LidoDAO Token Rewards Plan (TRP)

1

Introduction

As discussed in the recent budget proposal, Lido is in the process of continued decentralization towards a permissionless, contributor-driven DAO. As part of this process, we are proposing the creation of a Token Rewards Plan for LidoDAO contributors.

Summary

The goals of the Token Rewards Plan are to:

  1. Attract top talent
  2. A means to provide governance participation to deeply engaged contributors
  3. Prevent premature departure of contributors prior to work product finalization
  4. Minimize governance overhead through simplicity

The plan has the following components:

  • Term: four years, beginning on November 1st, 2022 for existing contributors
  • Vest Schedule: one year cliff with monthly vesting thereafter
  • Base Compensation: Base Fees, in US dollars
  • Level-Multiplier: Based on experience and skill
  • LDO Price: Calculated as the trailing 180-day close price of LDO, using the following Dune query as the source of truth
  • *Repricing Mechanism: Allows the contributor to manually trigger a reset of their TRP and vesting schedule, locking in a new LDO Price at the 180-day moving average, but forfeiting any unvested LDO. For example, if a contributor decided to reprice their TRP four months into the plan, they would lose all LDO accrued during those four months, and reset their cliff to 12 months from the date the repricing mechanism was used.
  • Upon being used, a new four year plan with one year cliff is granted, and if a contributor has multiple packages due to promotions - all are reset and consolidated into one new package. The maximum discount that contributors can reprice at is 50% below the original TRP package price.

*Note - contributors are only allowed to reprice their package once per four years

Levels & Skill-Multiplier %

Lifeguard: 800%, or 200% per year
Orca: 400%, or 100% per year
Shark: 300%, or 75% per year
Dolphin: 250%, or 62.5% per year
Otter: 125%, or 31.25% per year
Swordfish: 75%, or 18.75% per year

Policy Features

  • Contributors will have the option to opt into the new Rewards plan, at the 11/1/22 LDO Price of 1.5294 or continue with their existing plan. This option will last for two weeks from December 6th to December 20th.
  • Opting into the new plan will enable contributors to lock in the current LDO Price and retain their current cliff
    • Example: If a contributor is 9 months into their vesting schedule, their cliff will be 12 months - 9 months = 3 months, and the full vesting schedule will be for 4 years (48 months) starting at month 9 (3 months until the cliff, then 45 months of monthly vesting thereafter).
    • Example 2: If a contributor is 14 months into their vesting schedule, they will have no cliff and continue vesting monthly at the LDO Price for 4 years (48 months)
    • Note - Contributors opting into new plan will be paid out pro-rata to the day for LDO accrued (e.g. If a contributor has worked 7.4 months, they will be paid out LDO at a daily rate and their cliff will be remain unchanged at 4.6 months in the future)
  • New packages will only be granted upon hire, promotions, and base compensation raises of 30% or higher (multiple raises are just as accounted for. Issuance of new TRP package resets this counter.)
    • A promotion is defined as a change in level, i.e. from Shark to Orca
  • A contributor voluntarily or involuntarily leaving the DAO will forfeit any unvested LDO
  • After the initial four year Rewards plan is fully vested, the DAO will vote on a new four year program
  • Promotions will result in an incremental package granted to the individual for the difference between the existing package and new level package, at the LDO Price at time of promotion, capped at the annual USD amount of the new level package.
    • Example: An Orca has a $100K compensation and priced their token Rewards package at $1/LDO. They receive 100K tokens per year for four years. The individual is then promoted to Lifeguard after 1 year with a $130K compensation and the new LDO price is $2. They will receive a new package for:
      • Promotion Rewards USD amount = $130K * 800% = $1,040K
      • Additional TRP = ($1,040K - $400K) / $2 = 320K LDO, or 80K LDO/year
      • Vested Portion of Plan = 100K LDO
      • Remaining Existing Plan = 400K - 100K = 300K, or 100K LDO/year
      • In this instance, the contributor will receive a new package for 80K additional LDO per year.
    • At t=0, the contributor’s four year vesting schedule of 400K LDO are granted
    • At t=1, the contributor receives 100K LDO and is promoted to Lifeguard, and receives an additional LDO package of 80K LDO that vests over four years
    • At t=2, the contributor receives 100K LDO from the prior package and 80K LDO from the Promotion Rewards Package
    • At t=3, the contributor receives 100K LDO from the prior package and 80K LDO from the Promotion Rewards Package
    • At t=4, the contributor receives their last 100K LDO from their first package and 80K LDO from the Promotion Rewards Package
    • At t=5, the contributor receives 80K LDO from the Promotion Rewards Package
    • At t=6, the contributor will receive a new Rewards Package based on their Base Compensation and LDO Price

TRP Table - Promotion Rewards Example

image
image722Ă—155 3.83 KB

Base Rewards Calculation Example for a Dolphin, Base Compensation of $100K, and LDO Price of $2:
Base Rewards = (Base Compensation * Level-Multiplier) / LDO Price
Base Rewards = ($100K * 250%) / $2
Base Rewards = 125K LDO Tokens, or 31.25K tokens per year

Rewards by Level, based on a Base Comp of $100K and LDO Price of $2

Examples

Example #1: >1 Year into LDO Vesting

  • Existing LDO package of 48K, 20 months into vesting out of 24 months
    • Monthly equivalent of 2K LDO per month over 24 months
    • Unlocking at 4K/month for months 13-24
    • Received 32K LDO
  • New package @ 180d MA of 1.5294 = 150K LDO over 4 years, 37.5K/year, 3.125K/month

This contributor has accrued 2K * 20 months = 40K LDO and been paid out for 32K. If they opt into the new package, they will immediately receive 8K LDO (40K - 32K) and start vesting 3.125K LDO per month for 4 years.

Tech guy #1 will likely opt into this plan because they will receive 8K + (3.125K * 4) = 21K LDO over the next four months rather than 16K LDO if they stay with the current plan.

Example #2: <1 Year into LDO Vesting

  • Existing LDO package of 24K, 10 months into vesting out of 24 months
    • Monthly equivalent of 1K LDO per month over 24 months
    • Unlocking at 2K/month for months 13-24
    • Received no LDO so far
  • New package @180d MA of 1.5294 = 150K LDO over 4 years, 37.5K/year, 3.125K/month

This contributor has accrued 2K * 10 months = 20K LDO and been paid out 0 LDO. If they opt into the new package, their cliff will be 12 months - 10 months = 2 months and receive:

2K * 10 months = 20K LDO
+
3.125K LDO * 2 months = 6.25K LDO
= 20K + 6.25K = 26.25K LDO

Once the shortened cliff is reached, they will vest 3.125K LDO per month for 46 more months (48 month plan - 2 months of vested LDO at the new plan)

Example #3: RCC >1 year into LDO Vesting

  • Existing LDO package of 80K LDO/year for three years with 1 year cliff (start date Oct 1, 2021). Contributor opts-in to new TRP on Month 14 (Dec 2022) (150K/yr for 4 yrs).
  • The contributor has already passed his cliff so vesting will be monthly at 12.5K LDO per month for 48 months

Example #4: RCC <1 year into LDO Vesting

  • Existing LDO package of 80K LDO/year for three years with 1 year cliff, 8 months into vesting schedule
    • Cliff is in 4 months and the vest is calculated as:
      • Old Plan = 80K/12 = 6.66K LDO per month
      • New Plan = 150K/12 = 12.5K LDO per month
      • (Old Plan monthly * months worked) + New Plan monthly * months remaining to cliff)
      • (8 * 6.66K) + (4 * 12.5K) = 103.3K LDO at month 12, with 12.5K LDO monthly vesting thereafter
      • Remaining months = 44
      • 12.5K LDO * 44 = 550K LDO
    • Total LDO = 103.3K + 550K = 653.3K LDO

This proposal will be updated with an additional LDO budget request and a link to corresponding Snapshot, when contributors’ decisions are collected.

UPDATE: the proposal wording was actualized according to changes approved in Lido-V2 Snapshot.
Added a clarification for base compensation increases of 30% and higher

13 Likes
2

Hey,
Thank you for sharing, and appreciate tons of work preparing this proposal!

I have some questions regarding the mentioned above reprising mechanism (AFAIK, this feature is unique and hasn’t been widely adopted yet).

I am a bit confused by the following terms:

*Repricing Mechanism: Allows the contributor to manually trigger a reset of their TRP and vesting schedule, locking in a new LDO Price at the 180-day moving average, but forfeiting any unvested LDO. For example, if a contributor decided to reprice their TRP four months into the plan, they would lose all LDO accrued during those four months, and reset their cliff to 12 months from the date the repricing mechanism was used.

and here:

A contributor voluntarily or involuntarily leaving the DAO will forfeit any unvested LDO/

So, If the reprising was triggered before the cliff date, It would be implemented in a rather obvious way, agree. The question arises if the reprising has been applied a few months after the cliff happened. What would the calculation look like?

As for me, as a general suggestion, an ideal illustrative form would be an online calculator or even a google spreadsheet template containing all formulas and comments to make some trials with numbers.

4 Likes
3

Thanks for such a great work!

I think we should offer extra token package not only when level is changed but also when base compensation is changed by more that some threshold (say 30%). Because there can be cases when contributor is underpaid at the moment and will get increase in base comp without upgrading level.

4 Likes
4

Also it is important to know that we are planning to use smart-contracts for TRP vesting. In the smart-contracts it is easier to implement per-block vesting, rather than per-month one. I think we should add this into the proposal.

2 Likes
5

Thanks for sharing, I wonder why the otter is among the inhabitants of the underwater world?

4 Likes
6

The calculation is the same. For example, if your original plan is for 100K LDO vesting over four years at a price of $2 LDO and you reprice your package at $1.50 LDO right after your cliff is met (1 year in) the 75K remaining LDO of your vesting schedule is replaced by:

50K / $1.50 = 33.33K LDO/year or 133.32K that will vest over four years, with a one year cliff.

If you have any additional questions, please feel free to reach out to on discord or telegram directly to the finance team (Aes, adcv, McNut, pipko, Alex) or through the finance channels.

Thanks for the feedback! Agree - we have updated the policy to account for this situation.

The plan is indeed to transition to smart contract contract vesting. Per-block vesting would complicate taxes for a number of contractors and contributors so it will have to be something that is carefully considered.

We like Otters :slight_smile:

image
image803Ă—500 104 KB

3 Likes
7

Current MVP design of the vesting contracts is pull based. It means that tokens are not flowing automatically to the recipient each block but can be claimed by the recipient. Recipient can choose how often he/she will claim vested tokens. More on that here https://hackmd.io/bDylyQVeR1eeRfjHwl0JUA?view

1 Like
8

One more thing. Promotional TRP will not have cliff, right? Except for the case of early promotion, when the initial cliff is still active. In this case promotional TRP will have the same cliff end date as the original TRP, right?

1 Like
9

Thank you for detailed TRP description!

One question: when the promotion TRP package is applied - next month after the increase or some other way?

10

We’ve created a calculator that will help contributors calculate their annual and total expected rewards based on their level, base compensation (fees), the LDO price and in the event that they are promoted. Please input the variables into the beige cells and you will see the output generated in the grey cells. Please let the finance workstream know if you have any questions!

Yes that’s correct.

The promotion TRP will start vesting on the day of the promotion and the contributor will receive their first reward allocation one month after that day for contributors who have already passed their cliff and at the cliff for those who have not reached their vesting cliff yet.

4 Likes
11

I have a few additions to suggest for this proposal before it goes ahead and becomes a governance reference.

These suggested amendments are not about calculations or formulas but around the context of decentralized distribution of power, wording, and some details around admissions and exit to the plan.

There should be more context in the background for example affirming that rewards not measured by or dependent on hours worked, production or efficiency and will allow contributors to accumulate LDO tokens to vote in DAO governance.

"The goals of the Token Rewards Plan are to:

  1. Attract top talent
  2. A means to provide governance participation to deeply engaged contributors
  3. Prevent premature departure of contributors prior to work product finalization
  4. Minimize governance overhead through simplicity"

Remove bullet #1 - although admirable, this is not measurable and therefore cannot be a goal and the TRP is just as likely to attract bad talent. It also injects ambiguity into the dominant purpose which is stated as the furtherance of decentralization. Governance power is proportional to the total owned tokens and the more independent actors to prevent concentrations of voting power the more decentralized the DAO becomes> which is expressed in bullet #2; May consider to replace #1 with increase the number of brand influencers, but not necessary. Less is usually more.

Bullet #2 - increase the number of rational independent actors who participate in DAO governance; contributors are desirable to recruit into the governance process because they are better positioned to make informed independent judgements on the merits of governance proposals because they inherently have a higher understanding of liquid staking technology and DAOs through their experiences and exposure to the space. More preferable for example than airdrops to the disinterested.

Bullets 3&4 no comments.

“The plan has the following components:”

In this section steps for members to join and exit might be included.

For example to include that the membership in the TRP is optional - eligibility criteria, self-nominate based on that criteria , and some process will determine the admission to participate. Similarly, the member should be free to exit the TRP on demand. Lastly, to include method of arbitration for disputes however simple.

The DAO itself should retain the right to modify and change the terms of the TRP and how changes would be communicated to the members and how members accept changes; it is not obvious that this is the case.

The above suggestions do not have to be lengthy procedural explanations; just bullets that capture the direction of governance on the framework of the plan.

Lastly, in the bottom sections consider to delete the word “vesting” and use a more appropriate word like “Milestone” to reflect when the rewards for the ongoing loyalty periods become available to members. What is actually going on is that after defined periods of contributing, members become eligible for gift tokens.

4 Likes
12

Hey, hey! The Lido team is thrilled to announce that TRPEscrowFactory
was successfully deployed to mainnet.
The contracts code was audited by statemind.io
Final audit report confirms code quality, reliability, and security.
This factory is proposed to be used for actual TRP contracts deployment (actual proposal will be published later).
Feel free to investigate the contracts code.
The source code is available on ethrerscan and GitHub - lidofinance/lido-vesting-escrow: Token vesting escrow with cliff, clawback and full clawback.

9 Likes
13

Proposed operations plan for TRP can be found here - Lido DAO Token Rewards Plan (TRP). Operations plan

4 Likes
14

On the back of the successful Budget Renewal Request, we included two minor modifications to the TRP program. These changes will be reflected in edits in the policy above.

1 Like