Restructuring DAOs For Fair Compensation Mechanisms, Reputation and Efficiency

Open DeFi
6 min readJun 10, 2021

Community-governed protocols currently in the DeFi space revolve around the expectation that all token holders can effectively manage and improve one core piece of tech, or the “revenue-generator” such as token exchanges, debt protocols, or an asset such as stablecoins or wrapped tokens. The current governance solution offered to token holders has been sufficient enough to get some protocols to multi-billion dollar TVLs. When the whole community is focused on improving the core revenue-generator, it is often simpler and easier to leave all strategic decisions in the hands of token holders. As protocols expand into multiple revenue streams, chains, and different verticals of DeFi, it is quickly being recognized that the current governance solution has not been able to scale quite the way DeFi innovations have. This issue has been pointed out by the communities of multiple leading protocols such as Yearn Finance and MakerDAO.

As a DAO with a wide variety of stakeholders across protocols and L1s, it is critical to us that we provide a governance solution that is not only more efficient and inclusive, but can scale at the speed we will be innovating at. In order to maximize efficiency of the Open DeFi DAO, we will be introducing a somewhat modified governance implementation proposed by the YFI community, with slight modifications that we believe can help us on our specific mission. Before we dive into it, we would like to thank the Yearn community for putting this initial concept into the atmosphere.

As much as we all love DAOs, it is fair to say that they have not been able to ship products or manage teams anywhere near as efficiently as traditional organizations in the Web2 space. When recruiting some team leaders and initial core team members for our project with financial or engineering expertise in the TradFi space, this was the only concept they could not seem to wrap their heads around. “How will I get paid?” or, “How do I manage a team of venture strategists or yield farmers in a crowd of thousands of stakeholders?”.

We spent a lot of time trying to solve this with some great projects, and we believe the solution is to create a modified architecture for our DAO, with the core permissionless, transparent, inclusive features that made us want to launch a DAO in the first place. The idea could be visualized like this:

Instead of electing a multi-sig of core team members, or random stakeholders to act as a safe-guard to our DAO, we will be pushing the multi-sig signers to different branches or departments of our decentralized organization. These key holders are community-elected leaders of different departments that can climb up the ranks of the DAO and build reputation through contributions and participation in their subject of interest. For example, a venture-strategist named “Alice” who over time has made successful decisions regarding portfolio and treasury diversification, and earned a reputation through a growing balance of delegated votes, can now run for election of the lead for the Open DeFi Venture Strategist department, essentially being paid, issued a multisig signer key, given a budget, and a team of other venture strategists doing what he just did to climb up the ranks. Across our whole organization, this is happening with every aspect of our DAO, a team and leader for yield-farming, operations, research and grants, etc.. Once a leader, such as Alice, is elected by the community to lead a team, they are added to the payroll (paid in the asset of their choice from the treasury, with a salary decided by the payroll department) and is now in charge of managing proposals, implementing, and providing expertise regarding that component of our DAO. Alice is assigned a multi-sig signer key and along with the other experts from every other department, act as the final safe-guard for every decision that our DAO makes. With this model, we are now able to effectively streamline decisions and offer a new modular architecture that keeps all committees of our DAO aligned, funded, and focused.

To some, this may seem like a more centralized solution to governance whereas in all reality it is quite the opposite. With this model:

  • Multi-sig signers are shifted from core-team members to expert community members who have proven their expertise through participation, something any community member can do.
  • As a community member, you have full teams ready to help get your proposal ready and passed. If you are opinionated on the vaults we support, throwing it on a forum or discord chat with no direct contact won’t get you far. Come straight to the yield farming team with your idea and get it to market faster.
  • Every department has an even say. We recognize our Ethereum and Polygon community trumps the early L1 communities we are trying to develop. By giving, for example, our Solana or Moonbeam instance its own leader and department, we can grow the ecosystem significantly quicker and let all ecosystems participate in a fair and distributed manner.
  • If you want to have a say in everything, you still can. This model is simply proposing a more modular approach to our DAO that improves efficiency. You can still see, govern, and participate in all decisions like any other DAO if you choose to.
  • Fair compensation for community members contributing to this DAO. If we were to launch using current governance mechanisms, it would be similar to launching a unicorn FinTech organization created and maintained by a bunch of Fiverr workers. In order to make this the largest treasury of assets in DeFi and incubate DeFi goliaths, we need employees. This model allows us as a community to discover talent, and properly incentivize those interested in working for our DAO.

On launch, we will have a 6/9 multi-sig council hosted on Gnosis SafeSnap, as defined by the Operations department, each team leader will be allocated a salary and budget that they can then work with to make their department as streamlined and productive as possible. Prior to launch, the Open DeFi community is looking to fill the nine following roles with early-contributors and long-term community members:

  • Yield Farming SubDAO — You will manage and strategize on the vaults supported by Open DeFi (in order to fund our treasury with as many tokens as possible). You will also be responsible for emissions of our liquidity mining tranche.
  • Operations SubDAO — Any organization needs an operations team, you are a more business-centric individual that has knowledge on how to run and scale a company.
  • Venture Strategist SubDAO — You have an eye for the DeFi projects of tomorrow, this role is for those who can take tokens from our capital reserve and diversify them across the DeFi ecosystem in incubation opportunities.
  • Portfolio Management SubDAO — This SubDAO is tasked with growing our treasury even further, how will you manage our treasury and take the assets sitting idle in our treasury and capitalize on them.
  • Developer SubDAO — Help write smart contracts, integrations, and improvements to our protocol.
  • Partnerships SubDAO — Well connected individuals who are able to strategize and create the right partnerships for our DAO in the CeFi, DeFi, and TradFi industries.
  • R&D / Grants SubDAO — This role is for those who recognize our industry needs research in order to succeed. You can work with protocols and other community members to allocate funds in initiatives that benefit
  • Marketing SubDAO — A core-piece of any project in DeFi, the marketing SubDAO is responsible for organizing PR, announcements, and social media. How you choose to approach our marketing strategy is completely in your hands.
  • Financial SubDAO — Manage the finances, payroll, and budget of the Open DeFi SubDAOs, and organize sufficient allocations to each department in order for them to execute their improvements.

At the end of this election process, these 9 SubDAOs will run the Open DeFi community; they will act as the final council to pass proposals similar to any other multi-sig. If you are an expert in any of these fields and looking to work for a DAO in the long-term, Open DeFi has a home for you. You can join us on discord to discuss this topic further or even help improve and design this model. Over the next few weeks, we will be rolling out more technical details on how this will work in collaboration with our community, partners, and other ecosystem members.



Open DeFi

A community driven DAO creating the next era of multi-chain DeFi.