As we approach OpenZeppelin’s next compensation adjustment at the end of June, we’d like to propose a change to the payment structure of our original partnership agreement. We ask the community to consider approving our next two quarterly payments in USDC rather than our typical COMP stream, starting with Q3 in July. This would effectively change our $4M annual compensation structure from 100% COMP to 50% COMP / 50% USDC. Please see our motivations and details below.
OpenZeppelin’s ongoing compensation, paid in COMP as a continuous stream, has been far lower in dollar value than originally expected over the first two quarters of this year. Due to the market conditions, of the $2M expected in dollar value, we have experienced an effective loss of nearly three-fourths or ~$1.5M. We have held onto the vast majority of this COMP throughout the duration as part of our commitment to align our long-term incentives with that of the DAO community. However, we find ourselves in a position where we need to cover FIAT based costs (e.g., auditor payroll) and other operations as part of this partnership.
If we move forward with the existing compensation structure for Q3, we would need to consider selling a large portion of COMP to cover our costs which would create additional downward pressure on the market. We do not like this approach as it would likely still incur losses for us, reduce our alignment with the community’s incentives and negatively impact other holders of COMP. Instead, it would be preferable for us to receive our remaining compensation in a stablecoin such as USDC. This would allow us to hold on to our remaining COMP long-term while still covering operating costs.
Our upcoming Q3 governance proposal would be to move 1M USDC tokens from the cUSDC market reserves and send it to OpenZeppelin’s Multisig address. Stablecoin reserves have been accessed in this way before in Proposal 56 to compensate users affected by DAI Liquidations. We have also seen recent service proposals such as Certora include a 50/50 split of USDC and COMP payments. If we are compensated in USDC for the final two quarters of this year, this would effectively replicate the same 50/50 split for OpenZeppelin’s total annual compensation.
In detail, this proposal would:
- End the existing COMP stream to OpenZeppelin’s Multi-sig
- Reduce reserves of cUSDC by 1,000,000 USDC
- Approve 1,000,000 USDC for transfer to OpenZeppelin’s Multi-sig
It’s important to note that this would be a lump-sum payment rather than a continuous stream. Compound does not have a built-in feature to stream other ERC20 tokens. While we could make use of Sablier, we do not want to run into the same issues that we experienced in our Q2 proposal and would prefer to wait until their newer version is released with better governance support.
Given that this is a change to our existing proposed partnership agreement, we want to hear the community’s feedback before moving to submit a proposal. I’ve listed out the possible concerns and our response but please raise any other concerns that we might have missed. We’re also open to alternative suggestions on how to address our compensation concerns.
- Changing the partnership agreement - We recognize that this is a change to the original agreement and that we’re asking the community to approve a change to our compensation terms, although the original dollar value will remain the same. We think that preventing the need for us to sell COMP is mutually beneficial and we hope the community will agree. We would also expect that, if the DAO continues our original partnership into 2023, our Q1 2023 quarterly proposal would restart compensation to 50% USDC / 50% COMP each quarter going forward following these terms.
- Payment Incentives - We recognize that receiving a lump sum payment at the beginning of the quarter rather than a continuous stream may be an uncomfortable change. However, we believe that our past performance reflects our commitment to excellence and that our existing holdings of COMP will keep us aligned with the long-term interests of the community. We intend to use Sablier for streaming future stablecoin payments once their new version is released.
- Impact on USDC Reserves - We recognize that cToken market reserves are an important component of keeping Compound healthy in turbulent markets. We do not believe that the impact of removing $2M from reserves of $13M in a stable asset over the course of this year will put the protocol at risk but we welcome feedback and alternative suggestions for stablecoin payments.
Please post your feedback and signal your support below. We hope to collect enough feedback over the coming week to be ready to submit a governance proposal by next Friday, June 24th.