As we work through the recent changes to how we request compensation and do work, it is worth re-visiting the previous conversations about how (in what tokens) we compensate contributors. There are 2 main questions which need to be answered:
- what assets does the DAO (token holders) want to use to compensate contributors?
- What assets will contributors accept and what strategy is most beneficial to attracting contributors.
These questions are intertwined and in the end are answered by different parties. But like the rest of the procedures that we are developing, while they may change once tested in practice, we must start somewhere.
Let’s review a bit of history of YAM’s compensation procedures:
The original compensation package for contributors was skewed toward stablecoins (variable amounts but close to 75% stablecoins) for full time contributors as seen here: YIP: Yam Contributor Manifesto and Compensation Revised 12.1.2020. Part time contributors were paid entirely in YAM (with 1 exception). This proposal was determined mostly by “feel” and none of the guidelines here are still in use. There was no real vesting of the YAM as it was streamed in real time similar to a salary.
A few months later, a new contributor compensation guidelines proposal by @feddas went into effect for new contributors: Contributor Compensation Guidelines. According to those guidelines, 50% of full time contributor compensation was paid in YAM. Part time compensation was paid entirely in YAM. There was still no vesting for YAM, which was streamed and claimable monthly.
Both of these pay guidelines were revised again in YIP-84, which I wrote after talking to contributors and doing research on how the existing model was working: Analysis of Current Compensation model. YIP-84 changed the breakdown of stablecoins and YAM that contributors could receive to a maximum of 70% stablecoins, with no minimum. That proposal also included a 6 month vesting cliff but this was never implemented. This proposal passed in September 2021.
YIP-100 is the last chapter in this history, and while it ostensibly deals with compensation, it really focused more on the process for applying for and receiving compensation and not the breakdown of what assets it is paid in. It builds upon YIP-84, setting the max stablecoin payout at 70% of total pay. YIP 100 did remove a requirement for vesting or streams for YAM payment, with a nod to potentially re-implementing a better system later.
To sum up, our current, approved compensation process allows contributors to request up to 70% of their compensation in stablecoins, with the rest being distributed in YAM. Both YAM and Stables are distributed directly at the end of the month. There is no vesting for either YAM or the stablecoins.
The new design for YAM that is being developed is partly an update to YIP-100. It requires that contributors apply for funding for the work they are going to do and are then paid upon completion. YIP-100 assumes a monthly compensation cadence. The new model does not need to. This is a parameter of the design that we can choose.
- What parts of YIP-84 and YIP-100 should we keep?
- Should we allow any work duration before payment (as opposed to monthly)?
- Should we allow grant applicants to request funds in any denomination or should we require that funds are taken in specific denominations (i.e. 30% in YAM).
- Should we institute vesting for YAM?
When answering these questions, we should keep in mind the goals of the compensation process. The goals below are ones that I came up with in a prior post. They can be changed and modified if we (token holders) don’t agree with them.
- The Process should be transparent for contributors and token holders.
- Contributors should be held accountable for the work they do and not be able to “game” the system
- Contributors should be fairly rewarded for their work.
- Payment should be incentive aligned.
- Payments should be for work that has already been done.
- The process should require as little overhead as possible from contributors and token holders to achieve the above goals
For me, the biggest question is whether or not the DAO should require that contributors/grant applicants take some of their compensation in YAM. Or should we make this purely a case by case question for each grant application?
Here is a list of pros and cons for requiring some YAM compensation that I have come up with:
- Potentially less treasury drain.
- contributors accepting YAM may give the market confidence that YAM is valuable (assuming it isn’t just sold by contributors).
- Incentive alignment if designed correctly.
- We can pay more on a dollar basis since we can mint YAM for this purpose.
- Contributors may not want YAM, or may request a higher compensation rate if we pay a portion in YAM.
- Could add to sell pressure if contributors sell YAM they are paid in and that looks bad.
- Paying contributors in minted YAM dilutes all YAM holders. Paying contributors a portion in YAM will require minting more YAM, or draining the treasury.
Looking forward to hearing others’ thoughts on this question.