I’m not particulary motivated in discussion on that topic, as it feels to me like beating a dead hourse. It’s mostly year-long whining about how much airdrop is deserved, but fine, I’ll share my thoughts yet again.
First of all, nice job with airdrop-emulator.
Let’s start from the beginning, to see what we currently have and what we trying to achieve here. Let’s refresh memory on how it started:
2,396,307 COMP have been distributed to shareholders of Compound Labs, Inc., which created the protocol
2,226,037 COMP are allocated to our founders & team, and subject to 4-year vesting
372,707 COMP are allocated to future team members
4,229,949 COMP are reserved for users of the protocol
775,000 COMP are reserved for the community to advance governance through other means — which will be announced at a future date
As you can see, while users of protocol have about 42% of total supply, all this COMP where scheduled for linear distribution over 4 year period. So vast majority of voting power stayed concentrated in hands of shareholders, founders and team.
And this isn’t a bad thing by itself. Compound governance mainly controls important protocol parameters, which can’t really be adjusted by average user without good understanding of not just protocol functions, but often how economy, broad markets
and even tokenomics work. And adjustments to protocol often require coding knowledge, ability to write code, test it, audit it prior than putting it into governance. That is the task many just can’t achieve. It really does make sense that Compound governance require substantial amount of voting power to be able to create proposals. (And i not even completely convinced that lowering it to 65k was such a great idea) And what is maybe more important, Compound governance works. It’s functional mechanism, not just some instrument of creating community polls.
So, that 4,229,949 COMP are those, which are currently disributing to users of protocol with aprox 3,500,000 remaining for distribution at the moment. Approach was quite innovative and not really far from being called groundbreaking at that time. Now, when many more projects followed it might not look as such, as there been some improvements to distribution model discovered by other projects. One of that improvements is so-called community airdrop. It’s something what Uniswap did later,
and what Compound have not. One of the main purposes of community airdrop, wasn’t really to enrich masses, it’s more about creating engagement and strong community, aligned in long-term success of the project.
And here we come to that community airdrop. First we are not in same position now, as if it was done when token launched. At that time you can call it zero-value governance token. But now it’s just not anymore. It’s traded on regulated exchanges and now is an asset which DO have monetary value, and is a taxable event as well. We not just talking about distribution of 500 000 voting tokens, but about distribution of approx 200 million of value. And much care should be taken.
Ok, so we are talking about distributing not just voting power, but a monetary value. But to whom? Well, since that tokens are taken from user distribution than it should be users of protocol. Then what is the problem with current distribution?
Well, there are some.
To be clear, i’m big fan of capitalism. Not because it’s perfect (it’s not), but it’s pretty much best what we have now. So, there is nothing wrong with the fact that bigger capital have more gains. The problem is when it grabs vast majority, like almost all. And this is the problem with current distribution. If you are a user of Compound protocol, maybe even more or less active, using it for either personal or business purposes. Might be you have 5 or 6 digit value in protocol. But you still going to get scraps from that user distribution of governance tocens, as you massively diluted by big capital. And that is NOT a good thing.
Community airdrop adresses that particular problem, decreasing that massive advantage big capital have to a degree. Not to the point of making everybody equal. But to shift some power back to community. That makes sense, as if we empower more users they eventually become stronger and more engaged players, they might be able to develop and pursue their own agenda, their values. WE need more of that both in broad society, and in particular communities, which share same interests and values.
That is what is about from my perspective, it’s about letting active users to collect fruits of their engagement. And the more you engage, the more it should scale.
It might be a bit long introduction, but it was kind of necessary, so we could look from same perspective. So, the goal of community airdrop, is to reinforce engagement primary. It’s not that much about decentralisation. In such a big project as
Compound is, it’s not viable for everybody to be able to create a proposals left and right. We can’t achieve that no matter what. And it’s completely unnesessary, person who is complaining that he can’t create a proposal more often than not is not really able to propose anything meaningful. And actually work on implementing that. There are some people in community who do, and governance should be about delegation of power to that users, not about airdropping tokens to them anyway. (but that’s out of scope of current discussion)
So, our goal is to provide additional push for people who already pushing for something. I as well see no value for Compound to deliver anything to addresses with less than 0.01$ interest accrued. This are not users, they were never really used Compound, and i see no reason why should our power be wasted on anything like that. I would strongly advocate for zero, and if we feel charitable for some reason than 1 COMP is a max in my opinion what should be considered. It’s about 400$, which is very generous for doing literally nothing useful.
Second group is group from 0.01 to 0.5. Or might be even to 1$. These aren’t really an active users either. It took very little usage to get 1$ of interest, and that argument somebody presented, that he supplied ETH and iterest was low. Yeah, but
you not really supply collateral to earn 0.01% APR. That’s not even peanuts. You use that collateral to borrow something, and interest on stables was double digits for a very long time. So telling that somebody is active user of Compound and he not
managed to earn 0.01$ in interest is damn LOL.
But ok, that’s so-so users, but still users. They kind of fit into description. I see airdrop of 5 COMP kind of appropriate to an extend (more about that later)
And here we come to third, largest group earned from 0.5$ (or 1$) to whatever. That’s primary userbase, actual users who did used protocol. If we are talking about doing community airdrop, that is where most of COMP drop should go. And weighted by
their interest accrued.
There is some nuance i want to suggest though. Last 2 addresses in the list earned amounts vastly bigger then anybody else. I suggest to exclude them from calculations. Not from airdrop itself, but from calculations. I suggest to distribute to them exactly same amount as third address from the end of the list recieves according to formula. And the reason is because it’s overall a community distribution. Interest earned is used as a measure of activity rather than size of capital. Big capital can still very much participate in ongoing distribution and isn’t diluted to same point as small users.
Now, when we outlined main thoughts on every group and starting to talk about numbers i want to highlight that the idea to reward somebody for actions done in some distant past doesn’t really resonate in me much. And certanly it feels extremelly
wrong to distribute 30 COMP to addresses which achieved only as much as 1$ of interest. Like 12k$? Are we even serious here?
But here is the concept of what possibly can be done with that list.
First it shouldn’t be airdrop. It should be claim only, for any address, any amount. Big chunk of that addresses in list might be dead and not active anymore. We don’t want COMP to be send to dead address.
I suggest to implement additional requirements for users to be eligible. For example, let’s say user address is eligible for 30 COMP according to the formula.
Than, to be able to claim it, user is required to provide equivivalent value amount of LP tokens in Uniswap v2.
If it’s 30 COMP, then to claim it, user need to stake 30x400$=12k$ of COMP/ETH Uniswap V2 liquidity tokens, lock them in staking contract for 1 year, and than can claim his 30 COMP. Which, ideally, would become gradually unlocked and able to be
withdrawn linearly overly one year period.
I hold very small amount of governance tokens personally. It’s not me who can decide how value, created by other people may be distributed. My main point is here: it’s not about charity, it’s not about giving away, and it’s not about decentralization for the sake of decentralization. It should be about empowering active userbase in doing something they already doing. Kind of fixing a little bit a disbalance in distribution, vastly diluted by massive capital holders. And i don’t believe that doing something in very distant past justifies giving away 10k$ of value.
But qustion is: Are we fine that vast majority of tokens dedicated for users going to go in to pocket of very few owners of big Capital? Because if nothing is done, that will how it will eventually end with current distribution mechanic.