Proposal: Experimental Incentive System for Active ArbitrumDAO Delegates

Proposals
8

Hello everyone,

We would like to thank @maxlom0, @Patrick_J, and @Bob-Rossi for their valuable comments and feedback. Special thanks to @Patrick_J for his thorough response; we at Soveign Finance AVC, created by SEEDLatam within MakerDAO, are big fans of his contribution and dedication to MakerDAO.

We would like to share some thoughts:

  • I would like to emphasize that our framework is not intended to favor any particular entity. It aims to encourage active participation in the DAO, regardless of who the participants are (builders, protocols, individual delegates, etc.). We try to make it as neutral as possible.
  • It is important to recognize that this framework is experimental and far from perfect. For this reason, we understand Patrick’s concerns and are very thankful for the feedback we received.
  • We believe starting with a baseline is important, evaluating the results over a given period, and then making adjustments to improve. We are aware of the difficulty of achieving a fair balance, but we are confident that, over time, we will be able to establish the right incentives for ArbitrumDAO.

Tiers and Number of Delegates: Evaluation and Proposal

We recognize and share the concerns raised by @Patrick_J. Initially, we implemented a tier system to mitigate incentive manipulation. However, it is clear that this approach requires significant adjustments. In response to this, and also addressing the concerns of @Bob-Rossi and @maxlom0, we propose the following structural changes:

Delegate Requirements:

  • Voting Power: >50K ARB, corresponding to 194 delegates. (Source: Arbitrum Delegates and Voting Power - Dune Analytics).
  • Incentive Eligible Delegates: 50.
  • Program Duration: 6 months
  • Budget Allocation: 1,500,000 ARB (5,000 ARB per delegate per month).
  • Historical Participation Rate (Tally): Over 30%, considering votes from a 4-month period (current rate over 70% since inception) ~ *note, this would be the historical participation needed to qualify for the program.

Tally Exclusivity

We use Tally as the main source of data to make it easier for delegates to calculate their participation rate since it already provides it, considering that now, due to the STIP, there are also more than 100 proposals on Snapshot. But we are open to changing this (maybe karma could help aggregate snapshot participation).

Scoring System

We just want to clarify that the maximum TP currently is 125%, but the limit of the amount paid to delegates would just be 5k ARB (corresponding to a TP of 100%). The remaining TP would just help them improve their rank.

Note that delegates are responsible for reporting their activity in an orderly fashion, thus avoiding overburdening the program administrator.

Bonus Points

In response to @maxlom0’s proposal on compensation for proactivity and initiatives, we are incorporating a bonus system (+25% in TP points) for delegates who contribute significantly to the DAO. These points will initially be allocated by the program administrator, but we do think we need at least some sort of rubric that the administrator could use to determine how many bonus points a delegate should receive for specific actions.

Our original intention was to encourage delegates to be more proactive, and ideally compensate those who manage to push proposals like the following to snapshot with bonus points:

Note:

  • The program administrator should post a brief justification for the bonus points awarded in the forum.

Specific Considerations

  • Applications: We agree here, we can get them to accept Community Guidlines or work on drafting a Code of Conduct.
  • Use of Multisig: We agree with implementing recurring onchain votes for monthly payments to delegates, although we know this could be tedious for the DAO. We seek additional feedback on this aspect.

Incentive System Administrator

In the current context, the Arbitrum Foundation has two Facilitators. However, we are aware that we cannot assign additional responsibilities to them as DAOs. The initial uncertainty about the magnitude of the workload to administer this system has been clarified thanks to the feedback provided by Patrick. Consequently, we consider it pertinent to seek the collaboration of another person, delegate or entity, who, in conjunction with SEEDLatam, will contribute to the effective implementation of the program.

We are willing to allocate a specific budget for this collaboration, but we wish to confirm if this proposal has the governance endorsement. We also want to emphasize that we offered to administer this program from SEED Latam in case we don’t find a facilitator willing to run it ~ and if this happens our delegation would obviously not partake in the program, regardless we do understand the concerns raised plus potential conflicts of interest.

This approach highlights the relevance of roles such as facilitator. Previously, we proposed an RFC to discuss the integration of the Facilitator role in the DAO. At that time, the activity and initiatives were not as significant as they are today, which is why we did not move forward with the proposal. Currently, we have a draft for the election of governance facilitators, which we share below for your review and comments:

Karma

We agree that if we can automate procedures, it will be easier for the program administrator. We can ask @mmurthy if Karma has any problems or suggestions with these changes.

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