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:
- Compensation & Community Ownership (this post)
- Retrospective Airdrop to historical contributors
- Dynamic Staking Model
- V2 Full Time Hiring Guidelines
- Owl Levels (not yet released)
- 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.
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.
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.
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:
- Poaching in the industry is rampant - offer competitive salaries or people will leave
- 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.
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.
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.
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.
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.
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.
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).
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.
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.
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.
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.
Here is what we proposing as clear next steps:
- Airdrop (@DevOnDeFi ) - Nov 12th
- Flexible contributor rewards (@Pepperoni_Joe ) - Nov 12th
- V2 hiring guidelines (@gregdocter / @Pepperoni_Joe )- Nov 12th
- Staking model (@iluscavia ) - Nov 12th
- Owl Levels (@bradwmorris / @Pepperoni_Joe ) -
Nov 5th17th 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.
- 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.
What do you think of this proposed process?
- Post individual forum posts on each topic
- Facilitate public discourse on each topic as needed
Should we move forward with this approach?