Findings from Uniswap Delegate Reward Working Group

[Doo_StableLab]

Hello Uniswap Community, we have formed a Working Group to assess the current landscape of Uniswap governance and delegate responsibilities, all to build the framework for a successful Delegate Reward Initiative. After over a month of research and response gathering, we are happy to share our findings.

The Working Group’s tasks were split into three groups:

1. Stakeholder Interviews
2. Evaluating existing delegate composition, roles, contributions, and responsibilities
3. Conducting market research to determine best practice

Group 1 : Stakeholder Interviews

Aim:
Consolidate feedback from stakeholder interviews across Active, Small, and Inactive Delegates, Large Investors, and the Foundation regarding the proposal to introduce rewards for Uniswap delegates.

The primary goal was to evaluate the community’s sentiment towards delegate rewards, understand the motivations of current delegates, and understand the goals that delegates and the broader stakeholder group hope to achieve with delegation writ large. The consensus points towards the need for a formal compensation scheme for delegates, though perspectives on implementation, oversight, and value vary.

Conclusion:
There was a general consensus across most categories that a compensation program for delegates could improve participation quality and dedication. However, the enthusiasm varied, with those deeply involved in governance showing the strongest support.

The interviews illustrated a variety of concerns and reservations about delegate compensation across different stakeholder groups, ranging from the potential for misaligned incentives to the practical challenges of implementing such systems.

The primary reasons for supporting compensation were to ensure active participation, professionalize the delegate role, and align delegates’ activities with the strategic goals of the DAO.

Alternatives were also proposed, including defining better paid committees with discrete scopes and experimentation with futarchy and information markets.

In contrast, those less active or indirectly affected by governance outcomes, such as Liquidity Providers and Inactive Delegates, were less clear on the value and urgency of rewards, but recognized the potential benefits of incentivizing high-quality governance contributions.

Full research can be found here: https://butterd.notion.site/Uniswap-Delegate-Rewards-Stakeholder-Interviews-2ff124cbfd4a4203ae4327f096bb1533

Group 2 : Evaluating existing delegate composition, roles, contributions, and responsibilities

Aim:
Evaluate existing delegate composition, roles, contributions, and responsibilities via quantitative and qualitative analysis.

Conclusion:
Delegates help with the governance security. And their role has been becoming more important as the time goes, evidenced by the number of voters dropping but the voting power still being holding due to mostly delegates participating. Delegates contribute to discussions, voting, writing, reviewing proposals as well as participating in various working groups. Therefore, there’s time and effort put in being a delegate in the DAO ecosystem.

Full research can be found here:

https://docs.google.com/document/d/1ZAFCBSQP-VeqU-uo0mdyi7RgsbCsboN5GRp25GCoCRE/edit?usp=sharing

Group 3: Conducting market research to determine best practice

Aim:
Evaluate other models for delegate compensation in the ecosystem to identify possible best practices for the Uniswap DAO to model. This approach aims to build on observed successes in protocols that have a similar mission and delegate profile to Uniswap, and ultimately save time while iterating on models that are already working.

We chose to explore the Maker DAO and AAVE delegate compensation programs. These were chosen because they both have a track record of observed success and the programs appeared to match the scale of participants that we believe a Uniswap Delegate program would include.

In this report, we present a high-level overview of both programs followed by a conclusion that identifies components of each that we believe would be of value to a Uniswap delegate compensation program.

Conclusion:
a.Delegates’ compensation should be based on their commitment to the protocol based on criteria that are specific, quantifiable, and objective.

b.Should include periodicity to remove stale delegates and add fresh delegates.

c.Compensation should include gas fee component

d.DAO’s should assess their own unique needs

e.Limits should be set.

Full research can be found here: https://docs.google.com/document/d/1DCRQeDt3VJGDbcUWnxURMGiFRBC68SsBJGqhF864Cns/edit?usp=sharing

Next Steps

-We will appreciate the community’s feedback on those findings. We will potentially proceed to offchain votes.

-We will also soon be posting a RFC to compensate Uniswap Delegate Reward Working Group members for their time and effort so far and potential further contributions for a short term. It will be sent to Multisig held by the Accountability Committee, in which any leftover will be used for any future initiatives by the Accountability Committee. We hope for the community’s support.

Once again, we want to thank the following members for their time and efforts:

@noturhandle
@AbdullahUmar
@Bobbay
@Doo_StableLab
@coltron.eth
@Sinkas
@Juanbug
Gab from @she256

[kfx]

Appreciate the work. One aspect that I don’t see discussed in the report is legal concerns. If the DAO itself becomes more vulnerable from legal actions because its members are paid then this is something should be clarified before any proposals go to voting. Moreover, maybe it will be argued that the individual delegates also have higher levels of legal responsibility if they’re paid.

In the interview, I was surprised to learn that I was the first to mention this concern, especially as US-based and larger delegates probably are in front of the line.

[cp0x]

Thank you for your research and hope to have a proposal out soon.

[ChristianDike]

@kfx

One aspect that I don’t see discussed in the report is legal concerns. If the DAO itself becomes more vulnerable from legal actions because its members are paid then this is something should be clarified before any proposals go to voting. Moreover, maybe it will be argued that the individual delegates also have higher levels of legal responsibility if they’re paid.

@kfx i agree with you that this is a key issue. looking at the way Uniswap ecosystem entities are structured from a legal perspective, it seems that the Uniswap Foundation does not serve as a legal wrapper for the DAO.

this will mean that delegates/members may be exposed to legal liabilities arising from their activities and entitlements within the DAO. ideally, a legal wrapper will provide DAO members with limited liability.

its something worth considering seriously within the context of assessing Uniswap governance and delegation responsibilities.

[NathanVDH]

I think the fact that only a couple of people have responded to this says it all. This is not the only DAO I participate in, but I think it’s the least active by far, and that’s including projects that are way below its valuation. A lot needs to be done to get governance going and I think two of the main things are: give the DAO real things to decide, compensate the delegates at a similar rate to other DAOs.

[Boardroom]

We appreciate the Uniswap Delegate Reward Working Group’s thorough research. The stakeholder interviews and market analysis provide valuable insights for informed decision-making. We’re excited to contribute to this discussion and suggest initiatives that address the key challenges and opportunities identified in the research.

Challenges

The research reveals several critical challenges in the current governance system. The stakeholder interviews also highlight concerns about the potential misalignment of incentives and the need to ensure that rewards promote genuine, long-term engagement rather than short-term exploitation. Furthermore, there is a clear desire for a more transparent and trusted system that allows the community to recognize and validate all governance participants’ diverse roles and contributions. Addressing these challenges presents an opportunity to create a more holistic, inclusive, and effective governance model.

The market analysis shows that most existing compensation programs rely heavily on objective metrics, such as voting participation and proposal creation, which may not capture the full spectrum of valuable delegate contributions. @StableLab has done a great job tracking some of this in the past, and other tools exist that quickly index this type of activity and performance in real-time. However, this approach may fail to capture delegates’ full range of valuable activities, such as community engagement, new initiatives, IRL activity, working group contributions, mentorship, and knowledge sharing. To create a truly comprehensive and effective compensation system, Uniswap could go beyond these baseline metrics and find ways to recognize and incentivize diverse contributions.

Suggestions

To address these challenges and opportunities, we suggest exploring a comprehensive approach to recognizing and incentivizing governance contributions. By leveraging on-chain data and EAS peer and trusted third-party attestations, Uniswap could create a holistic, transparent, and trusted system that captures the diverse roles and contributions of all governance participants, as stated:

“Delegates contribute to discussions, voting, writing, and reviewing proposals, as well as participating in various working groups.”

This approach involves creating dynamic, verifiable records showcasing each participant’s achievements, activities, and impact within the Uniswap ecosystem. Peer and institutional attestations would allow community members to endorse and validate contributions, fostering active participation and high-quality engagement.

1. Real-time onchain and offchain governance and forum data could provide the baseline for becoming a distinguished delegate.
2. To expand on this initial baseline, detailed on-chain schemas would be created through the Ethereum Attestation Service. Peers and trusted institutions could vouch for one another over various metrics, such as proposal participation rates, the value of forum contributions, attendance at governance calls, and working group evaluations.

Implementing this system could bring numerous benefits to the governance process, but for the purposes of this discussion, they can enable informed decisions about delegate compensation and incentivize valuable activities. By promoting trust, transparency, and accountability through peer recognition and validation, this approach would contribute to building a more inclusive and sustainable governance ecosystem. As a team passionate about decentralized governance, we’ve begun exploring solutions in this direction and would be excited to collaborate with the Uniswap community to bring this vision to life.

Potential Next Steps

To move this initiative forward, we propose the following next steps:

1. Community Feedback: We invite the community to provide feedback on these suggestions. Please share your thoughts, questions, and suggestions in the comments below or contact us directly.
2. Collaboration: We are eager to collaborate with interested Uniswap Delegate Reward Working Group, delegates, and the Uniswap Foundation to refine the schema and develop a detailed implementation plan. If you want to get involved, please express interest in the comments or contact us to discuss this further.
3. Pilot Program: Based on community feedback and collaboration, we propose a pilot that indexes data and basic attestations for existing delegates to test and iterate on the recognition system. This will allow us to gather real-world data, identify areas for improvement, and make necessary adjustments before a full-scale implementation.

[amanwithwings]

Hey all, Aman here from DAOstar. I’ve been more of an active observer than an active participant in Uniswap governance. Delegate compensation is such a critical issue that I’ve finally decided to post something!

First off, kudos to all the working group members [I wanted to tag all of you but can’t since this is my first post:( ] for releasing this first iteration. Delegate activity should be rewarded - there is just no way around it. I believe that getting compensated will improve a delegate’s sense of belonging and will reduce conflicts of interest in the long run.

One thing I was telling @Doo_StableLab about and would like to make a note here is the need for conscious effort in creating a compensation structure that will not ossify the present distribution of power. Governance is path dependent, and not every action/state is reversible. If we decide to compensate the top n delegates by voting power like in the case of Maker, it does create a set of highly active delegate-whales. However, it will most likely solidify the governance structure as the top delegates will be incentivized to keep their positions, and it may not be feasible for smaller delegates to keep up their contributions and acquire more voting power. I don’t want to take names here but it should not be hard to find examples of where this has negatively affected the decentralization in a DAO.

In an ideal world, every UNI token holder delegates their voting power to themselves and votes on every proposal. Obviously, we will not have that. But maybe, Uniswap’s governance compensation model could incentivize meaningful participation from all levels of governance power. Maybe, it could sustain a pathway for new Uniswap-aligned delegates to rise up.

As with creating anything new, we have the opportunity to fix broken ends here. Excited to see what comes out of this initiative!

[Dario_Spina]

@amanwithwings

Governance is path dependent, and not every action/state is reversible.

This is a great point that deserves ample consideration. Compensation will increase governance participation, but aligning the incentive structure to support Uniswap’s governance goals will be key for long-term success.

Maker has created somewhat of a party system that does not seem in line with our goals here, but it served a purpose as they work towards endgame. For Uniswap, governance participation is an area needing improvement. Even more important than active participation is aligning delegates with strategic goals of the DAO and maintaining that balance.

I’m looking forward to the continued discussion and will leave a few questions to consider:

What do we want Uniswap governance to look like with an active community of delegates / voters?

What avenues are there for delegates to grow?

How can we assess the sustained alignment of delegates with the goals of the DAO?

[Tane]

We’d like to thank @Doo_StableLab and all contributors to the reports. We found them comprehensive and good to understand the current status of the reward systems for DAO delegates.

@Doo_StableLab

We will appreciate the community’s feedback on those findings. We will potentially proceed to offchain votes.

What particular proposal are you planning to put out for an off-chain vote? With those findings, we don’t find any particular direction that the working group suggested yet.