Contributor INV Grant Redesign
Summary
At present, Inverse Finance DAO core contributors receive compensation through an INV grant and vesting structure that lacks clear parameters or guidelines. This results in inconsistencies where various contributors are granted differing vesting packages, often without transparent reasoning behind these allocations.
This proposal aims to rectify these concerns through a thorough overhaul of the INV grant and vesting system. Our goal is to establish a more rational compensation model for contributors, foster a culture of constructive feedback, and incentivize impactful contributions.
The revised framework comprises two key components:
- A fixed xINV grant and vesting schedule for contributors, directly proportional to their total monthly salary.
- A flexible xINV grant program determined by a Coordinape “bonus round” every three months.
Previously Used Structure
As of September 2023, Inverse Finance utilized the following INV grant vesting structure which saw ~8588 INV distributed per year, approximately 2.42% of the total circulating supply.
It should be noted that multiple contributor INV grant packages have been fully vested since September 2023, having completed the two years they were set for.
One nuance to note is that contributors’ INV grants are entirely denominated in xINV. This offers contributors dilution protection as the amount of INV each contributor receives for their xINV will grow in line with protocol inflation. This exchange rate for INV to xINV is 5.52 at the time. This means that whilst the xINV contributors currently receive through their vest will remain unchanged, the INV amount they receive will increase over time. For example, in 3 months time, Patb’s grant package could grow from ~160 INV per month to ~180 INV per month even though Patbs xINV package will remain constant at 0.951 xINV per day.
The existing grant structure exhibits significant shortcomings:
- Lack of Fairness and Transparency: There is an unclear connection between the size of the INV grant, individual salary levels, and the actual contributions made by team members, resulting in a compensation system that is perceived by team members as being unfair.
- Demotivation and Disparity: The disparity in grant packages can have a demoralizing effect on team members who may perceive their efforts as undervalued.
- Ambiguous Onboarding Guidelines: New contributors have expressed concern about how INV grants are determined, which can lead to confusion and dissatisfaction during the onboarding process.
- Lack of short-term incentives and accountability mechanisms. The current INV grant structure lacks mechanisms for providing peer-to-peer feedback as a means of improved accountability. Similarly, the current structure lacks a vehicle for providing short-term incentives as an additional means of rewarding performance.
Addressing these inadequacies is imperative for establishing a more equitable, motivating, and accountable INV grant system for contributors that fosters a culture of transparency and continuous improvement within our organization.
Fixed INV Grants
We propose implementing a restructured fixed INV grant program that is linearly aligned with the dollar compensation of contributors listed within their Season 1 Working Group proposal.
Under this proposal, contributors will be granted 0.0016 xINV per month for every $1 of their monthly salary. This allocation is capped at a maximum of 23.2 xINV per month, irrespective of salary levels (i.e. 0.0016 xINV*monthly salary = Fixed INV grant per month). Consequently, even if contributors fall outside of well-defined salary bands or work reduced hours, a standardised calculation for their INV grant can still be determined.
On today’s date, at current xINV to INV exchange rate of 7.05 this equates to a maximum INV vest of ~5.24 per day, or ~163 INV per month.
A breakdown of the proposed INV grant schedule by band can be seen below:
| Band | Salary | INV / month | INV / day | xINV / month | xINV / day | One year as % of circ supply | Full package (4 years) as % of circ supply |
|---|---|---|---|---|---|---|---|
| A | 14,500 | 163.6 | 5.38 | 23.2 | 0.76 | 0.40% | 1.58% |
| B | 12,000 | 135.4 | 4.45 | 19.2 | 0.63 | 0.33% | 1.31% |
| C | 9,500 | 107.2 | 3.52 | 15.2 | 0.50 | 0.26% | 1.04% |
| D | 7,500 | 84.6 | 2.78 | 12.0 | 0.39 | 0.20% | 0.82% |
| E | 5,500 | 62.0 | 2.04 | 8.8 | 0.29 | 0.15% | 0.60% |
Grant Structure
-
Contributors in a given band will receive the same fixed INV grant for 48 months. If contributors leave the DAO or become inactive, a governance vote will cancel this grant.
-
All contributors, including future contributors joining the DAO, will have identical end dates for their grant schedules.
Governance Voting:
Only tokens that are claimed will be eligible for voting in governance. Contributors’ unvested and unclaimed tokens will not be eligible to vote. This protects the decision-making power of delegates and large token holders within the DAO and prevents new contributors from immediately gaining an outsized voice in governance, as they would if their entire vesting package could be used to vote.
Vesting Cliff
Grants to new contributors joining the DAO will be subject to a 6-month cliff, meaning the first six months of INV vesting cannot be claimed until 181 days following their first day of receiving payroll. If a new contributor leaves the DAO or becomes inactive before the end of the cliff period, the contributor will forfeit any INV grant under this program.
For the sake of clarity, all existing contributors, having completed a minimum of 6 months at Inverse Finance, are presumed to have already satisfied their cliff period and will initiate the receipt of their fixed monthly INV allocation once this proposal is ratified.
Flexible INV Allocation
The fixed INV component of this compensation proposal offers a transparent, dependable, and consistent mechanism for remunerating contributors for their input and building a stake in the protocol.
Contributors have voiced a desire for this mechanism to be completed by a flexible compensation element that aligns with their impact. In a fast-moving and constantly evolving environment, such as Inverse Finance, clearly tying bonuses to a specific performance indicator (KPI) is challenging and would likely lead to unfair outcomes.
Instead, we propose leveraging Coordinape as a tool to aggregate subjective opinions on impact in a way that can be directly translated to reward. This approach has the additional benefit of driving good conversations, leading to a more effective organisation with higher-impact contributors.
How it Works:
- Step 1: Every 3 months, we propose allocating 113 xINV (~796 INV as of March 2024) for Coordinape distribution (roughly 20% of total INV going to active contributors). This directional commitment will be confirmed via the passing of this proposal.
- Step 2: All contributors receive 150 GIVE tokens (GIVE is purely a token that exists on the Coordinape servers, not on any blockchain, read more here) to allocate among their fellow contributors every 6 weeks (1.5 months)…
- Step 3: The total amount of GIVE each person receives is calculated as a percentage of the overall GIVE pool for the 3-month period. The overall GIVE pool is 300 GIVE * number of contributors.
- Step 4: Contributors then receive a percentage of the 113 xINV “bonus” directly tied to the percentage of GIVE they received from the total GIVE pool.
- Step 5: The final Coordinape allocation figures, along with the proposed INV “bonus” for each contributor, are shared on the forum in a proposal.
- Step 6: This proposal is taken through governance. If the proposal passes the allocated xINV bonus will be automatically placed in a 6-month vesting contract.
- Step 7: The process is repeated in 3 months’ time, with additional INV bonus vesting tranches being allocated in a similar manner
Example:
Over the course of 3 months, four contributors each distribute 150 GIVE tokens every 1.5 months among themselves, totalling 1200 GIVE.
- Elliott receives 450 GIVE (37.5%)
- Hammad and Dom each receive 300 GIVE (25%)
- Joe receives 150 GIVE (12.5%)
Next, the 113 xINV tokens are divided based on these percentages:
- Elliott: 42.4 xINV
- Hammad and Dom: 28.3 xINV each
- PJ: 14.1 xINV
A forum post is then created to outline the allocation and corresponding INV bonuses. This proposal is submitted for governance approval.
Once the proposal is approved, the distribution of these INV bonuses over a 6-month period will result in
- Elliott receiving an additional 0.232 xINV per day for the next 6 months.
- Hammad and Dom each receiving an additional 0.155 xINV per day for the next 6 months.
- PJ receives an additional 0.077 xINV per day for the next 6 months.
Note: The flexible INV allocation is experimental, and the mechanism may be altered or even completely removed in the future as contributors seek to refine and optimize the process.
Costing
Fixed INV Grant
The fixed INV grant component of the proposed model establishes a linear relation between the total contributor wage budget and the distribution of INV tokens. Based on the Season 1 Working Group budget outcomes, roughly 2.57% of the total circulating supply of INV will be allocated to contributors annually through fixed xINV grants. As grants are denominated in xINV the percentage of total supply allocated to contributors will remain broadly constant year on year regardless of broader protocol inflation. Based on the current contributor pay structure from Season 1, the fixed INV grants would look like this:
| Contributor | Band | FTE | xINV/Year | INV/Year | % of INV circulating Supply Distributed via xINV Fixed Vest Each Year |
|---|---|---|---|---|---|
| Patb | A | 1.0 | 278 | 1,963 | 0.40% |
| Alien | A | 1.0 | 278 | 1,963 | 0.40% |
| 0xMT | A | 1.0 | 278 | 1,963 | 0.40% |
| Tabboz | B | 0.5 | 115 | 812 | 0.16% |
| Naoufel | B | 1.0 | 230 | 1,624 | 0.33% |
| cryptoharry | A | 1.0 | 278 | 1,963 | 0.40% |
| Karm | B | 0.5 | 115 | 812 | 0.16% |
| Edo | B | 1.0 | 230 | 1,624 | 0.33% |
| Total | 1,805 | 12,724 | 2.57% |
| Working Group | xINV/Year | INV/Year | % of INV circulating Supply Distributed via xINV Fixed Vest Each Year |
|---|---|---|---|
| PWG | 672 | 4,738 | 0.96% |
| RWG | 346 | 2,436 | 0.49% |
| GWG | 278 | 1,963 | 0.40% |
| TWG | 278 | 1,963 | 0.40% |
| AWG | 230 | 1,624 | 0.33% |
Flexible INV Vest
We are proposing four distributions each year, each consisting of 113 xINV tokens. This totals 452 xINV tokens allocated through flexible INV vesting over the next year. This would result in an additional allocation equivalent to ~0.63% of the total circulating supply of INV over the next 12 months.
Total Cost
Under this structure, we forecast 3.13% of total circulating supply of INV will be distributed via fixed and flexible contributor grants each year.
| Current DOLA Payroll | Fixed INV/year | Flexible INV/year | Total INV Yearly | Fixed INV/4years | Flexible INV/4years | Total INV/4years |
|---|---|---|---|---|---|---|
| 94,000 | 2.57% | 0.64% | 3.21% | 10.27% | 2.57% | 12.83% |
We feel this allocation aligns closely with the standard allocation for the core teams of other early-stage projects.
Close
We acknowledge the complexity of introducing a new compensation structure native to a DAO, as compensation is a deeply personal and subjective matter. Following extensive consultations with Inverse Finance contributors, we believe that this compensation structure strikes a balanced middle ground. It aligns with the objective of providing fair compensation, incentivizing effort, while also maintaining prudence regarding the organization’s overall budget. We warmly invite feedback from the community and our contributors on this proposal, recognizing that their input is invaluable in shaping our collective journey forward.