Renewing the Compound Governance Working Group (GWG)

Renewing the Compound Governance Working Group (GWG)

Co-authors: @PGov, @Doo_StableLab, @AranaDigital

Overview

Over the past six months, it has become increasingly evident that robust and resilient governance remains fundamental to Compound’s growth and security. Having played a significant role in expanding the governance ecosystem amid ongoing volatility, we are committed to building upon our work from the 6 month iteration of the GWG, and further strengthening the protocol’s governance framework by boosting both the quality and quantity of delegate participation.

We believe that initiatives focused on enhancing Compound governance are vital to the long-term sustainability of the DAO, and by extension, the protocol itself. This is especially critical as we strive to maintain a competitive edge against protocols like Aave and other emerging money markets. Our original rationale, detailed here, remains as compelling today as it was six months ago, and we bring the same unwavering enthusiasm to this mission.

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Governance Activity Retrospective

One of our highest priority items during the trial period was to achieve and maintain a consistent level of participation, along with constant attainment of quorum. Since initiating the delegate race and onboarding the working group in July, we’ve observed a notable uptick in the voting participation rate, rebounding back to earlier year highs.

(Year-to-date Voting Participation Rate)

As shown in the above data, participation fell steadily from February, dropping from around 28% to just over 20% by July. This calculation displays the amount of voting participation over the number of total delegates votes. With no coincidence, the governance attack occurred during July. The establishment of the working group during this period of decline has already yielded a tangible improvement, with participation rates rebounding to over 28% by October.

Persistent participation is vital for the success of Compound since its success is now fully community-driven. More operations in the future are likely to be conducted using decentralized governance rails, therefore requiring a well-oiled process and high voter turnout. This is especially important since the average number of proposals created over the past six months hit an average of 18, considerably higher than the monthly average of 5 proposals/month maintained between Apr 2021 - Jan 2024.

(Number of new proposals each month since July 2021 - October 2024)

As for quorum, since the delegate race was instituted on September 2nd, 100% of proposals have attained quorum. This race enabled the DAO to delegate 250k COMP to 8 individuals/entities that demonstrated active participation in the Compound governance. The year prior to this delegate race saw approximately 8% of proposals fail to reach quorum, a result that has proven frustrating for parties managing the protocol’s risk, requiring them to rerun proposals. Relative to H1 2024, which saw an average voting turnout of 508k COMP, the post-delegate race average turnout stands at 713k, a near 40% increase.

At the beginning of the term, before the delegate race commenced, a malicious proposal from Humpy and the Golden Boys managed to pass. Regrettably, we were just under a week away from having sufficient trusted governance participation to prevent this outcome. Nonetheless, after a few stressful days, the GWG worked hand-in-hand with multiple DAO entities in many battle rooms to quell this debacle. Special thanks to the @Alphagrowth and @OpenZepelin teams for their hard work on the frontlines during this situation. Based on the above data, and due to the reinstatement of the Guardian, such governance attacks will more than likely be evaded.

Added Scope During Trial Period

Over the past few months, the GWG has formally and informally taken on additional responsibilities relative to the mandate initially outlined at the start of the trial period. The goals to start with primarily hinged around enhancing governance participation, but some alterations and additions were made as a way to best position this working group to serve the DAO. Moving forward, we propose to have explicit purview over:

• Funding and escrowing capital for DAO programs: For unestablished teams looking to come to the DAO and request funding, it is often advantageous to have approved funds go through a trusted intermediary, allowing for the option to send funds on a periodic basis or based upon the completion of certain milestones. This ensures a layer of trusted accountability and prevents an excess of onchain votes.
  • Ex: We helped facilitate the recently passed ImmuneFi Bug Bounty Program and set up a multisig to escrow bug bounty funds until they are needed.
• Community payroll functionality: In concert with the above points, there may come times in the future where different community members will receive funding from the DAO. Rather than running a separate one-off vote for each instance, we propose escrowing the budget for said program from the start—and then distributing as needed.
  • Ex: As mentioned prior, the Bug Bounty Program funds will be distributed a few thousand at a time from an already approved budget, called upon as needed. In the future, if the DAO implements other working groups or delegate/contributor incentives, the GWG will act as the operational team tasked with verifying and executing payments.
• Compound MetaGov: In the future, there may be instances where it is in the DAO's best interest to take a more active role in the governance of other chains or projects. Having the GWG take on these actions when necessary is logical and ensures we maximize our chances of working together in other DAOs. Voting power may also enable Compound DAO to exert influence in attaining grants. We will work hand-in-hand with the Alphagrowth team to ensure cohesiveness and efficiency in this domain.
  • Ex: With Compound recently launching on Scroll, we were allocated an airdrop by their team. The GWG and Alphagrowth created a shared multisig to receive this airdrop on behalf of the DAO, where funds will be used for growth in line with Alphagrowth’s mandate, as well as strategic governance involvement to ensure Compound’s continued success on the chain.

What to Expect in the Future

• Publishing of a “Constitution” for multisig signers on the Compound Proposal Guardian and Community Multisig in collaboration with @cylon and DefiSafety. This will include a formalization of the role and expectations for a critical piece of security within the DAO. Our team has been collaborating with the noted parties since the governance attack to ensure the Guardian ruleset is properly and safely administered.
• The DAO will see a proposal in the coming months to institute an active delegate rewards program to further increase the level of engagement from existing delegates and to further entice competent external parties to partake in Compound governance. The grant given to WOOF last month will allow us to track individual delegates’ participation, allowing for the creation of a score, which should help benchmark if a delegate qualifies for compensation. As a part of this initiative, we also plan to reinstate the active usage of the forums for delegates to communicate their voting rationales in a threaded form.
• After analyzing the results of the first delegate race, we will look to structure a second cycle, and if needed, alter any voting power from the existing set of Franchisers. After the governance attack, one of our priorities was increasing the participation rate based on voting power. Since the delegate race, we are less worried about reaching quorum on proposals and attaining the perspective of a supermajority of stakeholders. However, this does not directly tackle the issue of enabling a diverse set of delegates to partake in Compound governance. A key focus during the next year will be to broaden the overall set of delegates. We will likely aim to index on drawing a higher quantity of knowledgeable participants in the governance space over to Compound, along with a focus on including CGP grantees and other stakeholders in the voting process. A second version of the delegate race for these underrepresented delegates is worth exploring.
• In an ad hoc manner, as we see the need to develop more governance tooling for the DAO—as was the case with the governance metrics grant awarded to WOOF in October—mini grants will be allocated. These can vary in scope, from data analytics to product development. As more tools are put in place, we will continue taking a data-driven approach to analyzing the state of Compound governance and creating corresponding initiatives to address foreseeable needs. There have been grants from the CGP given to a couple of teams like Karma to explore governance tools; we hope to revisit some of these completed grants and foster a longer term relationship with such partners. We will also commit to maintain the developments from these microgrants, ensuring that deliverables like dashboards are maintained and accessible to delegates.
• In DAO wide future accounting processes are needed, our team will work with relevant parties to report on token flows for the DAO, clearly outlining operational expenses. This function may result as a direct consequence of the payroll and escrow services that we have begun providing. An aggregated report of flows and balances for these programs may prove to be useful.
• We will conduct a review of the existing guidelines for delegates to get involved in Compound governance. Many of the documents flagged on the forums are from 2022 or before, so it is worth polishing and renewing those posts as relevant, especially for new entrants.

Composition

The GWG will consist of the same three members (PGov, StableLab, & Arana Digital) to ensure a diversity of perspectives, while maintaining operational efficiency and experience. As we conclude our trial period, the GWG will be renewed for 12 months between December 2024 - December 2025. For the duration of the 12 months, we request a total of $280,000 in COMP tokens, in line with our prior 6 month request ($131,000), to cover funding and operational expenses for the team. Unlike the trial run, we will not be requesting separate funds for multisig management, as this is included within the total. Additionally, with this funding, we will re-top the budget allocated for research and data tools included in the trial run ($50,000), which will include funding select high impact mini grants that contribute to governance.

Total request for 12 months: $280k in COMP.

Timeline

We welcome any and all feedback on the forums. Above all, we will continuously look for new ideas and suggestions on how we can best steward governance at Compound. We will seek to propose an on chain vote after at least a week of RFC.

Terms and Conditions:

The Compound GWG shall be governed by the Terms of Service that were updated as of Nov 22nd, 2024.

Note: A 30 day TWAP price has been used to convert from Comp to USD @ 46.6