TL;DR:
- Voting cycle 3 (or round two Phase 1 of the Optimism Governance Fund) concludes on Jul 20, 2022. Nine proposers requested ~4.1m $OP tokens worth ~$3.1m USD at time of drafting this post
- As an Optimism delegate, I voted FOR four proposals and AGAINST five. For this round of proposals, I’ve beta tested a scorecard methodology to evaluating proposals (explained within this post)
- Although not relevant to the Governance Fund, I want to support the Optimism ecosystem due to what I perceive to be a sound “one commandment” commitment to Retroactive Public Goods Funding (RPGF)
Optimism governance voting takes place on Snapshot, governance overview information is organized on Boardroom.io, and proposal submission and feedback takes place on Discourse.
If I got anything wrong or for anyone who would like to collaborate to improve or influence my governance approach as an Optimism delegate, reply to this companion TWEET.
Optimism token and governance fund overview
Why Optimism for me
My current favored L1 nation is Ethereum and I’m in the process of making Optimism my L2 neighborhood. I am drawn to the Optimism commitment to maximize Retroactive Public Goods Funding (RPGF). If Optimism is able to maximize “good” MEV capture and remain economically and technically competitive to other chains, I think that would be a great outcome for the network and ecosystem writ large and create public goods for the masses. Providing economic incentives to build public goods should support mass adoption and long-term use of the ecosystem.
I plan to spend more time with Arbirtrum, Polygon, and the zero knowledge L2’s coming online soon, but Optimism appears to be committed to a “one commandment” (a la the Network State) focus on RPFG. I like RPGF as a single commandment.
I also plan to dive deeper into Cosmos and it’s app chain / IPFS ecosystem at a future date as it sounds like there are a lot of interesting possibilities with that architecture as well.
The Optimism token allocation
The Optimism token dropped end of April 2022 and is broken down as follows:
For the purposes of this post, I’ll focus on the Governance Fund (GF, 5.4% slice) under the Ecosystem Fund (25% slice) above. Live proposals on Boardroom and Discourse all relate to phase one, which ends in two days (Jul 20, 2022).
Governance fund phase 1 overview
General guidance
There is a good overview of the GF and more specifically Phase 1 HERE. The highlights are:
- Any project launched on Optimism is eligible to submit a proposal
- Proposals must include a plan for how the tokens will incentivize growth on Optimism
- Although not a strict requirement, the Optimism Foundation recommends that each project submitting a Governance Fund proposal include a commitment to match OP token incentives with their own project incentives
- Proposals are reviewed and approved by the Token House (OP holders, or their delegates)
- When a project gets a proposal approved, they are still eligible to apply for further proposals
- Recommendation is that projects distribute their initial allocation of tokens before requesting further tokens
- Projects are also encouraged to reference data from the success of their initial distribution to strengthen their case in future proposals
Amount of tokens requested by proposers
Below are two tables I created to frame the magnitude of the nine proposals in relation to the total governance fund:
Assuming I’ve interpreted the various governance docs correctly, phase 1 proposals currently up for vote (cycle 3) represent 1.7% of the total GF (for a total of ~$3.1m USD at time of drafting on Jul 18th, 2022). After cycle 1 (phase 0), cycle 2 (phase 1 round 1), and assuming all nine cycle 3 proposals pass; 81.3% of the GF is available to allocate in future phase 1 cycles.
Overview of delegators and the token house
The token house is comprised of all $OP token delegates. Holders of $OP = delegates if the holder agrees to the responsibility of acting as a delegate and participating in governance. If a holder of $OP chooses to not participate in governance, that holder may delegate their tokens to a proxy delegate. I have self delegated and plan to participate in governance going forward.
Here is an overview of how the token house fits into the broad Optimism governance structure, for reference:
Rasmuky’s proposal evaluation scorecard approach
Scorecard overview
In an attempt to evaluate proposals in a consistent way and in line with guidance provided by the Optimism core team, I developed a basic scorecard:
I’ll iterate on the approach for future processes, but conceptually:
- Factors developed based on guidance from Optimism Collective, reading through comments on Discourse from other delegates, and considering factors that matter to me personally or that I feel are positive for the network
- Weights were subjectively developed and will be reevaluated for future phases or future proposals
- I plan to rank each factor on a 0-10 scale, with a hurdle of 5.0 for a FOR vote.
- For parameters which appear more binary (i.e., project on Optimism)
- No will render as 0
- Yes as 5 so as to not negatively impact hurdle score of 5.0
- If it’s obvious the project is heavily invested in Optimism, can scale up from 5 to as high as 10
- The respective weights will be applied to the 0-10 score and then aggregated to produce a weighted score
All of this is very subjective, but this approach is likely less subjective than just saying “I like the project, yes vote from me.”
Expected evolution of scorecard process
I only recently began to immerse in the Optimism governance process, so this scorecard and broad approach will be refined for future phases or proposal cohorts. Ideally, I would have spent more time engaging on Discourse with the proposers for this tranche, but alas.
With more time to research and engage more with proposers, I would likely include other factors like protocol decentralization, open source codebase, chain of custody of digital assets, approach / emphasis on security, evaluation of grant size request relative to other historical proposals, robust assessment / diligence of on chain metrics (across all chains), etc.
The diligence of on chain metrics is factor and value add to the Optimistic Collective I’m most excited about. I believe I could provide an objective analysis of proposer protocol use and growth which all Optimism delegates could use for their proposal evaluation process. Data and analytics diligence is what I currently do in Web2, so I’m very comfortable objectively analyzing data, engaging with management teams to stress test my interpretations, and then packaging outputs for intuitive interpretation by a wide range of user profiles.
If other delegates choose to deploy a scorecard style approach, ideally delegates would decide the parameters that are most important to them, develop their own weights, etc. A diverse set of approaches to governance is healthy, this is simply the approach I chose for this round.
Overview of phase 1 proposal evaluations
As I was late to the party for this round of proposals, I’ll be brief. Also, at snapshot I only held 1.6k $OP tokens and had none delegated to me, so no vote I cast will move the needle on proposals in this round.
I expect to increase my future phase vote impact (i) as I accumulate my own $OP stake and (ii) by earning $OP token holders support as a prudent and thoughtful delegate. DM me on Twitter if you would like to discuss delegating to me.
Proposal A | Superfluid
Superfluid is a protocol which enables payment streaming (e.g., high frequency settlement, like salary payments every day). I voted FOR for this proposal, scorecard output:
Highlights:
- Plan for how tokens will incentivize growth (+) - Products like Superfluid tend to be very sticky once organizations / people begin to program payments or streams. I’m not sure of the adoption or competitor set, but relative to more mercenary capital / temporary use cases, I think there is more potential for long-term Optimism adoption and growth with Superfliud
- Transparency of proposer to end recipient (+/-) - A portion of $OP tokens will be utilized to subsidize fees to set up and execute streams, which should be pretty easy to observe and directly benefit Optimism. A separate portion will be allocated to developers to support migration of treasuries and other activities to Optimism. It would be very challenging to validate or verify that use of GF grant is to the benefit of the Optimism network in the case of developer compensation (the developer could have been working on a different chain)
- Money on chain / alternative to TradFi (+) - I’m a big believer that creating boring use cases to lure retail users away from TradFi banks and get them on chain will drive adoption. I don’t think I’ve ever met someone who genuinely likes their retail bank, huge opportunity. Creating set it and forget it programmed payments and receipts platform which would improve money fluidity and access is in line with this concept
For reference, Boardroom.io and Discourse.
Proposal B | Kromatika
Kromatika is a swap DEX with an optimized approach to limit orders. I voted FOR this proposal, scorecard output:
Highlights:
- Growth on Optimism - I do think that limit orders are a relatively basic building block of finance and markets. I haven’t used the product (I will soon), but if the platform works well I can see it being a sticky protocol
- Rewards / incentives transparency (+/-) - Marketing and especially influencer marketing tends to carry a negative connotation in Web3, but I think it is important and leveraging high quality educational influencer material is a good choice. While the ecosystem is very small, organic growth based on word of mouth is achievable. As the ecosystem continues to grow, I think fluency in marketing will be very important. However, I don’t have a clear view of how influencer marketing spend or early user drops will be traced into actions on Optimism
- Money on chain alternative to TradFi - As mentioned, limit orders is a relatively basic use case so I suspect many retail users would benefit from Kromatika. If I thought more average retail TradFi users were actively trading with limit orders this factor would have carried more weight
For reference, Boardroom.io and Discourse.
Proposal C | Hundred Finance
Hundred Finance is a lend borrow protocol for DeFi. I voted FOR this proposal, scorecard output:
Highlights:
- Growth on Optimism (-) - Incentives appear to be majority based on yield farming emissions which generally attracts mercenary capital
- Proposer funded incentives (+) - Proposer committed to substantial co-incentives to generate attractive yields for users. Ranges provided where quite wide, so some refinement or monitoring of co-incentives would be a good check
- New to Optimism (+) - Slight positive based on cross chain lend / borrow activity as that sounds like a unique product to me. Unclear how that may impact activity on chain (is cross chain positive for Optimism or not?), but sounds interesting to test
For reference, Boardroom.io and Discourse.
Proposal D | Biconomy
Biconomy appears to be a diversified Web3 / Crypto exchange and dApp creator. The proposal appears to center around Hyphen (bridge protocol) and Gasless (partner protocol test subsidizer). I voted FOR this proposal, scorecard output:
Highlights:
- Growth on Optimism (+) - Liquidity incentives to support bridging to Optimism and gasless incentives to incentivize testing of dApps on Optimism has potential to be a tailwind for growth. Also, the fact that the Biconomy is open to collaborating with the token house to select worthy dApps is a good gesture as well
- Proposer match (+/-) - Score is simply the match ratio as stipulated by the proposer
- New product / demand need (+) - The Gasless product is very versatile in that it can incent users to migrate to Optimism to utilize a wide variety of dApps, presumably many of which would be new to the Optimism network
For reference, Boardroom.io and Discourse.
Proposal E | Dope Wars
Dope Wars is an MMO (massively multiplayer online) game in line with Grand Theft Auto. This is not an area of the ecosystem which I’m fluent in, though Dope Wars presents as committed to making Optimism it’s home base. I voted AGAINST, scorecard output:
Highlights:
- New product / additional demand (+) - Blockchain gaming is not prevalent on Optimism to my knowledge, but can definitely drive a lot of volume if the respective game achieves solid traction
- incentives / rewards transparency (-) - A portion of the incentives are slated to go into the project treasury, which is likely to be very opaque and hard to correlate to growth on Optimism
For reference, Boardroom.io and Discourse.
Proposal F | Infinity Wallet
Infinity Wallet is a multi-chain desktop focused crypto wallet with robust native integrations with various dApps. I voted AGAINST this proposal, scorecard output:
Highlights:
- Growth on Optimism (+) - A dApp native integration approach could be very sticky if the UI / UX is positive. I have not used the product, but do see value in the concept
- New product (-) - There are multiple wallets operational on Optimism. The native dApp integration sounds interesting, but I’m underwhelmed about the braggadocio of being desktop focused. Humans are mobile
- Incentives / rewards transparency (-) - 80% of the incentives / rewards are earmarked for developers, which is generally great. Validating what developers are working on is no easy task, so I suspect confidence of prudent spend would be challenging to verify or get comfortable with
For reference, Boardroom.io and Discourse.
Proposal G | Dexguru
DexGuru is a crypto trading platform. I voted AGAINST this proposal, scorecard output:
Highlights:
- Growth on Optimism and incentives transparency (-) - Incentives primarily go to developer resources in the DexGuru DAO. Understanding how those incentives translate into time and attention on developing the Optimism ecosystem would be a challenge in my opinion
For reference, Boardroom.io and Discourse.
Proposal H | Overnight.fi
Overnight.Fi is the creator of USD+, a high yield rebasing token backed with USDC. I voted AGAINST this proposal, scorecard output:
Highlights:
- Growth on Optimism (-) - Proposal plan is to provide incentives to increase LP liquidity / yield farming, which tends to attract mercenary capital. I think the long-term growth on Optimism from these types of strategies is uncertain at best
- Proposer incentives - USD+ (-) - Produces yield as a result of yield farming strategies, but the proposer team has not matched incentives to further drive growth on Optimism
For reference, Boardroom.io and Discourse.
Proposal I | Saddle Finance
Saddle Finance is a token swap platform focused on stable coin liquidity and which caters to traders and LP pools. I voted AGAINST this proposal, scorecard output:
Highlights:
- Incentivization of growth of Optimism (-) - The incentives are largely liquidity mining incentives, which typically are more mercenary in nature. It sounds unlikely these incentives would result in meaningful long-term growth for the Optimism ecosystem
- Rewards transparency (+) - Although the stickiness of the rewards are uncertain, transparency as to use of funds should be clear if visible on chain via yield farming
- Forum engagement (-) - It’s hard to conclude in many cases with no background knowledge, but my general thought is that when an organization is asking for a grant they should go out of their way to to be as cordial, productive, and positive as possible in the discourse. Everyone absolutely deserves the right to defend themselves and their organization, but reiterating data driven positive elements of their proposal and staying on topic is what I look for from a proposal team
For reference, Boardroom.io and Discourse.
Outro
There are definitely some protocols / projects which appear to be value accretive to Optimism in this Governance Fund cohort. I look forward to engaging with the next cohort of proposals in cycle 4 and refining my evaluation approach.
Let me know what you think I got wrong in this companion TWEET! I want this approach well oiled to do my part to contribute to the Optimism ecosystem.
About rasmuky: