[RFC] Delegate Compensation Program for Compound

Request for Comments (RFC): Delegate Compensation Program

Co-Authors: @AranaDigital, @PGov, @Doo_StableLab, @Mel_StableLab

Summary Motivation

This proposal introduces a Delegate Compensation Program to incentivize active participation, enhance accountability, and support sustainable governance. Delegates are essential to Compound’s governance, but lack of compensation impacts participation and retention. We propose a structured program to ensure fairness, transparency, and high-quality contributions. If this proposal passes, we will work together and incorporate community feedback to create an application to select the first cohort of compensated delegates.

Background

Governance in Compound has been live since 2020, and the protocol has grown considerably over the past couple of years, now reaching a TVL of over $4B. There have been 375 proposals so far, and as the protocol grows, there are more proposals per month than before.

However, the number of voters has been decreasing, despite their importance, likely due to the absence of a financial incentive.

Delegate Compensation Programs Across DAOs

DAO Compensation Participation Requirements Unique Features
Aave DAO $5,000/month in GHO + gas refunds. Min 20k delegation (Orbit program), 70% participation. Administrators/Service Providers excluded.
Arbitrum DAO Up to $7k/month 25% participation, 50k ARB delegation. Points system; forum participation required.
Lido DAO Max $5k/month per delegate. 70% participation, >2M LDO delegation. Code of conduct adherence required.
SKY/MakerDAO Max $4k/month in USDS. Top 6 compensated, SKY delegated. Comp tied to participation and delegated SKY
Uniswap DAO $6k/month per delegate Top 16; participation system. UniswapDAO is a delegator, supporting quorum.
1Inch DAO $4,000/month if KPIs are met. Min 500k 1Inch delegation, KPIs. Pilot, focus on KPI-based performance.

The program we are proposing aligns Compound with high-performing DAOs while allowing the CGWG to adapt incentives to meet the protocol’s unique needs.

Detailed Specification

Compensation Philosophy

The foundation of this program is to align delegate incentives with Compound’s overarching goals, ensuring that their contributions directly advance the protocol’s long-term success. By rewarding behaviors such as thorough proposal evaluation, consistent voting participation, and meaningful engagement with the community, the program fosters a culture of diligence and responsibility.

At the same time, equity and transparency are integral to its design. Clear criteria and measurable performance metrics are established to ensure fairness in the allocation of rewards. This approach not only promotes trust within the community but also encourages a sense of accountability among delegates, reinforcing a governance ecosystem that operates with integrity and mutual respect.

Additionally, community feedback will play a central role in shaping these incentives, ensuring they resonate with the DAO’s values and priorities. This phased approach ensures the program is both effective in the short term and scalable for future implementation.

Performance Evaluation

The program will employ transparent metrics to evaluate delegate performance, relying on quantifiable and objective criteria such as participation rates and existence of rationale for the voting decisions; these metrics ensure that delegate contributions are measurable and aligned with the program’s objectives. To maintain accountability, performance will be assessed through monthly reviews, with detailed data and insights made publicly available. This regular evaluation process not only fosters trust within the community but also provides a clear framework for continuous improvement and informed decision-making.

After the first pilot 6 months, for the next Delegate Compensation program, other metrics might be considered as well based on the feedback received and the results.

Governance and Oversight

The CGWG will oversee program implementation and performance reviews. We will monitor community feedback mechanisms to allow stakeholders to continuously provide input on delegate performance and program effectiveness. In the future, to ensure compensation structures discourage behavior contrary to community interests, COI statements might be required from delegates and reviewed by the CGWG.

Implementation Plan

The Pilot Program will run over the six months. With a budget at $300,000, the pilot will be allocating $50,000/month, which will allow Compound DAO to evaluate key metrics, including delegate engagement, governance outcomes, and community feedback. These insights will be critical in assessing the program’s effectiveness and identifying areas for improvement.

If this budget passes, we will incorporate community feedback and suggestions to structure an application process and template for delegates interested in applying for compensation. For this first pilot, there will be a two weeks application process for the interested delegates, where up to ten delegates will be selected. As mentioned we will incorporate feedback to structure this application but metrics considered will likely be COMP delegated, voting participation, and community participation piggybacking off of the Compound Dashboard’s delegate metrics here. The goal will be to cover most of the current active and engaged delegates.

Once the application process selects up to ten delegates, delegates need to pass eligibility requirements to receive the rewards, which will be decided upon in a future post if this budget passes along with the application.

Proposed Next Steps

We will wait for community feedback, launch the Pilot proposal, and once passed, start on the application process to start the Pilot program. If launched, the Working Group will review metrics, conduct monthly payouts, and receive constant feedback for next iterations.

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Hey all!

Around 2 months ago, I submitted a grant application to further develop the Compensator project (Enhanced Vote Marketplace Interface). From what I previously understood, it was to proceed shortly. Seeing this now, I am just concerned about potential overlap here. Compound awarded Mike Ghen a hackathon prize for his work which I was planning to build upon: GitHub - mikeghen/COMPensator: Vote Marketplace for COMP delegates.

cc @allthecolors

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@cmrn my take is that a voting marketplace built on the COMPensator project and an incentivized delegate program would not be intrinsically at odds with one another. Unless the CGWG identifies a compelling reason to exclude delegates participating in that marketplace from eligibility for delegate incentivization, it seems to me like delegates would in principle be able to participate in both simultaneously.

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I think we can help with this and anything else requested.

Would like to get a group chat going. Will PM

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I have a natural conflict of interest here as a likely future applicant to such a program, but I support the spirit of the proposal. Are the plans for how many delegates to incentivize and how much to compensate them are based more on the expected benefits to the DAO, or is it more a question of matching what has been done historically in DAOs of similar prominence?

Of the DAOs listed in the table with delegated compensation models, Compound is the least capitalized except for 1Inch, but even 1Inch is better capitalized than Compound on a stablecoin basis.

I’m inclined to be in favor of broadening participation (at the expense of diluted compensation per incentivized delegate) if it means a more robust cohort of active delegates. Would halving the per-delegate compensation to double the participation rate be so severe an undervaluing of their service that it would actively drive away professionalized DAO governance teams (who, in my experience, generally do add meaningful value to governance)? I’m generally curious how important folks feel it is that Compound match the “going rate” for incentivized delegation given its smaller available runway.

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Do you mean delegates are voting less or regular users? With the upcoming staked COMP plans couldn’t we just restrict APR to those who vote? Thus we get to solve the problem with 0 added cost (besides the obvious dev costs).

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Hi, it will be up to ten delegates

Fewer and fewer delegates are voting.

Many of the delegates don’t have COMP themselves but rather delegated so this wouldn’t actually solve the issue. Also staking COMP plan itself still has further timeline from what we understand.

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What CGP or what’s won in Hackathon is not necessarily at odds with initiatives by DAO participants. Of course, it’s up to DAO to proceed what they think is the best path. But Compound Governance Support Working Group has been planning for delegate incentive program since the inception of its working group so it was something that has been communicated to Compound DAO regularly.

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The full amount would be $5,000 per month for Delegate which is inline with what other major DAOs have provided. But the eligibility to receive the full amount would have several conditions so effectively, many delegates are likely to start with half or $3000 and then once they are able to achieve the metric, receive the full amount.

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Can we insist on a minimum COMP ownership requirement for delegates? This seems like an obvious thing, people with 0 invested won’t do what’s best for COMP owners, there’s a reason most company board members are also large stockholders. At the minimum I’d insist delegates are paid in COMP and must keep it locked up for 3 years at a minimum.

“Fewer and fewer delegates are voting.”

I’d also say we should probably remove the delegates who aren’t voting.

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Though that might sound like a solution, fewer active delegates would expose it to greater governance attacks. If fewer active delegates are able to get more COMP delegation, then maybe it can be mitigated but Compound governance, like many other governance, do not have active re delegation by big holders.

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To be transparent, @cmrn hasn’t had the grant proposal passed, but wanted to talk in private. But we believe it’s better to discuss in public

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Either way, we appreciate all the ideas and would recommend the community to share their ideas here

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Whether or not the grant passes, at this point i’m still making the chat. I gave you the opportunity to invite me yesterday and you declined. I don’t believe you’re acting in good faith, but I hope you will in time.

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Ah Ok, as long as we can share in public about the discussion later, I am ok. For CGP, I been strongly proponent of going via public like Questbook. Seems like there’s misunderstanding.

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Do we have more applications than we have delegates? If not I can volunteer haha.

" I created a chat for delegates/community to engage (feedback/coordination) on Telegram. You and any other community members/delegates are invited: Telegram: Contact @compdelegates"

I assume the COMP discord is the best place for this.

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Why not Discord? Many more people are active on TG. Delegates already have a chat there, so what I mentioned should be complimentary (as it includes the community).

Why not forum? TG is just for quick feedback. It can be useful in pre-forum discussion. It should not detract from and if we believe it is, there is no stress in closing it.

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Discord is an official communications channel for COMP, is organized into communications channels, and it’s better for PC plus has less scammers/spam.

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Hi @Doo_StableLab and other contributors, thank you for proposing this Delegate Compensation Program! We see a lot of potential in this proposal to drive greater participation and foster diversity in Compound governance.

We have been actively engaged in governance over the past four months, voting and providing feedback on proposals, and we’re excited to continue contributing through this program.
We appreciate the clear evaluation criteria for incentivized delegates outlined in this proposal, as tracked through the Delegate Analytics Dashboard. However, we have a few suggestions for further discussion:

Clarifying the role of community participation

The proposal mentions that community participation will be factored into delegate evaluations, but it’s not entirely clear how this will be measured.
Based on the Delegate Analytics Dashboard, it seems to primarily focus on on-chain voting participation for scoring the delegates.

Inspired by Arbitrum’s Delegate Incentive Program, which incorporates voting rationale into scoring and community feedback, a similar approach here could enhance transparency and better reflect meaningful contributions. If you already consider this point, it would be great to clarify this in the evaluation logic.

Ensuring support for delegates with smaller COMP delegations

The current scoring system gives certain weight to voting power, which could demotivate smaller delegates despite their active participation. This may reduce diversity in the governance ecosystem.

An idea: introduce small incentives for active but under-represented delegates. This could help keep them engaged and encourage deeper participation, strengthening the governance community as a whole.

We hope these ideas support the program’s goals of fostering a more inclusive and effective governance ecosystem. Thank you for considering our feedback in advance!

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Glad to see positive development in the area of sustainable governance in the DAO. As these programs have offer successful outcomes in other DAOs, I am in favor of testing this out in Compound.

I’d like to second the comments made by @Tane

Additionally I’d encourage learning from the program and not capping the number of delegates which can be included and if it comes to that, then discouraging plutocratic voting in choosing the final list of delegates.

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