Community Ownership & Compensation | V2 Proposal

Community Change
21

@Pepperoni_Joe

Can you share the holistic budget for the following in one place for us to look at ?

  • Air Drop 1.5%
  • Wages (ref. here)
  • DSM
  • Full Time Packages

All of these scheme form part of a holistic contributor package. So they should all be apart of the same conversation and not acted on separately. The high level question, still unanswered is how much do we pay for human capital ? What do all these schemes amount to for an individual ?

Currently, these initiatives are all fragmented with no holistic financial planning. With out an holistic overview, it is very hard to have an informed discussion. For instance, I used this months contributor reward distribution and over a 5 year is more than half the proposed ownership package. Without doing a full deep dive, I think all these programs risk breaking the bank. We will need to choose between investing in growth or retaining people.

Of the 5 Gold Owls who will walk if this proposal does not fly, how many were apart of building the model ?
Was it 3 feathering their own nest.

I am unique here, this airdrop and DSM program does not change my commitment to Index Coop. If no change was made, my actions would be the same. If someone needs to be paid a lot more than gold or full time to be retained, then wonā€™t they just leave as soon as the yield tapers ? I donā€™t like the pay me more or I leave stance.

More broadly, collectively as a community, we donā€™t know the organisation structure we want nor how many people it needs to function efficiently. Perhaps knowing what we need is a better place to start rather than 4 different renumeration structures and 5 different owl levels. It just seems a bit backwards is all.

The greatest ROI is founding a DAO, not working for an established DAO. This model does not, and never will come close to bridging that gap. Top talent will always end up working for itself. If you are Gold or above, the real money is beyond the coop. Hence why this program does nothing to retain someone like me.

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to be clear I am FOR this compensation & community ownership program as-is & am not in favor of any delay in implementing.

There will be sell pressure as long as we are paying contributors in $INDEX. Even if we started paying out in USDC or Eth, weā€™d have to sell $INDEX to do so. Even still, selling $INDEX should not be taboo (said as someone who has never sold any $INDEX). We must increase demand for our token. Rising tide lifts all boats.

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@TheYoungCrews Brings up an important point and while I understand the momentum behind and necessity to get the compensation framework in place, I do not think these are mutually exclusive pursuits. Regardless of how the comp package is structured, we will need to have sound tokenomics to deal with $INDEX sell pressure. Properly engineering the $INDEX token as well as building the right paradigms and narratives around it benefits comp in two important ways:

  1. Contributors and team will be less likely to sell given that it has stronger value accrual mechanisms
  2. Understandably, they will need to sell some; however, sell pressure can be better absorbed by stronger demand for the token

Having a small working group conducting strategic review of $INDEX tokenomics and utility, whilst also canvasing the crypto space for other tokenomic models (both through research and conversations with other teams and investors), is accretive to this comp structuring discussion. These can be parallel tracked if the community desires.

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24

We did explore at length the opportunity to use KPI options to unlock additional community ownership.

However, based on feedback on the need to keep the model simple, we opted to remove the KPI option from this proposal. They could be reintroduced at a later date - think more hibernation than dead.

Agreed, hence why this specific proposal directly covers and/or links to the Airdrop, DSM and FT packages (priority hiring). Contributor rewards will continue to be distributed in the normal fashion.

@ElliottWatts, @prairiefi and yourself have been part of the Compensation and Community Ownership group since the 28th of September - and have attended many of our regular calls.

We have incorporated feedback from F.Nest throughout the process and have repeatedly requested further financial forecasts and budgets information. The information F.Nest provided is contained within this proposal.

Our V2 compensation framework should be pretty straightforward. All Owls earn a fair market salary, either fixed yearly or every 3 months. All Owls build ownership via the DSM. The model has been designed in such a way that it allows current FT contributors to transition seamlessly onto the new system.

What makes you think this?

Distribution via the airdrop and DSM for Jan 2022-Jan 2023 would utilise <10% of our INDEX reserves, without even touching the $10 million in stables.

We are all different. To me, ownership is an essential aspect of working in a DAO - and is a core philosophical underpinning of the web3 economy.

What Iā€™m really struggling with is what specifically you want to be changed?

Pausing any progression on compensation or ownership until the following is completed?

  • Tokenonomics
  • In-depth financial forecasting and planning
  • Org design structure (pods and nests setup)
  • Owl Levels

100% agree these topics are extremely important. But we have to move forward.

I would also love to form a pod and start to see proposals come to the forum!

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25

I know youā€™re passionate but I donā€™t understand the concerns here @Matthew_Graham given the flexibility of the proposal - and the concerns come late in the game, with little signal and effective communication to our Pod, and after some weeks of not being very engaged in the Pod.

If this construct is not working, the community can change it. Nothing is locked for four years. We can certainly do more modeling as we go - while we look to improve the liquidity (and use) of the INDEX token. (Iā€™m personally very keen to see the liquidity situation optimized). There are going to be some changes of tack along the way, regardless of what we implement here - KPI driven options, vesting packages, DSM, etc. To potentially just pass this through IIP and do nothing else to support this project - and keep directing it optimally - would be suboptimal and unholistic, but thatā€™s not the goal.

You like many people (myself included) have been pushing, pushing, pushing for more ownership for contributors - especially versus other holders. This means giving them more tokens, simple. Tokens = ownership.

I am one of the gold owls that thinks this is the best way forward and will be monumentality disappointed if this huge body of considered and incredibly thought through work is stopped due to a wrinkle - something we can simply work through as we go. I donā€™t seek any more ownership than what the proposal outlines, if thatā€™s what you mean by feathering ones nest. Weā€™re a for profit entity with for profit investors. If people think this is all wrong and too much nest feathering, thatā€™s fine - itā€™s a big open crypto market and there are excellent, charitable foundations in crypto to work for, building and funding public goods.

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26

It really sucks being the contrarian on these topics. In broad general terms, I have the following opinion.

  • If wages were priced adequately, sweat equity would enable contributors to earn their desired amount of INDEX. Why have a DSM program if you can just pay more. In the crudest form, the DSM is a whitelisted farming program.

  • I favour earning INDEX over the air drop and the DSM as we have almost maintained that Index Coop pays above market rates. By retrospectively paying people via air drop, it contradicts the narrative we pay above market rates. Unless the narrative we pay above market rates and then more. Philosophically, that is a point of difference.

  • DSM will create sell pressure that wasnā€™t already there. After an individual reaches a certain holding size, a self determine amount of INDEX, the DSM program becomes a farming program whereby the proceeds will be sold in perpetuity. ETH is ultrasound money, INDEX is a high risk governance token.

  • Leading a tokenomics revamp with the first sprocket being an exclusive contributor only DSM program, sends a signal to market where the prioritise fall, contributors first, overall business model second. This is a bad signal to send the market and the sequencing of event is a symptom of a DAO in fire fighting mode.

  • Optics of committing 22.5% up front with a disclaimer is can be spread like butter, as thin or as chunky as the community wantsā€¦ To me this is the wrong framing because it is anchoring high rather than creating a smaller pot of capital and then allocating to it over time. Philosophically, I would come at this from the start small and lean into it. I feel more comfortable with a 1% allocation per year to start with. This is something we could offset through other initiatives, 6.5% in the initial year feels heavy. We donā€™t need to follow the start up model with oversized returns up front, we have a choice to say the next generation of contributor who works towards keeping Index Coop as market leaders is as equally valuable as a contributor today. Again this is philosophical.

  • Each year the community will need to engage in this debate about how much to allocate, then audit everyone to ensure there not participating with borrowed capital, maintain the whitelist and then monitor everyones owl status to ensure they get paid what there entitled to. This seems like a sub-optimal design feature design for exclusivity. There will be a burden of maintaining this.

  • Reflecting on this personally, I feel like this program gives me free money that leads to no material change in my level of commitment to Index Coop. Iā€™m not motivated by the dollar sign on the pay check, I want to build cool stuff with nice people.

  • Other protocols who have distributed tokens through similar vesting proposals with staking contracts have experienced significant sell pressure. I can sell now, be given more than I sold by the airdrop, but investors, they are not so lucky. This hurts the why invest in INDEX narrative.

  • I honestly believe this program will hurt the token price through sustained fully transparent sell pressure. I am actively considering selling my holding, very least shorting a portion of it, to hedge my price exposure. I wish I could protect the communities treasuryā€™s value by hedging this risk.

  • I would love to see a holistic financial plan published showing qty of INDEX, market value of this INDEX being distributed. I donā€™t think we know how much we will budget for paying contributors. How many INDEX is the average gold, gold+ and neon owl expect to receive over a 5 year period assuming they participate in the DSM ? Letā€™s see that number and see if it feels right.

The above are my own views, from someone who cares more about the products we are building, less about the token price and who is pro sustainability of the community. I think this proposal with 22.5% unnecessarily commits funds and the contributor allocation is actually greater than 30% when all the other initiatives are factored in. But I am yet to see the numbers in a nicely presented financial plan and I strongly encourage others to support this initiative be incorporated into a broader tokenomics revamp and for the holistic proposal to be votes on. We donā€™t need to commit to individual aspects of the tokeonomics revamp. It is a holistic system after all.

There is no need to reply @Pepperoni_Joe or @0x_Dev, all of the above is philosophical and there is no need to debate if the proposal is right or wrong. There will always be a spectrum of opinion and only some opinions will be on the forum. Noting founders and many large investors are absent here and I am not sure about the optics come snapshot time. I think the real vote of confidence will be in the INDEX : ETH price, the number of request from Full Timers to sell their INDEX back to Treasury and the balance of the large INDEX holder wallets will be the signal to watch.

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Big shout out to @Pepperoni_Joe and the Team who produced an extremely detailed V2 proposal. Disclosure to date I have been more in the investor camp rather than a paid contributor.

Couple of comments

  • from the weekly calls I have participated in I have been impressed by a number of the Team members and the level of the discussion. So personally think Retaining people long term is important as well as bring in new Full Timers particularly in the AWG area. (hugely in demand skill set)
  • Where I agree with @Matthew_Graham is that compensation links in with 1. broader Tokenomics and 2. unlock/price effects are important.
  • I would love to see a holistic financial plan published showing qty of INDEX, market value of this INDEX being distributed. I donā€™t think we know how much we will budget for paying contributors. How many INDEX is the average gold, gold+ and neon owl expect to receive over a 5 year period assuming they participate in the DSM ? Letā€™s see that number and see if it feels right.

It would be good to see the full picture of how the treasury will change over time.

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This is such a comprehensive proposal. DAOs should definitely refer to this as a good case practice!

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A few thoughts from a layman:

I think this is a slightly over-simplified but very defensible point he is making as a foundation for his philosophies. I would say I fall into this camp as well in my general thesis of this new world.

@Matthew_Graham This might be true for you - but as one of theā€™ incoming next generationā€™ of Index Coop, that holds INDEX that is counted in the 2-digit range; and is considering leaving a well paying W2 jobā€”I transparently admit I do care about the dollar sign on the paycheck and the ability/incentive to climb the ladder to greater ownership. That being said, I do not want to vote for something now that puts at risk fairly rewarding the generation behind me and beyond. I think your comments on this are valid:

However, it seems to be that the proposal writers believe this is not the case.

Is there a way to have FNest evaluate several scenarios with differing risk profiles of the $INDEX price, to give people like me a tangible way to evaluate how the DSM and airdrop will affect the treasury long-term?

In the same line of thinking, I think it would be educational for us to see how total contribution would play out for different levels over several years.

@Matthew_Graham your post brings up a lot of interesting points to consider. I DO like the directional trajectory of the proposal towards long-term contributor thinking in regards to holding INDEX; as well as the intention to get more INDEX in the hands of the contributor community taking IC into the future.
I appreciate your counter points very much and would be curious what you would consider should be either:

  1. altered in the current proposal to increase runway?
  2. what aspects should go into an overall tokenomics rethink?

Overall I support the proposal as it is the only currently proposed solution to get more governance into the hands of contributors with a bias toward long-term commitment. I support taking some action towards this rather than tying it to other un-initiated proposals.
I do not have a professional TradFi background and have to rely on the analysis of folks like @Pepperoni_Joe and @dev and all the other authors to answer the question, ā€œwhat is the risk this will break the treasury long-term?ā€

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32

I am planning to vote FOR this.

There are so many details and so much discussion about this that I have not read through them all, and as a significant INDEX tokenholder I donā€™t think I should have to.

Frankly, seeing Wise Owls squabbling in the forum over a topic of this magnitude is pretty annoying and frustrating. I would see it as a failure of leadership if a significant plan to equitably distribute ownership of INDEX tokens outside of founders and large investors was not passed within the next 2-3 months.

I would like to see the Wise Owls put up a summary forum post indicating where each of them stands on the proposal with short explanation FOR or AGAINST. I think this should become a standard for proposals of this magnitude of importance, especially when there is dissent among the Wise Owls.

CC: @Matthew_Graham @Pepperoni_Joe @jdcook @mel.eth @LemonadeAlpha @Metfanmike @Cavalier_Eth

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I never understood why this DSM uses decreasing APY because sans staking Iā€™m typically a hodler. And as @Matthew_Graham points out introducing this staking mechanism offers incentive for me to sell/swap INDEX holdings to earn proportionately higher APY. I thought this was maybe the intended benefit for contributors? And that maybe I was missing something.

So to clarify my understanding Iā€™ll go with transparency here. Probably 2000 INDEX is now my target limit on exposure to INDEX staking/or no staking, itā€™s a personal finance decision by a solo parent in favour of diversification and risk management. If I reached 2000 and for some reason, I need to sell my current understanding is that I might as well sell 75% back to 500 INDEX because it seems that way I diversify (gain ETH) while achieving a higher APY on a smaller holding, I can not see the benefit of holding 1500 as opposed to 500.

@Pepperoni_Joe can you clarify what the different APY is at 0 500 1000 1500 1999 because in my limited understanding I see that it is a non-linear, and diminishing value. A charted visualization of the APY/Holding up to 5k

EDIT: to clarify that I DO support this proposal and also see where Matthew is coming from. Also +1 on @Thomas_Hepner call for a summary post.

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I will be voting FOR (catching @Thomas_Hepner and @lee0007ā€™s call for transparency). This is a ground-up well considered plan. I spent a good bit of time in the trenches (aka highly advertised and expertly run workshops) with the dozens of contributors that helped make sure this plan gets governance to those that are the highest context nodes in our network.

As I see it, this work product is the result of delegated authority by the Autonomy Group commissioned by this DAO, I had every opportunity to help craft this proposal just like every other contributor; given how we got here, one could effectively write Index Coop DAO as co-authors and it would be dead accurate.

In a DAO that requires a contributor base larger than a vanilla protocol, weā€™ve become a powerhouse in just one year. The existing reward system has worked pretty well; however, stating that wages are a fine method of token distribution when 1.3% of the community allocation has made its way to those choosing DAO over time with family, while over 4% has been OTCd to investors, is easily refuted. FT vesting contracts, held by a handful, are worth more than half of the total wages paid to all contributors, and all of that together is still only 2.1% of governance with DAO contributors after year 1 (with less than 2% able to vote). We have a DAO that is governed by a token barely held by the DAO members.

I donā€™t put much stock in the ā€œcap out and dumpā€ theory floated above. Those actors would gain less share of the pool over time (diminishing returns) as those reinvesting and contributing more gain a larger share of the pot, itā€™s a massive incentive to stay. Even if 20% is sold year one, thatā€™s still only 1% of token supply hitting market via the community allocation in a year; thatā€™s incredibly thin relative to other token distributions and less INDEX than hit the market in the past year by an order of magnitude - weā€™re good on that front.

I dropped some thoughts on a tokenomic model here but at this point weā€™re all just banging together bits of tokonomic models in our garages. We Owlsourced this community ownership proposal, we can Owlsource tokenomics too (I believe we need a representative INDEX-holder contingent for that discussion, massive RAPID incoming?)

Huge thanks to those still driving on this; solving community-wide problems when we have 2% of the voice and value is frustrating - weā€™ll all get there!

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I am strongly IN FAVOUR OF the V2 Proposal. @Matthew_Graham is, without any doubt, a highly respected core contributor to the Coop, and I trust his integrity. We are all thinking for the best of the community. However, my personal view is that your worry is overstated. DSM is specifically curated to offset the additional sell pressure while potentially even tapering it. It is reasonable to assume that the majority of the contributors are incentivised to 1. accumulate INDEX and 2. stay active in the community.

IMO, this proposal has profound implications beyond compensation and talent retention. When people leave the Coop solely because of insufficient comp, it is in my view a failure in our mission and culture. To me, what justifies this proposal is that it facilitates a more even distribution of governance power between whales (VC and large investors) and contributors on the ground, therefore making the Coop much much more resilient to agency problems, major internal conflicts and other unforeseen circumstances that require community solidarity. In times of these, I would trust INDEX in the hands of of our amazing Wise Owls, Gold, Silver and Bronze contributors, who are most likely, more than anyone else, voting in the best interest of the LONG-TERM success of the DAO.

Historically, a major reason why democracies fail is the uneven distribution of governing power. Ancient city-state democracies in Greece collapsed due to extreme inequality in wealth and citizenship (the right to participate in politics). In our time, democracies are increasingly less resilient as the middle-class shrink. Think of our contributor as ā€œthe middle classā€, who earn tokens through labour, instead of wealth. A redistribution of wealth towards contributors reduces outsized influence from the wealthy and large capital.

Special thanks to those curating the proposal and everyone who either contended or supported it. It is the collective wisdom that counts.

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Thanks for bringing this conversation back to the high level @mel.eth!

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I disagree. If we expect the Wise Owls to function as leaders I think a summary forum post indicating the groups collective position/recommendation is more appropriate especially in an organization like ours.

This is what a board would do.

By suggesting they post individually youā€™re intentionally creating a hyper competitive environment where everyone just gets more entrenched in their viewpoint, disunity continues to be rampant, contributors align with different WOā€™s, and the culture continues to degrade.

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I think you are actually agreeing with me, @nic.

Iā€™m suggesting they post a summary post with the official opinion of the group, but share how individual members voted. This is very similar to how US Supreme Court or Federal Reserve functions and I think itā€™s helpful to copy. The organization has an official opinion, but there is a majority opinion and a dissenting opinion.

I think tokenholders would like to know if a WO endorsement is unanimous or if there is a lot of dissent.

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Sure @Thomas_Hepner that totally makes sense. I misread your comment. I do want us to be thoughtful and intentional around cultural impacts of how the WO is shaped as an institution, and set up whoever is in those roles for success.

I like the idea of an ā€˜official opinionā€™ and individual voting records, as long as it doesnā€™t put a target on people politically. Iā€™ve watched this kind of interaction persist in these very forums. Weā€™ll need to mature past this if we intend to grow as a legitimate organization.

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We are delighted with the show of support this proposal has received, with 88% of votes in favour of this approach.

We also really appreciate the thoughtful and considered feedback we received - and are providing our proposed next steps based on these insights.

#1.

Firstly, we appreciate that there are some implementation interdepencies to resolve before the Dynamic Staking Model and Airdrop can be taken through IIP and go live, namely:

  • Owl Level redesign

Thus, we scheduled a pt 2 Owl Level redesign workshop for the 21st of December and will look to formalize a new Owl Level framework immediately.

#2.

We also recognize that further progress on the following would increase the overall success of our Compensation and Community Allocation work:

  • Tokenomics
  • Index liquidity
  • Holistic financial planning

As such, we propose the following:

  • Formation of the Tokenonmics Pod (fill in this form to join), appointed by and accountable to the Index Council.
  • Liquidity Pod to provide a proposed solution to low INDEX liquidity in January.
  • Holistic Financial Plan to be provided by Finance Nest

We believe these actions would increase the overall success of the holistic Community Ownership and Compensation proposal which was presented.

#3.

Would like to progress our proposed Priority Hiring guidelines to snapshot as an IIP, alongside a directional commitment to implement the Dynamic Staking Model and Airdrop. This will be enabled by the activity mentioned in points 1&2.

Priority Hiring guidelines should be uncontroversial and recommends transitioning a number of high impact contributors onto fixed yearly salaries. It assumes that the equity aspect of their package will be delivered through the Dynamic Staking Model.

The order for those who go through priority hiring will be determined by the Index Council. More details on the Priority Hiring guidelines can be found here.

=====

To this end, the proposed IIP is linked below:

IIP-XX: Priority Hiring Guidelines and directional commitment to the DSM & Airdrop

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41

Adding my FOR, for the record.

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42

Voting FOR this proposal.

  1. Getting tokens in to the hands of key contributors is vital
  2. The concern of sell pressure once contributors reach a personally-decided thresholds is a valid, but Iā€™m unclear on how this can be avoided entirely
  3. The best indirect path that I can see to minimise sell pressure is to increase the value of holding INDEX, which I believe needs a concerted effort across both our AUM, and tokenomics
  4. Despite what feels like a complex approach, I defer to the team who has proposed this as the best mechanism
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