[temp check] ENS Governance Distribution Program

[AvsA]

The core of the ENS DAO is to ensure the long term viability of the ENS protocol and the Metagov Stewards believe that governance would be healthier if we had a wider set of responsible actors participating more actively on it.

The goal with this program is the following:

• Combat voter apathy. Reaching the required quorum of 1M ENS votes for an executable proposal has become harder. We believe this happens because of governance fatigue, where large delegates often get tired of monthly voting. Thus rewarding responsible delegates as well as having new ones should help.
• Increase decentralization of power responsibly. Right now the current distribution means that 6 top delegates could agree to execute any proposal.It also means that the largest delegates could stop bad proposals being voted, so they’re also a line of defense. It means distributing power should not be done for the sake of redistribution, but responsibly to parties we believe have a long term interest of ENS in mind, as well are philosophically aligned with the goals of web3
• Create more aligned third parties with the ENS ecosystem. We believe the more we can have serious parties, who have a stake in the future of ENS, the bigger the reach and long term stay our technology will have.
• Combat stagnation of voting power. We believe that while some continuity in the work of previous stewards and other parties is good, it’s also healthy to bring new voices in the ecosystem and all of that starts in the voting power distribution.

Amounts and vesting

These are the current hardcode limits for ENS governance:

• To propose a social vote on Snapshot: 10K ENS
• To propose an executable vote: 100K ENS
• Quorum needed to execute a proposal: 1M ENS

The equivalent monetary value is volatile: ENS at its launch was briefly at $50, then for many years stayed in the $6-$12 range and recently has gone up again to $25. We believe that the best way to detach governance decisions from monetary value is with multi year vesting. So all our ENS distributed in this program will be streamed using Hedgey, which will permit the receiver from having immediate voting power, but they can only access the monetary value over the 3 years as a stream.

The only exception will be Steward compensation for term 5. Due to the limits of rule 4.8 on Stewards ruling on their own compensation, we can only recommend the stream to be applicable starting on term 6 and beyond. Term 5 ENS compensation will follow the manner in which was defined by metagov term 4, distributed in two tranches at the end of each semester, in June and December. It’s effectively similar to a 1 year vesting.

Stewards

Maintaining previous compensation, all stewards are eligible for 10k ENS over the full term, paid at the end of each semester. This has been done in previous years and was always listed on the metagov budget. In order to increase this transparency, we also commit ourselves to start doing a more longer process of campaign and outreach to new steward candidates, both to get more quality candidates in the candidate pool, but also to make sure they are widely known by the community before the vote. This will be detailed later.

ENS Stream Providers

As people who have been working deeply into the ecosystem building tools for it, we believe developers who are participating in the Service Provider payment should have a vested long term interest in ENS and a larger voice on its future decisions. To ensure that the decisions are not centralized in companies but rather on the people working on them, ENS will be granted for Individual developers, NOT the companies themselves.

Each participating company will have the option to elect one representative for each 100k USDC/year of their current budget. So a company receiving 300k per year will be eligible to indicate 3 different persons, who will receive 10k ENS vested over the next 3 years (with immediate voting power). These persons must be employed in the company and involved in the day to day decisions, development and outreach of ENS (but there’s no requirement they be doing direct development or technical work).

Delegates

Being a delegate is a big responsibility that requires time commitment which is done voluntarily. Many of the top Delegates have voting power not because of individual ownership of ENS granted at airdrop, but rather the decision of small individual Airdrop receivers who have delegated to them. Because these votes are seldom redelegated (despite campaigns), it means that a person who was a delegate candidate in 2021 might be stuck for the foreseeable future with the responsibility of decisions for many voters without any compensation.

As such the Metagov Working group proposes picking 3 delegates who fall under the following criteria:

• Have voted on most of the snapshot votes in the past 3 years
• Do not already qualify on the two criteria above, as either steward or stream provider
• Their voting power is a representative of a large amount of individual delegations rather than just holding lots of ENS themselves (we understood this could be gamed by an individuals distributing their own ENS in multiple accounts, but right now we have no reason to believe it applies)
• Have shown responsible and thoughtful voting. How they voted should not matter, just the fact that they are share their thinking and engage with debate, etc

The exact process for this selection will be detailed later. The selected delegates will be compensated with 10k ENS each, with a 3 year vesting and immediate voting power.

Besides these 3 delegates we will also commit to distribute another 30k ENS through snapshot “incentivized voting” feature, over the full year. The exact process for which will be detailed later.

Other Companies and groups of interest

Metagov Working group is also interested in identifying other parties that would benefit from the program. We hope to find 3 to 5 parties that match the following criteria:

• Are building a large product with ENS at the core of their business, or participate in other organizations who would make sense to be aligned with ENS
• Are aligned with the overall philosophy of Web3, distributed applications and permissionless networks
• Are not already large holders of ENS

Conclusion

With the current distribution plan, Metagov would be distributing about 550 thousand ENS to over 50 different key parties, all who are considered responsible and important partners, who would then be aligned over the long term prospect of ENS.

This is just a preliminary temp check to see if the community agrees with the direction. Numbers, dates, amounts, and even criteria are subject to change, and the total amount is not even completely funded by the current metagov budget.

[snowdot]

A change in governance distribution sounds promising.

As an early adopter of ENS, I personally fall into the category of a small individual airdrop recipient who delegated my votes to an individual holding 1.5% of the quorum. Recently, I reclaimed my voting power after discovering that the delegate has voted only twice in the last two years.

I’m eager to contribute and share my perspectives in future discussions on this topic.

[nick.eth]

I’m strongly in support of finding more ways to allocate ENS tokens to community members and teams who will use them to further the ENS DAO and democratize its governance.

That said, I think there are some serious issues with this proposal that need remedying.

@AvsA

Maintaining previous compensation, all stewards are eligible for 10k ENS over the full term, paid at the end of each semester.

I think this should be explicitly vested, over at least a 1 year period.

I also think this may be a good time to set some norms, or propose changes to the bylaws currently being drafted, to increase transparency. Three things that come to mind are requiring conflict of interest disclosures in steward applications, setting an explicit conflict of interest policy for the DAO and working groups specifically, and requiring MG to draft a “scorecard” for stewards that includes information from previous terms, including voting and meeting participation and disposition of ENS tokens. This last needs to be handled sensitively, as in many jurisdictions stewards may incur tax liabilities for their ENS token and have no choice but to sell at least some to cover that; we don’t want to select only for stewards independently wealthy enough to be able to cover this out-of-pocket.

@AvsA

To ensure that the decisions are not centralized in companies but rather on the people working on them, ENS will be granted for Individual developers, NOT the companies themselves.

I don’t think this is a good idea. Companies can simply nominate founders, or they can require the nominated individuals to sign the tokens over to them. Setting a limited number of recipients is likely to cause issues inside a team that doesn’t have the ‘right’ number of members.

@AvsA

As such the Metagov Working group proposes picking 3 delegates who fall under the following criteria:

• Have voted on most of the snapshot votes in the past 3 years
• Do not already qualify on the two criteria above, as either steward or stream provider
• Their voting power is a representative of a large amount of individual delegations rather than just holding lots of ENS themselves (we understood this could be gamed by an individuals distributing their own ENS in multiple accounts, but right now we have no reason to believe it applies)
• Have shown responsible and thoughtful voting. How they voted should not matter, just the fact that they are share their thinking and engage with debate, etc

The exact process for this selection will be detailed later. The selected delegates will be compensated with 10k ENS each, with a 3 year vesting and immediate voting power.

This seems way too open ended. No matter how scrupulous the stewards are in finding and selecting delegates, it will be impossible to demonstrate impartiality, and accusations of unfair dealings are practically guaranteed. Any distribution needs to either be broadly across the whole qualifying delegate base (in which case it is susceptible to Goodhart’s Law) or selected by a democractic process (in which case self-voting will favor larger delegates).

@AvsA

Besides these 3 delegates we will also commit to distribute another 30k ENS through snapshot “incentivized voting” feature, over the full year. The exact process for which will be detailed later.

I worry about the unintended effects this will have as well.

@AvsA

With the current distribution plan, Metagov would be distributing about 550 thousand ENS to over 50 different key parties, all who are considered responsible and important partners, who would then be aligned over the long term prospect of ENS.

Assuming this is annually, it would cause the DAO to run out of ENS in less than 10 years, unless the DAO starts exercising its seigniorage privilege on the token.

[garypalmerjr]

I think it would be great to enhance the governance structure of the ENS protocol, by encouraging broader participation and decentralization of ENS governance and responsibilities.

I believe a well thought-out “ENS Governance Distribution Program” could increase responsibly and decentralization within the ENS ecosystem.

I agree with the need for vesting periods for ENS tokens, to detach governance decisions and participation, from monetary value of governance and ENS responsibly.

[cap]

I just finished reading about the Metagov Funding Request.

While reading through it, I was thinking about how to further increase participation and decentralize voting power.

I’m very happy to see this temp-check that already captures and improves all of my messy thoughts (from an hour ago) that were coming and going as I was reading through the Metagov Funding Request.

It makes me happy to see Service Providers being included here because I believe all of us are both long-term supporters, builders, DAO members, discussion participants, regular votes, etc. and my assumption is that no one would oppose giving Service Providers some voting power. That said, thanks from Namespace team, @AvsA

@nick.eth

@AvsA

To ensure that the decisions are not centralized in companies but rather on the people working on them, ENS will be granted for Individual developers, NOT the companies themselves.

I don’t think this is a good idea. Companies can simply nominate founders, or they can require the nominated individuals to sign the tokens over to them. Setting a limited number of recipients is likely to cause issues inside a team that doesn’t have the ‘right’ number of members.

I agree with Nick here. Namespace for example has multisigs for Owner, Treasury and Grants wallet that are controlled by 3 of us and it would be best if our voting power could be there instead on me alone for example.

@AvsA

Other Companies and groups of interest

I wouldn’t be against this but the companies that usually qualify for this like Rainbow and Coinbase who built large products are the ones that already have big voting power and not a lot of activity. I know these two don’t qualify because they’re big delegates already, I’m just giving an example. So if I had to pick some I’d go with companies who enjoy covering DAOs and Web3-related topics, so maybe something like Bankless, or Sassal from Daily Gwei, Kevin Owocki from Green Pill, etc. who can possibly help with highlighting the importance of this topics by mentioning any upcoming votings in the future in their podcasts. Just an idea.

[AvsA]

@nick.eth

I think this should be explicitly vested, over at least a 1 year period.

I am in favor of vesting and will recommend that it be applied to the next term, and will support if someone passes a proposal that allows me to put in on term 5.

@nick.eth

No matter how scrupulous the stewards are in finding and selecting delegates, it will be impossible to demonstrate impartiality, and accusations of unfair dealings are practically guaranteed. Any distribution needs to either be broadly across the whole qualifying delegate base (in which case it is susceptible to Goodhart’s Law) or selected by a democractic process (in which case self-voting will favor larger delegates).

The ENS DAO requires a lot of work from delegates, there’s a lot of big DAO votes for very important issues and many delegates have lots of delegated power but very little tokens. I think they deserve to be compensated like this, but I agree that it’s hard to find a good way to select this that isn’t problematic.

@nick.eth

Assuming this is annually, it would cause the DAO to run out of ENS in less than 10 years, unless the DAO starts exercising its seigniorage privilege on the token.

This isn’t intended to be every year. Maybe the amounts distributed should be halved every year so that it never runs out .
As I said, this is a first draft, and numbers should be discussed, but I do think a good indicator of how much is a good amount to distribute is to look at how much voting power the top delegates have. A good rule of thumb should be that the new entrants, if united, should be able to have more voting power than the largest single delegate.

[accessor.eth]

@AvsA

The ENS DAO requires a lot of work from delegates, there’s a lot of big DAO votes for very important issues and many delegates have lots of delegated power but very little tokens. I

There are also A OT of delegates that are absent of activity as well.

@AvsA

This isn’t intended to be every year.

I was going to add this to the conversation. I agree absolutely not a per annuam type ordeal, but only when obvious sentiment shows.

Is there a list of persons to potentially be distrubuted to be shared publicly. It would be a shame to miss anyone that is deserving and would allow time to make case.

[Griff]

I love this proposal in spirit… but I think we have been conflating 3 things in this DAO can do with ENS in somewhat inappropriate ways. This DAO can use $ENS to do these 3 things:

1. Governance Power
2. Long Term Alignment
3. Rewarding Contributions

I think all 3 have very specific approaches that make sense…

1. Governance Power

Governance Power should be delegated. People we want to have a voice don’t need to hold $ENS. If we think people deserve a voice in the DAO, let’s give them the voice, without the tax liability

5-10k of voting power is not enough to make a difference IMO, and if we give them the ENS, can’t they just delegate it to someone else (or worse, sell it)? This category is the only category that really should be denominated in $ENS

It’s easy enough to spin up a Safe, put some $ENS in it and delegate it to the person/entity that needs a voice. I assume there is an even easier way i don’t know about…

2. Long Term Alignment

If we want a group to have long term alignment, we should give them locked tokens. This is what the current proposal is allocating to everyone. I would also consider using the lockups that Labs gives contributors as a standard practice, so a 4 year vesting with a 6 month cliff and 3.5 year stream.

One thing to consider also is if there is a way for the lockup to be revoked… like real traditional vesting that companies do. Lockups are fine, but a KPI based vesting would really get some skin in the game IMO.

Also this should really be denominated in USD value rather than # of $ENS. The alignment comes from its capital value. That is the skin in the game.

3. Rewarding Contributions

If someone did great work in the past and deserve to be rewarded for it, I think it is fine to pass out liquid ENS for that. It should also be denominated in USD value as it is a reward, and the value of the reward is really based on the market price of $ENS at the moment. It doesn’t make sense to be considered voting power. If we want to give someone voting power, we should delegate it to them.

These sorts of rewards are best given via clear guidelines applied to everyone equally. Optimism has done this really well… whether it is distributed via community voting (like RetroPGF) or if it is rewards for badgeholders, delegates, or NFT creators. Having a fair way outlined to distribute these rewards is really the right approach.

Mix and Match

If you want to give someone Rewards and Voting Power, have the DAO delegate to them and give them liquid $ENS. If you want to give someone voting power and get their long term alignment, have the DAO delegate to them and give them locked $ENS in a hedgy.

My assumption on why this is hard to accomplish.

I don’t know if any of the following is true, but…

I assume there is some sort of “ENS is a valueless governance token” thing that makes things harder than it should be. This is really challenging for me to deal with… but if we have to use the double speak of governance power for all 3 categories… fine. But, in practice, we should make sure we are applying these three buckets, even if we have to say everything is Governance power… We shouldn’t let the legal guidance/engineering confuse the correct strategies for aligning incentives properly.

Also, I imagine that its harder for people close to the foundation, specifically AVSA and Nick to say anything but “ENS is a Valueless Governace Token.” But delegates I don’t think have to live in that legal world as much and might have a bit more freedom to be real about these things… so if you need help proposing things, we are here for you!

[AvsA]

Thanks for your feedback Griff.

I agree that there are 3 separate scenarios here.

If someone did great work in the past and deserve to be rewarded for it, I think it is fine to pass out liquid ENS for that. It should also be denominated in USD value as it is a reward, and the value of the reward is really based on the market price of $ENS at the moment.

I think in this case it should be simply rewarded as USDC.

People we want to have a voice don’t need to hold $ENS. If we think people deserve a voice in the DAO, let’s give them the voice, without the tax liability

Giving people pure voting power is good. Maybe there should be some appointed positions, that get automatic voting power without the token. That would work best when the person is intended to work within a time frame to make decisions and not necessarily is expected to stick around. However this does mean that you get responsibilities without other benefits. In a sense, this is not very different than being in the cliff period in a revokable vesting, since for the first X months you get voting and only can access tokens if you stay long enough.

One thing to consider also is if there is a way for the lockup to be revoked… like real traditional vesting that companies do. Lockups are fine, but a KPI based vesting would really get some skin in the game IMO.

If it is revokable I would make it revokable only directly to the DAO, not even the WGs, so that it takes a big leap to revoke it. Otherwise there can be a feeling that if you vote against the Metagovs they can revoke your tokens.

Also this should really be denominated in USD value rather than # of $ENS. The alignment comes from its capital value. That is the skin in the game.

It’s common practice that you get an equivalent amount of equity as your salary, priced at the start of the contract. However in this case, I would say we should also take in consideration that the point is have more voting power, meaning that if the price pumps and it means that the receiver only has 100 votes while top delegates still have hundreds of thousands, then the point is moot.

Maybe one approach would be, in the case of contributors, that they get a vested amount equivalent to their pay, but also are delegated 10k in voting power, to make sure their voice counts.

[Griff]

@AvsA

I think in this case it should be simply rewarded as USDC.

In most cases I agree, but for one case you mentioned up in the post around rewarding ACTIVE delegates, I think giving them liquid ENS for past governance work could make sense. There are other circumstances too… There is some magic to being retroactively given a governance token, it feels like you earned it. Where as being given ETH or USDC feels like being paid for it. It is nuanced for sure tho.

@AvsA

However in this case, I would say we should also take in consideration that the point is have more voting power, meaning that if the price pumps and it means that the receiver only has 100 votes while top delegates still have hundreds of thousands, then the point is moot.

This is exactly why i think it is important to separate the two considerations. If we want to give someone voting power, we should give voting power to them in the same way everyone else gets voting power, as delegation.

If we want to give them skin in the game, then denominate it in USD and given them an amount of ENS that makes sense.

If we want to do both, do both separately, Delegate AND lock some tokens for them because if the price dumps or pumps, it will causes weird situations, better to avoid those problem at the outset IMO.

[estmcmxci]

@AvsA

Term 5 ENS compensation will follow the manner in which was defined by metagov term 4, distributed in two tranches at the end of each semester, in June and December. It’s effectively similar to a 1 year vesting.

I advocate for this position.

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@AvsA

This has been done in previous years and was always listed on the metagov budget. In order to increase this transparency, we also commit ourselves to start doing a more longer process of campaign and outreach to new steward candidates, both to get more quality candidates in the candidate pool, but also to make sure they are widely known by the community before the vote.

Love to hear this! There are a lot of ‘sleeper delegates’ that should be considered for candidacy. I’d love to see more delegates be involved in stewardship.

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@nick.eth

Three things that come to mind are requiring conflict of interest disclosures in steward applications, setting an explicit conflict of interest policy for the DAO and working groups specifically, and requiring MG to draft a “scorecard” for stewards that includes information from previous terms, including voting and meeting participation and disposition of ENS tokens.

Yes, absolutely — I will personally keep this in mind as we continue to develop the bylaws openly, in tandem with @Lemma and based on community feedback

—

@Griff

It’s easy enough to spin up a Safe, put some $ENS in it and delegate it to the person/entity that needs a voice. I assume there is an even easier way i don’t know about…

Okay, I see where you are coming from, but what stops someone from rugging the delegate should they vote the ‘wrong way’? I believe that deserving individuals who demonstrate significant impact should be rewarded with sovereign voting power—an unalienable right, if you will.

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@AvsA

Otherwise there can be a feeling that if you vote against the Metagovs they can revoke your tokens.

My sentiments exactly.

—

All in all, I love seeing this effort to continually vest interest in the future of the ENS protocol in those who are actively contributing to it, including service providers, delegates, stewards, and other passionate and deserving advocates.

[Griff]

@estmcmxci

Okay, I see where you are coming from, but what stops someone from rugging the delegate should they vote the ‘wrong way’? I believe that deserving individuals who demonstrate significant impact should be rewarded with sovereign voting power—an unalienable right, if you will.

What stops Metagov stewards from running away with the funds in the metagov multisig?

I think it is fair to say that we can trust people to manage these admin processes appropriately, there is a lot more trust given in other circumstances.

[estmcmxci]

@Griff

What stops Metagov stewards from running away with the funds in the metagov multisig?

Oof, that’s harsh. Do you really believe that the current Meta-Governance Working Group would do such a thing? Even if there was malicious intent, there are failsafes in place to prevent such a thing from ever happening.

I don’t know what else to say, but it was nice to interact with you on this forum.

[AvsA]

After some consideration I think that the options of giving people delegated power without tokens is also problematic. If there are multiple people who have votes but no control in the tokens, then it means that whoever is in control of these tokens is effectively the power behind the votes, everything else is a sock puppet. So this would only work if the power to change the delegated votes is directly under the DAO, or another smart contract with specific rules. And I think the rule “you get delegated power and if you keep doing this for N years and don’t do anything that would prompt a DAO vote to push you out, then you get to keep them” is the best I can come up so far.

[NameSys]

This is precisely the very first thing that I had suggested:

@NameSys

A better solution might be that the DAO delegates (not transfers!) a larger number of tokens to stewards and contributors through a special contract. Instead of giving each 5,000 $ENS (which is meaningless voting power but significant monetary value), delegate to them 50,000 $ENS tokens in pure voting power instead.

There is no reason to involve any monetary value at all

[estmcmxci]

Sorry, but I think you are misinterpreting avsa.eth’s comment. He states:

@AvsA

I think that the options of giving people delegated power without tokens is also problematic.

The $ENS token should primarily be regarded as a voting utility; however (!), it is intrinsically tied to monetary value, and there’s no way around that.

@AvsA

So this would only work if the power to change the delegated votes is directly under the DAO, or another smart contract with specific rules.

Sure, but I still feel like this is a half-measure. I believe that participants who earned $ENS by contributing and investing time in proliferating the ENS Protocol deserve sovereign voting rights. Instead, this could be implemented as a probationary measure for non-compliance or as a trial period for new and incoming stewards. However, the vesting process will likely cover this aspect.

[AvsA]

@estmcmxci

Sorry, but I think you are misinterpreting avsa.eth’s comment.
…
The $ENS token should primarily be regarded as a voting utility; however (!), it is intrinsically tied to monetary value, and there’s no way around that.

The main issue is not that it’s intrinsically tied to monetary value, but rather the question of who controls the votes. If a person is given votes without tokens, then they are still subject to the rules of whoever controls the actual tokens and can redelegate them away.

[AvsA]

This proposal is outdated and being replaced by the following one.