[DRAFT PROPOSAL]: Moving to a Grants Council

Technical Proposals 📃 Reflection Period Proposal
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Please read Guide to Season 3: Course Correcting for full context before reading this proposal. The Grants Council will be voted on by the Token House in Special Voting Cycle #9a.

As outlined in Guide to Season 3: Course Correcting, the current Governance Fund grants process faces significant challenges. Luckily, there is a lot of room for optimization. Some goals for Season 3 include:

  • creating a more streamlined and consistent process for proposers
  • setting a pace for grant distributions
  • defining a clear scope
  • creating accountability via smaller grant sizes and milestone-based distributions
  • reducing the workload on delegates so that they have more time to weigh in on high impact votes, better positioning the grants process within the broader responsibilities of Token House governance

In Season 2, the Token House experimented with multiple committees, which made non-binding recommendations on proposals within their domain. While committees reduced the workload on non-committee delegates, they introduced new challenges:

  • voting cycles became increasingly complex
  • proposers became even more confused as they received conflicting recommendations from multiple committees
  • multiple committees vying for power created a dynamic that negatively impacted culture, made worse by the lack of enforceable delegate code of conduct
  • there weren’t appropriate checks on committee power, including a clear mechanism to remove committee members mid-Season
  • several large delegates were prevented from voting for committees due to third-party application errors, which impacted the perceived legitimacy of elections

These challenges are related to specific committee design choices rather than the organizational structure itself. Instead of continuing committees into Season 3, we propose experimenting with a Grants Council to overcome many committee challenges while helping achieve the goals of Season 3.

If this proposal passes:

  • In Season 3, Governance Fund grants process will be managed by a Grants Council. The Grants Council will be comprised of 1 Lead and 8 Reviewers and will have full decision making authority as to which grants are made.

  • Non-Council delegates will no longer vote on each grant proposal. Instead, they will elect Council members and, if the Council continues in future Seasons, approve the Council budget. Throughout the Season, non-Council delegates will serve the important role of oversight on the Council and voting on other proposal types, such as protocol upgrades. There will be a multitude of other activities non-Council delegates will be responsible for in future Seasons.

  • Council members will be subject to the following checks on their authority:

    • All Council members will be subject to the Delegate Code of Conduct and may be off-boarded from the Council at any point during the Season via Token House vote.
    • All Reviewers will be subject to re-election if they wish to be a Reviewer for an additional Season (provided the Council were to be approved to continue beyond S3).
    • While the Grants Council will reduce the number of delegates directly involved in decision making, this only pertains to grants. Other Season 3 initiatives are aimed at broadening the base of token holders that would hold the Council accountable. A high degree of transparency will be required of Council operations so that non-Council Token Holders are able to provide effective oversight.

Council Structure

If approved, there will be 1 Council, comprised of 2 sub-committees. Each sub-committee will have a clear mandate and be tied to a specific grant objective. Sub-committees will be encouraged to create RFPs to incentivize well-aligned grant applications. At the end of Season 3, the Token House will have the chance to evaluate, re-approve, or modify the two sub-committees.

  • Builders Sub-Committee:

    • Goal: maximize the number of developers building on Optimism
    • Non-goal: retroactive funding
    • Possible RPFs: prospective builder grants for new projects, hackathons, technical content
    • Format: proposers receive grants <50k OP, which are locked for a period of 1-year. If access to upfront capital is a blocker for applicants, Optimism may put them in touch with alternative resources to support teams in this position.
    • Suggested budget: 850k OP / Season
    • Reviewers: 3 (see below)
    • Consensus: 2/3 vote required to fund a grant

  • Growth Experiments Sub-Committee:

    • Goal: maximize the number of users interacting with applications on Optimism
    • Non-goal: retroactive airdrops
    • Possible RFPs: small-scale liquidity mining experiments, usage incentives, user education
    • Format: proposers receive milestone-based grants <250k OP to pass on directly to their users as incentives for engaging with a protocol, platform, product or service. 40% of the grant will be distributed to the proposer upfront and the remaining 60% will be distributed upon completion of a mid-way point milestone. Completion of all milestones should be achievable in 3-6 months.
    • Suggested budget: 4M OP / Season
    • Reviewers: 5 (see below)
    • Consensus: 3/5 vote required to fund a grant

Council Responsibilities

All Council members will be required to abide by the Delegate Code of Conduct. All Council members will be required to disclose all anticipated conflicts of interest when applying to serve on the Council and all actual conflicts of interest in all written voting rationale where a conflict is present.

  • The Grants Council will:

    • filter and process all grant applications. All grant applicants should receive feedback, even if it will not proceed to Council review.
    • approve grants in regular cycles (the Foundation recommends 3 week cycles)
    • publish a report outlining grant decisions within 3 days of the end of each cycle
    • assess whether grantees have meet pre-defined milestones
    • publish periodic milestone updates, as applicable
    • ensure ongoing Council operations and performance are transparent to the community

  • The Council Lead will oversee the general administration of the grants program and will:

    • process and filter applications. Applications that are submitted to the Council database should also be published to the Forum, unless a proposer opts-out of Forum publication
    • provision and/or maintain external and internal information about the grants program, and any other resources needed by the Council
    • facilitate coordination across sub-committees by scheduling and hosting regular Council meetings
    • monitor progress towards milestones and run a process to ensure milestones have been met before milestone-based distributions are made (possibly via a system similar to Radicle’s)
    • prepare regular reports to communicate grant allocations at the end of each cycle and periodic reports to communicate milestone updates from grantees
    • submit budget/renewal proposals at the end of the Season, if applicable
    • exercise decision-making authority in the event that sub-committees cannot come to consensus on an administrative or operational matter
    • commit to spend roughly 30 hours per week on these responsibilities

  • Reviewers will vote on grant proposals submitted to their sub-committees and will:

    • have the subject matter expertise required to evaluate advanced proposals. It is recommended that at least one member of each sub-committee have a technical background
    • be accessible to grant applicants - within reason - to provide feedback, answer questions, and respond to comments. This should be done via public communication channels whenever possible. It should be clear to grant applicants how to get in touch with the Council
    • work with proposers to ensure proposed milestones are clear, measurable, and achievable within the specified timeframe
    • maintain a participation rate >70% on Council votes
    • document voting rationale for each grant
    • provide any information required to publish regular reports and periodic updates in a timely manner
    • commit to spend roughly 12 hours a week on these responsibilities

Council Membership

All Grants Council members will receive rewards for their work, which will be allocated from the Council’s 5M OP budget.

  • Lead

    • The Foundation will select the initial Council Lead (which is an administrative, non-voting role) via an open application process. If the Council continues in subsequent Seasons, the Foundation may hire a full time contributor to fill this role
    • The Council Lead will be compensated 35,000 OP per Season

  • Builders Sub-Committee:

    • 3 elected delegates (there is no minimum voting power requirement)
    • Reviewers will each be compensated 14,000 OP per Season

  • Growth Experiments Sub-Committee:

    • 5 elected delegates (there is no minimum voting power requirement)
    • Reviewers will be compensated 14,000 OP per Season

If this proposal passes, additional information will be provided on the Council Lead application and Reviewer election processes. Snapshot votes will be counted manually in the event of third-party application errors.

Council Budget

The Council budget for Season 3 will be 5M OP. Should the Council operate in subsequent Seasons, the budget will be approved by the Token House on a Seasonal basis. As a result, this budget may fluctuate up or down each Season. For more information, please see the Gov Fund Charter.

Ecosystem grants will continue to be disbursed by the Foundation, meaning the Council will not operate its own multi-sig wallet at this time. Any budgeted OP that is not distributed at the end of the Season will remain in the Governance Fund.

Implementation and Administration

In Season 3, the Foundation will provide administrative services to the Council consistent with the services described in the Operating Manual. This includes reviewing and approving (in its discretion) Council operating expenses for reimbursement, conducting a KYC process on all grant recipients, and administering the multi-sig wallet for grant disbursements. In future Seasons, the Council may control its own multi-sig as the Foundation increasingly decentralizes its role.

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Are there any requirements for the council lead or members such as 0.5% voting power or can anyone apply?

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Locking up builder grants for a year really decreases the utility of a grant. Could someone elaborate on what the thinking is behind this?

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Assuming you are referring to one year lock up for builder sub committee.

I believe this is an excellent move for two reason.

  1. Locking for one year reflect that individual is not here for quick money
  2. Push the myopic community away and focus on long term sustainable governance.
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Lots to digest here. Some initial feedback from a first read:

Suggested Budget

I see that there is a suggested budget per commitee per season. This is really good. Thank you. One of the biggest problem I have personally had was giving out other people’s money without an idea of any budget constraints.

This will help.

I would even turn it into budget. Not suggested. Staying in budget should be a requirement. Would really help guide decisions.

Council work

  • approve grants in 3 week cycles

I would like to ask for this to be better defined by using some of the learnings we have had.

A typical grant proposal’s life looked like this in this season:

  1. Forum post is created
  2. Trying to get eyes on it
  3. Trying to get committee eyes on it
  4. Somehow it ends up on a vote before even committee had time to deliberate on it
  5. Forced to vote

I would like to explicitly split the cycles. Have cohorts. Only a specific number of grants go in a cohort, perhaps in a first come first serve basis? Perhaps in a simple application process?

Then the council goes on a 3 weeks round of feedback and back and forth with the proposers to improve their proposal and align it with the interests of optimism.

Then we can go on a council vote period which would be … dunno … 2 weeks?

Delegates compensation

I truly think that this is still the biggest elephant in the room. Perhaps it’s offtopic to this particular post but all delegates, irrespective of being in the council or not should be compensated.

There is considerable work involved as a delegate even if you are not in a council/committee and the governance process relies on delegates performing that work. Right now it’s done pro bono. This is wrong.

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I agree but unless I didn’t understand the change proposed I don’t think this matters in the future. Most of the work is to be done by the Council, delegates will just oversight (no need to spend much time reading grant proposals and so on since they will not vote on them anymore, they will only oversight).

I don’t completely dislike this kind of solution since it provides the relief delegates wanted but from a decentralization perspective this is bad. Anyway, I hope the best for the Grants Council since the responsibility is much higher for them. It was an interesting experiment.

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Providing oversight, means reading proposals and making sure the council does its work.

Not to mention about all the rest of the work that governance should be doing (apart from grants). Keeping up with these forums alone is a job on its own :sweat_smile:

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From a theoretical standpoint this is correct, nonetheless human nature doesn’t exactly work like that. Oversight will most likely work based on how things will turn out (instead of spending as much time reading many comments and trying to understand the proposal).

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New projects with non-trivial amounts of complexity generally require a lot of labor, often by multiple specialized individuals. By locking grant money up for a year it limits the pool of builders to people who can afford to contribute significant amounts of work for free. This works against the goal of “maximizing the number of developers on Optimism.”

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This is a really positive direction to move grant disbursements toward. It’s wonderful to see this. Great job!

Given that the OP token has no use other than voting, and will not longer be used for voting very much, is there any thought given to how to continue to support the value proposition of holding OP? Will there be other, non-grants-related votes coming up that wouldn’t fall under the Grants Council? If not, how will engagement with OP holders be encouraged now that voting will become infrequent and based on personal ties vs proposals that can be evaluated?

Another excellent improvement! Without commenting on the correct level, having a budget is likely to raise the bar for submissions as the level of competitiveness increases. Very good addition.

Is this a linear vest, a 1-year cliff, or some other arrangement? Thanks in advance for answering!

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This is another very real and important point. What’s a governance token without governance? This proposal effectively diminishes (or even nullifies) the role of delegates.

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gm! This is an important question.

The Token House is responsible for a broad set of governance decisions listed in the Operating Manual under “Valid Proposal Types.”

To date, the Token House has only focused on the first proposal type – allocations from the GovFund. But the Token House is also responsible for protocol upgrades, inflation adjustments, treasury appropriations / Foundation budget, and Director removal. These responsibilities are super important to the future of Optimism.

These additional proposal types will come online as we continue to iterate through seasons. Notably, Season 3 will include the first vote on a protocol upgrade for the upcoming Bedrock release.

As a personal opinion, I’d also add that the voting power to establish grants council budgets, membership, renewal, scope, etc is a much higher-leverage decision that voting on individual grants themselves.

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Our goal here is to create long-term incentive alignment between the team and Optimism – not to fund up-front operational costs.

If access to capital is a blocker for a team to keep building, Optimism can help put them in touch with additional guidance or resources. The builder grants council will get instructions on the right way to support teams in this position.

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The lockup here is a 1-year cliff

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Return of the Councils

Councils are a step in the right direction. There was too much conflict between members and committees in making decisions. Instead empowering individuals to be on grant councils and trusting their decisions, removes a lot of the obstacles involved.

Along as there is a clear path for reviewers to be off-boarded if necessary, then this is a good step forward. We want to clarify that if reviewers aren’t pulling their weight, then other team members or token holders should be able to follow an outlined process to remove them.

Accountability

Using a tool like Questbook for public accountability will help here. It’s a public and transparent tool for everyone to track grant updates and see grant distribution. They are free to use and can be split into sub-committees as mentioned in the proposal. You can see it being proposed in Compound too.

Misc

Grant reports

Since the council will be voting on grants instead of token holders, they should provide reports that inform the community on the protocol, what they hope to achieve and why they were funded simply and concisely. If OPLabs has a template in mind, it would be great to share it.

Transparency

Aave, balancer, and Uniswap have good processes to keep grant information transparent. We should take inspiration from them. Documenting processes and grants in one place such as a notion page or questbook would be a good start.

Delegate compensation

Is a 1-year cliff fair? 50% released after 6 months, and the rest released after another 6 months.

It’s a privilege to be paid retroactively, but waiting one year is a long time. Organizations like ours don’t have an issue with this, but this might deter individual delegates from getting involved.

Process

I agree with @lefterisjp here. Some form of grant waves would be easier, so both proposers and reviewers have a concrete plan to follow. Season 2 was a bit messy when it came to reviewing grants.

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I also think this is not correct. Delegates do work now and they should be compensated for their service now. If I gave my employees their salary with an 1-year lockup I would not have any employees.

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No one raised it earlier, so I assumed people were in support of it. I was trying to find a middle option. Ideally, I would prefer to see all members paid monthly similar to a salary, or when the season is complete (similar to Season 2).

I don’t see the need for any lock up.

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I’ll add to this process weekly calls for proposers to talk about their projects and plans.

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