new faces!

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I’m curious to know whether there has been any discussion in the past about migrating voting to an L2 to save on the mainnet gas costs. Seems like a reasonable move, no?

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This has been lightly discussed in the past but there hasn’t been an extensive conversation regarding specifics. I believe we would need for all delegates to have each token holder redelegate their tokens to new L2 addresses which might be complicated since redelegating doesn’t happen very often.

Additionally, another concern would be which L2 to choose from and if this would affect Hop’s standing with any other L2s. Any thoughts on the best way to implement governance on an L2? Any specific L2 you recommend for governance?

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The problem of having to redelegate could indeed hinder the ability of the DAO to operate for a bit and we could see a shift in voting power across delegates. We could however frame the whole thing as an opportunity to renew governance - especially if we tie it to the conversation around delegate incentives.

It would be a major change requiring multiple moving parts coming together, but I think it’d be a worthwhile endeavor for the DAO. As for which L2 to choose, I don’t think it makes too much of a difference when it comes to voting.

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FYI this proposal has been posted on Snapshot for a vote. Please participate in the vote and feel free to share any comments or questions in this thread or the governance discord channel.

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I am going to vote no here.

I am completely opposed to this proposal as it’s worded in the snapshot and really dissapointed in the lack of proper incentivization for delegates here.

I hoped things would improve by now but I see no improvement.

I am really bothered by

  1. Requirement to self-report and calculate rewards through a complicated formula manually. No other DAO I have participated in, requires this. OR requiring a link to a comment on the vote saying I voted yet or no. Just nonsense adding more bureaucracy for no reason.
  2. Gas rebates being in HOP and not ETH.
  3. Lockup of 6 months of all incentivization payments.

All 3 above are nonsensical and make me personally no longer want to participate in the governance of this DAO.

I was pinged to vote here: [RFC] Treasury Diversification for Ongoing Expenses - #6 by francom in the latest onchain proposal.

It was not gonna pass the quorum and wold have been a wasted onchain proposal. Yet I pushed it over the quorum at the last minute on a Sunday. I paid more gas for doing so than the lunch bill for my entire family on a nice full Sunday meal.

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Hi Lefteris, I appreciate your comments! The last thing this proposal is trying to achieve is to disincentivize participation from high quality delegates such as yourself. I take responsibility for the wording and am happy to implement any changes if the vote fails.

  1. Since you are familiar with other DAO’s can you please share how other DAO’s verify delegate incentive qualification and compensation? I agree that the process is cumbersome and inefficient but I have not been creative enough to think of an improvement on this front.

  2. Regarding gas rebates being in ETH i believe that this can be accommodated if the DAO agrees. While the DAO treasury currently lacks ETH I believe the treasury can benefit from being further diversified with ETH.

  3. The lockup of six months was discussed in previous community calls and was intended to help further align the delegates with the DAO. The goal is to have delegates stick around longer and it would be great to hear ideas as to how to create more “stickiness” with the delegate program.

Finally, I really appreciate you voting on the most recent on-chain proposal because it wouldn’t have passed without your participation. You have been a great delegate since the inception of the DAO and I hope that your participation in Hop DAO is always accretive.

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I agree with above posted sentiments, however anyways I have voted positively.

@francom:

  1. Check Arbitrum’s trial: FAQ and Best Practices Guide for the Delegate Incentive Program - Governance - Arbitrum
  2. I think ETH is better. Let’s change this on the next iteration? Or perhaps an amendment afterward?
  3. Not sure if this could be done differently

For (1), I agree it would help to have a system in place to manage and control automatically delegates’ participation. Snapshot/Tally participation can surely be automated since it’s on-chain and also Snapshot has an API, but participation in forums I don’t 'think so unless everyone uses the same structure (like for example a delegate participation thread with a specific text structure that a bot can read).

For this, I propose that we create a new role to manually track this and report it publicly in a thread here in the forums. This role could be elected through voting and someone from the DAO interested in doing it could apply. I think this is a lot easier and more straightforward than trying to find someone to code a tracker or use a tool like Karma that does it automatically.

Thoughts?

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Hey francom thanks for the response.

  1. Doing it even more simply, such as by just checking number of onchain votes or amount of tokens delegated should be enough. And completely automatable.
  2. ETH should be easy enough and if it’s for gas rebates it should not end up being to too big amounts I guess.
  3. It’s quite simple why this is seen as bad by me. I don’t pay gas in 6 months. I paid it now. I incurred expenses for the DAO now, not in 6 months. It’s unfair to move the payment quoting arbitrary incentive alignment. Same for anytime I spend looking in the forum or doing any kind of work/activity for any DAO. It happens now, not in the future.
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The point on the gas reimbursement is fair IMO. Regardless of where the vesting discussion lies, I think that gas should be reimbursed monthly instead of a 6 month wait. I think that becomes more obvious when comparing to traditional jobs, where you wouldn’t be expected to wait 6 months to get reimbursed for gas / toll / parking expenses if you had a company vehicle, for example.