Re-introducing the Community Methodologist Role

This is an updated post to reflect the feedback from the original proposal (summarised here) from @gregdocter and others. The change is highlighted under ‘Bonus Compensation’.

Summary

The first community index proposal just reached DG2 . It is now important to clarify the structure around how the product will be managed and the managers compensated. This is tied to Full-Time Contributor Retention , please read this post first if you haven’t yet had the chance.

This proposal introduces a trial framework to compensate 2 Coop community members to manage the MVI full time, should it pass DG2. It is intended to set a precedent for community-managed index products going forward, but is experimental and we expect to learn and iterate as we progress beyond launch.

Abstract

With major initiatives like the liquidity mining framework and the methodologist fee menu under discussion, there is potential confusion around how members of the community might straddle multiple roles and subsequently what that means for their relationship with Index Coop. In this case, it’s necessary to find a solution that protects Index Coop and the individuals involved while providing clarity to the community.

With that in mind, we set out to list the most important business goals for the Coop at an organisational level, relating specifically to this situation:

  1. Launch products that solve big, recurring, and growing customer needs.
  2. Market and distribute our products better than any of our competitors.
  3. Work with the best brands to increase our product’s leverage and our reputation.
  4. Retain talent within the Coop.
  5. Continue to incentivise sound methodologies from within the community.
  6. Allow contributors to produce outstanding products without having to force them out of the Coop.
  7. Set the template for future community methodologists.

The worst-case scenario would be that every time a product methodology is launched, the Coop has to draw a line under the relationship with the community members involved and treat them as external methodologists. Equally, it might not be the optimal solution for individuals to spin up a separate business just to manage the methodology. A compromise is required.

Why is the Community Methodologist the right solution?

There’s inherently a different relationship between Index Coop and community members and Index Coop and external methodologists. Having a community-managed product blurs these lines, so it’s essential to clarify how a Community Methodologist role might fit within our community and set expectations for both parties.

By creating a Community Methodologist role, we retain talent that can continue contributing to the Coop more widely (albeit at a reduced level). At the same time, contributors get to pursue and grow their idea, leveraging the strong links they have within the community to make the product a success. Furthermore, by getting the compensation and incentives right, we ensure great products continue to come from the community in future.

What are they responsible for?

Taken from the community handbook, the base level of requirements are listed as follows:

  • Propose a product that is well differentiated from existing Index Coop products;
  • Target a sufficiently large market to be meaningful to the Index Coop;
  • Do an on-chain liquidity analysis for underlying collateral assets;
  • Have a complete methodology;
  • Keep all documentation related to the index up to date, tracking performance and sending out updates monthly/quarterly/yearly as appropriate;
  • Stay visible to index holders and Coop members to answer questions and act as a single source of the truth in relation to the specific index;
  • Respond to questions on the forum and discord relating to your index.

In addition to the Base Level requirements, there are several value-accretive categories where the methodologist can add value to the product. It is not expected that Community Methodologists will commit to categories 1 or 2, instead excelling in category 3 where they can use their network and relationship within the Coop to drive the product forward.

  1. Provide capital to bootstrap liquidity (Note: Optimal initial liquidity will vary by product and will be discussed before a product goes up for Decision Gate 2 voting.)
  2. Partner with Index Coop to offer liquidity mining incentives bootstrapping the product (Note: The scale of Liquidity Mining incentives will vary by product and will be a function of the size of the liquidity pool necessary to accommodate the target customer.)
  3. Unite together to combine sales & BD efforts, including marketing, distribution, promotion and product development. This would include things like ecosystem integrations, DeFi partnerships, CEX listings, etc.

Outside of product focused workstreams, it’s likely that Community Methodologists would continue to provide input in other areas of the Coop, although this would not be a requirement of the Community Methodologist role.

How is compensation for the role determined?

When thinking about compensation, we considered the amount of time and effort required to manage the product while also working back from how external methodologists would typically be rewarded (assuming a conservative 20% fee split to methodologists). We concluded that community methodologists should be compensated through the treasury and not from the fee split, allowing the Index Coop to retain 100% of product fee and methodologist bounty. Without the fee acting as incentive to grow AUM the following is being proposed:

Base Compensation

Community Methodologists are taking on a full-time role as portfolio managers. As such, they would expect to receive a salary and vested tokens in line with the amount proposed for other full-time contributors here .

Put another way, the community methodologist role can be treated as similar to a Portfolio Manager and compensated in line with similar responsibility levels at the Coop. For reference, the team at Yearn collated this doc to track compensation levels across various DeFi projects.

Bonus Compensation

Addressing business goals 1&5 above, we want to encourage community members to create and pursue ideas until they become successful products. With the fee (and methodologist bounty) both being retained 100% by the Index Coop, two bonus rewards are proposed instead:

$10k per methodologist at launch* - this is to ensure future ideas continue to be put forward by the community and those involved commit to getting the fundamentals in place to launch (estimated 3-4 months work required to get a product to launch readiness, varies with complexity)

Changed - $5k at $10m AUM, $10k at $50m AUM and $25k at $100m AUM - to align long-term incentives towards growth and adoption. (context - 1% fee to Coop at $100m is $1m/year in fees)

It’s important to note that the figures above are specific to MVI and that different products may settle on different values depending on the level of complexity and involvement required, in some cases it may not even be necessary to have a full time position be created. The compensation conversation is just that, and will require a discussion between the community members proposing an index and the Coop to come to an agreement. What will remain the same is the framework, where the Coop will receive all fees (and any INDEX bounty) and community methodologists are paid from the treasury.

*For full transparency DFC and Verto both had a line item for MVI in the Feb rewards document meaning part of the work involved with progressing MVI counted towards their total. With the passing of this proposal, it will no longer be the case that the treasury committee takes account of community index proposals, instead rewarding at launch with the bonus. In this case given the work during Dec/Jan that was not compensated, plus the effort involved with paving the way for this structure to exist, it is proposed that they receive the bonus upon successful launch of the Metaverse Index.

  • For - Implement Verto and Dark Forest Capital as Community Methodologists with the expectations and compensation as proposed
  • Against - Do not implement as proposed

0 voters

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The thing that grinds my gears the most about how the COOP is organized right now, is the reliance on centralized methodologists

Let The People Method!

Hey Uncle.

Take a look at the dash 0xBoxer put together on Dune to see how the market treats products with indexes decided by community. The chart doesn’t show the sheer amount of incentives those products are getting either! DPI has $100m AUM that isn’t receiving any incentives from us at all.

If we want to be the largest group in the index space we need to give customers confidence and transparency. By having an open methodology, run by committed methodologists we achieve that. Whether it’s a group like DFP or a couple of community members being brought on full-time like with me and Verto. Hopefully that gives some context as to why we do it this way, and it’s currently working pretty well!

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@DarkForestCapital Thank you for drafting the proposal, I have a few questions that are mostly tightly linked to the full-time contributors proposal:

Here are the main incentives I can see:

1- Community Methodologists are now solely focused on their product

2- Community Methodologists are guaranteed a compensation in monthly salary and vested INDEX tokens, regardless of the level of commitment to & the performance of their product.

3- Community Methodologists get an additional compensation package for their product’s instant success (AUM milestones).

4- I can see little alignment between the product’s continued success on the longer term and Methodologist’s incentives. (INDEX success is dependent on so much moving parts, that direct link to individual products at launch is hard especially on the short & medium terms).

5- I can see little reputational or financial risk community Methodologists are incurring related to failure or abandonment of the product maintenance, and definitely little to no incentives to do so after the vesting of the INDEX tokens, which in itself (2years/6month cliff) is quite short by industry standards(4years/1 year cliff).

While I do agree that everyone bringing new & successful ideas to the Coop & implementing them should be handsomely rewarded, I would like to see more incentives alignment, especially that individual product creator/maintainer roles are very different from people working on the Coop in general, and pushing all products together!

Another consideration of mine, is that products we are building in the Coop are very long term endeavors that might unfold over several years, while the incentives being set are either instantaneous, like the AUM bonus, or medium term at best like INDEX vesting which is set at 2 years with a 6 month cliff, for liquid tokens, while industry standards are 3 to 4 years with a 1 year cliff for illiquid shares!

This is why, I think that the Community Methodologist role, incentives package should be re-though as a whole, and independently from the Full-time contributor role, because they are inherently very different roles, requiring very different incentives as well as timeframes.

I also have pointed out this previously, I strongly disagree with any large spending that is happening without community votes. There should be a cap on any $ amounts that ca be disbursed without going to a vote, with a quorum requirement, since any INDEX holders are entitled to

Quick tweaks (that need more fleshing out of course) that would align incentives much better would be:

1- Tie the INDEX rewards to continued and sustained performance of the Methodologist’s product, by disbursing an INDEX token boost based on revenue generated by the coop from the product, which would incentivise managers to optimize product performance.

2- Increase the INDEX vesting time from 2 to 4 years, with a 1 year cliff to make sure community methodologists are committed to make their products a success on the long term, especially that there is no reputational risk for failure here, and holding INDEX for longer periods is the best way to make sure the community indexes are well managed until they have escape velocity!

The above still needs fleshing out in numbers as I mentioned before, but I definitely think it provides better incentive mechanisms.

Thanks for the feedback. As you’ll see the full time contributor roles vote already passed unanimously and has been implemented. The community methodologist post above is purely a re-hash of the bonus awards based on feedback saying it was too discrete, essentially the same point you are making which is that we should spread the rewards over a longer period to align incentives. It might be worth dropping a note on this post with your thoughts on moving certain amounts of money requiring an IIP. While I see your point, it could slow us down, especially if we see outcomes like the recent TTI vote where large holders don’t vote so we end up struggling to move forward.

On the suggestions:

There is already a scheme for point 1 called the Methodologist Bounty, which we chose to forego along with the fee split (which would’ve had the same effect in terms of incentive to grow product) so that we could maintain a role within the community but still allow the Coop to retain as much revenue as possible. Given your recent posts on DPI AUM and the threat of TTI/MVI for taking away liquidity, I’m sure you’re acutely aware of how the methodologist bounty works and that with a 6 month headstart DFP is doing pretty well at defending the full monthly allocation of those tokens. If we went with the method as you suggest we might get 5% of that bounty at $10m AUM which is 2000 tokens/month so pretty similar to what we receive as full time contributors. So you’ll see how this changes the relationship with the community and other methodologists, and is something we wanted to avoid with this solution.

On the second point, 4 years is absurd and longer than the vesting period for the founders of Index Coop. The methodologist bounty is also relevant here given the 40,000 tokens DFP receive every month with no vesting requirement, compared to the full time contributors who are getting roughly 600/month and have 6 month lock-up.

As I think the post explains, we tried to get a win-win where community members can maintain a good relationship within the Coop, without conflicts of interest. Meanwhile the Coop receives maximum revenue. If we linked as you suggest then during a bear market there would be no incentive whatsoever for methodologists to keep working on the product. There is a caveat in both posts that this is a trial framework and will be reviewed after launch (3 months after inception specifically for all FT contributors), at which point the community can review progress and hold contributors accountable.

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Support the amendment to comp structure!

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I voted FOR. I agree with this revised framework. It makes sense to me and helps eliminate the agency problem.

I agree with @DarkForestCapital I believe this is vesting period is too long.

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