[RFC] Uniswap Delegate Reward

Summary

StableLab’s proposal “Delegation of UNI to Active but Underrepresented Delegates” from last year highlighted key issues in governance participation in Uniswap and the lack of incentives for governance participants who are crucial to a healthy governance ecosystem.

With governance participation costs expected to rise due to market activity, such as increased gas fees for voting and an increase in governance proposals and assessment, we see an opportune moment to introduce a delegate reward program at Uniswap DAO. We believe that this is an ideal period to propose and discuss the Delegate Reward program for Uniswap.

We propose a 6-month program with a total budget of $600K in UNI to incentivize and reward Uniswap delegates. To determine these rewards we will consider three main factors: Voting Participation, Communication, and Badge Ownership.

Proposal Background

StableLab’s “Delegation of UNI to Active but Underrepresented Delegates” proposal proved that accountability and delegate incentives indeed lead to more active and secure governance. For example, all of the delegates who participated in the initiative showed a 100% voting participation rate over the past 3 months. This kind of active governance ensures proposals are actively reviewed and assessed, preventing malicious proposals from passing while also meeting quorum for beneficial proposals.

Onchain governance helps secure governance further, but with each voting cost more and more and executions of proposals can even cost a few hundred USD as the Ethereum gas fee is increasing, it is not sustainable nor fair for delegates to bear all the cost.

Proposal Focus

Leading DeFi protocols like AAVE and MakerDAO feature Delegate Reward programs varying in requirements and reward amounts. Despite the differences, they commonly emphasize delegate participation and communication. And in many cases, delegate compensation is factored by the voting power as well, thus the larger delegates often get a greater share of the delegate reward compared to smaller delegates.

StableLab has experience designing Delegate and Governance reward initiatives across various ecosystems. In the case of Uniswap, our goal is to prioritize collective growth and accountability over typical competition. The Uniswap community and its governance consist of various esteemed and reputable contributors, fostering synergy through collaboration.

Proposal Details

Participation and communication as Delegates requirements that are common across delegate compensation will be applied. However, similar to “Delegation of UNI to Active but Underrepresented Delegates”, rather than calculating the voting record since the start of delegate launch, it would be examining for the past 3 months (which also means the delegates should at least should have contributed for 3 months) to allow more participation. Generally, the reward is a linear scale where the better the performance such as participation rate, the more reward such delegates get. However, for simplicity and also to be more inclusive, the proposal will use 80% for the past 3 months as a benchmark for both participation and communication.

Also generally, the reward is factored by the amount of token delegated. For certain protocols, one needs to be top 8 or 12 to be considered for delegate compensation. However, to be inclusive, we will implement a mixture where we borrow the idea of a badge system. 500,000 UNI or above delegated , of which 50+ delegates have such amount according to tally, have “Badges” and can apply for Delegate Reward if they also fulfill participation and communication requirement. For those delegates that have less than 500,000 UNI delegated can also apply for the “Badge” with endorsement from delegates with 500,000 UNI +. There’s no limit on how many these 500,000 UNI + delegates can endorse as this mechanism is in place to prevent spams but also give ample opportunity to all the genuine delegates.

While there can be other factors to be considered such as need to author or co-author a proposal, we believe the above three requirements are good place to start for RFC.


Example from MakerDAO- Pre-Endgame

More Details - Communication Metric

Communication means an interested delegate will need to create a delegate profile post, make an introduction and also post voting updates that require reasonings behind their votings. This is crucial in ensuring healthy governance as the reasoning allows the governance and the community to challenge if needed and eventually allow a more active, vibrant, and accountable governance environment.

Example of Delegate Platform- StableLab

Proposal Budget - 6 Months

In total, the budget will be $600,000 worth of UNI for 6 months.

StableLab will receive compensation for overseeing the program in addition to our current delegate responsibilities. To clarify, StableLab will NOT receive delegate compensation to prevent double-budgeting.

For Delegates, a total of 94,000 USD per month is allocated, to be distributed among qualified delegates. For instance, if there are 10 qualified delegates, each delegate would receive $9,400.

Position Description Cost per month
Management Operations of the Uniswap Delegate Reward Program by StableLab $6,000
Delegate Delegate Compensation in Total $94,000
Total $100,000

Next Steps

As this is a RFC, the contents may change significantly based on community feedback before it’s moved to an offchain vote. We welcome and appreciate any and all feedback and suggestions to improve this proposal.

5 Likes

Thanks for the post @Doo_StableLab and we’re happy to see these discussions starting to happen!

I’m a little confused by the proposed setup: Is anyone who holds a badge and has over 80% voting and communication considered “eligible”? Then the monthly budget gets evenly split across all eligible members?

If so, I think some Sybil or spam scenarios might occur where badge holders nominate many small wallets and take up more “eligible” spots than “deserved,” especially since the requirements are rather lean and don’t take much effort to “game”. Some sort of token weighted structure such as the quadratic method Maker used in your image might be more appropriate in my opinion, and/or implementing a true “cutoff” (albeit lower UNI such as 250k or 100k).

2 Likes

Yes, that is correct. So that also means even if a delegate is not eligible for certain month as one’s voting record dips below 80% (at the time of recording) . If the delegate is able to have it above 80% the next month then one is eligible.

The idea is that those who 500k + UNI delegated right now are reputable contributors who wouldn’t randomly approve many small wallets that are just to game the system

We recently posted our Uniswap Gas Rebates Program, and I wanted to share my thoughts on these two programs and how they can complement each other.

Our goal with the Gas Rebate Program is to encourage further decentralization of Uniswap voters as aligned with [Delegation of UNI to active but underrepresented Delegates] proposal. These gas rebates make it easier for those with UNI to voice their opinion, especially those without gas costs sponsored by delegators or expensed by a company.

This Delegate Reward program seems to be more focused on compensating large and active UNI Voters . Being a delegate is a time-consuming task, and it does deserve compensation, but to be clear, these two proposals tackle two different goals imo.

Saying that, I have a few thoughts on this proposal:

  • Arbitrum is currently working on a delegate incentive program that utilizes Karma. Maybe they can chime in here to suggest some improvements from their experience.
  • Is there a minimum % for the communication metric, i.e., 80%, and will this be a contributing factor to determining the compensation?
  • Depending on how this proposal spans out, we could automate payments through UMA’s OO, and StableLab can participate in the delegate program themselves due to the reduced administration work required.
  • If both proposals move forward, we should work together, to prevent double dipping of delegates receiving payment from both programs.
3 Likes

In general, we’re supportive of this initiative. We have clearly seen and noticed ourselves a greater uptick of activity around the forums and proposals.

On the point of sybil, if the minimum req. is 500k UNI then we don’t see how it makes sense for anyone to game it.

Lastly, good points raised by @Bobbay around gas costs. We’re not aware of UMA’s OO so it would be good to explain how would that work.

1 Like

If the requirement is 500k UNI as a minimum, this makes sense to us and we are in favor. Don’t think the badge holder side of things is necessary at this point. Maybe decrease it to 250k as there are a few players I can think of that have that amount and are very active and should be included.

As for @Bobbay’s proposal, if costs can be cut this would be definitely interesting to consider, but are also fine with Stable Labs spearheading this for the first few months as coordinator/lead.

@0xkeyrock.eth You can find an explanation of how UMA’s OO would work in our gas rebate proposal under “How it Works”.

On how UMA’s OO would apply here, this would depend on the eligibility requirements to be a recipient of the delegate rewards. They don’t seem to be set in stone in the proposal yet.

I echo the comments on the badge and don’t think its necessary.

1 Like

Thanks for tagging Bobby. Our team at Karma implemented the delegate compensation dashboard for Arbitrum to automate all the tracking. The program starts in March, so we don’t have data yet.

Few things you might want to consider:

  1. In the Arbitrum’s incentive framework designed by SeedLatam team, admin gives out bonus points to most valued contributors of that month at their discretion.

  2. Anyone who contributes to a proposal that goes for a vote gets additional points.

  3. We are considering introducing peer to peer endorsements. So delegates can choose to endorse other delegates contribution for that month. This does open up things to collude but if the weightage is low, may be there is not enough incentive to collude.

1 Like

Hi Bobby,

Yes, that’s the percentage we are thinking

We are open to different ideas. Though it would also depend on cost of such admin technology offering

Delegate compensation accounts for gas cost so would be better to have it as part of Delegate compensation plan

1 Like

We want to support Uniswap DAO and make governance participation a lot more attractive and seamless for the active participants. No costs are associated with using UMA’s OO.

Yeah, happy to put it together and find a way for it to work together.

2 Likes

For what it’s worth, 250k was a typical delegation size during the last year’s Uniswap delegate race. Quite a few got that amount, including yours truly.

1 Like

That sounds like a great tool to integrate. Though might require reducing delegate reward total by 50k to make a room for it.

Of course, the cost is not fixed and will love to have the community’s opinion.

No need to reduce by 50k! As you said earlier, delegate compensation is part of gas costs, so feel free to keep the budget as it is or adjust it based on community feedback.

2 Likes

We are excited about this upcoming proposal and believe there’s a lot of synergy where both active delegators and delegates can share the benefit from the growth of the protocol

https://gov.uniswap.org/t/rfc-activate-uniswap-protocol-governance/22936?u=doo_stablelab

3 Likes

Great offer.
And I like the correct justification for gas - now the cost is just off the charts.
The only thing that confuses me is the number of delegated UNIs
It seems to me that they are slightly inflated, given that the program is limited to 50 participants.
In addition, please note that all existing delegations are canceled upon acceptance of the related proposal
https://gov.uniswap.org/t/rfc-activate-uniswap-protocol-governance/22936

Thanks for pushing the ball forward @Doo_StableLab. I am generally supportive of experimentation here, but I have a couple thoughts:

  1. How will we know if this was a success? I’m wary of rewarding participation for participation’s sake. Ultimately if the protocol is spending UNI out of the treasury, it should be in service of generating good outcomes for the protocol itself.

  2. If we’re looking at this like an experiment, I think it’d make sense to partner it with some research that was being discussed at GovSwap on Tuesday. Will let @noturhandle and Gab from @she256 go into more detail, but they have a plan to map delegate responsibilities and competencies that I think would bring a bit more rigor to future delegate comp discussions.

With the Arbitrum airdrop last summer, we had a bunch of teams suggest liquidity mining in some form or another. We successfully combined those teams into a unified proposal and have seen a fairly successful program on the back of it. I think this might be another opportunity to gather a couple of related ideas (this proposal, @Bobbay’s gas rebate, and the research) into one vote so that they can run simultaneously. While we’d have to spend a bit more time crafting this up front, their combined results could better inform the next time we revisit this as we iterate toward a sustainable and scalable solution.

Thanks for your comments!

There are two ways of looking at it. First, the important connecting point would be why is participation important in the first place? We have seen many DAOs recently suffering from governance attacks ranging from Beanstalk to most recently, Indexed Finance and also Tornado Cash. A higher participation allows more assessment to the proposal to help to reduce malicious votes from passing. In addition, in DAOs with relatively high quorums like Uniswap, such participation help to pass votes that are beneficial. Therefore, participation contributes to both security and growth.

The second point would be there indeed can be tasks such as drafting effective or beneficial proposals if the community wants to tie to beyond participation.

I look forward to hear details, but ideally, what @noturhandle thinking should be different from what they had in AAVE where literally only one delegate was selected to receive the reward. Though their after campaign stat shares were interesting.

Hey @Doo_StableLab :wave:

During the GovSwap event earlier this week, a number of participants discussed delegate compensation. Naturally, discussions centered around this RFC.

Overall, we have broad consensus that delegate compensation is both necessary and a goal for Uniswap. Below, I’ll share the main points made during the workshops and the group’s final suggestions.

Questions

  1. Where are we now?
    • What are the current demands on Delegates?
    • What currently incentivizes delegates?
    • What is the current composition of delegates (expertise, etc.)
  2. Where do we want to go?
    • What is the ideal composition of delegates?
    • Who is not in the room that should be?
    • What do UNI stakeholders want delegates to do on their behalf?
    • What does the Foundation want from delegates?
  3. How do we get there?
    1. What is the goal?
      1. Same as Labs?
      2. Same as Foundation?
    2. What is the Job Description?
      1. Responsibilities?
      2. Requirements?
      3. Expectations?
    3. How do we incentivize the right activities?
      1. Who decides which activities?
      2. What kind of compensation?
        1. Monetary
        2. Non-Monetary, e.g. reputation
        3. Base
        4. Performance
      3. Who provides checks and balances?
      4. How do we change this over time?
  4. Defining an owner
    1. Who should own this?
      1. Delegates?
      2. Foundation?
      3. Third Party?

Proposal

The group proposes that, as part of this proposal or separately, the DAO conducts a Discovery process on behalf of stakeholders to provide answers to the above questions.

This process would include:

  • Consulting with stakeholders
  • Gathering existing contribution data
  • Evaluating existing delegate composition, roles, and responsibilities
  • Conducting market research to determine best practice

I’d love to know your thoughts.

3 Likes

I believe the result can be part of this proposal to reflect such findings. In terms of logistics, as the topic is something the community already thought about. Instead of putting seperate voting for the working group. It might make sense to you and I and any other interested members to coordinate, and conduct the research together for 2-4 weeks.

Then using that findings, we can have another RFC based on such feedback. Including budgets retrospectively if needed for the research we will be doing.

1 Like