Compensation & Community Ownership - Next Steps

[jdcook]

Authors: @jdcook , @Pepperoni_Joe , @0x_Dev , @Metfanmike , @anon10525910 , @Hammad1412 , @ElliottWatts , @iluscavia , @bradwmorris

Summary

This post seeks to outline a holistic redesign of Compensation (salary) and Community Ownership (equity) at Index Coop. It is intended to share the current thinking before additional forum posts & calls occur on these topics that enable us to continue this discussion together.

This post is the first of six exploring the comprehensive overhaul of Compensation and Community Ownership at Index Coop. Whilst each topic is a stand-alone piece, they are interrelated. We recommend reading through the posts in the following order:

1. Compensation & Community Ownership (this post)
2. Retrospective Airdrop to historical contributors
3. Dynamic Staking Model
4. V2 Full Time Hiring Guidelines
5. Owl Levels (not yet released)
6. Flexible Compensation (not yet released)

It is also worth noting that these discussions of airdrop, staking and compensation are occurring in parallel. They are interconnected and can be approved and implemented independently - hold ups in one area does not prevent implementation of another.

Background

On August 25, 2021 Index 2.0: Autonomy Next Steps kicked off the ongoing transformation process. “Compensation & owl levels” was one of the workshop themes.

A workshop was held on the 23rd of September (slides here, video here) to open this topic as a community. Coming out of that workshop, it was realized that the topic overlapped with the “Genesis Distribution” topic and so both topics would be best addressed in parallel.

This work has been developed by a cross-functional group of contributors as part of a merging of the Compensation & Owl Levels and Token Distribution lanes of Index 2.0. It is the beginning of a solution - one that we aim to be community-informed and supported.

Moving Forward

The main goals of this re-design are:

• Competitive Web3 Compensation - Providing competitive compensation packages for both part and full-time contributors in order to reduce poaching and increase contributor retention.
• Community Token Ownership - Sustainably increasing contributors’ ownership in the protocol they have helped (and will help) build by allocating a fixed proportion of the total Index to be distributed to the community for years 1-4.

This proposal will seek to outline a multifaceted model which we will explore through a series of upcoming posts and workshops. The topic is massive and complex, but this thinking is what is needed to address both of these core challenges.

We recognize that some of these concepts/mechanisms will be hard to materialize without set numbers and boundaries, but that is intentional in this post. We believe it is important that the entire Coop community is caught up on the discussion, shares a similar understanding of the situation and proposed direction, and is part of the conversation as changes flow from the Compensation & Ownership workshops to IIPs.

It should also be recognized that redesigning Compensation and Ownership in a fully public setting is an incredibly difficult challenge - but one we must face head-on as a DAO. There may not be perfect solutions. It may require us all to lean in and challenge our own thinking. Regardless, we believe we can be trail-blazers for DAOs broadly when it comes to compensation and ownership.

Opportunity

Compensation

DAOs operate in the most flexible labor market in history. This flexibility has allowed us to build a world-class team, but presents real challenges:

1. Poaching in the industry is rampant - offer competitive salaries or people will leave
2. Contributors support Index Coop in a variety of different ways, any compensation model will need to accommodate this flexibility

We believe that we can create compensation models that are flexible enough to cater towards contributors across the spectrum, as well as provide top-rate compensation within Web3.

Ownership

Token distributions are intended to align entities towards a common, long-term goal. The Genesis Token Distribution allocated 70% to Community and 30% to Team. The “Team” distribution was divided up - 28% to Set and 2% to DeFi Pulse. However, “team” did not include the early core contributors or the core contributors that have followed and will continue to join and impact the Coop. Thus, contributors have been left without a clear path to ownership (equity) and have been left expecting to build equity/ownership from their monthly contributor rewards (salary).

We believe that a portion of the INDEX supply should be earmarked and allocated to a separate “Community Ownership” multi-sig to guarantee ownership to contributors - past, current, and future.

Model

Please recognize, again, that this is a work-in-progress model, and you can expect more in-depth forum posts in the future so that a constructive conversation can be had. Your input and questions are important!

The purpose of posting and summarizing here in this post is to outline the current thinking and bring the community up to speed in order to receive feedback and guide the rest of the development. Subsequent forum posts will dive deeper into different aspects of the model.

Compensation

The compensation model consists of multiple mechanisms in order to match the flexibility demands required.

• Early contributors (owlets, copper) will be rewarded through tipping/bounties functionality provided by Collab.land.
• Regular contributors (bronze, silver) that receive a flexible reward, but not a “salary” will be rewarded through more flexible payment solutions (such as Coordinape) which are better equipped to address this type of payment structure than our current monthly contributor rewards process.
• New full-time hiring guidelines will be created to allow for the transition a number of core Index Coop contributors onto fixed salaries based on competitive market rates for the role/area of contribution. These will be administered through a relationship with Parcel.
• Working Group leads, and other core contributors who don’t transition to a full-time package will still be eligible for quarterly/bi-annual stipends as under our current framework.
• Non-financial benefits will be offered across the contributor spectrum.

Ownership

As mentioned in the summary, the intention is to allocate a % of INDEX supply to a community wallet in order to execute the following mechanisms to distribute ownership across contributors.

Airdrop

A retrospective airdrop to contributors achieves two important objectives:

• Rewards contributors who have helped build the Coop to current day
• Jump-starts the contributor staking model for all past and current contributors

Aside from determining a specific % to be distributed, the proposed plan is to simply use past contributor rewards (denominated in USD) to facilitate a fair retro drop.

Contributor Staking

This is undoubtedly the most complex (and new) mechanism being introduced and will require a slightly longer summary.

As we know, commitment and contribution take different forms; but can be categorized under Talent, Treasure, and Time. Keeping these elements in mind, we created a model designed to incentivize contributors to increase the quality of their participation (talent), while at the same time incentivizing them to hold and/or increase their ownership of INDEX tokens (treasure) over a longer time frame (time).

Talent

In the model, increased quality contributions as reflected by higher owl levels are rewarded by a higher staking reward. The rationale behind this mechanism is that meaningful contributions are rewarded by a higher owl level and are generally indicative of high-impact efforts that benefit the broader INDEX community.

Treasure

At the same time, a higher financial commitment to Index Coop through token holding is also rewarded by a higher net reward for those with the most “skin in the game.” This mechanism encourages contributors to hold INDEX and creates an alignment of financial interests between community members and the Index Coop which will drive a long-term mindset and lead to higher token prices, benefiting everyone. Token rewards based on holdings will be logarithmic, so contributors with the smallest stakes receive the highest APY and so benefit most from the model.

When combined with the INDEX received through the retroactive airdrop, all Owls will be given a “running start” and have INDEX tokens available to benefit from the staking program - regardless of whether they have previously had to sell INDEX rewards to cover living expenses. Furthermore, the base staking level requires 0 INDEX, yet still retrieves a monthly INDEX vest.

Time

Lastly, these staking rewards are also subjected to a vesting schedule. By subjecting the rewards to a delayed payout with conditions, community members are also incentivized to contribute over a longer time frame.

These elements working together should benefit INDEX by aligning contributor incentives with the community’s long-term success all while delivering meaningful ownership (equity) to contributors.

Owl Levels

It may be clear to you that essentially all of the mechanisms introduced here rely on a robust owl leveling system. This is a critical focus area as a part of this work - subsequent forum posts will focus solely on building and implementing this system.

Compensation and Community Ownership Model

Next Steps

Here is what we proposing as clear next steps:

Key Deliverable(s)

Forum Posts

1. Airdrop (@0x_Dev ) - Nov 12th
2. Flexible contributor rewards (@Pepperoni_Joe ) - Nov 12th
3. V2 hiring guidelines (@anon10525910 / @Pepperoni_Joe )- Nov 12th
4. Staking model (@iluscavia ) - Nov 12th
5. Owl Levels (@bradwmorris / @Pepperoni_Joe ) - Nov 5th 17th Nov*

*due to the interdependencies between Owl Levels, and other aspects of the comp framework, the team thinks it is sensible start a discussion with the community on Owl Levels after those elements have received community feedback.

Input

• Outside of the above folks, there are many other contributors who voiced strong, informed opinions and whose further input is deeply valued.
• This process is intended to be community-driven. Community calls can be scheduled as needed - discussion on this post, and all subsequent posts, is highly encouraged.
• Discussions with investors and major stakeholders (Set, DFP, Methodologists) will be scheduled as needed.
• The #compensation-and-community-ownership discord channel is open for fluid discussion - anyone is encouraged to ask questions and/or join the discussion.

Temperature Check

What do you think of this proposed process?

In summary:

1. Post individual forum posts on each topic
2. Facilitate public discourse on each topic as needed

Should we move forward with this approach?

• YES
• ABSTAIN
• NO

[BigSky7]

Great work team - this is a huge step forward for our community. Excited to dive in an discuss over the coming weeks.

Let’s get this done

[prairiefi]

Great work everyone on tackling such a mammoth task. I love to see the breadth of skills represented in the team.

@jdcook

Community Token Ownership - Sustainably increasing contributors’ ownership in the protocol they have helped (and will help) build by allocating a fixed proportion of the total Index to be distributed to the community for years 1-4.

Something about reading this really inspired me to imagine what the Coop can be by year 4 and beyond, IF we retain the momentum, shared knowledge, and encourage long term contribution. It would be great to see some OG owls help carry the torch for years to come with the right incentives to stay, while the plan of the highest APY for lower levels can encourage the new owlets to work towards becoming the grizzled veterans of the future.

[overanalyser]

Great work team, I think it’s fantastic to see such thought being put into how we become a sustainable community.

[Elmit]

@jdcook

3. V2 hiring guidelines (@gregdocter / @Pepperoni_Joe )- Nov 12th

Shouldn’t it be V3 as in the picture mentioned?

[anon10525910]

the picture is off – v1 exists today, supposing we want to stay in order, v2 would be next

[mrvls_brkfst]

Great to see this holistic approach valuing contributions, talent retention, and commitment. Though a big task, it is clearly worthwhile . I’m excited for the footing it will put the Coop on and the example it will set in the ecosystem.

[JMoss]

Reading through this post gave me real hope and solid trust, not only in the current mode of DAOing and the entire leadership, but also in the future that is embedded in community governed organizations, especially the Index coop.

@jdcook

As mentioned in the summary, the intention is to allocate a % of INDEX supply to a community wallet in order to execute the following mechanisms to distribute ownership across contributors.

I have always sadly stood by the fence when it comes to voting and exercising ownership through index holdings, because of having to convert my rewards for basic sustenance and contributing expenses.

Having to see this conversation through to maturity is an antecedents all present and future owls will look back to and feel proud of being an Owl.

IC is a beautiful community that is and will continue to grow exponentially in all ramifications

[Elmit]

That’s why my staff always loved to check their code. I usually spot such differences

[TheYoungCrews]

Kudos to the all involved in putting this together - looks like it’ll be a brilliant level up for the coop

In the spirit of designing collaborative games, one mechanic I’d like to see in action tying a WG’s flexible contributor rewards to a KPI. As in, I’d like to see the whole pie available to growth contributors be tied to the # of impressions we generate (or N$F, # of unique holders etc if we pivot to a different target KPI).

The vision here is to build on our impression mining schematic to reduce friction of coordination by uniting people around shared, positive-sum, economic incentives and empowering people at the edges of our community, with the @Magra’s of the world, who also have their own personal brand, top of mind, to act as owners while minimizing the overhead / context burden of helping the coop drive towards its goals.

Pretty sure this is top of mind for @jdcook already, and the staking mechanism goes a long way towards this end, but I’ll go ahead & call it out since I don’t see it explicitly stated in the post: reducing the sell pressure on $INDEX from contributors selling their rewards for living expenses in in the best interest of all $INDEX holders. I think it makes sense to see most base compensation delivered in USDC or ETH whilst separately allowing contributors to have a stake in the upside of the protocol thru an options/bonus/vesting/staking component.

[Pepperoni_Joe]

Just an FYI to the Owls – I expect the following posts to hit the forums tomorrow:

• V2 Full Time Hiring guidelines
• Dynamic Staking Model (forward facing)
• Retroactive airdrop (backward looking)

Next week also expect

• Owl Level redesign
• Flexible compensation model

As a reminder, these topics are big and will inevitably be discussed via replies and on calls before reaching any end-state

[afromac]

Amazing Joe. Cannot wait to see all of this come together.

[Crypto_Texan]

@jdcook

Aside from determining a specific % to be distributed, the proposed plan is to simply use past contributor rewards (denominated in USD) to facilitate a fair retro drop.

Wondering if rewards distributed from the Impression Mining program are being considered in this calculation as well?

[LemonadeAlpha]

It would be criminal if this wasn’t the case

[MrMadila]

Full disclaimer: I would also benefit due to being a beneficiary from the early days of IM but finding high quality, consistent, motivated Micro content producers has been one of GMWG’s biggest challenges to date. CT really is a rare find, is super reliable and has formed the bedrock of our social media presence through thick and thin. Strongly urge IM to be considered for inclusion to reward such impactful contributions.

[Thomas_Hepner]

I suggested that here as well:

@Thomas_Hepner

A specific tweak I would make to the proposal:

Add impression mining rewards to the retroactive airdrop and dynamic staking programs.

@Crypto_Texan has been one of the most valuable IC contributors and not including the outsized impact of his work through the impression mining program would be a mistake.

Wondering if rewards distributed from the Impression Mining program are being considered in this calculation as well?

[Cameron_Notional]

I really appreciate what IC is trying to do here. We (at Notional) are trying to figure a lot of this stuff out as well and it’s amazing to have a model to look at when figuring out the right programs and mechanics for our ecosystem. I am excited to dive more into the impression mining posts and see how effective these new programs like contributor staking are.