PIP-40 Pre-Proposal: Simplified updates to PIP-38 Compensation Language

[zaatar]

TL;DR

MSA’s preproposal is a scaled down, weakened version of the compensation scheme of PIP-39. It fails to address creation of the DAO committee that will oversee the use of its treasury to fund compensation, thereby necessitating yet another proposal and DAO vote (on the committee). All of MSA’s valid concerns are now addressed in the amended version of PIP-39 that incorporates changes proposed by Michael O’Rourke.

Four Key Features of MSA’s Preproposal

MSA highlights the following four key features of his preproposal (PIP-40). I will address these, in turn, below.

Shannon completion compensation package

@msa6867

Reduces Shannon award by half each quarter starting end of Q3 2025 in the event that Shannon completion is delayed beyond Q3 2025. This preserves a feature desired by @zaatar et al, but does it more gracefully than declaring an all-or-nothing cliff in August 2025. (Language is ported verbatim from @zaatar as placeholder to define when the Shannon completion milestone is achieved; this language may need refining from the dev team)

My understanding is that Shannon will be shipped in time; I would leave one year as a hard limit. However, I would empower the DAO remuneration committee, upon recommendation by PNF, to extend the one-year deadline if the delay is due to circumstances beyond the Shannon team’s control.

Total rewards for price milestones

@msa6867

Limits Shannan and Milestone Remuneration rewards to 80% of DAO treasury at the time the milestone is achieved. This preserves a key feature desired by @zaatar et al to protect DAO integrity from an event that drains completely its treasury, but does so much more simply than the @zaatar proposal.

PIP-39 as now amended preserves the reward package totals as set out in Michael’s original compensation scheme but, like MSA, stipulates that the totals cannot exceed a fixed percentage of the DAO treasury. My proposal (PIP-39) sets this limit at 15 percent of the DAO treasury, though for flexibility, it provides that the committee, following consultation with PNF, can modify this percentage. Ramiro (above) notes that 80% is reckless and that 15% is in the strike zone.

DAO committee powers

@msa6867

Adds a 3-person DAO Remuneration Committee to approve Foundation-suggested remunerations, in keeping with @zaatar proposal, especially the comment by @o_rourke stating he was amendable to such a committee so long as it was to approve Foundation suggestions, not to initiate suggestions.

PIP-39 as now amended proposes a 3-person committee. Under MSA’s preproposal, the committee would have authority only to approve the distribution suggested by PNF. There is no discussion about what occurs if the committee declines to do so.

Under PIP-39, the committee must treat PNF’s recommendations with deference. However, in cases where the committee does not accept PNF’s suggested distribution, the committee must try and reach agreement with PNF. Only if agreement is not possible would the committee’s decision govern.

Allowing the committee, in these narrow circumstances, to make decisions on how to apportion rewards is in keeping with Michael’s agreement to “leave control over compensation payments to the DAO for hitting price-targets.”

Lock-up loophole

@msa6867

Closes a loophole that allows the Foundation to unilaterally decide to remove the lock period associated with the rewards by making the DAO, rather than the Foundation, responsible to to correct defects in award lock if so advised by legal counsel.

PIP-39 also closes this loophole.

No Discussion of Committee Setup and Operation

MSA’s preproposal fails to discuss the establishment and functioning of the committee - a serious omission. Details on the committee’s creation and operation are a necessary piece of the compensation scheme. Hence, “implementation” is a big and indispensable part of PIP-39.

Best to Avoid Delay & Fatigue of Separate Vote on Committee Setup

MSA’s approach would require two DAO votes - one on changing the PIP-38 compensation scheme and another, afterward, on the committee’s setup and operation (PIP-41?). This would create delay and unnecessarily exacerbate voter fatigue.

Voting for changes to the compensation scheme and creation of the committee should be part of the same proposal as this ensures the committee will be up and running and able to approve the Shannon completion package as soon as possible. It’s important that the Shannon dev team know without delay what they’ll be getting.

Other differences between the PIPs

Several terms included in PIP-39 are notably absent from MSA’s preproposal; some of these are noted below. These missing terms are designed to protect the DAO treasury and ensure the fair distribution of rewards.

Mechanism to address misbehavior

@zaatar

• In the event that there is wrongdoing or a violation of the spirit of this agreement, the committee by majority vote may suspend, modify, or rescind this package.

MSA’s preproposal provides no way to deal with possible misbehavior, However unlikely misconduct might be, not having a mechanism to deal with it is imprudent.

KYC

@zaatar

• All grant recipients must be KYC’d before receiving any grant funds.

KYC is necessary to prevent improper allocation of DAO funds. MSA’s preproposal does not require it.

Individual Reward Limits

@zaatar

No single individual shall receive more than 5% of the payout for each of the first two price milestones, or more than 2.5% of the 3rd and 4th price milestone payouts. The Committee, by unanimous decision, can increase this percentage.

This provision is meant to ensure a wider distribution of the reward pies. For flexibility, the committee can up these percentages. MSA’s preproposal imposes no such limits.

Flexible Criteria for Reward Allocation

@zaatar

• Retro grants will be awarded to applicants (devs, PNF directors, marketers, etc.) whose work is shown to have had a positive impact on the token price and on Pocket Network fundamentals such as Tier-1 exchange listings, increases in exchange trading volumes, paid relays and the number of gateways, drop in net inflation (supply growth - burn), and diversification of paid relay customers. The Committee, or PNF with the Committee’s approval, can expand or modify the criteria for receipt of a grant.

• Anyone can apply to PNF for a grant based on the eligibility criteria. These applications must be made public.

• Based on the eligibility criteria, the Foundation will propose the distribution which must be approved by majority vote of the Committee.

My proposal creates a transparent and flexible process for reward allocation decisions by PNF. Any Pocket community member will be able to apply to PNF for a grant based on published eligibility criteria. MSA’s preproposal includes no such framework which makes PNF allocation decisions, however well meaning, susceptible to arbitrariness and bias.

PIP-39 is ‘Complex’ and ‘Restrictive’

@msa6867

This author finds the @zaatar proposal to be unduly complex, restrictive and burdensome

By limiting the size of Michael’s POKT compensation packages to a reasonable percentage of the DAO treasury, much of the “complexity” of PIP-39 has been eliminated.

In order to protect DAO funds and ensure fairness, PIP-39 does include restrictions on PNF conduct (e.g., open application process for price-milestone grants based on published eligibility criteria). But at the same time, it’s flexible and contains mechanisms for relaxing these restrictions where necessary.