RFC: Renewal of the Hop Delegate Incentivization Trial

[Kene_StableLab]

RFC: Renewal of the Hop Delegate Incentivization Trial

Authors: @Kene_StableLab, @Bobbay_StableLab & @fourpoops

References

1. Original Delegate Incentivisation Trial
2. Delegate Amendment

Simple Summary

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

Motivation

Through the delegate incentivisation trial over the past six months, 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 to ascertain their lowest level of Hop for that month and use this visualization graph 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 ÷ all proposals) * 100

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

• Lowest Amount of Hop for the period

• Incentives to be paid out.

Changes to the Program

Sequel to the feedback provided in this proposal, the following changes will be implemented in this 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 six months; the program will retain all the guidelines and procedures laid down by the original proposal and its subsequent amendment.

At the time of writing this post, these are the delegates actively involved in the Hop DAO

• Dybsy
• StableLab
• Lefterisjp
• Fourpoops
• Francom
• quasimatt
• Olimpio
• max-andrew
• Synthetix Ambassadors

Within the past six months of this Delegate Incentivization Trial, a total of 85,129.21 HOP Tokens have been paid out to delegates. If this proposal passes, we are estimating that about 90,000 HOP tokens would be spent compensating delegates in the the next six months of the delegate program.

Next Steps.

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

[max-andrew]

I haven’t done the math to see if I’m newly eligible for this yet, and haven’t said anything because I didn’t want it to look like I was just arguing in my own interest, but I’ve always questioned why we do qualifications as a percentage of all votes.

Doesn’t this discourage new entrants from getting involved? I think we should use this as an opportunity to reset to qualifying based on a percent of participation in each period.

@Kene_StableLab

• Vote participation percent = (Number of proposals voted upon ÷ all proposals) * 100
• Communication participation percentage = Number of proposals referenced with voting position and reasoning for that position ÷ all proposals ) * 100

[dybsy]

I agree with this. The participation metrics for voting and communication should be reset every 6 months.

[thegreg.eth]

I would vote for the renewal of the Hop Delegate Incentivization.

Also agree with @max-andrew and @dybsy that resetting the metrics would better encourage new participants.

[fourpoops]

This seems like the sensible and simple option to reset participation metrics every 6 months.

Rather than renewing this as a trial, why don’t we turn it into a more permanent solution, but that permanent solution is still up for dissolution every 6 months unless otherwise voted to renew? This also gives us a chance to re-spec based on how things may have changed during the 6 month cycle. It’s effectively the same thing but gives a little more longevity to the idea of delegate incentivization.

[Kene_StableLab]

I agree with this; we should reset it.

[Kene_StableLab]

I agree with this, and I will reword the next draft of this proposal to make it a more permanent solution which is up for review every six months.

[olimpio]

New entrants should definitively be incentivized to enter and not penalized because they are new. The minimum participation metrics to be eligible for Delegate compensation should positively be reset on every cycle.

I also believe to be a good idea that delegates who have worked and gotten involved in the DAO from the start should be accounted for distinctively. If there were a total cumulative participation that goes farther than 6 months for the people that have been involved for more than one cycle - then there is also an incentive for the oldest delegates to keep participating and being active.

Perhaps we can include both stipulations, boosting $HOP depending on cumulative historic participation, and also considering the current cycle’s participation. This way, the DAO is not penalizing new entrants by granting them 0 $HOP for being below the hard punitive threshold, and it’s also distinctively recognizing those who have been working the longest.

Either way, everything can be re-reviewed after 6 months, so I am keen to see the DAO try new things and see how impactful they are. What do you all think?

[Kene_StableLab]

I see your point, there should be a distinction between delegates based on how long they have participated actively, we would need a different formula for calculating the incentives, and this will factor in how long a delegate has participated.

[fourpoops]

Yeah, it’s a cool idea. The overall formula should be the same, but there should maybe be some sort of decaying multiplier for having sequentially participated in N number of 6 month cycles.

[mmurthy]

Hello - I wanted to see if you would be interested in using our contributor tracking system to streamline this entire process. We already index Hop delegate activity across On-chain delegation, Snapshot voting and Forum discussion as you can see here: Hop DAO Contributors Leaderboard

If you plan to include new delegates, it might be cumbersome to manage it in a google sheet. Also, sometimes delegates might forget to self report on time. With an automated system, no self reporting is necessary, the system will index all the activity. Depending on the logic everyone agrees on and the format, we can generate the output and display in the webapp. We can even dump the data to ipfs so anyone can inspect at any time.

Let me know if there is any interest in automating this entire process!

[citizenmeta]

This looks like it would be a useful tool, but unfortunately the link seems to be broken!

[mmurthy]

Strange, it’s working for me.

[Bob-Rossi]

I am a newer delegate who started participating mid-way through the initial 6-month incentive window. Obviously, I’ll have some biases because of that, but I’ll try to keep that in check here… Just fair disclosure… some thoughts below as a newcomer:

I strongly agree with others that the the metrics should be reset every 6 months. My understanding is the threshold is 70% participation - so anyone entering this 6 month window is effectively locked out of rewards as the highest you’d get is 50% (Just reasonably assuming similar HIP activity each period). That will only compound as time goes on, and is a centralization factor keeping it cumulative from the start will just lock out new entrants as time goes on.

As I type’d that paragraph out, I’d probably go as far to say I’d vote against it if the threshold wasn’t reset each 6 months. Again, obviously I have the bias as I’d be one of the people locked out because of that, but looking past that… this would just block out new entrants too much as the HOP DAO matures.

I think adding some type of multiplier for those who have been delegating in multiple incentivization periods is totally fair and reasonable, as we would want to incentivize long-standing delegates. However, I’d warn that this creates a centralization risk if the multiplier is too lucrative, and great care should be taken to what that looks like. Whether the ideal lies who knows — but just gut reaction, tossing out a number… something relatively low like 1.1x the rewards, scaling maybe +0.1 every period, capped at 1.5x? Along those lines where it is a noticeable benefit but not overpowering.

A final food for thought type question for those out there. Is there any reason not to allow people to start their % of votes counting when they enter? Right now the percentage threshold basically creates a limited-time entry window for this program, as if your not participating within the first 1/3rd of the period your going to be mathematically removed from incentive payouts. Maybe this adds unnecessary complexity, but given the relatively small amount of HOP this seems overly punishing. Plus, if you enter say 3 months late your already missing out on 3 months of rewards anyway… so your already being ‘punished’ by losing half the incentives anyway.

[fourpoops]

@Bob-Rossi

Is there any reason not to allow people to start their % of votes counting when they enter? Right now the percentage threshold basically creates a limited-time entry window for this program, as if your not participating within the first 1/3rd of the period your going to be mathematically removed from incentive payouts.

This does seem like a fair criticism. Would there be any strong opposition to just removing the percentage participation threshold given that a penalty is still applied?

@Bob-Rossi

I think adding some type of multiplier for those who have been delegating in multiple incentivization periods is totally fair and reasonable, as we would want to incentivize long-standing delegates. However, I’d warn that this creates a centralization risk if the multiplier is too lucrative, and great care should be taken to what that looks like. Whether the ideal lies who knows — but just gut reaction, tossing out a number… something relatively low like 1.1x the rewards, scaling maybe +0.1 every period, capped at 1.5x? Along those lines where it is a noticeable benefit but not overpowering.

Based on these suggestions, it seems like adding a multiplier and removing any participation threshold would be a pretty elegant system. @Bob-Rossi, building on your initial thoughts, we can create a new formula that incorporates a multiplier for delegates based on their consecutive participation periods (although these are all parameters that can be tweaked!). For simplicity, this does not currently include the penalty for incomplete participation, but I think that should still apply. Here’s the formula with an option for a multiplier:

I = ((log(h) - 4.55) * 3500) * M

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). In this case I think “completed” can be defined as any amount of participation above 0%.

This new formula incentivizes long-standing delegates by increasing their rewards based on their consecutive participation periods while still ensuring that new delegates can join and receive compensation. And again, any of these values can be tweaked, but I think this is a reasonable starting point.

[Kene_StableLab]

@fourpoops

This does seem like a fair criticism. Would there be any strong opposition to just removing the percentage participation threshold given that a penalty is still applied?

On this point there is no strong opposition from me, I would prefer a situation where the door is always open to becoming a Hop DAO Delegate.

@fourpoops

This new formula incentivizes long-standing delegates by increasing their rewards based on their consecutive participation periods while still ensuring that new delegates can join and receive compensation. And again, any of these values can be tweaked, but I think this is a reasonable starting point.

For an initial attempt, I think this formula would work well, I would appreciate comments from other delegates.

@dybsy @max-andrew @francom @olimpio @lefterisjp

[lefterisjp]

I think that penalty for just missing 1 vote should either not exist or be super minor. People do travel and should keep their keys in hardware wallets. So taking holidays should be allowed. I missed one due to being off for 6 days. The vote was on for 5 days.

As for not having a big multiplier for being a long-time delegate I also agree. This would create a barrier of entry to new delegates. And that’s not a good thing. We want people to come and go freely. Fresh blood is always gonna be needed

[dybsy]

i just want to add one caveat to the discussion here about encouraging new delegate participation, and that is the threshold delegation to be eligible for the program: 90,000. at that level of delegation, we are not dealing with your every-day delegate and participant in governance. perhaps we should colour this discussion under that context, which is not to say i don’t agree—because i do. i just think the strawman-impact against which we are advocating is possibly not as dire as its made out to be.

[Bob-Rossi]

@fourpoops I think the formula for the “M” value works well with little added complexity. I’m for something like that, of course I’d be curious other delegates input as well. Especially the on the 1.0 - 1.5 multiplier values.

One other thought — my initial gut reaction was that 0% might be too low a bar for “completion” of a period… although reality is someone only voting in <70% of HIPs would be getting 0 rewards anyway so sort of a non-issue (and for sure not a hill I’ll die on…). But maybe even simpler is just tying the “completed” criteria to the lowest penalty incentive (70%, unless adjusted). That way the line where someone is considered being an active delegate is clear on all fronts. I totally get where the >0% definition comes from, but it inadvertently indicates that voting in 1 HIP is enough to be viewed as completing a 6-month window, but the >70% threshold for payout sort of indicates otherwise.

[fourpoops]

@Bob-Rossi

my initial gut reaction was that 0% might be too low a bar for “completion” of a period… although reality is someone only voting in <70% of HIPs would be getting 0 rewards anyway so sort of a non-issue (and for sure not a hill I’ll die on…).

I think the intention would also be to get rid of the <70% threshold unless there is any strong opposition. So you still get a period completed if you only vote once, but you would be getting very low rewards anyway.