Abstract
This proposal seeks to make 2 amendments under the delegate incentive program:
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Increase the minimum voting power requirement to 500k ARB to follow the existing process of joining the delegate incentive program (level 1 delegates)
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Delegates between 50k - 500k ARB wishing to become part of the program need an endorsement from a level 1 delegate (level 2 delegates)
67 delegates were eligible in December for payment of between $3000-7000 (only 50 can be approved). Only 21 delegates would meet the threshold under the increased requirements. If each of these delegates then nominated a smaller delegate (web of trust), we would have roughly the same number of delegates as we currently do while improving the economic foundation of the program, be more comparable to other DAOs in minimum eligibility requirements for delegate pay and foster more accountability by having level 1 delegates withdraw their endorsement in case of poor performance by a level 2 delegate.
Motivation
On October 27 2024, Arbitrum DAO approved the Delegate Incentives Program for a total budget of $4.2 million. Its goals are to keep delegated voting power active in Arbitrum DAO and focus on the professionalization of delegates by incentivizing them to stay abreast with developments through attending calls, voting regularly and sharing their rationale. Another goal (which was not how it played) was to allow large delegates to hire staff that could do the research required for a proposal.
The proposal committed to a review process on the parameters at the 3 month mark, also adding in the ability to change any of them via a simple snapshot vote.
After analyzing the delegate payment program, increasing voting power requirement by 10x from 50k to 500k ARB can increase economic foundation of the program, create a better environment for organic participation and bring us more in line with the delegate compensation programs at other DAOs. At the same time, we hear the feedback that smaller delegates between 50k to 500k ARB do as much or even more effort. The pathway is still open for them to join the program if they can secure an endorsement from a level 1 delegate.
Rationale
The amendments to the delegate incentive programs will help Arbitrum DAO in 3 ways;
- Improved economic foundation: Currently, the program treats all delegates equally, whether they have 50k ARB or 20 million ARB delegated. This is not reflective of reality. Programs based on equality rarely end well.
Delegates with higher voting power have more responsibility in getting their decision right - this is a fact. At the same time, they have said the engagement from smaller delegates helps them make their decision. Reflecting this reality, allowing smaller delegates between 50k to 500,000 ARB to participate in the program if they have an endorsement from a larger delegate will help preserve the good parts of the program.
There are currently some exploits possible where with 50k ARB (~USD 30,000) of voting power, you can fulfill the checklist of voting, attending calls and commenting to reach breakeven point in 4-10 months while still having your principal. I do trust in the capable SeedLatam team to filter out such delegates, but we should not open up such an attack vector in the first place. Increasing trustless requirements to join the program by 10x to 500,000 ARB makes economic sense and only includes those delegates who can upload snapshot proposals.
- Benchmarking with other DAOs : if we look at similar delegate compensation program, Arbitrum stands out in having a much lower barrier to entry and a much higher amount earmarked for paying delegates.
Aave pays a comparable $5k USDC, but excludes service providers and only includes those with 20k AAVE in voting power (~6 million usd). Similarly, Lido requires 0.1% of voting power delegated to be eligible for payments. The most comparable program is 1inch, which requires a minimum of 500k 1Inch (~ USD 150,000) and pays $4k USDC per month .
We stand alone in keeping a low minimum requirement of only 50,000 ARB. There might be compelling reasons to do so, but we should justify why we are straying so far from industry benchmarks. A happy middle ground is letting such delegates participate if a larger delegate can attest to the value they provide.
- Organic Participation: When we financialize the forum for a large proportion of contributors, we crowd out organic participation. We see a high influx of comments from delegates who need to check their tick box, which SeedLatam is on the lookout for, but it nonetheless adds more noise than signal to pay for participation from an average delegate. When level 2 delegates are accountable to level 1 delegates (who may withdraw their endorsement at any time) we will not face this issue as acutely.
Specifications
The original proposal stated that any of the parameters in the delegate incentive program can be changed via a simple snapshot vote.
The delegate incentives program is adding value. Increasing the minimum voting power required for eligibility by 10x, while still allowing smaller delegates to participate if they can secure an endorsement, will bake in a level of accountability beyond the capabilities of the program manager. We also propose capping the limit to 1 endorsement per level 1 delegate in this initial iteration.
Timeline
We will keep this on the forum for at least 10 days before moving to a snapshot vote on 13th February.
If approved, the new parameter will come into effect immediately for the remainder of the delegate incentives program.
Total cost
I donât expect any prizes for this work but will gladly accept in the future if anyone has found the public sensemaking work valuable.