SITG Experiment #3 - give yourself a raise in SNT

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This post has been written with the following principles in mind: Liberty, Decentralization, Transparency, Resourcefulness, and Continuance.

tldr: Core contributors can choose to trade 10% of their fixed fiat income for a higher variable SNT income.

Proposal

UPDATE - Based on Treasury decision the new terms are as follows: To be part of The Experiment / Alternative Structure, a minimum of $500 should be contributed to the SNT pool. Up to $1000 this is matched by Status by 50%. An individual may choose to contribute more than $1000.

Let’s say a core contributor makes 10k a month. They give up 10% of their fiat income, i.e. $1000. Additionally, 50 other core contributors choose to do the same. This means the total funds available is $50k. Status then matches these 2:1 in SNT in what we’ll call a SNT pool. This SNT pool thus has the equivalent of $100k in SNT in it.

In exchange for a core contributor doing this, they get two things:
a) the privilege to fund projects with the amount they gave up
b) access to the SNT pool through potential compensation being paid out

How does this SNT pool work? It is dedicated to DAO-like compensation mechanisms. This roughly means:

  • crypto based (compensation paid in SNT)
  • delegated/decentralized in some fashion (voting/multisig based, liquid pledging/DAC, bounties)
  • generally in line with current thinking of DAO structure

For example, a participant might choose to delegate their funds to DAC0 or a specific idea in Status.app. Additionally, they might choose to participate in an idea sponsored by this DAC. If a milestone is reached and they are responsible for this, they would get that money as additional compensation.

What does this mean for this person’s compensation? If before they made 8k in USD and 2k in ETH, $10k in total, now they would make 7k in USD, 2k in ETH and 0…N in SNT. Assuming all core contributors are equally productive (in the sense of, solving problems that are highly valued by SNT pool funders / individuals of Status), the individual would make 2k in SNT. Before: 100%, after: 90% (minimum), 110% (average), or more (no specific upper limit).

Assuming the individual is productive and accountable for valued outcomes, it would be a win for them.

Additionally, it gives them direct influence over what Status works on through the use of individual funding, which is a coordination-free mechanism for resource allocation, as it is acts similarly to a price discovery mechanisms which doesn’t require consensus.

Next up is how this looks from Status Finance point of view, feel free to skip this section.

(Optional for core contributors) Status Finance

How does this look from Status Finance point of view? First, it moves compensation from USD to SNT, which is a desirable goal on its own. Additionally, it creates transparency in terms of where funds are allocated. It shifts the focus from employees and its associated centralized concern (people leads, performance management) to the funding of specific outcomes that are highly valued. Finally, it gives us a way of creating an alternative structure with a voluntary win-win approach that can slowly increase in saturation over time.

The big question here is: how does this scale and how is it sustainable? One thing we want to do avoid is the well-known double spending problem, where we pay twice for the same amount of work. At the same time, we want to give a carrot to people in terms of encouraging adoption, starting with the most brave ones and then working down the tail to the laggards.

In terms of matching ratios, one way of thinking about this is as a form of ‘inverse regressive tax’. With this setup, the premimum Status can be expected to pay is roughly 25%, assuming 100% adoption. Additionally, this creates another carrot for people to get in early, as that’s where the matching ratio is the highest.

The first question is: what is the % of fiat compensation we want people to give up for this SNT pool? I suggest the following aggressivity scale with associated names for a phase 1:

  • Tiny: 1%
  • Small: 2.5%
  • Decent: 5%
  • Medium: 10%
  • Aggressive: 20%
  • Reckless: 50%
  • WTFBBQNAU: 100%

Assuming 100 core contributors at 100k/y or 10k/m (rough round numbers), for a burn rate of $1m/m, ‘decent’ would come out to at ~50k/m. As an example of calibration, SITG 1 experiment around drinking champagne is at around ~10k (free additionally money right now).

Here are the propose incentive for matching funds:

  • Tiny: 10x (already done)
  • Small: 4x
  • Decent: 2x
  • Medium: 1.5x
  • Aggressive: 1.2x
  • Reckless: 1.1x
  • WTFBBQNAU: 1.05x

This works as a form of inverse regressive tax. It’s not exclusive with other types of solution This would mean the total capital cost to Status would be: 1*10=10%; (2.5-1)*4=6%; (5-2.5)*2=5%; (10-5)*1.5=7.5%; (20-10)*1.2=12%; (50-20)*1.1=33%; (100-50)=52.5%. I.e. in total 10+6+5+7.5+12+33+52.5=126% or roughly 25% premium for:

(a) moving completely from USD to SNT
(b) having more fine-grained control over funds and outcomes in a decentralization fashion.

Of course, specific numbers can be tweaked but this can serve as a guide.

(Optional) Additional problems this address

The following points require some additional context and might not make sense in isolation / without further discussion. Including them here for people who are intereested.

  1. Centralized, employee like compensation leads to mismatch between permission-less (work on what you want) ideal model vs funding/burn rate reality (work on what ‘we’ need). First, we must survive. Concerns regarding this might not (and probably shouldn’t!) be top of mind for everyone. That said, as a collective we need to ensure criticial things for the Status network are done, and bottom up decentralized funding allows for this, without any form of top-down interface. In the limit case, 100% of compensation is funded through a DAO and the initial salary point acts as a form of bootstrapped reputation system for weighted votes in a meritocracy.

  2. Crypto compensation is too low (~5%) and USD burn rate too high. This is unsustainable from a DAO POV. With gradual opt-in to a DAO that is voluntary and a win-win, and doesn’t require any sudden changes.

  3. Loss aversion and lack of win-win in using own funds in e.g. sitg-two experiment. Moving to DAO like compensation requires double burn for SNT, which is unsustainable. With the approach above the money used for funds is already “gone”, and by being given access to the SNT pool it becomes a win for the individual funder.

  4. Lack of accountability for specific needs (as defined by other nodes in the Status network with their money) and outcomes, at least in the idealized work-on-what-you-want model. By allowing people to vote with their money, things that are criticial for the collective are more likely to be taken care of, and individuals would more critical in terms of their money is being spent (did you actually solve the problem or just move code around?). This feedback mechanism is now done by proxy with defunc people leads and delayed performance review.

  5. In the short term, easier accounting/legal situation for individuals as the variable reward can be dealt with in batch. This is useful while smart contracts solutions are being built out.

Your time to act

  • Status Finance - Write in this thread if you would fund this idea or not.

  • Core contributors - Write in this thread if you’d agree to these terms. (See example below)

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I agree to these terms and signal my commitment to forfeit 10% of my salary into a SNT pool.

In fact, I’ve already done this through sitg-one and sitg-two. I’m likely to keep doing this for DAC0.

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I agree to these terms and signal my commitment to forfeit 10% of my salary into a SNT pool.

I just wanna play some [incentive] games with y’all! :heart:

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I agree to these terms and signal my commitment to forfeit 10% of my salary into a SNT pool.

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This is an amazing initiative, and is a step towards more meritocratic compensation.

I would be in favour of the organization funding this idea, and would be curious to hear @Dani and @yessin’s perspective. That said, given many of these DAO-like compensation mechanisms are new territory, let’s consider testing this on a small scale initially? (perhaps by capping the total size of the SNT pool?)

Note one hurdle is that doing this at scale may cause large fluctuations in SNT due to lack of liquidity, but could be solved by buying back SNT from the market each month using ETH. We’d need to investigate this possibility from a regulatory perspective.

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given many of these DAO-like compensation mechanisms are new territory, let’s consider testing this on a small scale initially?

Agree. On the aggressivity scale above, where do you think we should set it? My suggestion would be to go with Medium (10% of core contributor compensation) under the assumption that no more than 50% of core contributors will buy in to this in the initial few months. We can also make that a hard cap, first-come-first-serve. In reality, it seems likely it’ll be less than 50% who opt-in as well. This would put the maximum ‘exposure’ to 5% of total comp, which would be 10% once matched (in SNT).

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I agree to these terms and signal my commitment to forfeit 10% of my salary into a SNT pool.

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@oskarth , @Dani, and I just come off a call discussing SITG Experiment #3. Please find a summary of the topics addressed:

The fund matching by Status should be capped or set degressive to the funds contributed to the Experiment to avoid a considerable increase of cost for Status.

Each fund contributor can define tasks and attach bounties in the size of his contribution plus the amount matched by Status. The idea would be that only other fund contributors of the Experiment and community members can pick up bounties, but non-funding Core Contributors cannot.

There is a risk of collusion among the Experiment participants as they are free to decide on the use and allocation of the funds. The incentives set by the experiment could also distract from the general work on the Status project. The Experiment is conducted based on the assumption that participants will overcome these challenges and act in accordance with the Status values.

A fixed contribution amount by the participants of the Experiment rather than a percentage of salary might be more appropriate to avoid revealing people’s wages. E.g., if a person publicly contributes 10% of this person’s salary then everybody would know his salary.

If community members pick up large bounties, this could qualify as an employment relationship subject to social security and tax. The particular compliance aspects will have to be addressed. Separating the structure of the Experiment from the operations of Status could be an approach.

The Experiment will reveal many further aspects and challenges of decentralized management and compensation models. Discussing and documenting them will be very valuable in finding new solutions to decentralizing all the things.

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This is super important. Can we ensure this (or another) Discuss thread will have regular updates on challenges, solutions and other interesting tidbits. Sharing the experiences of individuals and the entire team will be invaluable to future experimentation :muscle:

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For three months and every month, the Status Treasury is matching 50% of the funds contributed to the Experiment up to USD 1’000 in SNT per participating Core Contributor.

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Thanks @yessin and the Status Treasury for the generous matching! Since these are slightly different terms than initially, I think we as core contributors should re-affirm our commitment.

New terms

To be part of The Experiment / Alternative Structure, a minimum of $500 should be contributed to the SNT pool. Up to $1000 this is matched by Status by 50%. An individual may choose to contribute more than $1000.

Example: A core contributor contributes $500. Effectively this is worth $750 when they use it in the SNT pool.

Example: A core contributor contributor contributes $2000. Effectively this is worth $2500 when they use it in the SNT pool.

I agree to the above terms and signal my commitment to forfeit at least $1000 of my salary monthly into the SNT pool.

On acting in Status’s best interest

There are many edge cases, but generally the principle is: act in Status’s best interest (a la Netflix policy Netflix Jobs). For example, as a giver, it’s generally not prudent to fund your own work directly. But if you give to DAC0 and DAC0 gives to your swarm, that’s totally fine and encouraged. Likewise, if you are a swarm lead and your swarm receives funding, it that swarm lead should be able to be the recipient for at least of those funds.

Since this is new territory and I’m driving a lot of this, I’ll personally not be the receiver of any funds from this Alternative Structure in any form in 2018, for simplicity’s sake.

Future

As the capital exposure increases and the risks around this increase, we can consider other forms of matching mechanisms. For example, the matching might be specified by some form of voting, which would turn this into an honest majority assumption, as the unmatched money is a just proxy for free-market money.

On unused funds

I propose if a funder hasn’t used their funds within a month, they stay within the SNT pool and can be used as additional bonus matching. Alternatively, they go back to Status. It’s advised to always use your funds, as this can be as simple as delegating them to DAC0 or some individual/team (say, QA) that you think will make good use of your money.

Open question: Incentive for increasing exposure

An open question is why an individual would give up more than $500 or $1000, given that it doesn’t give them more upside. They already have access to the Alternative Structure. Thoughts on this would be welcome.

Call to action

@cryptowanderer @barry @Ned if you agree with these New terms, could you indicate so in this thread? Likewise, if you disagree, please indicate why here or privately if you prefer.

Core contributors: If you agree with these terms, please write something to the effect of:

I agree to the above terms and signal my commitment to forfeit $500/$1000 of my salary monthly into the SNT pool.

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*I agree to the above terms and signal my commitment to forfeit $1000 of my salary monthly into the SNT pool.

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*I agree to the above terms and signal my commitment to forfeit $1000 of my salary monthly into the SNT pool.

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*I agree to the above terms and signal my commitment to forfeit $500 of my salary monthly into the SNT pool.

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I agree to the above terms and signal my commitment to forfeit $750 of my salary monthly into the SNT pool.

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First of all - another thank you to those who put their own money on the line to move us closer to the ideal version of Status the network. You are all living in the future and get it at a visceral level, which is amazing to see.

In light of the recent push towards the Status Network with liquid pledging as separate from the Gmbh, what do people want to do with this? As far as I know this hasn’t resulted in any funds being transferred, save from SITG-1 (which was separate and didn’t require being part of SNT pool). This despite a bunch of fish hooks been put out over the last month.

Personally, I wouldn’t mind keeping the unclaimed funds in SNT pool to steer development in a leveraged way (see @yessin’s big bounties for finance, e.g.). But it isn’t quite clear to me how this jives with network/gmbh split, as well as how to get enough of a critical mass of people to opt into the SNT pool.

Or maybe the people who are in this is enough already? If someone who opted in has some idea they want to push that they think I might fund, please don’t be shy - put it down here boldly and let’s make it happen! Seeing real people making profits of taking risks might encourage more people to opt into this structure, and eventually ascend onto the blockchain through the Status Network.

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All of my funds (and likely most of my salary for December at least) will be going towards covering travel costs for others coming to Merry Merkle.