Thank you to the Flipside team for bringing this proposal to the table, and thank you to the community at large for providing helpful feedback. The Flipside team has proven itself to be a valuable community member, delivering high quality tools like the Uniswap V3 Fee Calculator. Furthermore, we appreciate their introduction of an innovative funding method that does not require the sale of UNI tokens.
We at a16z value Flipside’s work initiating this proposal, but voted no.
We wish to share some thoughts about this proposal to provide insight into our thinking about how to approach something similar in the future:
- While allocations to private entities to provide services are okay, community grant programs should be left to neutral community actors to administer.
- Oversight committees associated with grants should be composed of community members that are independent of the grantee.
- Flipside proposed a compelling funding method, albeit one that requires oversight and a thorough specification.
We explore each of the aforementioned points in greater detail below:
While allocations to private entities to provide services are okay, grants programs should be left to neutral community actors to administer.
The proposal had two components: (1) funding earmarked to fund a private service provider’s operations, and (2) funding earmarked for a community bounty program run by that same service provider.
We think (2) is inappropriate when the administrator of those funds has a conflict of interest with potential grantees–the allocation of community grants should be left to neutral actors. The original Uniswap Grants Program is an excellent example of how to create such a program.
Alternatively, we have no problem with (1)–DAO treasury funds going to a private service provider–given that the service provider demonstrates a compelling use for the funds and sufficient community oversight is in place.
Oversight committees associated with grants should be composed of community members that are independent of the grantee.
If a proposal involves an oversight committee to hold a grantee accountable, it’s crucial for members of that oversight committee to be independent of the grantee. Ideal members of that committee would be active community members who don’t stand to benefit from the grant directly.
Flipside proposed a compelling funding method, albeit one that requires oversight and a thorough specification.
Flipside’s proposal of using yield generation strategies to avoid selling allocated UNI is worth exploring.
This approach, however, requires the deployment of a large amount of UNI to generate yield. This should entail oversight in accordance with the guidelines above, as well as a thorough specification of the management of the funds over time.
An alternative funding method that requires less oversight is a stream grant (for example, see an implementation by Compound). While this eliminates the benefit of not selling the governance token, it allows for much more control from the DAO, as the grant can be stopped at any point via a proposal and vote.