CIP-18: CoW Grants Program Renewal Proposal

CIP: 18
title: CoW Grants Program Renewal Proposal
author: netrunner.eth, middleway.eth
status: Active
created: 2022-12-13

Summary - Renewal of the CoW Grants Program (CGP)

We are excited to launch this CIP to seek community support to renew the CoW Grants Program.

This program is an essential resource for advancing the CoW Protocol ecosystem and it will help improve the utility of $COW tokens and facilitate deeper integration with other DeFi solutions.

In June 2022, the CoW Grants Program was established through CIP-8. Now, we look forward to continuing the program seeking community support to renew it for 12 months.

Motivation

The CoW Grants Program is committed to helping grow the CoW Protocol’s ecosystem, having reviewed and funded many applications with more on the way.

These contributions include analytics, tooling, UI/UX, infrastructure and growth projects. We are also beginning to see integrations with other well-known organisations like Yearn, Shapeshift and Defi Llama – positive signs that the program is making great progress!

There are few places to follow the Grants Program progress:

image

The Grants Program has processed payments for grants in the total sum of

  • 106,640 xDAI
  • 190,100 COW

There are also pending obligations (conditional to milestones delivery):

  • ZeroMEV data API: 15k xDAI
  • Shapeshift integration: 5k xDAI, 400k COW
  • Golang SDK: 5k xDAI
  • Surplus capturing AMMs study: 21k xDAI, 150k COW
  • TWAP orders (SC): 10k xDAI
  • Ongoing stipend and contributors: On a monthly basis

Volume-based Partner Reward Program

This idea was pioneered in the Shapeshift Integration Grant. The model is straightforward and effective for both CoW DAO and its partners. Rewards are based on actual performance, creating incentives for driving more volume to the CoW Protocol, as well as giving partners exposure to the COW token.

Over the term of this 12 month grants program, we intend to gather information on what an economically sustainable expense would be to acquire new users (volume). We believe that a tailored partner reward program is a good way to test these kinds of collaborations before a general open program can be implemented.

Baseline deal:

First $10M volume: 60k $COW
Additional $50M volume: 120k COW
Additional $200M volume: 240k COW

Volume milestones must be surpassed within 12 months to be eligible for funding.
All COW tokens granted will be subject to 12 months of vesting.
  • Baseline numbers for the purpose of this proposal are open for public discussion.
  • Once the proposal is approved, the committee should not approve a partner deal with higher rewards per volume and per partner.

Grants Committee

Committee Members
The CoW Grants Comittee is comprised of seven members - three from the core team and four from the community. Four community members receive a stipend.

Stipend
At the beginning of the program, community Grant Committee Members received a stipend of approximately $750 USD per month. However, due to a decline in the price of $COW, we propose an increase in the stipend from 5,000 COW (~$350 USD) to 8,000 COW (~$600 USD), with an additional $150 difference being paid in $XDAI. We believe that this adjustment is fitting considering the decline in $COW prices and the responsibility for executing the Grants Program entrusted to us by $COW token holders.

Technical grants lead
The previous 6 months grant program has also highlighted that reviewing highly technical grants needs a dedicated resource to do the following:

  • Grantee assessment: Assess the grantee’s capabilities to finish the grant;
  • Technical review: Review technical specifications and conduct feasibility studies on Grant Proposals to assess the Grantee’s aptitude to execute, making sure these align with CoW Protocol’s development and standards;
  • Evaluate results: Assess technical milestones before payments are given by the Committee.

Therefore, we propose that should this CIP be approved, Grants DAO will create a technical grant lead role to perform these core tasks.

Grants Program Term
The Cow Grants Program will be a rolling 12 month arrangement, with annual renewals approved by CoW DAO.

Specification

Budget
The budget for general purpose grants is proposed to be increased by 1.5M $COW and 500k $XDAI, in addition to existing funds on the Grants DAO Funds Safe. It is proposed that funds will be requested and bridged as tranche payments as required. This will ensure Grants DAO can meet current and future grant commitments while maintaining capital efficiency.

New Safe
The Grants Committee proposes the establishment of a new Multisig Safe, separate from the Grants Safe, but still operated by the Grants Committee. This new Safe was already created with the exact same setup as the Grants Funds Safe, to be used if this proposal passes. It’ll be used to operate the proposed Volume-based Partner Reward Program with a narrower mandate to only approve and pay performance-based rewards. It is proposed that this Safe will be funded with 3M COW tokens exclusively for this purpose.

Safe Transaction Data

{
   "version":"1.0",
   "chainId":"1",
   "createdAt":1673613134179,
   "meta":{
      "name":"Transactions Batch",
      "description":"",
      "txBuilderVersion":"1.11.1",
      "createdFromSafeAddress":"0xcA771eda0c70aA7d053aB1B25004559B918FE662",
      "createdFromOwnerAddress":"",
      "checksum":"0xb927b18c1f3b5fc551e49da277b88fdcf10e81d543604648cdac9b9803edacbd"
   },
   "transactions":[
      {
         "to":"0xDEf1CA1fb7FBcDC777520aa7f396b4E015F497aB",
         "value":"0",
         "data":null,
         "contractMethod":{
            "inputs":[
               {
                  "internalType":"address",
                  "name":"spender",
                  "type":"address"
               },
               {
                  "internalType":"uint256",
                  "name":"amount",
                  "type":"uint256"
               }
            ],
            "name":"approve",
            "payable":false
         },
         "contractInputsValues":{
            "spender":"0x88ad09518695c6c3712AC10a214bE5109a655671",
            "amount":"3000000000000000000000000"
         }
      },
      {
         "to":"0x88ad09518695c6c3712AC10a214bE5109a655671",
         "value":"0",
         "data":null,
         "contractMethod":{
            "inputs":[
               {
                  "internalType":"contract IERC677",
                  "name":"token",
                  "type":"address"
               },
               {
                  "internalType":"address",
                  "name":"_receiver",
                  "type":"address"
               },
               {
                  "internalType":"uint256",
                  "name":"_value",
                  "type":"uint256"
               }
            ],
            "name":"relayTokens",
            "payable":false
         },
         "contractInputsValues":{
            "token":"0xDEf1CA1fb7FBcDC777520aa7f396b4E015F497aB",
            "_receiver":"0xbD96C4Fe53f1d89a8Bdb3522BCEDfB20b5601b69",
            "_value":"3000000000000000000000000"
         }
      }
   ]
}

The proposed transaction is bridging 3m COW tokens to the newly created safe on Gnosis Chain for Volume-based partner program. Additional funds for the Grants program will be requested when needed.

Tenderly Simulation

Link to Tenderly simulation

Snapshot

Link to be provided.

2 Likes

Great initiative.
Indeed the Grants program mandate is due to expire in January, six months after the approval of CIP-8.

I would like to add and discuss few topics that can potentially be added to this proposal:

Volume-based partner reward program

This idea was pioneered in the Shapeshift integration grant. The model is very simple and effective for both CoW DAO and its partners. Rewards are being payed based on actual performance, which align incentives for driving more volume to CoW Protocol as well as allowing partners to get exposure to COW token. There are still business evaluation missing for what is the sustainable expense the protocol can allow to acquire new users (volume). Having said that, I think a bespoke partner reward program is a good way to allow this type of collaborations even before a general open program is possible.

My proposal would be to create a dedicated Safe separate from the Grants Safe, but still operated by the Grants Committee. This new Safe will have a narrower mandate to only approve and pay performance-based rewards for integration partners. The baseline deal could look something like:

First $10M volume: 60k COW
Additional $50M volume: 120k COW
Additional $200M volume: 240k COW

Volume milestones must be surpassed within 12 months to be eligible for grant funding.
All COW tokens granted will be subject to 12 months of vesting.
  • Baseline numbers for the purpose of this proposal are open for public discussion.
  • Once the proposal is approved, the committee should not approve a partner deal with higher rewards per volume and per partner.

Technical grants lead

During the first months of the grant program, it became more apparent that nailing down grants that are more technical in nature is a challenging task for multiple reasons:

  • Grantee assessment: The technical ability of the grantee to ship the grant should be evaluated
  • Technical specifications: The scope and details of the grant should be defined in a way that is practical to execute and evaluate, and aligns with core CoW Protocol development and standards.
  • Evaluating results Milestones should be evaluated before the committee is issuing a payment

I think the DAO should consider to open a position for this role

3 Likes

Excellent points and I agree with them fully. They have been integrated into the proposal for community consideration.

Thanks for incorporating my ideas.
Adding few more notes

I think 3M COW tokens is a reasonable amount to allocate for the Partner Reward Program Safe, to be spent according to the the aforementioned program guidelines.
I think the remaining COW tokens in the Grants safe is enough for the foreseeable future of other general grants.

In the past few months the Grants program spent less that $100k (xDAI), meaning more than $500k is still remaining. I think it is reasonable to assume that expenditure will increase as the program just started to ramp up.
Having said that and given the intention to start active treasury management, every dollar that sits idle on the Grants safe carries with it a cost of opportunity to generate yield.
For this reason, I suggest that this proposal will tentatively approve up to $1M of spending on grants in the next 12 months, but would not allocate additional funds at this moment in time, but only when the remaining funds are depleted.

I think that a more practical approach would be to allow the grant committee to publish a job description and onboard an additional committee member with dedicated compensation according to the estimated workload (or potentially promote an existing committee member @mfw78)

I agree that committee members should be fairly compensated! I support this adjustment.
I wonder if you thought about the opposite scenario where COW rallies during the next 12 months and whether adjustments should be made also in this scenario?

@netrunner.eth General tone looks good. I agree with @middleway.eth with respect to idle money being a yield cost, and having a budget approved by CowDAO, but topped up as required, seems to be sound. I’d propose that CowDAO top up the funds safe to ensure at least 1 month’s average forward spendings are available (or additional amounts as requested by the committee, up-to-and-including the maximum approved budget).

The current risk appetite from both sides given CIP-8 has been to absorb opportunity / market risk over a 6 month period. So, as such, to maintain a fair (read: existing) balance, I’d propose an amendment to this draft whereby the committee is renewed for 12 months, however remuneration has a 6 month adjustment clause, such that remuneration remains at USD$750, with a maximum payout in $COW being fixed at 8000 $COW. Any residual is to be made up in xDAI.

Currently this would see 80% of committee payments denominated in $COW which should allow for thorough incentive alignment.

You’re correct that risk-off assets in the safe can’t earn yield, so I have adjusted the proposal to correct for that, and agree that $COW and $XDAI tokens should be bridged as required.

In regards to committee stipend, I feel like its being overcomplicated, requiring 6 month clauses and calculating the market value of $COW using an oracle, working out the monthly average price of $COW and dividing by $750.

Personally, I think setting a sum like 8000 $COW/month for 12 months is very simple and straightforward. If the market rises by the end of the grants program, we simply readjust the amount when we apply to the DAO for program renewal. Then the DAO can accept/reject the proposal.

In favor of this proposal, I think there is a lot of potential for the Grants DAO

Could you share an overview of how much of the last budget was allocated and how? Generally, it would be great to define some goals/metrics that we use to in hindsight evaluate the success/impact of each grant.

2 Likes

The last budget consumed 130,000 $XDAI and 106,000 $COW.

As the program is starting to ramp up, it is reasonable to expect expenditure to increase over the next 12 months. You can find more details about the funding request in the Airtable link provided [here].

By providing funding to support the growth of CoW Protocol’s ecosystem, we believe it will further decentralize the protocol and encourage the use of $COW.

1 Like

I’ve updated the proposal to include more information and references about approved grants and program expenditure.

I’d like to move this proposal to the voting phase in the coming days

2 Likes