Incentivizing DAO participation: Ideas and Strategies

The purpose of this post is to propose ideas and kickstart a solid discussion on what I consider to be a very important piece to the ENS puzzle.

I think it is very important to note that these are ideas which require maturing, and not meant to be a complete solution. I am completely open to any criticism or disagreements to any ideas proposed as the true goal of this topic is to generate community discussion to come up with a strong proposal to put forth.

I will edit this post as discussion on this topic continues in order to attempt consolidating all ideas into a single post to keep the ideas organized.

These are ideas I have had for a while now about how DAOs could generate leadership structures while increasing participation via incentives. I’ve written about this in other areas of the forum but I thought it really deserves its own post to kick off a serious discussion.

ENS is in a great position to do this as there is a legitimate product which brings in revenue, providing the elements necessary to create a symbiotic relationship between the web3 organization itself and the humans controlling it.

Problem: Dedicated Leadership

Most, if not all, successful organizations have dedicated leadership. Leaders who focus most of their energy in learning the organization and making decisions as to what is best for the organziation. Web3 (DAOs) will be no different, ENS included. We should design an incentive program which allows delegates to focus time needed on ENS.

Solution: Incentive Program for DAO Leaders - Delegates

ENS delegates have chosen to dedicate their time in order to participate in discussion and proposals, and many are dedicating time helping users as well, yay! In order to encourage the continued effort by these individuals, avoid early participation fatigue and compensate them for their time, I propose we create an incentive program funded by income from ENS registration fees.

I propose that the Incentive Program reward delegates based on the number of votes they control. How this is done, and to what degree must be discussed. Should it be linear, quadratic, base “pay” plus bonus over number of votes controlled? Should there be a minimum pay to help support “smaller” delegates? Should there be a max pay cap?

Problem: User participation

Delegates are acting as representatives to the users who chose to delegate their votes to said delegate. This is a responsibility the delegates take on behalf of the users. The users are participating in the DAO themselves by choosing which delegates they trust will make the correct decisions on their behalf. They choose to secure ENS tokens and guarantee participation by doing so themselves. We should encourage users to be ENS owners and participate!

Solution: User Incentives

I propose that the Incentive Program be inclusive of users as well as delegates. We are all in this together, and without the users participating by selecting a delegate, the delegates would not be honored with the responsibility of representing users and carrying the weight of the “constituents”.

Problem: Less Informed Users Voting

$ENS carries with it a great responsibility. It literally has full control over the DAO. IMO we dont want less informed users voting on proposals without a full understanding of what they are voting for and/or why, simply to receive incentives.

Solution: Stronger Incentives for Delegating Rather Than Voting

This solution may seem strange at first, but I think it is actually quite necessary. We really do want the votes coming from informed and well researched individuals who are dedicating the time necessary to fully understand the proposals and what they mean for ENS. So I propose that the Incentive Program actually give fewer incentives to self-delegated votes. This would encourage users who only wish to receive incentives to delegate their votes to more dedicated community leaders as opposed to simply voting for incentives.

One way I imagine that would work is that the Incentive Program would give a bonus to every user who assigns their votes to a delegate. This way if a user truly believes in ENS and is willing to dedicate the time such that they self-delegate, they will still receive incentives. Less so than delegating, but their passion will compete with their wallet to make the appropriate decision for themselves.

This could be easily bypassed by a user simply delegating to a second address they control, but those fringe scenarios are not a big deal, in my opinion, since serious delegates would likely want to signal their dedication by holding a healthy supply of $ENS themselves, which would not happen if they delegated their votes to a different address.

Problem: Actual Participation

We need to ensure that incentives for participation are only paid out to participants. The idea is not to create an incentive just for holding tokens, but for active participation.

Solution: Incentives For Participation ONLY

The incentives would pay out only to active participants. This one may be a bit tricky, because how does one quantify participation? Strictly basing this off proposal vote participation may be a bit too limited, definitely need some community help figuring out this one! Any Ideas?

The participation mechanism would be amplified by users. For example, if a delegate fails to garner a Participation Incentive, it is likely their ‘constituents’ would move their delegations to another delegate in order to not miss out on future Incentives. Thus the delegates incentive to participate is greater.

Problem: Too Much Control To Any Single Delegate

One concern would be that a few delegates, perhaps those with significant followers, could receive more delegate votes than would be healthy for the DAO, allowing only a few key delegates to manipulate the DAO to their own demands by carrying a significant portion of votes.

Solution: Cut Off Incentives When Threshold is met

By removing incentives any time a delegate reaches a certain threshold - I’m thinking something like a significant % of total tokens in circulation - then users will not assign their votes to that delegate because they would be forfeiting their Incentive earnings. Thus the Incentive Program itself should regulate total voting power of delegates to prevent a select few users from gaining overwhelming voting power.

Summary

This is a skeleton of an idea to kickstart discussion of the idea. The basic principal is to incentivize user participation by rewarding those users with ENS. This would accomplish multiple positive results:

  • Increase participation in the DAO, strengthening it
  • Harden the DAO by encouraging healthy distribution across many delegates
  • Strengthen the DAO by continually removing $ENS from users who no longer wish to hold it, and distributing it to participating $ENS members

Basic ideas:

  • incentivize delegates to accumulate votes and participate
  • incentivize users to delegate their votes by providing a bonus incentive for delegating to another address, incentivizing votes be delegated to knowledgeable, dedicated users.
  • incentivizing active and continued participation
  • disincentivize any delegate from accumulating too much voting power

A few of the suggestions would need some major discussion such as:

  • how much funds to dedicate to incentives; should it be a static amount or dynamic based on # of proposals or registrations in any given distribution period?
  • how often should distribution periods happen; Should they be scheduled, distributed upon any proposal completion, etc?
  • what % of total votes in circulation is too much for any single delegate?
  • do we distribute funds based on total votes controlled; would it be linear, quadratic, etc; is there a cap, or max distribution; is there a base, or minimum distribution so as to not discourage “smaller” delegates?
  • ?

Thank you for taking the time to read this wall of text!
GraspOnCrypto

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Encouraging real participation in the DAO without incentivising pathological behaviours is a real issue. I think these proposals need a lot of work, though, as they have substantial flaws as currently formulated.

I think this will be counter-productive, and will encourage delegates to both campaign at the expense of other delegates, and to offer bribes to people to delegate to them. A delegate with 200k votes isn’t doing any more work than a delegate with 100k votes; if delegates are going to be rewarded, it should be based on participation, not on voting weight.

This is easily evaded by simply delegating your votes to a second account under your control. If most rewards come from being a delegate, users will do this as a matter of course to maximize their earnings. I would even expect “contract delegates” to pop up that simply vote “no” on everything and give most of the delegate reward to the people delegating to them.

This is also easily evaded by having multiple accounts.

A simple strategy that may work would be to allow users to “stake” their ENS tokens in a contract that requires they be delegated, and gives staking participants additional ENS tokens from the DAO allocation. If there are no marginal benefits to voters or stakers for selecting a particular delegate, users can have a free choice without impacting their return - and giving ENS tokens to people staking acts to gradually increase the voting weight of those most involved, at the expense of people who don’t participate in governance.

Independently, and regardless of this, we will need to compensate active DAO participants somehow - not just delegates but anyone making meaningful contributions to the DAO - and that needs to be proportional to impact, not voting power.

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Also, we have to go beyond our circles to engage people from other disciplines. Imagine a surgeon, farmer and a lawyer having access to the DAO.

It would help us think potential services and help us bring this tech to the low-tech communities.

A diverse delegation would definitely allow us to integrate this powerful tech to the society we are working for.

4 Likes

That is a good point.

This is true, and I touched upon this in my post. Really no way to avoid that, but its likely an edge case. If someone is going to go through all that trouble, why not just delegate to someone who will do the work for you :wink:

This is a problem. I saw a thread the other day on twitter where someone has already created such a contract. Not sure what can be done about that, but one should be able to not incentivize votes delegated to a specific contract - Perhaps on a case by case basis, though would likely turn into a case of whack-a-mole. Something to ponder on for sure.

I lightly touched upon this as well. I’m not sure how big of a problem it would be, I imagine only real world experience could tell. However, I think maybe not a huge issue. A delegates account becomes a type of persona. By creating multiple accounts they would also be splitting that persona. Would users rather delegate to Nick1.eth, Nick2.eth, NickN.eth or to UserY.eth? Again, no way to really tell how the mass would react, but I feel like if they wanted to delegate to Nick.eth and saw that the account had reached a maximum, they may prefer to skip over to UserY.eth as opposed to Nick1.eth. Again, a difficult scenario here.

This is a difficult proposition. If there is not consistent and quantifiable measurement to “meaningful contributions”, then the compensation will likely have to be actively passed each time. As in someone creates a proposal to compensate X user or Y group of users, etc, and then a vote on said proposal. This will almost assuredly be the case for the foreseeable future, especially if little projects or tasks requiring work pop up.

One consideration might be to generate multiple ideas and iteration and run them each for a few months as alpha test runs, to see how the populace behaves according to the different strategies. Also, might be worth considering a very simple Incentive Program, which just compensates all users actively participating in governance. At least something which gets the ball rolling, shows positive interaction with $ENS holders, and, hopefully, generates lots of interest into what ENS is doing!

Thanks for the responses, ideas and counter-arguments, Nick.

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Well, the way to avoid it is to not set up incentive structures that encourage this!

Because if you delegate to an account you control, you get both voter and delegate rewards.

If the delegate is giving people a compelling reason to delegate to them, I do not think a marginal amount of friction will stop them. They can even set their name to resolve to a rotating set of addresses!

There are various systems other DAOs are experimenting with for funding contributions, such as continuous voting. I’m keen to see what people propose, but I think it’s too broad an effort to try and capture in this thread.

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First of all: do we NEED to incentivize participation? In the latest two votes over 8% of the total liquid delegation power voted on proposals. I’m used to seeing DAO participation as less than 1% of all tokens. I think this is the result of a successful campaign to have people delegate votes during claim and the fact that the top delegates are quite active.

I would be very weary of any program that pays for votes, delegation or non-delegation as it creates very weird incentives. I believe delegates should NOT be paid for just voting. I would prefer to have a system that incentivizes contribution, not just voting, so people are paid for the value they bring to the ecossystem, not based purely on their votes or delegated power. What if someone has a great contribution to discord but is not active on twitter? Or is very active on this forum but not on others? How do we even measure such things?

I think there are many ways to implement this but it would be beyond the scope of this post. I would rather think about having social incentives, instead of monetary ones. A few things come in mind:

  1. Can someone build a website that highlights delegate participation? Maybe a “wall of shame” of delegates with large amount of power with the least amount of participation?
  2. Can we get small delegates to re-delegates their vote? (unfortunately I think this would not be possible as it would require expensive changes in the contract level)
  3. Can we subsidize gas costs for redelegating, so if a user is unsatisfied with their current delegate they can start a campaign to delegate to someone else?
  4. If someone wants to start a campaign for being a delegate after the airdrop is over and therefore most claims have been made, what would be the barriers to entry? Ideally we should incentivize a system in which delegates aren’t fixed, but come and go as they become less active and gain or lose votes.
  5. should we have a yearly campaign to get people who are delegating to inactive delegates to redelegate to others?

I

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I worry that we do. From our ENS dashboard:

Without some incentive to delegate - or at the very least, reduced friction/costs - we should expect this trend to continue downwards.

Definitely agree on this, and I think people are exploring various mechanisms to reward useful participation in the DAO. I think that’s a better approach to take for delegates or other participants than just paying them for existing.

I do think there’s room to consider incentivising delegating your votes, though, if we can do it in a way that remains impartial as to who you delegate them to.

Tally, Boardroom, Sybil, all attempt to do this, but don’t come close to capturing everything. I hope one of the WGs will see fit to help fund efforts along this direction.

See this thread.

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These are some great ideas! I would also suggest that we get some very simple ideas down, and consider a gradient of implementations.

What I mean is that if one attempts to make a very complex yet accurate system, it could take significant time and resources; meanwhile, participation declines and the project becomes a bit lost and forgotten.

So it could be beneficial to consider steps, or degrees, of implementing such strategies. One could be a very basic incentive for short term compensation even while not being an efficient long term strategy, but used more as a stop-gap during interim phases as longer term solutions are discussed and designed.

I do not really have any good input on what that may be (the delegation fee covered by DAO is a great one), but throwing the idea out there as food for thought. I know in other projects where such ideas have been mentioned, the discussions lead to very complex designs and scenarios that are not quickly feasible and the discussion and participation drops until the idea is simply left abandoned.

So perhaps setting some goals and deadlines could allow an implementation gradient to be a possibility.

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Some points to consider that I’d like to bring up. Currently, there are some who haven’t voted because it’s slightly difficult. In order for a user to delegate votes to themselves, they have to claim their airdrop, then delegate the votes over to themselves. Maybe someone can check me on this, but I did not see a way to delegate until the airdrop was claimed. Some users won’t claim until next year maybe due to having their taxes reflected for 2022.

Also, it would be great to figure out a way to vote without needing to spend so much gas. Maybe some kind of L2 voting? I feel like this would include more people, and the DAO could shoot out more proposals for voting without worrying about the community needing to continually spend gas to place votes and move things forward.

The top 3 bullets in the summary of your OP are good objectives which I support. This is interesting, been meaning to find the time to reply as I’ve seen various threads on this topic.

After reading a number of them tonight, I think my opinion (not necessarily correct) is that some types of participation, if we want people to help the DAO and undertake those roles to a proper standard, may need to offer some form of incentivisation / reward. The strongest arguments I have seen are that if this doesn’t happen, then there is a risk you polarise the people that can make significant contributions as either (or both) (i) people with significant wealth to spare, who don’t need to be compensated for their time; (ii) people with significant time to spare, who have the most free time to give away. I’m not sure that’s a very good representation of society or that it would be beneficial to the DAO’s decisions. There is a huge proportion of humanity who don’t fit into either one of those categories.

The following groups are my rough sketch of contributors in order of importance (up for debate):

  • Core team
  • Working Group members
  • Community support (if not in any of the above groups)
  • Delegates
  • Community participants
  • Voters

I don’t intend to diminish the role of a Delegate at all - but if there are no matters to vote on, then the Delegate (nor Voter) is required to do anything. I appreciate that’s hard to imagine right now when there is so much to discuss!

I’m not sure about funding anything from Registration fees - what happens if there are no registrations, or ETH prices go to historic lows for reasons we can’t yet foresee? You could validly have a situation where we had a healthy community of participating users, actively supporting the DAO, but with no new registrations (my personality type is always thinking “what if, what if”).

On bullet 3, you could charge people a dormancy fee (for holding ENS tokens and neither voting with them, nor delegating them) - and potentially use this as a source of funds - but I think that’s incompatible with Article II of the Constitution. It would however move ENS tokens to people actually wanting to participate.

Worth further discussion, I only wish I had more/better ideas for you.

3 Likes

You can delegate to yourself by clicking the “Enter ENS or address” button on the right and entering your own ENS name or address.

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This sounds like a great project to work on through Flipside. Eventually I think it will become crucial to have a more sophisticated representative system than 1 token = 1 vote. But one step at a time. It would be nice to have some type of delegate explorer and analytics.

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In this thread about gas subsidies for delegation I propose something that I think would be cool and combines these suggestions: a campaign to redelegate every year, to celebrate the airdrop anniversary.

Every november 8th, we could launch a website with some delegate statistics, showing most and least active delegates, as well as a list of most inactive votes (a list of token owners whose tokens were never used to vote, listed per balance) and some other fun statistic. We could have simulated campaigns of both new delegates and those looking for reelection and create some talks between them. Maybe, instead of having the “free redelegation” service be individualized (lastRedelegated>365 days), we could simply reset it every november 8th and allow everyone to redelegate for free once until the next november (lastRedelegated < 2022-11-08).

It could be a fun way to get more participation on the DAO and to make sure more votes were delegated.

7 Likes

Problem: Less Informed Users Voting

$ENS carries with it a great responsibility. It literally has full control over the DAO. IMO we dont want less informed users voting on proposals without a full understanding of what they are voting for and/or why, simply to receive incentives.

What if we had a simple quiz about ENS, and basic Web 3 principles as a small hurdle. It could serve two functions:

  1. Basic understanding of the principles voting upon
  2. encouraging people to learn, and providing resources to educate themselves.
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Quizzes before voting have a long complicated history: who writes the quizz, who decides what are the answers, or the cuttoff, etc. It’s been long used to disenfranchise people.

I don’t even think it’s a problem, as most people are likely to simply choose a delegate.

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I like positive incentives to encourage people to learn, instead of negative deterrents. A quiz would not take very long to make, and I think basic understandings are important. A safe fail to have delegates who have basic understandings. The problem was brought up in the original post, are you suggesting that the problem be removed from the document?

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I think it should be stated that most users who care to participate will likely choose a delegate.

Unfortunately, while it was very easy to choose a delegate during the airdrop claim, it is not so easy to do so if one simply buys $ENS off uniswap - and likely that a very large % of those buying on uniswap have not done so. Thats why I believe some incentives would be nice to drive users to find out more about participating an delegating. They will be encouraged to do so by missing out if they do not. Though there is the problem of needing to make it easy to delegate at any time…

I do agree, though, that a quiz shouldnt be a requirement. Could be a fun to have, if the community wished to do so, without making it any kind of requirement. And outside of the quiz, perhaps having some clear and precise Summary and/or Pros & Cons for every proposal be made available to everyone - could even have delegates sign stating they’ve read it. The document sign wouldnt be a requirement but could still be used as a signal to who is active and not just voting but also researching, etc.

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Very well could be determined to not be a problem. I’m fine with that! I wrote up the OP more as a kick start. I wanted to have ideas placed that would encourage discussion and activity.

That said, perhaps the problem has no true solution, but ideas such as a Summary (i mentioned in my previous post) and even a Quiz, could be supplementary. Though I would agree that both should be voluntary and not any requirement. Though in the end participation in those could be used as a weight to help determine delegate activity and compensation, or even to help with default sorting on any delegation UX for ENS holders - aka the most active delegates could be placed higher on a list than those who do not participate in the “extracurricular” education.

I do like that!

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Just putting it out there that the possibility of buying votes could be a problem too. As far as solving the issue of informed delegates, really only time, reputation, and contribution can be used to gauge trust.

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@grasponcrypto.eth thanks for taking the time to explore this topic and bring it up.

Nobody wants to discuss the threat and potential of waning participation, but it is important to be considered early to strengthen and improve the DAO.

As a governance team, I would like to speak on the problems of informed voting, user participation, and disparity of delegate control.

  1. Problem: Actual Participation

With over 19.6k members, ENS DAO boasts one of the largest voter communities on Snapshot. The image below shows the disparity of governance sizes and is a testimony to ENS:

On this metric, I do not think actual participation is decreasing. We are three votes and it is too early to diagnose if there are participation issues. Instead we must promote and watch trends of future votes.

I agree with the solution for this (possible) problem of being:

An example would be Algorand’s governance model (linked here). They divide Governance into four epochs and reward participants 15-18% on an annual basis. The only caveat is they must vote on every proposal to be eligible for the rewards. I would point this out as a potential model for our community.

  1. Problem: Less Informed Voters

In my opinion, this is the largest deterrent to governance participation.

The solution could be resources dedicated to creating an education page, where votes and proposals are posted in an unbiased format. This information paired with a UI tool which plugs into Snapshot could create more frequent participation and a smoother voting experience.

I along with others would be happy to provide more info on the creation of this resource.

  1. Problem: Too Much Control To Any Single Delegate

This issue is ubiquitous in DAOs. Early solutions have been incentivizing and allowing redelegation and introducing a limit on a delegate’s voting power. However, quadratic voting is something to explore.

Please see below on a visualization of quadratic voting:

Introduced mid-summer 2021, Vitalik expounded on the idea of quadratic voting for DAOs and protocols (article here). This voting mechanism has been used in actual elections, in Colorado 2020, and has potential outside of crypto.

By adopting quadratic voting, or a modified voting mechanism, ENS could more fairly distribute voting power among delegates and cement itself as a new, innovative DAO.

Instead of modeling off of others, we could be the model.

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