DAO Current Compensation and Incentivization: How Talent Are Rewarded

This is Article 3 of 4 for the BanklessDAO Writer’s Cohort.

From experience, I believe contributing to DAOs is the best possible way to do engaging and rewarding work in Web3. That said, one feature is consistent: adaptability and using flexible compensation processes that fit DAO contributors’ various needs.

This article covers DAO’s current compensation landscape (what’s working or not), the compensation tools used, and a peek into working groups.

DAO Current Compensation Structure

Many DAO members benefit from the flexibility DAOs offer their contributors. The flexibility is because, unlike traditional organizations, DAOs use multiple unique compensation mechanisms. Their payout models range from paying governance tokens to stablecoins and crypto for grants, bounties, and role-assigned tasks.

For example, governance tokens give members governance rights and equity in the DAO but often fail as an adequate wage for contributors because their market value may be lower than expected. In addition, paying contributors governance tokens may lead to dumping the tokens on the open market, which could further drive down the token’s value.

Grants, bounties, and payment for role-assigned tasks seem like a better incentivization approach. However, if contributors are present in multiple DAOs, keeping up with the roles/tasks, bounties, and grants in their DAOs could cause burnout. So you see, while flexibility appeals to contributors, some feel more productive when they’re focused on a single DAO with a compensation model they are comfortable with (to avoid burnout). As DAOs notice the burnout associated with DAO work, they should focus their efforts on:

• Making contributors feel valued and welcome to retain their talent
• Properly reward contributors so they can commit long-term

Below, we look at the models and tools DAOs use (and can use) to achieve the goals mentioned above.

Compensation Tools Used

One of the biggest challenges I have seen in the DAO space is compensation; knowing when you will get compensated, how you will get compensated, and trust that it will come in. A whole ecosystem of tools is helping with this, but our focus is on the few directly impacting DAO contributor compensation.

An incomplete list would include:

• SourceCred: Inspired by Google’s PageRank algorithm, SourceCred measures and rewards value creation in DAOs based on objective and subjective parameters. In DAOs, it is challenging to track all contributions and agree on the value of the contributions. With SourceCred data, measuring a DAO contributor’s value is easier than in traditional organizations.
• Coordinape: This list would be incomplete without Coordinape as it seems to be topping the list. It is similar to SourceCred as it helps DAOS incentivize participation and reward their most active contributors. But its mechanism is different. Using Coordinape, each member receives a fixed amount of GIVE tokens (100 GIVE in BanklessDAO), and it’s up to them to choose who receives the allocated tokens within their circle. Coordinape is cool because it eliminates the time-consuming process of financially rewarding DAO members for contributions. It also gives power to the people — the community members decide who should be rewarded.
• Request Network: Request Network is a protocol that facilitates payment requests between contributors and their DAOs. Users can manage and track crypto invoices, salaries, and expenses. Each transaction is immutably recorded on the protocol, and payments are processed without third parties or a network fee. Additionally, DAOs, organizations, and their contributors can pay in crypto through blockchains like Ethereum, Polygon, Gnosis Chain, Celo, Fantom, and Near.
• Parcel: Parcel is a treasury management and compensation tool that allows DAOs to execute multi-token, multisig mass payouts on a one-off and recurring basis. Parcel reportedly works with 200 DAOs, like FWB, Compound, and Aave Grants DAO. Its unique selling point is that it alleviates the pain of manually disbursing payment amongst multiple individuals in a DAO. Currently, the tool supports these disbursement functionalities:

Multisig requirement before triggering a transfer

Mass payout using CSV upload

Support for payout in ETH and ERC-20 tokens

Ability to choose between automated recurring payouts and one-off payouts

Batched payouts to save on gas fees

Spending limits for individual beneficiaries

• Disperse: DAOs often need to disburse payment in ETH or other tokens to multiple contributors. This process requires manual setup, tracking, and paying gas fees for every transaction. With Disperse, DAOs can send ETH and other token payment to multiple addresses with reduced gas fees. It is free to use and has a simple interface. That said, the tool comes with some challenges. For example, some software issues have been reported on Twitter, and you need to integrate more dApps to use the tool.
• Wonderverse: Wonderverse is a project management tool for DAOs integrated with token payments and wallets for the user. Additionally, projects can post bounty tasks, track progress and quantify contributions.

Wonderverse Features:

Feature 1: Project management

Feature 2: Contribution payments

Feature 3: Onboarding to a DAO

Feature 4: Product discovery

‍Feature 5: Use of Lit protocol to make token-gated permissions and also for curating members of the community.

DAO Working Groups

Big DAOs like BanklessDAO, Index Coop, CabinDAO, Gitcoin, and ENS use working groups or “guilds” to break down compensation. Each working group is based on talent/skill and has its budget, proposals, and payment models. Payments are broken down into quarters which many DAOs refer to as “Seasons.”

A cool observation of working groups is that they allow budgets and payments to be tailored directly to the individual needs of the contributors in the guild. It is important to note that DAOs utilizing guilds or working groups also use coordinape to distribute compensation. In contrast, DAOs like DxDAO, using a tier system, have a set compensation model.

Bottom Line

I believe DAOs should strive for continuous adaptability and flexibility. To illustrate, DAOs with diversified treasuries could allow contributors to select their preferred compensation model/mix of tokens. For example, a contributor could choose to get paid in a 60–40 mix of stablecoins and governance tokens. Another contributor could choose to get paid in governance tokens for personal reasons.

Whatever it is, DAOs should consider their contributor’s needs while ensuring their payment model/structure works so as to retain talent.

New to trading? Try crypto trading bots or copy trading