Contribution incentive approaches
Comparing different approaches that could be used to incentivise the execution of different ecosystem initiatives
Last updated
Comparing different approaches that could be used to incentivise the execution of different ecosystem initiatives
Last updated
There are a number of incentive approaches that can be considered when an ecosystem is looking to attract and retain people that are willing and capable of contributing to different areas of an ecosystem. Incentives that help with handling the execution of work are important for all of the funding processes (knowledge, priorities, ideas and contributors). These approaches are more focussed on how financial incentives are handled however further analysis could be beneficial to cover other types of incentives in more detail.
The following are some general concerns worth consideration that are relevant to incentivising execution.
Rushed execution
The incentives used for execution will be more effective if they help to encourage contributors to execute work to a high quality rather than rushing through the execution to just receive the compensation. Incentive mechanisms will need to consider how contributors may try to exploit a given process to get access to compensation more quickly with low effort or low quality contributions.
Inflexible contribution approach
Incentives used during execution will need to be considerate towards the fact that new information and changing environments may result in the need for the execution approach to change and that the final intended executed outcome may benefit from being updated. Incentives will benefit from accommodating these types of situations so contributors can most easily align themselves with creating high impact. Time consuming or overly complex processes that prevent contributors from executing impactful outcomes should be prevented where possible.
Measuring impact
Measuring impact will be an important part of identifying which incentives are most effective at consistently generating impact. The better that ecosystems become at measuring and improving how much impact they are able to generate through funding the faster they will be able to grow and evolve their ecosystem. The ongoing concern and complexity for ecosystems is ensuring that they are able to measure impact well enough so they can determine which approaches are more effective than others and which outcomes have actually been the most impactful.
Under or over compensation
Proposals that have a bigger scope of execution or that are more complex to execute can often have a higher likelihood that compensation for contributors could be under or over estimated. The incentive design for any adopted systems and processes will have a large influence on how often and how likely this outcome occurs. Good incentive design will mean making efforts to ensure treasury assets are not wasted. However it will also mean ensuring that the incentives provided are meaningful so that contribution efforts are not exploited.
Unfair incentive distribution
Numerous contributors could be involved in the execution of different proposals. Creating effective incentive mechanisms will mean ensuring that any contributors involved in execution are paid fairly for their contribution efforts based on the amount and quality of contribution they provided. A main area of concern and complexity will focus around how decisions are made to determine which contributions have been most important or impactful and how people's overall contribution is tracked and measured.
Not adding any incentives for the contribution process means there is no financial compensation for executing the work involved in completing a proposal that gets selected by voters. Contribution efforts would rely on other forms of incentives.
Reasons to adopt this approach
Outcome based incentive - Executing a proposal to achieve some end goal can be both a time consuming and complex task for contributors to commit to. Some contributors might not expect a financial incentive if they may already have a different outcome based incentive that is important enough to them for them to then provide their contribution without financial incentive. Some examples could be community building efforts, public goods or contributing towards personal areas of interest. The more time consuming and complex the execution of a proposal is, the more difficult it could become for these other forms of incentives to remain sufficient. Contributors will likely not have unlimited capacity and willingness to offer large amounts of contribution effort if it doesn’t help support paying for their day to day bills.
Small execution scope - Smaller areas of execution that require a low commitment in time and effort to support could be areas that are more suitable for having no incentives if there are other incentives that are compelling enough to attract willing contributors.
Concerns for this approach
Limited number of willing contributors - If no financial incentive is offered there will likely be a much more limited number of contributors that are willing and capable of contributing to the execution of a proposal.
Limited execution scope - Contributors have a limited amount of time in a given day and many will have a limited amount of time they can provide without compensation due to the day to day costs of living. This factor greatly limits the amount contribution effort an ecosystem could expect when adopting a process that does not include a financial incentive.
Low incentive to maintain proposals - Some proposals will benefit from ongoing maintenance of the proposals information so that it is kept up to date. Achieving this will mean voters will remain well informed on what the current state of the proposal is. Adopting an approach that has no incentive will make it more difficult to maintain proposals that require any meaningful amount of contribution effort to keep the information up to date.
Time incentives are when people are compensated based on the amount of time they contribute. Compensation could be determined based on hourly, weekly or monthly based arrangements.
Reasons to adopt this approach
Income stability - Paying contributors based on the amount of time they contribute helps to provide more income stability to those who contribute. This makes it easier for them to focus on the work in front of them rather than constantly needing to chase different incentives to be compensated for their ongoing contribution efforts.
Gradual execution incentive - Time based contribution results in the gradual release of treasury funds to pay for individuals contributions to the ecosystem.
Flexibility - Incentivising peoples contribution through time can help with making it more flexible in what the contributor is working on. This flexibility can be useful for allowing a contributor to realign themselves with generating impact when a larger problem or opportunity presents itself.
Concerns for this approach
Only somewhat aligned with impact - If contributors do not perform well or do not generate any impact they would be less likely to be selected again in future voting rounds to be paid as a contributor. This helps to provide some alignment with generating impact however their actual incentive is still based on the contribution time they provided. Time incentives on their own may not be sufficient to consistently generate highly impactful outcomes.
Low alignment with faster execution - The longer a contributor takes to execute some work the more they will get paid using a time based incentive. This creates a misalignment for the contributor to execute at a fast rate. This could be beneficial for mission critical pieces of work that must be done carefully and not rushed, however this factor could also be abused. Providing there is a sufficient supply of willing contributors that want to participate it would be easy enough to replace low performing contributors with other potential candidates.
Performance incentives are when someone is compensated due to the speed or quality of their contributions. The contributor could have exceeded expectations in how effectively they executed a piece of work or the outcomes of their efforts were the most efficient or to the highest quality when compared to the efforts of other contributors.
Reasons to adopt this approach
Alignment for quality and speed of execution - If the performance of a contributor is measured and then compensated accordingly there is a higher potential alignment for contributors to want to execute faster and to a higher quality to receive this compensation. Contributors would have an incentive to identify their biggest areas of strengths when contributing and to then focus on those areas of strengths to benefit the ecosystem but also to increase the likelihood that they get more performance based compensation. This approach could also help with creating an incentive to identify faster and easier ways to make contributions that lead to the same outcomes, achieving this would mean execution efficiency gains that could benefit the wider cohort of contributors that are doing similar work.
Continuous execution incentive - A performance incentive could be an ongoing process or be something that is handled periodically such as every week, month or quarter. This ongoing execution incentive can help with creating clearer goals that contributors can strive towards when making contributions and could also potentially help with increasing the retention of good contributors. Rewarding good performance can help create a positive feedback loop where people who want to receive good compensation are consistently able to do so when they make meaningful contributions.
Flexibility - Performance incentives do not need to specify exactly what a contributor is working on meaning the contributors are flexible to identify themselves exactly what areas they believe they are most effective in and could perform most effectively in.
Concerns for this approach
Performance measuring complexity - Measuring each contributor's performance to reward high performers can be time consuming and complex. Each contributor's exact contributions will be different and the real benefit of their contributions might not be immediately obvious. If these incentives are not well managed and distributed fairly there is a risk of conflict between contributors and could also be discouraging for contributors to participate in the future if they don’t feel their contribution efforts have been truly appreciated.
Risk-taking behaviour - If executing at a faster rate is part of the incentive structure there is a risk that contributors try to execute too quickly in an attempt to receive more of the incentive. This could be counter productive if the outcomes of the work are more mission critical for the ecosystem or the general risk tolerance is low.
Income volatility - Performance based incentives could result in some contributors receiving far more compensation than others based on just their performance. Adopting a performance based incentive on its own could lead to high levels of income volatility which could be unsustainable for many contributors. Mixing this incentive approach with time based incentives could be one way to prevent this volatility.
Gaming the system - Contributors could identify areas of contribution or ways to contribute that are more effective than others for receiving high levels of performance based incentive. These areas of contribution or ways of contributing may not lead to meaningful improvements for the ecosystem to justify the cost of the incentive. Any adopted incentive mechanisms will need to reflect on which areas are receiving more or less of the incentive over time and consider the ramifications of what might happen if those outcomes persist over time.
Task incentives are when compensation is rewarded after the execution of some defined piece of work. Example areas of contribution could be for helping with moderation, providing valuable feedback & discussion, voting, making suggestions for information changes or reporting an application bug.
Reasons to adopt this approach
Targeted incentive - Task incentives can be highly focussed on achieving specific goals and outcomes that can be beneficial to an ecosystem. Task incentives can be effective for consistently generating impactful outcomes when it is known that the contribution effort that helps with executing the defined task will be useful for supporting or improving the ecosystem.
Participation scalability - A well defined task incentive can make it easier to scale the contribution efforts across a large number of participants. This is useful when it is beneficial to have a larger number of people help with the contribution efforts to achieve the intended outcome.
Low to medium sized tasks - Task incentives will often be compensated at the point of completion - although not necessarily they could also be compensated prior to execution! If the scope of the task becomes too large the task incentive approach becomes less suitable due to the larger delay in the incentive for the contributors who participate. The larger the scope of the task the more it may benefit from other approaches such as time incentives or milestone incentives so that the incentive is more gradually and fairly released.
Concerns for this approach
Incentive size complexity - A task incentive can increase the complexities around the scoping of work involved, understanding the time it will likely take and then matching this expected contribution effort with a sensible incentive amount.
Unforeseen outcome complexity - Part of the complexity for task incentives is understanding the different ways a contributor might approach the task and how those outcomes could lead to suboptimal results that were not intended or beneficial to the ecosystem.
Gaming the system - Contributors could find ways to exploit task incentives by either rushing the execution or identifying easier ways to arrive at an accepted outcome with less contribution effort just to receive the compensation more easily.
Milestone incentives can be used to better group together pieces of work that can then be executed independently. Milestones will often be executed one after the other until the final intended outcome is executed and delivered.
Reasons to adopt this approach
Execution based incentive - Creating milestones to plan out any contribution efforts will help with increasing the alignment that contribution efforts lead to the execution of a proposal to create the outcomes originally intended. Milestones create the need for the execution of future outcomes so that the contributors can receive the next milestones worth of compensation.
Thorough execution planning - Adopting a milestone approach can be an effective way to break down complex ideas into smaller and more manageable pieces of work. Making milestone based plans can help with better informing any voters on whether the execution plan appears to be feasible and sensible. A milestone approach is not required to break down complex problems into different milestones of execution however this approach could be one effective way for ensuring that this always happens.
Clearer outcomes - Planning ahead with milestones can help with communicating the exact intentions and future deliverables of each project. For situations where the voter wants to be highly involved in knowing exactly what gets executed ahead of time this would be an effective approach to ensure the voters are well informed prior to selecting any potential project.
Risk mitigation - Breaking down complex projects into more manageable groupings of work can help with identifying potential risks that might occur and different skill sets that will be required. Understanding these different execution factors can help with identifying strategies to mitigate those risks.
Concerns for this approach
Planning & estimation complexity - Planning out complex projects can be highly time consuming and complex. Attaching compensation to these estimations and plans increases this complexity further as any mistakes in the milestone planning could easily lead to under or over compensation for certain milestones. Large delays could occur with the release of compensation if existing works take longer than expected which could cause conflict or discourage existing contributors from participating in the future due to the upfront complexity involved. Proposers may also end up overestimating the time required on purpose to ensure they are always sufficiently compensated for their efforts or alternatively underestimating the time required to increase the chances they get selected for funding.
Change of execution plan complexity - If milestones are set ahead of time at the proposal stage then complexity can easily emerge if the idea needs to change due to a changing environment or other factors. This adds complexity to the milestone approach as the milestones themselves may need to be updated or changed in the future after they are set. If a governance process is added to handle these requests to change the milestones this only further adds to the complexity as then these moderators could have an influence over how projects are able to pivot and adapt to different factors.
Rushed execution - If compensation is released at the point of executing milestones then contributors may decide to rush the execution of milestones to get compensated more quickly. This could be because they are trying to game the system or be because the work was underestimated at the time it was planned. Now the contributors might need to rush the contribution outcomes in a milestone just to make sure they can pay for day to day bills.
Impact incentives provide compensation when contribution efforts achieve impactful outcomes. Generating impact could mean helping to achieve some predefined outcome that was already desired or alternatively it could be rewarding an emergent outcome that created impact that wasn’t originally planned.
Reasons to adopt this approach
Outcome oriented - Offering compensation when impact is generated helps to align the incentives for contributors to direct their efforts towards generating as much impact as possible. The better this is achieved the more quickly and effectively an ecosystem might be able to grow due to contributors consistently generating impactful outcomes.
Flexibility - Generating impact can come in many forms, impact could be generated across numerous areas in an ecosystem. Contributors have a lot of flexibility in determining how they will be able to direct their contribution efforts towards initiatives that they believe will be the most impactful.
Priority alignment - Providing compensation to contributors who help address existing ecosystem priorities could be an effective way to align the incentives of contributors to generate impactful outcomes through addressing important problems and opportunities that exist in the ecosystem.
Encourages experimentation & innovation - Impact based incentives can help with rewarding contribution outcomes that end up generating impact. This incentive could help with inspiring contributors to experiment with new and different approaches that open up new opportunities or improvements to the ecosystem.
Concerns for this approach
Impact measurement - Impact can be difficult to quantify and measure. Some areas of impact could be more qualitative such as providing a certain experience or changing how a community feels about something. These outcomes can be difficult to quantify and measure but could still have a significant impact on growing and supporting an ecosystem. Other areas of impact could go unnoticed or be difficult to spot. Capturing feedback about different areas of impact would also be complex to scale, mostly due to the difficulty of trying to get a large number of people to provide feedback about many of their experiences in the ecosystem and which of those did or didn’t offer them value.
Gaming the system - Contributors might try to game impact based incentives by looking for short term areas of contribution that align with what people are most thinking about at that moment. If a contributor focusses on where attention currently is at that moment it could be easier to get their contribution efforts seen by other community members to then be rewarded for those efforts. How impact gets measured and rewarded will influence how contributors allocate their time so this will be something to continuously consider and reflect on.
Delayed compensation - It takes time for a contributor to create meaningful outcomes and for those outcomes to then be measured to determine whether they created impact. Only focussing on whether impact is generated could end up causing highly delayed compensation for larger projects.
Risk of no compensation - If the entire incentive available is based on whether contribution outcomes make impact or not there is a high risk that some people's contribution efforts lead to no impact and no compensation for their efforts. This problem could be prevented by combining an impact incentive approach with time incentives or milestone incentive approaches.
External dependencies risks - Generating impact can sometimes rely on external influencing factors that are out of the control of the contributors who helped execute some area of work. This makes it more problematic to rely solely on impact based incentives.
Unfair incentive distribution - Due to the complexity of measuring impact it could be easy for certain areas of work to be overlooked and be less understood on the impact those efforts have helped to generate. If these impactful outcomes get unnoticed then the incentive could be distributed unfairly between the contributors involved. Unfair funding outcomes could lead to an environment that discourages contributors from participating in the future if they were not fairly rewarded for the impact they generated.
