Thanks to the StableLab team for putting this proposal together!
These are important conversations at a critical time in Compound’s growth and development. As things stand, Compound has been losing market share to competitors in the Lending markets. Many DeFi lending markets have rebounded significantly since bear market lows (Aave, Morpho, Kamino); in contrast, Compound has drastically lagged behind the competition, seeing largely immaterial and inconsistent growth since 2022.
While delegates are not completely to blame for this situation, no novel innovation, active development, or substantial adjustments to Compound’s core business model have been made over the past 18 months. In this context, we believe that if Compound is to begin incentivizing delegates, it’s worth re-evaluating what has and has not worked within the DAO and whether increased participation or more drastic change is needed.
Pros:
- Delegate engagement was a concern following the Humpy proposals; this at least ensures delegates are motivated to participate.
Cons:
- Cost: While the monthly amount is comparable, our understanding is that the annualized budget is more than some of the comparable DeFi DAOs (excluding Uniswap). A $600,000 annualized budget for delegates puts us significantly above Lido’s budget ($300,000) and 1inch’s budget ($100,000).
- Inclusion: We’ve seen this before and above in the thread, where smaller delegates, understandably, can push back against proposals that do not include compensation for all delegates. As an active delegate in several DAOs, Gauntlet can relate to both positions. However, if the DAO is to contain the budget, more delegates participating at this high-level of compensation would inherently mean a significantly larger budget will need to be allocated, thus something will have to be given.
- Governance Voting should decrease, not increase: Since June, ~85% of the total governance proposals have concerned parameter changes (Incentives, collateral assets, supply caps, etc.). Many of these concern Gauntlet’s operations as a risk manager. We expect delegate involvement in routine voting to significantly decrease once the Alternate Governance Track is released (currently testing on OP).
A couple of alternatives to proceeding with the proposal as-is:
- Review Post-Alternative Governance Track Effect
The DAO can continue to review and debate compensation packages while waiting for the delegate lift after deploying the alternative governance track. While delegate involvement should be encouraged regardless, it may arise that less compensation is required to drive engagement than proposed here.
- Performance-based Compensation
As such, rather than risk bloating delegate engagement with a significant incentive budget, what if we created DAO-level KPIs for engagement to align the DAO with long-term goals, such as winning back total market share, increasing revenue, expanding TVL, etc.? A long-term benchmark might help align and encourage more active contributors, rather than just participation.
Regardless, we look forward to discussing the merits of compensation in more detail.