[temp check] ENS Governance Distribution Program (v2.0)

DAO-Wide Temp Check
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This is a new version based on feedback from the previous proposal. The goals of the proposal remain the same:

  • Combat voter apathy.
  • Increase decentralization of power responsibly.
  • Create more aligned third parties with the ENS ecosystem.
  • Combat stagnation of voting power.

In the last proposal, main issues were the fact that metagov stewards making decisions on any ENS allocation would always be subject to further scrutiny and criticism, and that there’s a big difference in governance voting power and ens market value. This updated version attempts to address this.

But here, instead of approaching a global grant of ENS votes to multiple parties, I propose to break down the vote in two parts, “skin in the game ENS matching” and “inertial delegated voting power”

ENS Matching

The goal would be to get more alignment with third parties that have contributed to the DAO in any way, to grant them a long term investment with ENS.

Every year, in a given date (I would suggest doing at the end of Q2 every year) Metagov stewards would analyze all monetary transfers out of the DAO of ETH and USDC. That would include all transfers made from the main DAO wallet, but also Working Groups multisigs, ENS small grants program, etc. Then for every $1 the account received (accounting for the value at time of transaction) Metagov would grant them a matching $1 in ENS (valued at the time it would be granted). That value would be put in a vesting contract of a stream of a total 3 year duration plus 1 year cliff, with immediate delegated voting power.

Current term 5 steward would not be included in this comp, but this would also replace the ENS comp starting term 6. Funds coming in and out of the endowment also do not count towards the matching grants.

The goal here is that the recipients would not be selected by Metagov stewards, instead we would be assuming that any funds distributed by the DAO had already passed a high criteria, either by a grant committee, a DAO vote or an RFP, so were deserving. This would mean that all entities who have already been selected by the DAO would get a matching ENS donation that would give them skin in the game. We would also expect that if this is normalized, it would alter the candidate pool of any person or entity providing service to ENS, as they could charge less expecting that they would also be compensated with a “bonus”.

Once granted, only the DAO would have direct control over these vested tokens and any change would require an executable proposal.

Inertial Delegated votes

All persons who are considered representative of the DAO (in principle stewards but this could be expanded to include others, like service providers) would be delegated an immediate 50k ENS in delegated voting power. They would NOT have access to the underlying tokens, but only have the votes.

These would take effect immediately when their term started, but only end 3 years after their term ended. This “inertia” would mean that past stewards (and other representatives) would still have a voice in DAO decisions if they wanted, creating a continuity of policy. These delegations would be cumulative (but naturally limited to 3 years) meaning that a Steward that is reelected is given another 50k in delegated votes and could accumulate up to 150k ENS in voting power. This policy would also be combined with a stronger bylaw preventing stewards on voting for themselves in Steward elections, to make sure that this would not give them an unfair advantage to reelect themselves.

Only the DAO would have control over these delegated powers and any change would require an executable proposal.

Summary

The inertial part is important to create a sense of continuity that will help the DAO acknowledge and honor past decisions. It’s set in terms of ENS value but since the tokens are not controlled, then it would not be take in consideration token value but rather actual vote power. On the other hand, the ENS matching would indeed consider token value at the time of the grant, but vested over a long time, meaning that anyone who participates with ENS is given a long term alignment with the DAO and can accumulate a voice.

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Are there any plans to incentivize the average ENS holder to delegate their position to active delegates? The metrics could be difficult on how one determines an active delegate, but if there was an incentive structure where ENS holders earned a small incentive if they properly delegated, we could likely see activity of users paying a little more attention to their delegation and re-delegating if and as necessary to continue earning such incentives.

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This is another topic but I would be interested in testing out snapshot incentivized votes. Maybe they could also have a lottery not only on those who vote but also for those who delegated the vote.

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yas-omg cute girl gif

This is so great, so simple, low overhead… and I love the 3 year lock up!!

kids thumbs up

This is great, 50k I think it the right amount too.

I wonder if there should be some consideration of how much ENS is already delegated to a person… Some stewards and service provider reps (myself included) have high delegations already… so 50k might just make a whale more powerful, to go along with their outsized internal influence. And then some stewards/SPs have almost no voting power so the 50k is a great.

Maybe you only get the 50k if you aren’t a top 5 delegate? I don’t think that’s the best solution but I figured I’d flag the problem and offer an example solution for smarter people than me to jive off of.

I really really love the rework of the previous proposal.

THIS PROPOSAL IS GREAT!

Really great work AVSA, this is all really simple and elegant.

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Fantastic proposal! Concentrates on voting power. Removes monetary bias from the equation. Voting power is significant and a game changer. Conflicts of Interests in ByLaws. Music to my ears! Thank you :pray:

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In principle all of that sounds about right. I would only suggest to run some numbers on the current distribution of voting power and make some projections how proposed changes would affect that situation. Running numbers would also provide some justification on the amounts. I’m not against 50k number per se, but would be really cool if we could digitise it. Similarly how we discussed changing price of 3L names, everyone agrees that running numbers is important before introducing any changes, same thing here.

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You mean something like this? It’s an old study from early 2022 ↓

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I would personally approach it a bit differently, but I guess ye, something like this. I was thinking along the lines more like “projection” analysis, just show what the voting landscape would be given current stewards, some assumptions about changes in stewards and changes in stream providers. Just a simple excel table I think, nothing fancy, but make some sort of justification to the number.

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Thanks for the proposal @AvsA

While I am generally happy to see voting weight being distributed more amongst value aligned delegates, the proposal lacks technical specifications on how something like this should be implemented. Since partial delegation is currently not supported one way would be to send tokens to separate escrow contracts and put a fixed duration on delegation similar to the approach by uniswap

Additionally I would also like to encourage setting aside 20-30K ENS tokens to be distributed between a set of emerging or professional delegates which can be invited to submit an application and a snapshot vote can decide which of the top ‘x’ ones should be given this opportunity.

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Yeah, that’s what I had in mind. Basically the same analysis but after projecting for changes in vote distribution due to newly delegated tokens.

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It’s actually interesting to see how these numbers from 2022 compare to today. Today we need the top 15 delegates to reach 1M quorum. The current top delegate, fire eyes, has 216k votes, which would put him at 8th place back then. I wonder if this represents people who sold ENS and didn’t delegate, if it’s about ENS in DeFi and bridges which can’t be used to vote or if it represents people who delegated to smaller candidates. It certainly explains why it’s harder to reach quorum today than it was a few years ago.

A multidelegate contract is in the works.

Delegated power or vesting? Because I think we need to be very careful and thoughtful on how to distribute delegate power and specially who keeps the power to remove that power from them. That’s why that bit has very simple hard rules: you must be elected without your own vote, you get it at this date and is removed at this date automatically, etc.

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I suggest a 6 month or 1 year delegated voting weight. Any compensation would require some actual work imo. Taking the example of my delegate platform we would certainly benefit from revokable voting weight which is owned by the DAO to prove ourselves here. Since I am proposing this for new delegates, even if they vote for themselves it will not matter much since most of the voting supply is currently controlled by a few wallets.

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It’s not clear to me why this would only happen annually; if it’s automatic, why not give it at the time of each grant?

The one advantage of a periodic review is that it could allow performance assessment of grantees, and therefore allow the grant to be proportional to impact or alignment.

I like this idea. Would it be retroactive?

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We could have a overall limit of 150k total, meaning that the delegated power would amount to 150k (including the votes they already had) but not more than this, so a delegate over that amount would not get any more.

There are cases in which money coming out of the wallets should not also be a ENS match: for example a steward getting a travel reimbursement for ETH Denver, or a purchase order for shirts to said conference. These should not be matched unless we want a random graffiti artists to be a major delegate, so I think metagov could do a sanity check before sending the ENS. We could also do it biannually (twice a year, not every two years).

I think it would make sense for it to be, but respecting @Griff 's mentioned limit for total delegation.

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I’ve been reading previous post and this post, just want to add another point on liquid unvested ENS token distribution. Here I attach heat map of tokens performing YTD VS Bitcoin. What this tells us is that there are very few tokens which outperformed the major duo of BTC and Eth.

GIGghuKWAAAUvae
GIGghuKWAAAUvae2644×1360 366 KB

Historically all governance tokens be it Uniswap or something else were the worst performers ever. What this means is that if you are truly rational market agent, then it makes sense to sell all unvested ENS tokens the moment you receive them, otherwise that’s like bleeding money everyday on this allocation in your portfolio, there is just no point.

In theory of corporate finance, there is notion of “premium for control”. In other words there is certain delta on top “fair valuation” attributable strictly to the very fact that instrument offers you control over some entity. However I don’t think any of that is priced into ENS token right now, and maybe will not be priced into the medium term even.

So I just don’t see how ENS unvested distribution can ever be for “voting purposes”.

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Over the past few days,I think there may be some confusion and misinterpretations of terms that are interchangeable but may set different contextual precedents in discussion…

I would like to suggest that we define each of these terms to be used in their own respects. While each term may seem to have similar meaning, the specificity and manner in which they are used is important.

Rewards

  • Rewards are financial incentives provided to members for their unsolicited contributions to the ENS ecosystem.
  • These are typically one-time payments made in recognition of a specific action or contribution that was not explicitly requested or contracted by the DAO.
  • Rewards are denominated in USDC and are based on a standard metric established by the DAO.
  • The purpose of rewards is to encourage voluntary contributions and participation from the community.

Compensation

  • Compensation refers to regularly scheduled disbursements made in USDC for services that have been rendered and are expected to be rendered within a designated time period required by a specific position.
  • Compensation is subject to DAO approval and is typically associated with ongoing roles or responsibilities within the DAO, such as those of stewards or service providers.
  • The key aspect of compensation is that it is tied to a formal agreement or expectation of continued service to the DAO.

Distributions

  • Distributions is a broader term that encompasses any financial disbursements made by the DAO, including rewards, compensation, payments, funding streams, and grants.
  • Distributions can be one-time payments or ongoing disbursements, and they can be made for a variety of purposes, including incentivizing contributions, compensating for services, funding projects, or supporting initiatives that benefit the ENS ecosystem.
  • Distributions are made in USDC and are subject to the approval and oversight of the DAO.

Funding Streams

  • Funding Streams are allocated budgets designated for specific purposes or projects within the ENS ecosystem.
  • These funds are distributed to support ongoing operations, development, and initiatives that align with the DAO’s objectives.
  • Funding streams are managed and disbursed according to established guidelines and are subject to periodic review and approval by the DAO.

Grants

  • Grants are financial awards provided by the DAO to individuals, groups, or organizations for the purpose of supporting activities,
  • projects, or research that contribute to the advancement of the ENS ecosystem.
  • Grants are typically awarded based on a competitive application process and are intended to foster innovation, collaboration, and growth within the community.
  • Stewards of the Working Group soliciting for the grant can provide further clarification on requirements and outcomes

ENS Matching

  • ENS Matching is a program designed to incentivize contributions to the ENS ecosystem by matching the monetary value of contributions with an equivalent amount of ENS tokens.
  • This matching is subject to a vesting schedule, typically over a period of three years, to ensure long-term alignment and commitment from contributors.
  • The ENS Matching program aims to reward and retain valuable contributors by providing them with a stake in the future success of the ENS ecosystem.

Inertial Delegated Votes

  • Inertial Delegated Votes refer to a mechanism that allows for the continuation of voting power for a certain period after a delegate’s term has ended.
  • This is designed to ensure stability and continuity in decision-making within the DAO.
  • Delegates who have completed their term retain a portion of their voting power for a specified duration, allowing them to continue participating in governance and contributing to the DAO’s long-term vision.
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ENS Matching

So essentially:

  • Meta-Governance will review monetary transfers (ETH, USDC) annually
  • Review includes main DAO wallet, Working Groups multisigs, ENS small grants program, etc.
  • Match every $1 received with $1 in ENS, valued at grant time.
  • Funds granted subject to a vesting contract: 3 years total, 1 year cliff.
  • Immediate delegated voting power with granted ENS.

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I appreciate the idea of tying governance distribution to ‘skin in the game,’ as reflected in the monetary value accrued over a single term. In theory, this approach seems meritocratic. In practice, however, I question whether the Meta-Governance Working Group should be solely responsible for evaluating the distribution method yearly. Perhaps partnering with a third party to administer the program might be more effective.

Given that stewardship is not a permanent position, lasting only one year with potential for re-election, the workload may be overwhelming for new stewards who are unfamiliar with the program to manage alone.

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Exactly. I’d like to see this proposal enhanced with a plan for execution, including the technical specifications required to do so.

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Nice thought, but the token price is volatile, and vendors may not recognize the validity of this argument if the price is low. It could even backfire, providing vendors with a justification to charge more should the price of $ENS be low.

Besides, we should encourage people to hold the governance token in regard to its utility as a voting tool. Using the token as a point of negotiation may have unintended effects.

Okay, perfect. Vested tokens should be unruggable unless there is a motion approved by the entire DAO.

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Inertial Delegated Votes

Okay, this addresses the “sovereign voting power” versus “delegated voting power” discussion we were having in another thread (cc @Griff). Essentially, it creates a two-tiered system of suffrage where the base voting power (sovereign) is enhanced by inertia (delegated). This is an interesting feature, and I can imagine how it could also be considered an incentive for participants who are deeply involved in the ‘governance game’.

In the case of “inertia”, I believe it is acceptable for individuals to be delegated tokens without having outright ownership of the vote.

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Voting Power Distribution

Thanks to @santinomics.eth, I was able to access data from their ENS DAO Governance Dashboard. This enabled me to conduct a simple data analysis and create a box plot illustrating the current power distribution within the ENS DAO Governance.

ENS DAO Governance Power Distribution Box Blot (March 2024)
ENS DAO Governance Power Distribution Box Blot (March 2024)1590×1106 14.4 KB

Sample of the top 1000 delegates. Source: Delegate Rank and Voting Power

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Insights from the data:

  • The average delegate voting power is approximately 3796.65, far below the minimum 10,000 voting power threshold to put up a social proposal on Snapshot.
  • Over half of the delegates fall below the 50th percentile, which means that, from this sample, more than half of the delegates have a voting power of less than 421.90.
  • The standard deviation (σ) of 18148.14, indicates a significant spread in voting power.
  • The power distribution in ENS DAO Governance is significantly skewed, with 139 delegates who have disproportionately high power.

The overwhelming majority of delegates are demonstrably disenfranchised, a key factor, I argue, in voter apathy. Many might ask, “Why vote if my voice doesn’t matter?” Along with proposing an ENS governance distribution program, we should also envisage a more egalitarian representation of delegate voting power.

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I don’t think that delegating the aforementioned responsibility to a third party will do any good. It will just end up being another overpriced expense, and stewards are already being paid enough. However, if Meta-Governance MG stewards dropped some of their responsibilities and focused more on the management of this, it might be different. But I don’t see that happening. For example, if the DAO had an event coordination specialist who handles booking flights, hotels, and travel plans for all the conferences, I’m sure that would lighten the burden.

Maybe the DAO should distribute governance power without any constraints. I mean, we are all adults, and what recipients decide to do with their governance will be a direct reflection of their alignment with the project. That will be telling in itself. Maybe that’s what needs to happen anyway.

There is clearly a bloat in the price-to-vote weight of impact per token. If people are to receive tokens for their past contributions, I don’t see the logic in saying, “Thank you, here is your reward distribution, but we are still going to lock the tokens up.” Otherwise we wouldn’t be requiring the tokens to be caged.

There will always be an inevitable discrepancy between the price per token and the vote weight itself. As much as we try to find complex mechanisms to convince ourselves that the vote weight is more important than the price or vice versa, at the end of the day, it will always be partial to the opinion of the holder. Putting any restriction on such distribution to protect one of the two token faces doesn’t make much sense to me. Or maybe a solution would be to allow a penalty for partial token withdrawal pre-cliff.

Something about giving responsibility but also restricting that responsibility–the logic just feel strange to me.

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These are some good points to consider while thinking about distributing voting weight. I wonder if allocating more voting weight to any of the 139 delegates with disproportionately high power will actually help in combating voter apathy.

@accessor.eth makes some good points on defining the differences between comp, matching and delegation. If the goal of this proposal is to distribute voting weight, this can be done purely as a delegation instead of vesting or any other forms of distribution to all parties including contributors, stewards or delegates. A rational actor will simply dump tokens upon unlocks as @SpikeWatanabe.eth accurately points out.

In terms of concerte next steps, i suggest:

  • identify delegates who are actually active in governance (eg: voted on atleast x% in past 6 months)
  • filter to see how many of these are underrepresented, (eg:who have less voting weight than the average active delegate)
  • create a list of top ‘x’ delegates who qualify along with the voting power to be distributed to these delegates
  • Agree on a time period for this experiment (eg: receive delegation for 1 year) & delegate the tokens instead of granting, distributing, rewarding or compensating anyone
  • Post a evaluation criteria along with ways to measure success of this experiment
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But this could be done on a payment-by-payment basis, right? There doesn’t seem to be any obvious benefit to batching it.