BIP-30: Fourth Period (Economy)

choobie

Summary:

It is proposed that the Fourth Period sees significant change in BottoDAO’s economy, whereby Retroactive Rewards are removed and its 25% allocation is redistributed either to Active Rewards or Treasury.

The snapshot will contain three scenarios:

Redirect 25% of Retroactive Rewards to Active Rewards
Redirect 25% of Retroactive Rewards to Treasury
Do not remove Retroactive Rewards

It is expected that the DAO rationalizes and argues for one of the three scenarios in this proposal. For now, this BIP proposes the removal of Retroactive Rewards and reallocation of its 25% share of revenue to Active Rewards. Reasons for the removal of retroactive rewards are outlined in §1.3.

Voters can earn through:

Spending VP every week (Active Rewards Contract)**
Emissions (Governance & Liquidity Mining Contract)
~~Retroactive Rewards (Determined by the DAO after the period finishes)~~

* Requires an Access Pass or staked $BOTTO in the governance contract.
** Requires a minimum of 2,000 $BOTTO staked in the governance contract.

Protocol ETH revenue is distributed each round:

50% to Active Rewards Contract
50% to DAO treasury, with equivalent in $BOTTO burned

Subsidized Active Rewards

50% of revenue generated from any collaborations, derivatives, or royalties from the interim period (between Third and Fourth Period) are equally distributed across 12 rounds of the Fourth Period.

For example, this will include the Ryan Koopmans collaboration dropping on May 25th.

1.1. Economy Proposal Specification

50% of all protocol revenue within any given round is directly redistributed to Botto participants:

50% to those who spent VP in a round (relative to others), in ETH
~~25% to a pool for retroactive rewards, in ETH or $BOTTO~~

The remaining 50% of revenue is held in the treasury, with $BOTTO equal to 50% of weekly revenue burned from the treasury, like in the third period.

1.2 Active Rewards Contract

50% of protocol revenue in any given round will be distributed in ETH. This includes any revenue generated from derivatives, secondary sales, and any other revenue stream Botto as a protocol has. Distribution is based on how many Voting Points (VP) are spent by a user, relative to other voters in that voting round. ETH is deposited from the treasury into the Active Rewards contract after the round ends.

To qualify for rewards from this contract, a user must have at least 2,000 $BOTTO staked in the Governance contract before the end of the round and when they claim.

1.3 Retroactive Rewards

After much deliberation, this BIP proposes that retroactive rewards are dropped from Botto’s economy:

The current rewards system has been critiqued as complex, especially for new users who have to understand both active and retroactive rewards. Removing the retroactive rewards simplifies the system, making it more accessible and easier to understand.

The actions used to calculate retroactive rewards (days voted, artworks voted on, etc.) might not consistently reflect valuable DAO engagement for Botto. While the metrics we have defined in the second period are definitely impactful, and meaningful to the protocol in some capacity, they ultimately function like a vague airdrop. Even though the rewarded behavior is not perfectly predictable, they still incentivize users with relatively little skin in the game to “grind” a wide variety of behaviors in a way that may not be aligned with the protocol. For that reason alone, retroactive rewards should be discredited as a way to access ETH revenue.

Determining the distribution of retroactive rewards also adds another layer of complexity to DAO governance. This is to the detriment of the DAO, taking time and resources. We should be spending this time to either isolate preferred engagement variables and find meaningful ways to reward them, while at the same time keeping current incentive mechanisms straightforward and focusing on the idea of rewarding voters. One simple example we could consider would be rewarding certain behaviors (such as proposing governance proposals) in $BOTTO as an incentive to provably-aligned actors.

We strongly encourage proposals that reward qualitative contributions in a way that does not invite misaligned behavior, and see the treasury’s large holding of $BOTTO as an underutilized resource here.

Should BIP-29 pass, this change would not affect the distribution of Third Period Retroactive Rewards.

1.3.1 Reallocation to Active Rewards

Reallocating 25% of protocol earnings from Retroactive Rewards to Active Rewards means that active voting participants earn 50% of weekly revenue. Advantages to this may include:

Simplification of understanding rewards system for new project entrants
Maintaining the 50/50 split between DAO participants and the treasury
Increase in "Instant gratification"
Easier to model out BOTTO token value
Increase excitement in participation

1.3.2 Reallocation to Treasury

Reallocating 25% of protocol earnings from Retroactive Rewards to Treasury means that the treasury accrues 75% of weekly revenue. Advantages to this may include:

Simplification of understanding rewards system for new project entrants
Additional funds for the DAO to fuel growth
Potential reserve of funds for rewarding aligned contributions
Easier to model out BOTTO token value

1.3.3 Keeping Retroactive Rewards

Avoiding any reallocation and maintaining Retroactive Rewards results in no change to the Fourth Period economy. Advantages to this may include:

Maintaining a method for exploring and rewarding DAO voting behavior
Maintaining existing economy reward system
Maintenance of expectations of all voters (concept of "fairly rewarding" behaviors, i.e. early voting)

1.4 Treasury $BOTTO Burned

Following BIP-22, the DAO will continue to burn an equivalent of $BOTTO from the treasury equal to 50% of round revenue.

1.5 Interim Period

There is a 1 week gap between periods with Botto generating protocol revenue from derivative collections and a collaboration with Ryan Koopmans & Alice Wexell. This revenue would be reallocated equally throughout the 12 weeks of the fourth period active rewards.

2.0 Budget

N/A

2.1 Disadvantages

The removal of retroactive rewards without a set alternative established to reward diverse forms of contribution besides VP expenditure pushes off new solutions to experiment with.
Relying on the proactivity of the DAO to propose ideas may result in a delay that calcifies a more plutocratic economy.

2.2 Criteria of Success

Growth in proposals for alternative methods of rewarding
General growth in DAO Governance (more engaged participants)
General

juanje

Thank you for making another BIP for this and thank you for picking up the second alternative from discord´s discussion (i.e: redirecting 25% to Treasury) although (unfortunately) people haven´t seemed very enthusiastic about it. It won´t be surprising that increasing active rewards ends up winning the vote, given the incentives. Sending Eth to treasury just for the sending it to treasury is not attractive, using it for an ad-hoc initiative could raise more interest. Maybe just outlining that as an open possibility could be appealing.

Many of the arguments about removing retroactive rewards revolved around "simplicity" and a supposed "grinding behavior", and most of my arguments to support the status quo included "fairness" and discouraging "vote dumping". There are no ways for DAO members to monitor the fairness and the accuracy of this assertion, just like we don´t have (and won´t have) means to check whether this proposed BIP will bring positive or negative outcomes. Let´s hypothesize that after retroactive rewards are removed, voting activity (broadly defined, again) plunges 30%, or that vote dumping significantly increases. Shouldn´t those be considered a criteria of success/failure?

In turn, how can be encouraging "growth in proposals for alternative methods of rewarding" a criteria for success? The incentives for this seem non-existent if firstly we don´t agree and define what behaviors should warrant rewards (and which, maybe, should not). This BIP assumes that voting behavior should be left out of the equation, but does not say why (simplicity aside, I get the strength of this one). With 50% to active rewards we will be rewarding (and attracting) capital, up to the point to which auctions, the token and financial opportunity cost permit. Maybe short term food for the token, but also, maybe, another missed step into that plutocratic loop, and into feeding Botto with an increased number of inputs and voters, who will make this interesting and worthy of getting a big spotlight in the future.

All the above is relevant but I really don´t mind whether we have more or less active for one or several periods, the main problem for me is how decisions are made and pushed: they are hardly ever data-driven. A symptom: we mention success criteria in all the BIPs, yet we don´t have access to a simple and reliable dashboard or DB with key (engagement) metrics, more than 1.5 years into the project.

That´s why I propose to send retroactive to treasury: if we still cannot invest resources well, let´s save it at least for the time being. Using those funds for anything that helps fix a problem could be positive, giving it away to people who (in the best case) won´t change their behavior, or to people who (in the worst one) will go less active (because there is an incentive to do so)...well...

narok

juanje

I wholeheartedly agree that we are lacking in data-driven approach. I would like to see some differences between voting periods that we had so far. It would be nice to see something like: number of wallets, average VPs spent per fragment, total fragments voted, etc. That would help us make informed decisions instead of speculating based on the feel.

That said I will support redirecting the retro awards to active voters. I don’t see ideas that are lacking funding, and our treasury has been growing so far. Without plans how to use the treasury I explicitly prefer rewarding active voters.

Attracting more holders through a reward mechanism is not something that we should avoid. Think the easiest if not the best way to get more votes and more participation is to offer more rewards to participants. Although we are AI art collective we are still built on blockchain. The obvious advantage is that we can share in equal way based on our participation. If during next period we see some unhealthy behaviour, such as, vote dumping or similar we can try to think about solutions for that.

juanje

Nothing against attracting more (and any) holders, all the opposite. But the fact is that only active rewards (active? lol) will be more attractive to a specific profile of holder (and less attractive to other ones). That former "holder" profile would only have to connect 30 seconds a week to accrue the value generated by Botto, the voters, the community, and the capital (also hers/his oc). This is the plutocratic loop that the BIP alludes to. There is more to do than capital provision. We already have some (also large) holders who vote dumped consistently, e.g.:

1M vps spent in 1 or 2 pieces only (consistently, repeatedly, week after week)
Fewer than 20 pieces voted a week (on average) by the top 10 voters (with a huge variance in the # pieces voted)

*I used the past tense in "dumped" because there used to be some data in the voter´s lb, which provided a few insights and stopped working.

However there are not alternative rewarding mechanisms, and we won´t be able to, imo, come up with better and fairer ones than retroactive for people who weekly spend some time voting/curating but are not able to provide a material contribution (such as building a bot, a dashboard etc.). Capital is rewarded atm via: governance contract, lm contract, eth rewards, and token appreciation. Anyone can get those just by being passive. Voting proactiveness is left on the hands of holder´s supposed "best interest" and good will. But the causal link between voting activity and rewards/token appreciation is broken, can easily be abused, and will be abused to some extent. Not sybilled, but abused.

Cooper

I'm tobie on Discord (seems I can't change my name here). I'm cautiously supporting that we remove the retroactive rewards. Mostly because it's complex.

I do however think that we should include some incentive into the active rewards that incentivise behaviour that trains Botto the most. Because as I understand, number of voting points spent is just one part of Botto training, another important part is to have a lot of votes.

I still don't know exactly how important it is for the engine to get a lot of votes to learn from, but if it is then I think we should incentivise that, and maybe put it into active rewards.

rubensher

Sounds good!