ARC: Incentivized Delegate Campaign (3-month)

noturhandle · February 11, 2023, 3:26am

02/22/23: UPDATE: We’re delighted to announce that this proposal has received a $15K grant from Aave Grants DAO.

We’ll use the funds to bootstrap delegate compensation using a simpler implementation of the pilot described below, as detailed here. This version won’t use staking; interested voters manually delegate to the election’s winner. We’re accepting applications from today.

Hey, everyone. I’m @noturhandle from Butter. First-time poster, long-time reader, many-time rAAVEr.

Website: buttery.money
Twitter: @butterymoney
Discord: Click Here

Butter is a vote delegation protocol. We extend one-token, one-vote governance to align decisions produced by DAO governance to DAO objectives.

DAOs like Aave represent an innovation in institution design. They have the potential energy to address global coordination problems, especially those concerning public goods, and we’re committed to accelerating their development and adoption.

Summary

Request for comment on a 3-month incentivized delegate pilot for Aave DAO operated by Butter to determine:

the impact of incentives on delegate candidates
the impact of incentives on DAO governance
tokenholder interest in compensating delegates
the impact of incentives on voter participation

N.B. RFC invites comments from AAVE tokenholders and expressions of interest from AAVE tokenholders and delegates (current or prospective). The RFC does not request authorization, and the DAO need take no formal action for the pilot to take place.

Description

Voters elect a delegate to work on a strategic initiative in Aave DAO for a fixed term of 3 months in exchange for rewards
Delegate is elected via a time-bounded competitive process, i.e., single-choice vote delegation, where the most popular delegate is elected (single-winner plurality voting)
Rewards are generated via:
- Aave Safety Module staking and distributed to delegates as compensation at the end of their term
- (Optional) AAVE Tokens granted to the pilot via AAVE Governance are also distributed to delegates as compensation at the end of their term
- A small % (TBC) of rewards are retained and split between voters and Butter

Rationale

Professional, full-time delegates such as FireEyes/Wildfire, Flipside Governance, GFX Labs, and Llama regularly participate in DAO governance.

Delegate roles are, in most cases, unpaid positions. Without adequate compensation, the quality, quantity, and diversity of delegates is constrained by the number of resources they have spare to commit to the DAO, hence many delegates are Service Provider Delegates or Investor Delegates. In this situation, where monitoring by voters is almost impossible, delegates also have an incentive to accept payments (bribes) for making decisions that may harm tokenholders—an example of moral hazard.

Delegators, especially large tokenholders, hold influence over their chosen delegates. They can force delegates to make decisions that benefit themselves over ones that benefit token-holders broadly under threat of removing their delegation.

Minority tokenholder voting power is redundant whenever large wealthy holders participate in governance or are the largest delegators. These stakeholders have no voice in governance.

Thus, DAOs are kneecapped by principal-agent problems that are yet to be addressed by their governance, including:

Self-dealing
Plutocracy
Free-riding
Resource-wasting

Butter introduces incentives for delegates, periodic elections, and a competitive election process to improve guarantees that delegates represent the preferences of all tokenholders, gain influence based on merit and performance, and have the resources to deliver on their goals.

Pilot Overview

Delegates publish their delegate platform to Butter as part of an Aave Molten Campaign, including:
- target strategic initiative
- implementation plan
- voting policies
- delegate address
Tokenholders select a delegate by staking their AAVE
Once voters stake over the threshold amount (5000 AAVE) with any single delegate, a 24-hour cooldown period begins, reset by any further AAVE staked
- AAVE stakes can be reassigned between delegates during this period
Once cooldown is completed without any further AAVE staked:
- delegate staking is disabled
- AAVE staked with non-winning delegates is made available for stakers to claim
- AAVE deposited is staked in the Aave Safety Module
- stkAAVE is delegated to the winning delegate
- mAAVE is issued to voters

Campaign

During the campaign:

If less than 80,000 AAVE staked:
- Delegates can vote on proposals with delegated stkAAVE + any AAVE voting power available outside this campaign
If greater than 80,000 AAVE staked:
- Delegates can submit AIPs
- Delegates can vote on proposals with delegated stkAAVE + any AAVE voting power available outside this campaign

90 days after the campaign begins:

AAVE unstaked and rewards claimed from Staked AAVE contract following 10 days cooldown
AAVE + Rewards claimable from delegate contract by delegates, mAAVE holders

Model

AAVE price: $80 (theoretical)

Addressable Voting Power

Rewards

Staked (AAVE)	Staked (USD)	Total Rewards (AAVE)	Total Rewards (USD)	Reward Rate (%)	Annualized Reward Rate (%)
5000	400,000	76.85602	6,148	1.54%	6.23%
10,000	800,000	153.66082	12,292	1.54%	1.54%
25,000	2,000,000	384.28008	30,742*	1.54%	6.23%

*MakerDAO’s maximum recognized delegate compensation is 12,000 DAI per month

Target Market

We expect participant voters to fall into two categories:

Minority Holders:
- Tokenholders hold AAVE not staked in the AAVE Safety Module
- Tokenholders are minority holders
Minority Stakers:
- Tokenholders hold stkAAVE and have staked in the AAVE Safety Module
- Tokenholders are minority holders

We believe participants will be motivated either to pay delegates with staking revenue they already receive or to pay delegates with staking revenue they have decided not to claim themselves.

Poll

Do you support a 3 month pilot to test incentivizing delegates in Aave?

Yes, I am an AAVE holder
Yes, I am a stkAAVE holder
Yes, I am a delegate (current or prospective)
No

0 voters

Jommi · February 21, 2023, 5:27pm

So basically this is a way to crowdsource a bunch of AAVE votes (staked AAVE) ahead of time, and then prospective delegates can pitch themselves to be eligible for those votes?

And the crowd can redeem their AAVE back after some cooldown period if they are not satisfied?

That’s pretty cool.

lajarre · February 21, 2023, 6:05pm

Hey - lajarre from Butter here.

@Jommi You are right that this is a way to crowdsource a bunch of AAVE votes, but not ahead of time. Delegates will first publish their delegate platform and start campaigning for voters, then only Voters will start voting by staking.
We believe competition among high-quality delegates will encourage Voters to participate.

Stakes directed towards delegates which haven’t been elected will be redeemable. But stakes directed towards the winning delegate will be locked for the 3-month period.
Note: we may introduce later a potential liquidation mechanism to ensure the winning delegate is kept in check.

lajarre · February 22, 2023, 1:29pm

We are happy at Butter to announce that Aave Grants DAO has granted $15k to this proposal.

Using this to fund delegate compensation, we are starting a delegate election and 3-month campaign in the coming weeks. For this, a simpler design will be used, allowing us to onboard delegates and voters ASAP. Notably, there won’t be any staking involved for this first version.

Here is our Mirror article containing all useful information to take part in the election process and in the campaign: Aave Delegate Campaign — Butter

Quickstart to sign up as a delegate: you can head straight to our delegate application form or read the more detailed “Delegate Signup” paragraph in the article.
If you are hesitant on the right steps to take but want to get involved, please submit an application for review or chat with us on our Discord server.

To participate as a token holder: you can follow this forum thread for updates, as well as our Discord.
Butter will post validated delegate initiatives and all important annoucements about the election.

Please join our Discord server to chat with the Butter team and start discussions with delegates and voters.

lajarre · March 21, 2023, 8:09pm

We’re pleased to announce that we have eight delegates who have committed to running as candidates for the Aave Delegation Campaign. They are listed below in alphabetical order:

We will soon be sharing each of their Delegate Initiatives for voters to make their choice.

The Election is Nigh

The next step before the start of the Campaign is the Election itself.

The Election will run for a week from April 3rd to April 9th, 2023.

We encourage delegates to think about how they’ll promote their candidacy to tokenholders and we’ll, of course, be on hand to help (as well as doing some of our own).

As a reminder, this election will be open to all AAVE and stkAAVE tokenholders to cast a vote.

If you are interested in voting and have any questions, you can reach out to us on this thread or on Discord.

Are You a Large Token Holder? Become a Delegate Partner

Butter’s mission is to accelerate the development and adoption of DAOs through governance. One of the key tenets of our approach is reducing the centralization of voting power.

To that end, we are launching a Delegate Partnership program: if you are a large token holder (or manage large holdings), you can allocate your delegation through Butter.

Here’s how it works:

As a Delegate Partner, you allocate voting power to our matching fund.
The delegate will then be elected by other token holders who participate in the Election.
Your voting power will then be delegated to the election winner, for the duration of the 3-month Delegation Campaign.

Please get in touch on Discord or Twitter to learn more.

Do You Want to Participate in a Butter Election as a Delegate?

Butter’s application form is always open.

The Aave election will start soon, so please get your applications in this week. Any candidates who apply next week won’t have much time to be onboarded and promote their candidacy before the election starts.

Following Aave, we plan to run Delegate Campaigns in other DAOs. You can apply using the same form to be considered in future campaigns.

And if you’d like Butter for your DAO, please reach out.