[temp check] Proposal for new Service Provider Streams

[AvsA]

Context

Over the last 12 months the ENS DAO made 22M USD in Revenue (dollars in for domains) which amounts for 30M of annualized income (income just for fees in the period). If we look at the daily revenue since January we will see a downtrend since the peak in april, offset by some occasional peaks pushed by premium income. Over the lifetime of the DAO, these funds have primarily gone to the endowment, which holds 59 million dollars today, about $9M has gone to ENS labs for past and ongoing work and almost $8M has gone to working groups which work on multiple fronts including multiple grant giving programs.

The Problem addressed

Our constitution states:

"Any income generated to the ENS treasury is to be used first of all to ensure the long-term viability of ENS, and to fund continuing development and improvement of the ENS system. Funds that are not reasonably required to achieve this goal may be used to fund other public goods within web3 as ENS governance sees fit."

I believe with the current endownment already fulfills much of the criteria of ensuring the long term viability of ENS and I believe we can afford to use more funds to “improve the ENS system”.

Right now we have two categories of projects funded by ENS: we have ENS labs, which receives over $4M a year and we have projects funded by Working Group grants, which typically gives out grants smaller than $100k. There’s not much in between.

So if you are a developer (or a designer, or a branding person, conference organizer, or artist) who wants to focus your full time to ENS you have 3 options:

1. Get a job at ENS labs (obviously not possible for whole teams)
2. Apply for a small grant in a single project (which can take months and is not guaranteed to be paid and is not big enough for teams)
3. Make a direct EP for the DAO to ask for money

This is not an hypothetical situation: I know multiple projects that are extremely talented and have been dedicated to the ENS system for years that are right now in this in between state and are considering the third option. The first few projects have a higher chance of getting the votes so as soon as one development shop makes an EP proposal, multiple others are bound to make the same and create a chaotic race to EP which will create governance chaos.

I’d like to propose another option:

Annual streams for service providers

Streams represent a great innovation in crypto: For Governance, they can be canceled at any time, so it’s a good way to stop a service provider who isn’t performing well. On the other hand, for the provider it’s a guaranteed income until the DAO changes their mind, meaning that inertia is in the provider’s side. It’s no coincidence it’s how ENS Labs is funded: they’ve only needed to ask once.

The DAO has a revenue of about 40k USD per day. ENS Labs gets a stream of 11,500k USD per day. I believe we can afford to create a new stream of another 10k USD per day (3.6M per year), but this will be distributed among multiple providers.

How would it work

A total budget of $3.6M/year of a stream would be announced, as well as a series of goals and projects we’d like the service providers to work on. Service providers would then provide a pitch deck listing the projects they intended to create, plus some documentation to showcase their capacity to deliver and a requested budget (each individual ask not exceeding $1M/year).

Then a snapshot would be put in vote with an Approval voting process. A greedy algorithm will then be applied:

• Vote Cut-off: We only look at pitches that get at least 1M ENS votes. This weeds out the less popular options right away.
• Top Pick Wins: The provider with the most votes is a shoo-in. They get their stream, and that amount is cut from the pot.
• Add More, But Watch the Budget: We go down the list of next most-voted providers. If adding a provider’s budget to the current total keeps us under $3.6M/y, they’re in. If not, they’re out.
• Stop When: We either hit the total cap or no one else can fit within the remaining budget or has enough votes to qualify.

Which projects would be eligible to be funded

There are lots of initiatives that can be done in ENS but can’t be done by ENS Labs (mostly because they are already doing so much) and can’t really fit in smaller 100k grants.

Per the constitution, the focus would to develop and maintain projects to improve the ENS system, which would include (but not limited to these) the following goals:

• Crafting alternative open source Front Ends for alternative audiences or platforms (a frontend focused on non web3 users, a front-end focused on social media or other countries etc)
• Developer Tooling (SDKs that would increase the ease to integrate ENS into other apps, including easier onboarding, searching for names, or more advanced integration, or SDKs for mobile or desktop apps, etc)
• A solid implementation of a referral program, including any contracts, dashboards needed and out reach to make sure the program is successful
• Improvements to the ENS base layer contracts to enhance the experience or allow cheaper batched transactions (including auditing current and new code, all in coordination with ENS Labs and other developers)
• Create and maintain better tools to allow ENS names to be used with decentralized storage solutions (More solid IPFS integration, tools for automating cross posting, integration with non web3 solutions, etc)
• New experiences of trading names off chain
• Experiments in other platforms or complete new usages that we haven’t thought about

A final list of these could be later voted or decided, but the idea is to give specific guidance on what we need, but also select great talent that will come up with solutions for problems we are not even considering.

These service providers would not be expected to work as spec builders delivering specific projects designed and spec’d by committee, but rather would be expected to have their own initiatives, create new bold ideas and fail often at them. A lot of the best ENS improvements (offchain registrars, profile avatars, dns integrations) did not come from building features voted by a large group, but rather the result of passionate deeply knowledgeable developers who were free to experiment. Overall this could guarantee that we have a broader set of engineers and great talent involved in multiple experiments with some bare financial security guaranteed by the DAO. If some of these fail to deliver much of value after a year, the DAO would hold another vote to choose new ones, and if something goes really bad (one of the providers closes shop or is discovered to be a new SBF) we could vote to terminate the stream immediately.

Until when these streams would exist?
Streams would be created with no set end date (but we could limit the total amount we stream for security reasons) but with an expectation that after a year we would look back at the process and consider a new vote to select new providers (at which point current providers could use the opportunity to change their ask too). The DAO would also reserve the right to terminate any stream at any moment in extreme circumstances (one of the providers closes shop or we run in a SBF situation with one of them). Of course, since the DAO needs to vote on all changes, the providers would naturally get an advance notice that they were being considered for termination.

What if multiple companies work on same or similar projects? Isn’t there a risk for redundancy?
It’s not necessarily a bad thing to have different implementations of the same idea. Ethereum is healthier for the fact that there are many different implementations of nodes. There are many ways to build an online shop that cater to different audiences. It’s not bad.

Would these projects be open source? What about companies that already make money?
Ideally all projects funded by the DAO should have a component that is open source and can be reused by other companies. But it’s ok for service providers to also make money from their own products and even have outside investors – in fact it would be even desirable as it could work as an incubator to help launch independent ENS related companies.

What would be the time frame for this stream?
Ideally we want projects to be working for the year of 2024. It could be possible to time everything to have the vote happen by the end of November and then a stream start by January, but due to holidays it might be more realistic to desire the full stream to start in February.

[Esk3nder.eth]

Really interesting proposal, avsa. I’ve been thinking a lot about how to increase velocity, competition, and asymmetric outcomes within the ENS ecosystem for a while now, so I appreciate you getting the conversation started.

A few thoughts/questions on your proposal:

• Reviewing pitches, voting, applying the greedy algorithm to determine funding, and determining which projects to end or reduce funding toward is complicated and could become a significant cognitive and governance load on the DAO. It’s also unclear in this proposal how this would be achieved; I fear this flies in the face of “DAO minimalism,” which I perceive to be one of our greatest strengths.

• Parallelizing fixed daily streams could become really problematic if revenue began to decline. Do we slash at the individual contributor level or across all entities receiving streams? These types of questions will force the DAO to act like a Board of Directors/CEO, which is out of scope, in my opinion, and encourages the wrong incentives in terms of project/delegate relationships.

• I think intentionally creating a blurry line between open-source contributions and profit-seeking ventures needs to be carefully considered.

• I’m unaware of any DAOs that have a similar model. Are there any that you could recommend I look into to better understand the model proposed? I don’t consider Ethereum to be a good example as it’s not a DAO, has a similar structure to us today (Labs is similar functionally to EF, DAO gives grants), and has very different economics powering it.

Overall, I’m bullish on getting more teams building on behalf of the ENS DAO, even if it does create some redundancy. However, as this proposal stands today, I would vote against it. What’s preventing every builder from proposing to build open-source software, getting a stream (enshrinement), and then building all types of personal profit-seeking ventures that are effectively subsidized by the ENS DAO?

I think there is a lot of work required to better separate the incentives for builders within the ENS ecosystem to ensure we build a fair and efficient ecosystem. I’m personally interested and excited to collaborate on this and look forward to your response.

[James]

Love this post & idea @AvsA and keen to see which service providers are first to jump at this opportunity.

I am conscious of the amount of revenue vs outgoings we commit to, however, this can always be adjusted over time.

How these service providers are chosen by the DAO is also interesting - I’m not sure we should commit to the $3.6m a year budget as a goal but rather a maximum. If the DAO only gets 1 high-quality service provider and only wants to spend a fraction of that amount, that should be completely fine.

+100 to this proposal and idea, MOAR ENS BUIDLERS

[jefflau.eth]

@Esk3nder.eth

Parallelizing fixed daily streams could become really problematic if revenue began to decline. Do we slash at the individual contributor level or across all entities receiving streams? These types of questions will force the DAO to act like a Board of Directors/CEO, which is out of scope, in my opinion, and encourages the wrong incentives in terms of project/delegate relationships.

I think this is a key thing that I would be worried about with this proposal. As Alex mentions, its the onus of the DAO to cancel streams, rather than on the grantee to reapply. As far as I’ve seen from EF, it’s mostly done in a grant-like fashion, renewing on reapplication. It feels like voting globally onchain for a stream would be fine, but reassessing/cancelling streams would need a smaller group of “board of directors” to manage assessing and cancelling streams more carefully, especially if revenue takes a turn for the worse.

I think the key thing I take from this post though is: We should figure a better way to attract and fund ENS builders that contribute to the space for the medium-long term, which I’m a big support of!

[AvsA]

@Esk3nder.eth

The total budget is roughly 10% of what the DAO made this year. I would argue to have an annual review which would adjust this total budget and drop projects that fall off the total diminished (or increased) budget.

Also while it’s up to the governance to call the stream, I’d implement it differently than what Labs do it, but rather more similar to how sablier and super fluid does: there’s a capped maximum budget allocated for the stream where we deposit a given amount. If the DAO does nothing then eventually that amount will drain out and the streams stop automatically.

The difference between just doing an annual grant giving is that if the new process takes a few extra months then the current service streams are uninterrupted while we vote and the new ones are adjusted seamlessly without skipping a single block.

[slobo.eth]

Having more dedicated teams working to improve ENS has a lot of upside.

I’m excited that the discussion so far has been mostly around how vs. IF.

It may be reasonable that for the first iteration, the streams have an initial end date of 1 year or 15 months. This way, there’s no “set it and forget it” risk for a pilot program.

After each team has had enough time, 9-12 months, they can collectively or individually put up a proposal to the DAO to remove the end date of the stream. This would make the stream indefinite, though it would always be revocable by the DAO.

As a steward responsible for funding builders, I see this as a good addition. I may even participate.

[lefterisjp]

I like the idea a lot. As both an ENS delegate and someone who is trying to find ways to fund opensource development through grants, ENS ones included.

Small grants are cool, but for software development they are not really sufficient. At rotki we tried to apply for the large grants but were rejected. A different method must exist somewhere.

[accessor.eth]

Should this conversation be held in a publicly facing forum via text or a call where people can voice their opinions?

IMO I think a good call would suffice. A working group meeting is not going to be able to facilitate this matter. I would like to voice my opinion on this.

@slobo.eth

This would make the stream indefinite, though it would always be revocable by the DAO.

As a steward responsible for funding builders, I see this as a good addition. I may even participate.

To be quite honest, this comment is pure adage of Goodhart himself and it is more than infuriating. I need not say anymore. It’s astonishing. ’ lets make indefinite streams so I can pay myself '. I’ve already made my arguments but not in the manner that they should of been.

Call me crazy but being this relaxed about funding streams scares mne. The DAO deserves more than this.
This is a serious topic that shouldn’t result in 100’s of thousands of dollars laying around.

[cap]

After more than a year and a half in the ENS DAO as a member, delegate, and builder, I’ve never read anything that got me more excited and happy than this! Thank you for this proposal @AvsA! I’m overwhelmed with joy.

I’ve committed all my free time to building on ENS and I’ve spoken to a lot of founders who do the same. I truly believe there’s no better way to allocate the money than to support projects and teams that have meaningfully contributed (and are still contributing) to the ENS ecosystem.

The issue I’ve been facing for over a year and a half now is that we build on ENS and only on ENS thus making our funding options very limited (to the ENS DAO only) or seeking outside funding (angels/VCs). We don’t qualify for any other source of public good funding and trust me there’s nothing I would’ve liked more than to build my platform as a fully open-source public good, complimentary to the ENS. This stopped us from ever dedicating our full time, energy, and focus to it.

Regardless of any circumstances, we managed to build a solid project that helps people manage subnames, with a lot of different features and use cases to it, and are still building new stuff because we like it and we’re simply builders who like building.

The bottom line is, every time I spoke to someone who has been building something on ENS the main concern they voiced was funding and the question of ‘how much longer we can keep this going like this’. So I’m pretty sure that this proposal will get 100% full-steam-ahead support from the people who have been building on ENS.

I also want to say and acknowledge that ENS DAO has supported builders before and has done a great job in some cases. What I am also saying is that this proposal is the missing piece of the puzzle to take it to the next step and make the support for ecosystem builders perfect.

Just my two, very modest and honest, cents.

[lightwalker.eth]

This is the most growth-inspiring thread I’ve ever read on the ENS DAO Forum.

It means a lot to see comments in support of this proposal already filling the thread. There’s a massive opportunity here to help ENS grow.

We have a community with a lot of talent. I’m thankful for the ENS grants that already exist, but it’s required economic masochism for talented builders to wholly dedicate themselves to helping ENS grow. The status quo with a lack of more sustainable funding structures for entire teams of full-time dedicated builders is really holding ENS back. There’s so much more to build for ENS that requires organizational-level efforts to achieve!

For the questions raised above about the ENS Treasury, we can look to point III in the ENS DAO Constitution:

Any income generated to the ENS treasury is to be used first of all to ensure the long-term viability of ENS, and to fund continuing development and improvement of the ENS system.

We’ve already completed Purpose 1 to “ensure the long-term viability of ENS”. It’s now time for the DAO to do more with Purpose 2 to “fund continuing development and improvement of the ENS system”. There is more than sufficient resources to run this as a pilot program for at least an initial 12-15 months and measure the results.

I’d encourage everyone here to look at this program as an opportunity, rather than exclusively as an expense. Providing financial support for teams of talented builders to sustainably dedicate themselves to the growth of ENS is going to produce results. If good teams are supported it can easily create a positive ROI for the ENS DAO. We have an opportunity here to “grow the pie” so that more and more talented builders can be supported across time.

Everything we’re building at NameHash Labs is planned to be open sourced and freely licensed for the ENS ecosystem. We’ll soon be making some big launch announcements for NameKit, NameGuard, and a (proposed) ENSIP for an ENS Ambassador Program. Everything we build is infrastructure that is not only dedicated to ENS, it is specifically designed to result in the outcome of ENS growth. We’re definitely interested in this program and advocate for its swift approval!

[accessor.eth]

I think using the 0xSplits vesting stream that @trent from The Protocol Guild used for their pilot program that supports Ethereum Core Developers would be perfect for this. Service providers could simply pull as needed and would reduce noise as its acts as a true mechanism for funding.

[nick.eth]

@AvsA

A total budget of $3.6M/year of a stream would be announced, as well as a series of goals and projects we’d like the service providers to work on. Service providers would then provide a pitch deck listing the projects they intended to create, plus some documentation to showcase their capacity to deliver and a requested budget (each individual ask not exceeding $1M/year).

Very supportive of this idea!

I’d suggest that for simplicity, there should be a basic fraction of 3.6m that all grant requests have to be. For example, $225k. If all requests are multiples of 225k, we know we can accept up to 16 ‘units’ of budget.

I’d also suggest that we have an annual ‘reelection’; existing streams would be included in the voting, but it’d be an opportunity for the DAO to take a moment to reassess each recipient, and evaluate any new applicants. Changes could happen outside this process, but this would be an opportunity to do an all-up review.

@AvsA

Would these projects be open source? What about companies that already make money?

I think we should be more prescriptive in this regard. Anything developed using funding from a stream should be open-source.

[accessor.eth]

Lets also ensure that we are sending funds to actually pay for service from providers.

@slobo.eth it appears that you have blocked me from sending you messages.

Tx for funding the Identity Server - SpruceID
→
200000USDC still sitting in safe with only 50k w/d 400_ days ago

this would suggest that the server was likely never paid for, perhaps.

[alextnetto.eth]

I’m a big supporter of this idea. This is the best opportunity for long-term ENS builders to innovate and improve ENS. It is also a way to decentralize one of the aspects of the DAO: development.

As a builder, I can relate to wanting to make more extensive contributions towards ENS and needing a way to do it while being sustainable. I don’t want to be repetitive here, agree with all points raised by @cap and @lightwalker.eth.

@nick.eth I’d suggest that for simplicity, there should be a basic fraction of 3.6m that all grant requests have to be. For example, $225k. If all requests are multiples of 225k, we know we can accept up to 16 ‘units’ of budget.

That’s a great idea. I also would like to bring some suggestion for which project/ideas would eligible for this funding program.

1. Apps that “build on ENS” (vs. improve the ENS system itself) are excluded. Examples of apps that “build on ENS” include everything from XMTP to OpenSea to Uniswap.
2. Agree to release all work produced under this funding program as open source with a permissive open source license (a non-copyleft open source license) that guarantees the freedom to use, modify, and redistribute, while also permitting proprietary derivative works.
3. Come from a team that has already demonstrated a track record of skillful technical execution in the ENS Ecosystem. This could be demonstrated through the receipt of prior ENS DAO grants or other clear technical contributions.
4. Identify what work or approval dependencies (if any) their proposal creates on ENS Labs. For example: If a proposal is to change core ENS Contracts, then it creates an approval dependency on ENS Labs. Any proposal creating any dependency on ENS Labs must receive an approval from ENS Labs to be open for consideration.

Looking forward to this big step towards growing the pie, thanks for raising this @AvsA .

[accessor.eth]

We could also use ENS Domain Names and Sub Names as a way to classify payments to better track financial endeavors!

[nick.eth]

@accessor.eth

@slobo.eth

This would make the stream indefinite, though it would always be revocable by the DAO.

As a steward responsible for funding builders, I see this as a good addition. I may even participate.

To be quite honest, this comment is pure adage of Goodhart himself and it is more than infuriating. I need not say anymore. It’s astonishing. ’ lets make indefinite streams so I can pay myself '. I’ve already made my arguments but not in the manner that they should of been.

That’s not at all what slobo said, and this kind of hostile behaviour is not helpful.

[caldonia]

Excellent proposal here.

ENS isn’t just a technology. ENS is a network of apps and users. The value ENS creates in the world is proportional to the network effects ENS achieves. We must continuously invest in growth to realize the potential impact of ENS on the world.

If ENS can institute programs like this, it will attract more organizational-level teams to build on it full time, a momentous and critical landmark in a protocol’s next phase of growth.

[AvsA]

The snapshots are live.

Also I’d like to disclose that I’m an angel at superfluid which is a stream company. It’s not a significant chunk I’m orders of magnitude much more exposed to ENS, and I’m an investor because I’ve been a supporter of streams for many years and not the other way around.

For that reason I’ll remove myself from implementations decisions regarding the proposal if it passes. We can do a custom contract (like labs has), use sablier or even superfluid.

[Limes]

I’m voting in favor of this proposal.

I see this proposal as a discovery tool that gives ENS the ability to take different stances on the design and implementation of the ENS user experience.

This approach can encourage a diverse set of solutions, creating more ‘shots-on-goal’ and leading to a richer ecosystem.

One point I want to make is that, in the event of an underperforming service provider, starting a proposal to retract funds is a large amount of friction and is presumably unlikely to happen. I’m fine with this because the alternative is setting up an oversight board with its own sets of trade offs and costs, but if we’re being honest, absent an obvious malicious provider, these are essentially one year commitments with options to extend.

[lightwalker.eth]

This post is written to all ENS DAO Delegates and offers a case for you to vote for a budget cap of $3.6m in the active Snapshot Voting for New Service Provider Streams.

There’s a general consensus on the merits of Service Provider Streams in this thread.

But why vote for a $3.6m budget cap? Why not less?

Here’s some important rules in the proposed Service Provider Streams framework:

• Projects must obtain a minimum of 1 million ENS in approvals to proceed.
• Eligible projects will be ranked by vote count. A greedy algorithm will then be applied to select the highest-voted projects, provided the cumulative budget does not exceed the preset limit.

We should note how it’s going to require a LOT (!!) of positive signals for any project to attain the minimum floor of 1 million ENS in approvals. For evidence, let’s look at some of the latest DAO votes completed:

• There were only 1.6 million total votes cast for each of the recent [4.4.X] ENS DAO Working Group budget requests.
• The ENS Meta-Goverance Working Group only received 1.3 million votes in approval of their budget request.

When service providers are submitting their projects to the ENS DAO for voting we can expect quite a high quality standard will be required to attain the required 1 million+ ENS in votes.

Every project passing through this demanding quality filter can be expected to be an excellent proposal. They will need to come from strong teams and show a clear plan for creating value for ENS and helping ENS grow.

I’ve been speaking with other dedicated builders in the ENS Ecosystem. Assuming the DAO approves this Service Provider Streams concept the aggregate total of really good proposals is going to sum to several millions.

If a budget cap for the overall Service Providers Streams framework is limited only to $1.2m this puts a high probability that multiple teams with fantastic proposals and a strong consensus of support from the DAO of over 1 million $ENS votes will be left out in the cold. That will really suck for ENS.

Appreciate that a cap of $3.6m is a lot of money. It is ! But if you’ve run teams of talented developers before you’ll be familiar with how shockingly fast developer salaries add up.

No one is making a case for it being good to spend $3.6m. This vote isn’t about spending money. It’s about investing into the continued growth and success of ENS. We have so much potential with ENS and there is so much remaining work to be done. These investments can produce a strong return in the growth of ENS.

Let’s not starve ENS of the resources needed for a more diversified set of builders and visions for how ENS can fulfill its mission. The DAO has these resources available. The endowment is mature, cash flows are positive, the funding for this program is capped at a maximum, any service provider who underperforms can have their funding stream terminated, and Clause III of the ENS Constitution already makes the case for the need and approval of funding improvements to the ENS system.