Token House participation and incentives: an extended analysis

šŸ› Token House Governance
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This is a shared effort of the @seedlatam delegation composed by AxlVaz, CryptoChica, Jadmat.Eth-DefiLatam, Joxes and Netrim.

Summary

Optimism Token House has been active for 1 year going through five seasons facing numerous changes throughout each season pursuing the best interest for the Optimism ecosystem. From the season 0 to 4, Optimism governance has established different processes for managing governance funds, protocol updates and other decisions to which delegates have had to adapt, even making the process more complex to guarantee; for example, the correct allocation of funds, with the introduction of committees, and later, the Grant Council. Over time, it has been possible to demonstrate the heavy workload that the delegates have had to face. For season 4, less than half of the delegates (>0.25%) had an active participation during the feedback and approval to vote process. In order to align the work of delegates and broaden the desire to participate, we believe that the path is to improve the incentive system aka rewards, as a way to increase the quality and fulfillment of the final goals.

1. Introduction

The launch of Optimism Governance marked a new phase in Web3 financing and Public Goods within the Layer 2 scaling solutions ecosystem on Ethereum.

During this period, the Governance Fund has funded numerous projects, and many OP tokens have been injected into the ecosystem. These achievements have been made possible thanks to the hard work of the delegates in Seasons 1 and 2 and the management of the Grants Council in Seasons 3 and 4.

Given the level of maturity achieved by Optimism Governance, itā€™s essential to consider not only the injection of OP tokens into the ecosystem but also to plan and execute incentives for delegates and other decision-making roles within the ecosystem.

Because of the nature of this governance and expected future, itā€™s critical to continue to keep current known delegates active and to attract new delegates from both the Web3 ecosystem and qualified individuals and groups who can be aligned with the optimistic vision (universities, ONG, foundations, etc.).

2. Optimistic Heart and Hands-on Work (Workload Volume in Optimism Governance)

Optimism Governance stands out not only for granting grants to a large number of projects but also for its agile iteration and flexibility to drive the constant growth of the ecosystem. This generates a considerable workload for the delegates, who must manage a dense feedback process to approve proposals.

To contextualize the above, letā€™s examine the work carried out by delegates in previous seasons, with a special emphasis on the current season.

2.1 Previous Seasons

2.1.1 Season 1

The system was open this season, and anyone could request a grant through a proposal in the forum. For a proposal to proceed to vote, it needed the support of at least 1 delegate with >0.0005% of the voting power (no data could be retrieved on how many delegates had this voting power).

Note: only proposals posted on Snapshot are counted.

Season 1 presented the challenge of handling many applications and the need for a transparent process to bring proposals to a vote. Changes were implemented in Season 2 to address these issues.

2.1.2 Season 2

In this season, 5 committees were introduced, specialized working groups consisting of 5 delegates each, which provided qualified recommendations on how to vote on each proposal. These committees received OP tokens for their work at the end of the season. For a proposal to proceed to vote, it needed the support of at least 2 delegates with >0.5% of voting power (about 36 delegates throughout Season 2).

Note: Only proposals posted on Snapshot are counted.

While the committees alleviated some of the delegatesā€™ workload, their role could have been more precise, leading to conflicts between proponents and committees and among the committees themselves. In Season 3, the Grants Council was introduced to address these issues.

2.1.3 Season 3

In this season, the Grants Council was established, a group of 9 delegates elected by the governance to manage the Governance Fund grant process under the direction of an individual from the Optimism Foundation. Each council member receives OP tokens at the end of each season.

The Grants Council have resolved the main governance issues:

  • Unclear processes
  • Workload for delegates
  • Conflicts among delegates

In the meantime, a portion of delegates accepted the responsibility of being part of the Citizen House for retroPGF 2. In numbers:

  • 10 were selected via governance nomination and voting
  • Other few via other badgeholders nomination
  • 195 projects analized
  • 2 weeks for revision + several others for preparation and onboarding

While this represents a significant achievement for governance, Season 4 has reintroduced new workloads per unit of time for delegates through missions.

2.2 Season 4

This season, missions have been introduced, consisting of proposals for specific initiatives to achieve short-term objectives (Intents). Any individual, team, or company can submit a mission proposal through a post on the forum, following predefined rules. For a mission to proceed to vote, it must have the support of at least 4 delegates with more than 0.25% of voting power (63 delegates with enough voting power for the first month of Season 4).

A total of 49 mission requests were received, out of which only 31 proposals went to voting. Despite having established rules for missions, they have reintroduced a workload for delegates and a low level of participation has been observed among them.

A table has been prepared by manually extracting data from the forum during the proposal pre-selection stage.

Delegate Support Intent #1:

1152Ɨ410 30.9 KB

Delegate Support Intent #3:

1153Ɨ773 62.1 KB

Delegate Support Intent #4:

1153Ɨ736 59.7 KB

Total support from participating delegates:

1537Ɨ443 80.8 KB

2.3 Current Participation and Voting Data

Based on the data presented in the previous section, the following figures can be extracted:

  • To date, Optimism Governance has a total of 1,125 delegates.
  • Only 63 delegates possess more than 0.25% of the voting power.
  • Of these, only 27 delegates supported missions.
    • 7 delegates (violet) are current members of the Grants Council.
    • 5 delegates (yellow) belong to the Protocol Delegation Program Season 4.
    • Delegates @mastermojo and @mattl (red line) supported missions with the same address, as clarified in their delegate statement, and could be considered a single delegate for the purpose of this assessment
    • 13 delegates (white) are independent or have no additional duties or external incentives.
  • 12 delegates supported less than 5 missions.
    • 5 delegates supported only 1 mission.
    • 5 delegates supported only 2 missions.
    • 1 delegate supported 3 missions.
    • 1 delegate supported 4 missions.

Note: If any delegate is missing or errors are detected, please report it here in the post for correction.

Additionally, itā€™s worth noting that the following behavior could be evidenced among the delegates in the forum:

  • Out of the 27 delegates, 13 only supported proposals without providing feedback to the proponents.
  • Delegates with a low number of supported missions maintained constant activity during the feedback stage, such as @jackanorak, @MinimalGravitas, joxes team group, and others.
  • Delegates who did not reach the 0.25% VP threshold actively participated during the mission feedback period, such as @opuser, @lee0007, @brichis, @itublockchain.

Summary reflextions

The granting of subsidies generates significant interest in Optimismā€™s governance from teams, builders, protocols, communities, grant seekers, and others. This results in a high volume of requests on the forum. Such many requests imply a heavy workload for delegates, who must filter, provide feedback, vote, and communicate.

The constant interaction and workload make it difficult to onboard new delegates to governance and exhaust those who have been present since the beginning. Having active and committed delegates is crucial to eliminate or disincentivize malicious actors within the governance.

3. Pursuing better incentives to strengthen governance

As mentioned earlier, the Grants Council has resolved governance issues faced in Seasons 1 and 2. This is partly because the delegates participating in the council are aligned with the Optimistic Vision and receive appropriate incentives for their work, considering it a job.

Thanks to this, we now have a competitive and efficient team capable of processing many requests.

However, this doesnā€™t mean that the same Grant Council model is applicable for the rest of the missions and resolves the season 4 problems automatically. It would be impractical to create a new council for each initiative of the Optimism Collective, with its own rules and members. Instead, we must focus on establishing the necessary incentives for delegates to maintain consistent activity and participation in governance.

In each season, incentives have been given to delegates, but those donā€™t seem attractive enough to keep their commitment to governance:

Therefore, we should establish a continuous payment system, by example, per voting cycle or other more predictables, that allows delegates to focus on governance. Additionally, we should implement a system in which those who donā€™t meet minimum pre-established requirements, related to expected grade of involvement, will lose their token allocation, allowing another delegate interested in governance to take their place.

Next steps and open questions

Approaching the path to have an established policy and more coherent with the work of delegates who are 100% committed to the Optimistic vision, a new system should be established and raise the requirements that lead to a more professionalized and diverse work on those who are already active and potential new ones. For this, itā€™s important to define what type of attitudes to reward and where to direct the focus for greater success. This means that we must be prepared to answer these questions:

  1. How to attract new delegates?
  2. How to catch the attention of delegates who have lowered their participation?
  3. How to define the quality of a dedicated delegate?
  4. How can the delegate be encouraged to share the Optimistic vision and bootstrap more participants and elevate the quality?
  5. What other activities of a delegate to evaluate besides participation in on-chain voting?
  6. Who monitors delegate activities?
  7. Based on previous experience, what is the direction to take for the reward allocation reassessment?
  8. What is the reward mechanism that best suits the current state of Optimism Foundation operations?

This and other considerations are aspects that we continue to evaluate based on this analysis that leads to a design that entails an improvement in processes and incentives, and that we invite delegates and community members to contribute in the discussion spaces.

4. Conclusion

As we found in this analysis, mainly focused on season 4, heavy workload and rewards are not leading to growth in engagement and diversity when itā€™s critical to have it. In order to best allocate governance funds to achieve the proposed goals, we must propose new incentives that are attractive for delegates to start working in a more committed way with diverse opinions and minimizing the effect of individual interests in specific decisions.

From SEED Latam, we have been observing the current situation, having internal discussions that lead to the solution of this problem that can encourage a large number of committed delegates; and meanwhile we keep working on, now we want to raise the discussion with the entire community.

At the end of the day, the final goal is to achieve more committed delegates, improve the quality of the discussions and deal with the diversity of opinions. Only in this way, Optimism governance and protocol will reach the state of maturity that the entire Ethereum community wants to see and perpetually benefit from its technology: in favor of public goods, open-source movement and all of the aspects behind the Optimistic vision that we all share.

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Hi @Joxes

Thank you for taking the time to write this. You and your team have summarized it quite well, and I appreciate the acknowledgement of my effort.

Reviewing proposals asks for a significant time and effort commitment. Getting more input from the collective, via some incentive, would add value to this governance.

I was not even included in the season 3 retroactive reward, but it does not stop me from contributing, with my limited knowledge, to our governance. If I didnā€™t talk about this at the time, I donā€™t see any point in talking about it right now.

While some reward could help others to attend web3 related conferences in real life, for others, it could act as motivation to contribute, which is just fine and should be encouraged.

Our already existing process is quite good, i would only suggest a small change : X + Y = Z (reward)
X = (voting power + activity on the forum + on-chain voting)
Y ?? Some changes to include new/low voting power delegates (again, I could possibly be on the receiving end of this, so leaving it for others to fill)

Another approach would be rewarding delegates for their contributions via RPGF. The challenge here is the missing context. Citizens not active in our governance would not be able to properly reward the delegates because of a lack of context. What we get is one page to write about our efforts, and at the end of the page, we are one step away from pivoting RPGF to a selling pitch. One with better writing and presentation skills will have leverage over others.

we must propose new incentives

The challenge is quite apparent. If announced in advance, we could see a boost in new users and delegates and quite possibly more noise. Remember the Connext proposal thread; creating an account here is free and takes only a few clicks. With a framework in place, we might be able to filter the noise from contribution.

I am always in favor of bringing more motivated individuals to our governance and giving them a stage to present their thoughts and ideas.

  1. We just had Tally sponsored DAO event, I dont have metric to to check if its was success or not, CoinBase is also encouraging users to delegate(from their wallet). Perhaps, we could do something like Uniswap that was a huge success for them.

  2. Participation will improve if we reward them, not necessarily in $$

  3. One suggestion would be to check their rational when they vote, not to name shame but voting for only 1 proposal under an intent when many are nominated raise question, specially when its delegated to you from Foundation. Accountability is missing from all DAO, providing rational will boost accountability.

  4. Education; share about Optimism and superchian where you can. Not just the good but bad and ugly side as well. We are working on iteration and should accept our mistake equally.

  5. In long term, Citizen house. In current form, foundation is doing an excellent job.
    Compensation and reward, I will leave for others to decide.

5 delegates (yellow) belong to the Protocol

Seriously ? only 5. We should work on this, I did gave them a nudge but not enough.

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Great write up. Thanks for gathering all that data; it couldnā€™t have been easy :smile:. In all honesty, though, I think we should expect quite a boost in participation here soon. Many delegate awareness initiatives have been approved as missions, and other projects have started their own initiatives. I also believe it may be up to us as delegates to help onboard new delegates and reengage existing ones.

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Hey @Joxes , as always, thanks for the great insight and thoroughness of this. I was looking to share my similar thoughts in the Feedback Thread , but since youā€™ve already begun the discussion with data to back it up I wanted to share more insight ( although I spot a typo in my delegate name :smile: ).

As seen with the activity of Season 4, I currently donā€™t believe the Token House is scalable. Compared to any governance protocol I have participated in or followed, this missions cycle had the most amount of work that had to be checked by (mostly) volunteers in the relatively limited voting period of 4 weeks. This leads to every delegate having to make a choice: is it better to go through many proposals quickly, or go thoroughly through a few?

Personally, I thought it was better to go for the latter, not only to help the applicants but to point to other delegates on things to watch out for before approving similar proposals (many missions from the same intent shared very similar content from each other). However, this ended up being much more time consuming than initially expected, with my usual allocated time for delegation barely being enough to ask questions to 4 proposals and approve 1.

Also worth noting here that currently the foundation is planning to discontinue the protocol delegate programme by the end of S4, guaranteeing at least a 20% decrease in active delegates with more than .25% of voting power by S5 ceteris paribus. I obviously would prefer a non-protocol delegate to decide whether a solution is even needed for this, but itā€™s a given that this change will decrease the pool of approving delegates even further.

Although not relevant anymore starting from S5, also worth noting that protocol delegates were excluded from these rewards, this is something that I brought up before in the past as a potential reason for lack of protocol delegate activity (as all protocol delegates have at least 1 other project to devote to full-time)

Whether better delegation rewards is the way to go or not I think itā€™s best to let other users decide, but in its current state, I really believe that we have to find a way to make becoming a (relevant) delegate less of an uphill and unproductive battle than it currently is, as this could bring issues to the proposed bicameral system .

I am hoping this is just an issue of awareness and the new misisons dedicated to this solve it, but itā€™s always best to plan for failsafes in case this is not the case!

Personally disagree with this, especially since the Token House and Citizen Houses are supposed to oversee each other. Citizens giving RPGF to ā€˜goodā€™ delegates is very subjective, and could quickly devolve to favoritism and both houses getting tied together in ways I do not feel comfortable.

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Thanks for your work on this! One thing I would note that I donā€™t feel is fully captured in participation here is a delegate reviewing a proposal but not getting to a support for different factors (e.g. budget amount requested) and giving their feedback on it. Otherwise these metrics showing number of proposals supported can incentivize only supporting/approving proposals.

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I think it is a mistake to leave this in the hands of the missions or any other temporary incentive. Governance must be the one that incentivizes the delegates, we cannot leave this in the hands of third parties. Delegates have to be aligned with the Optimism Collective not with a protocol or a spontaneous objective. We have to think long term. On the other hand, as you yourself say, this is part of encouraging others to join to participate in governance.

This is a personal opinion and not of the delegation in which I collaborate, which is SEED Latam.

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Thank you for your comment, for what you mention we also leave some observations below. We know that we cannot capture everything in these metrics, but we can observe that we are always the same people who have been participating in the forum for a long time. We need to add new voices that bring a critical view to governance. We think it is important to show it and take action on it.

This is a personal opinion and not of the delegation in which I collaborate, which is SEED Latam.

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Thank you so much for this analysis of participation. Itā€™s really enriching to see the evolution of governance this year, especially as one of the newer delegates. I agree that there is a type of participation that hasnā€™t been fully considered in the analysis, and itā€™s important to acknowledge it. The feedback for the missions added a lot of value to the process, but unfortunately, only a few delegates provided it. Personally, I took the time to read all the proposals, and it was quite time-consuming. I believe this model might not be able to scale effectively because if the alliances and missions continue, the number of proposals will only increase.

The fact that only delegates with more than .25% voting power can approve missions leaves out individuals like @Michael , @itublockchain and even you and your team were on a fine line between passing or not. The work you and your team did is invaluable. I donā€™t have the definitive answer, but I think it would be great to provide opportunities for people who have the enthusiasm and share values with Optimism but lack sufficient voting power to participate more actively in governance. As a Mexican delegate, itā€™s challenging to get more than 100k OP delegated, which represents a significant amount of money in Mexican Pesos. I will work hard to achieve it, but it would be fantastic if the path could be made a little easier for those who come with enthusiasm to participate.

Lastly, I want to express my gratitude for feeling that my efforts are appreciated. Thank you for that.

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There was a lot of discussion about this in the past and today we see the results, also the delegated protocols came when the Council was already working. However, from this governance it was always said that the protocols deserved a say because they were the ones that best aligned with Optimism.

I believe that Optimism this time has to bet on its delegates who are the basis of this governance and decentralization.

In my opinion, delegation in protocols should continue, we should let some things mature, sometimes I think we iterate too fast and this does not allow us to see and measure the real impact.

What do you mean by other users deciding? I think it is a matter of governance.

On the other hand, I understand that protocol delegates have other responsibilities and I think other delegates who can get involved in Optimism should be encouraged. As you rightly say, one way to be a competent delegate that is not difficult is to have the necessary incentives, including financial ones.

This is a personal opinion and not of the delegation in which I collaborate, which is SEED Latam.

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I think it is a mistake, for the same reason you say, you donā€™t always have all the context and you always vote for the best known. For me we have to have the necessary incentives for delegates to have continuity and activity in governance.

This is a personal opinion and not of the delegation in which I collaborate, which is SEED Latam.

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Apologies if it didnā€™t sound clear, shouldā€™ve said other delegates not users!
Basically, I was trying to say that as a protocol delegate, I would rather not steer the discussion too much of how to proceed with the protocol delegation programme as any incentives/benefits might come across as self-dealing and I might carry very obvious biases.

Speaking more as an individual than as a protocol delegate, I do agree that the programme is still on its early stages , and its lack of participation in this stage should not be indicative on whether letting protocols participate with governance is not possible.

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Quick correction to the data here. I have >.25 % of VP through Blockchain@USC. So anywhere I provided feedback was on behalf of Blockchain@USC. Iā€™ll have some fuller thoughts on this later.

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Yes, but we did not include comments that were outside the approval period.

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Great write up :grinning: Iā€™m sorry as to you arenā€™t the only one recieving no incentives not even 1-2or 3 of the drops either but still participating

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Firstly we appreciate your detailed analysis @Joxes, that was something that weā€™ve been talking about in our ITU Blockchain Delegation Team. Weā€™re aware thatā€™s consequential sustaining the engagement of existing recognized representatives and drawing in fresh participants from both the Web3 community and capable individuals and collectives who share optimistic vision.

In the Web3 ecosystem, Optimism reaches individuals from all fields, naturally leading to a high demand in governance and forums. In the face of this demand, as delegates, our responsibility is to adequately address this demand in exchange for the tokens allocated to us. This involves ensuring activity in forums and voting stages, and sharing our decisions with the community. As evident from your comprehensive and labor-intensive report that you shared with us, governance is evolving rapidly, and as delegates, itā€™s essential to keep up with this pace to keep the ecosystem vibrant.

We, the ITU Blockchain Delegation Team, diligently review each proposal and share our justifications with you. As @brichis mentioned, finding delegated 100k OP tokens is no easy feat. Especially in the MENA region we represent, where investors are relatively scarce, acquiring such an amount is challenging. We also believe that incentives should be in place to retain existing active delegates.

We appreciate your understanding. Your support in this matter is crucial as we work to maintain an active delegate community and uphold the vitality of the ecosystem.

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Exactly, this is what we believe needs to be done. We believe that to make governance more pluralistic and maintain activity there must be incentives for delegates. Currently in Optimismo it is easier or more attractive to run for a grant than to actively participate in governance (apart from board members who receive appropriate incentives).

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Hi, Iā€™m new here so apologize if my reply is outside of the discussion.

I think Iā€™m a potential future delegate that could help with the workload described here but I am not as of today. I will try to explain what is lacking for me to dedicate time to the Token house and other Optimism activities. This will hopefully add to the discussion and maybe I can help move it forward.

My main obstacles for committing time:

  1. I have no idea how much time would be required of me. Iā€™m already working full-time and have family responsibilities. And I donā€™t like to commit to something that I donā€™t know if Iā€™m able to follow through.

  2. I donā€™t understand the financial compensation of the work. And although Iā€™d like to become financially independent thatā€™s not my motivation. I prefer a balance between the potential financial upside and risks. A suggestion further up is to allocate smaller payments to participation in individual tasks or groups of tasks sounds smart to me.

  3. I find it really hard to find relevant information. I would love to start small but I donā€™t know how to do it and I donā€™t know where to find the information I need to get going. I would like to participate in real-world training at a conference but I live in Europe and going to Denver isnā€™t realistic. Online training is a good alternative.

Suggestion to look into
My guess is that all my obstacles are clearly addressed somewhere on gov.optimism.io. But itā€™s not easy to find under ā€œhow to?ā€ category.

I work at the local municipality and about to start a project on plain language. The goal for this project is that the population of the city should understand what the letters that we send them actually means. It shouldnā€™t be too much to ask for but itā€™s really difficult to do in practise.

We have started the process by training volunteers to ā€œreadā€ official documents that we send out and give us feedback on how they feel when reading. Example: ā€œI feel overwhelmed when I look at this document. I donā€™t even want to start reading because thereā€™s just too much textā€. This person was not one who struggled with the local language or in general.

My feeling when entering gov.optimism.io is ā€œIā€™m overwhelmed, where should I startā€. Iā€™m confident the information I need is there so I feel ā€œdumbā€ for not finding it.

I hope this makes sense. I guess the three obstacles I mentioned are symptoms and the plain language part addresses the underlying challenge of onboarding new delegates.

Plain language
Language that is plain to one set of readers may not be plain to others. Material is in plain language if your audience can:

  • Find what they need
  • Understand what they find the first time they read or hear it
  • Use what they find to meet their needs
    What is plain language?
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Hi, thanks for your comments, here is an update of season 5, this season we are referring to is already finished.

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Thanks!

Do you think my comments would fit anywhere in the DAO discussions?

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GM @Oakfloors! I suggest you start by adding the governance calendar. Tomorrow, we have the Community Call of the cycle at 18:00 GMT. You can access it here:

Additionally, @eugenia has recently begun sharing the OP Bulletin, which is great for finding everything in one place:

While there isnā€™t a formal training program, I recommend starting with these posts:

Have a great week!

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