Reflection on compensation for on-chain proposals

Background - Rising interest in working groups via on-chain proposals
At present, we have a number of existing (Ocelot, CCF 1) and upcoming (Climate Collective, CCF 2, Governance Working Group) independent groups. There are of course other initiatives too (for example Proof of Deposit), and indeed others I’m unaware of or forgetting. I see this as very positive for Celo.

Background - Strong Market for Jobs and Startup Funding
As a backdrop, there is a strong market for jobs and startup funding, particularly in crypto. Salaries and equity/token compensation are high. Startup valuations are also high.

This provides a high competitive benchmark for getting the best people to work on CELO.

A Dilemma for On-chain proposals
At present, the baseline for working groups is to pay contributors on an hourly basis at some agreed hourly rate. Clearly this does not present the same upside as token or equity compensation offered in the broader crypto (or non-crypto) markets where pay is more closely (though never fully, and certainly never perfectly) aligned with the value of contributions.

My Recommendations on Compensation
Despite the controversies that would ensue and feelings of over and underpayment that are inevitable, I would like to make the suggestion that:

  1. We as a community be open to approving performance based payments to working groups.
  2. We consider structures that include added compensation in the form of vesting CELO (using CELO release gold contracts - as would have been the case for CELO founders originally).

I think that performance based pay is always controversial and problematic, but I fear the alternative is that we handicap ourselves by limiting projects to hourly rates and fixed spending budgets (btw, I think fixed small budgets are great for small early stage grants. I’m talking about larger contributions here). If people/groups can’t find upside in working for an on-chain proposal, many (though certainly not all) will move to find upside elsewhere than an on-chain proposal. Ultimately, this may be at the community’s loss. To be clear, performance compensation may be inappropriate in many cases. My argument is that it is a tool for us to consider.

A specific (imperfect) example
Perhaps, for certain on-chain proposals, grantees may request a spending budget and also an equal amount of CELO that vests over time (i.e. unlocks over time), as a means of providing aligned upside.

Motivation
My motivation in this thinking (and I’m not suggesting there needs to be a CGP or anything formal, this is just philosophy) is to ensure that we get the best people contributing on-chain on CELO.

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@Pinotio.com Good proposal, as an employee of cLabs, I can also see the other side. Here is my take:

I agree here that unless you have a clear business model, issue a token and accrue value overtime, this is just a transaction and does not move forward the continuous value added, furthermore, I think it incentivize the community to keep “hunting” for one time work to continue to pay the bills.

I love this, I have seen proposals in the past where achieving certain milestones provides a kicker to the developers/founders. e.g if you get TVL of XXM or if you get YYk users. Maybe the community can find a few models and propose those.

Maybe we can append to release gold parameters for when the goals above are met/achieved.

Another aspect that we should discuss, is the other way around, let’s say you get a grant to do certain project, this is a mix of cUSD and CELO, with milestones… should the Celo reserve get some initial community tokens (or similar) from the project? that way in the case the project takes off, the foundation can use part of that to fund other projects that are just getting started.

Lastly, we should be conscious that not everyone will like CELO, some might just want an asset that is liquid and predictable to pay their bills. For those, IMO, cUSD grants should remain as is.

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Hi @Pinotio.com, thank you for bringing this up to community!

Overall, I agree and would support a move towards a more equitable compensation that has a vesting CELO component. There are several DAO’s and protocols that did a lot of research into this and have been experimenting with these models that we as a community can learn from.

From what I see, there are two components to this post:

  1. Introducing vesting CELO as part of working group contributor compensation in addition to pay in stable assets.
  2. Introducing a performance based compensation structure.

I don’t think these two are necessarily the same thing, I can see a scenario where the community moves towards introducing one or both of these. In either case it would be a move towards a more competitive model in the industry.

I think we can actually benefit from a more structured CGP set around compensation, onboarding, and offboarding of contributors. This is something I have chatted with people individually but would be interested to discuss in the open forum. First step is definitely gathering input from the community overall.

One huge benefit of offering CELO as part of compensation is turning contributors into owners and stakeholders in the ecosystem who can use it to vote on future governance proposals and have a greater impact overall. And empowering more people to take an active part in governance creates a more engaged and resilient community.

Some follow up questions I have is who would determine the parameters for performance base pay? How would we as a community agree on it, how do we enforce it? If we don’t have formal community guidance, would it be up to the working groups themselves (Ocelot, CCF, CC etc) to determine their own parameters? I’d be interested to explore the checks and balances of this more.

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Thank you for starting this topic @Pinotio.com and thank you @alberto for your insight. I’m part of Cambridge Cryptographic, the team behind the Proof-of-Deposit proposal.

We’re currently at the stage where we’re dealing with the exact question you’ve mentioned:

What is an appropriate way to capture the value of contributions if contributors are unable to simply mint themselves tokens?

From our team’s experience in non-crypto businesses, performance based rewards (where measurable and attributable) are usually a good default as it is a simple way to align incentives of all parties (contributor has skin in the game, only “winning” if the receiver also “wins”). Such deals seem to be more complicated in the crypto world, both structurally and legally. It certainly doesn’t get easier if the other party is a DAO, which is why our first preference is to go directly to cLabs or the Foundation.

As we appreciate this is a learning experience for everyone, we’ll try to share our insights as we go through this journey.

Personally I think mapping a good path out now will pay dividends in the future as attracting talent to the governance/constitution level will be increasingly important to retain a competitive advantage (or risk fading into irrelevance).

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Awesome initiative. Some feedback:

This is spot-on, but there’s a catch here. It is far better to receive tokens prior to the existence of a secondary market, as when a secondary market exists the spot price is the quoted as income price for tax purposes. Periods of high volatility can wreck receivers of non-stablecoins. There’s something to be said for performance payments being structured in cUSD unless the recipient explicitly wants CELO.

These sorts of payments work best when you have very accurate measurement of KPIs. So you’re going to need a sort of unbiased working group of auditors executing or throwing their weight behind these types of payments and ensuring proper reporting. Something to consider!

Absolutely – having an up-to-date public record of active contributors / folks looking for work is very useful. Nobody has quite cracked the code on this yet in our industry, but there’s a lot of DAO tooling trying to move this direction. Something to research!

Especially when invoicing. A lot of the folks are dead in the water when they need to issue an invoice to a multisig as there isn’t even a proper email to issue the invoice. A lot of grant recipients are playing it fast and loose and not declaring income. Even if it’s unconventional, it’s far better to issue an invoice to a multisig than to issue none at all and have no way to explain revenues. I think current on-chain working groups / proto-DAOs can do a far better job at structuring legal tie-ins to the real-world (e.g. an off-shore Foundation) in order to resolve these issues (there’s a lot of precedent for this at the moment, check out Otonomos).

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Thanks @alberto , @annaalexa , @ying_chan , @papa_raw . I generally agree with your points raised.

To answer @annaalexa .

On 2 Components (1. vesting CELO, 2. performance based comp.)
Yes, I agree there are two components. That was what I intended to articulate :blush:. Applicants can choose to make use of one or both or neither.

On whether there is formal community guidance?
I’m not opposed to there being some guidance, but since this is a decentralised community, I think the onus to lay out the performance parameters lies with the proposers/applicants. The CELO commmunity then decides by voting.

It’s a bit like conflict of interest disclosures. I’m not sure a community-wide standard makes sense, but as a Celo community member, it’s something I’m looking for applicants to address in their applications - each in their own way.

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