Authors: Solarcurve, Mog, LuukDAO, Xeonus, and mkflow

Table of Contents
I. Introduction
II. Process for Funding Service Providers
II.1 Domains of Operation
II.2 Key Objectives
III. Accountability Mechanisms
IV. Contribution Funding Pathways
V. Delegate System
VI. Voting
VII. Risk Assessment
VIII. Specification

I. Introduction

This proposal aims to outline how the funding and accountability process will work for any entity wishing to contribute to the Balancer ecosystem. To recap the journey so far, in early 2022 subDAO’s were formed 20 to give community contributors a formalized structure with clearly defined domains. More recently, the DAO has chosen to incorporate a foundation 15 in order to engage with service providers who require formal contracts.

This framework aims to deliver the following benefits:

Streamlined process for funding service providers
Clear and decentralized accountability mechanisms
Creation of a delegate system to enable a transparent dialogue between proposers and large token holders

II. Process for Funding Service Providers

A service provider (“SP”) is an entity with a budget attached to it, managed by one or more Leaders, that coordinate and pay contributors working to achieve one or more long term goals in the Balancer Ecosystem. When choosing to pursue funding as a SP or through the Grants program, a rough guideline is short term or one off engagements requiring $100k or less should go through Grants. A longer term engagement or one with a cost beyond $100k should be pursued as a SP.

To keep things simple, the terms “service provider”, “working group”, and “subDAO” are considered synonyms and interchangeable. A SP can be an incorporated legal entity or simply a loosely organized group of anonymous Balancer contributors. In order to interface with the Foundation a legal agreement is required so any SP taking advantage of the Foundation must be a legal entity or a natural person.

SP’s have an option to make their funding proposal through the Foundation. If it is made through the Foundation, the Foundation will create the funding proposal on the forum on behalf of the SP. The SP is expected to answer any community questions or concerns raised on the forum. Funding will be distributed to the Foundation’s wallet on a quarterly basis and from there distributed to the SP on a defined monthly basis. If the SP does not go through the Foundation then funding will be distributed directly to the SP on a quarterly basis.

All funding proposals must include “Domains of Operation” and “Key Objectives”.

II.1 Domains of Operation

Examples of Domains might be core protocol development, partner integrations, marketing, business development, front end, community, etc. While some overlap is acceptable (multiple SP’s operating in the same Domains) it is generally not an effective use of DAO funds to have multiple marketing teams or multiple teams managing the community for example. Clearly indicating Domains of Operation and the expertise an SP brings to that Domain will reduce inefficient overlap and help to increase coordination in the event of necessary or useful overlap. Having multiple SP’s building front ends might represent a useful overlap, for example.

Each SP should make clear how they will handle record keeping and the handover of those records in the event they are offboarded. If an SP proposes to enter a domain of operation already occupied by another approved SP, the proposal should outline how they plan to coordinate efforts to avoid the DAO paying double for the same work. It is expected that the work product of each SP is made available to the community on a regular basis.

II.2 Key Objectives

Key Objectives should be high level goals the SP plans to work towards and accomplish during the funding period. If appropriate, these might be broken down into a list of specific tasks. It is important that the DAO have a clear idea of what the SP is doing while also leaving enough flexibility for innovation and efficiency. Providing success metrics will also ensure the community can easily evaluate performance.

Finally, a brief overview of how the funds would be spent is the last requirement. In the event of an SP requiring additional funds before the end of the funding period a supplemental budget request can be made in the same format as a regular funding request. An estimate of the SP’s monthly spend should be included which will be used to calculate the quarterly distribution of funds.

All SP’s going through the Foundation must upload a copy of their “Service Level Agreement” or SLA to ipfs and include the link in their funding proposal.

III. Accountability Mechanisms

We must ensure any funds disbursed from the DAO treasury are used transparently and in service of the Balancer Ecosystem. Ultimately veBAL holders are responsible for ensuring SP’s are delivering enough value to justify the cost of funding them. We propose the following rules for holding SP’s accountable:

All SP’s must hold monthly community calls in any online venue of their choosing as long as it is open to the public. Failure to hold a monthly call will prevent the Foundation or the DAO from disbursing future funds. The recordings of these community calls must stay available for at least 3 months after the community call has wrapped up.
In combination with the monthly community call, a monthly summary must also be created which details progress towards each “Key Objective” outlined by the SP in their funding proposal. This should be posted to Balancer’s forum in advance of the monthly community call.
Anyone can make a forum proposal to the DAO to stop the Foundation/DAO from disbursing future funds to the SP. Such a proposal should include: SP in question, reason to halt funding, supporting evidence, and any other comments.
If the vote passes, all future funding to that SP will be halted until a new funding proposal is successfully approved. If it fails, funding continues as normal.
There will be an internal monthly meeting with mandatory attendance by at least one representative of every actively funded SP. The goal of this meeting is to ensure all SP’s are strategically aligned across the ecosystem. Ideally each SP should keep their representative the same month to month.

Every member of Balancer’s community shares responsibility for ensuring SP’s that receive funding from the treasury are acting in the best interest of the Balancer ecosystem. The rules outlined above empower every community member to act if they feel an SP is no longer acting in that best interest. The Foundation is an agent of the DAO and must honor the outcome of any legitimate snapshot vote, subject to any applicable Laws/Acts and Regulations.

IV. Contribution Funding Pathways

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V. Delegate System

While anyone can initiate a proposal to stop funding a SP it is large veBAL holders who have the strongest incentive to ensure SP’s are delivering value. The creation of a delegate system will lead to a more transparent and productive dialogue between proposers and those with large voting power. We encourage anyone interested in being a delegate to present their platform to the community in the new “Delegate Citadel 8” section of the forum.

VI. Voting

Delegates and token holders should not vote in favor to fund or against to defund a SP that they are working for or affiliated with. Additionally, SP’s should not compensate token holders monetarily in exchange for their votes (do not bribe on funding or defunding proposals).

There will be a third voting option added to snapshot to cover the case of a SP being affiliated with many large veBAL holders and thus failing to pass a proposal to fund them because so much voting power cannot vote in good faith. For each SP funding proposal, there will be “Yes”, “No”, and “Abstain”. It is expected that delegates and any token holders with a potential conflict of interest regarding a particular SP will only vote for “Abstain” if they choose to vote at all and provide the reason for doing so.

VII. Risk Assessment

There are various risks to the ecosystem that could arise from the adoption of this proposal.

A veBAL token holder might work for a SP (or the SP might have holdings of veBAL itself) and vote in favor of funding the SP despite this conflict of interest.
A SP might get funded and not follow through on their key objectives. With funds sent on a quarterly basis, this could result in a sizable loss of funds.
Balancer sees multiple SP funding requests and if all were funded this would represent an unsustainable burn rate.

The way to mitigate these risks is to foster an active and engaged community. Conflicts of interest should be declared up front to prevent any appearance of impropriety. Unknown or new SP’s might want to request a lower funding amount and/or utilize milestone based payments as a trial period. If milestone based payments are utilized they should be overseen by the Grants Service Provider. Delegates and those community members who handle management of treasury funds should speak up about the impact funding SP’s will have on the treasury - and it is a good idea for each SP to include their assessment of that impact in their proposal if they can.

The responsibility for stewarding the Balancer ecosystem towards a bright future lies with veBAL holders and delegates. We could try to create many rules to address many possible scenarios but we see value in creating a simple and flexible framework for funding all kinds of Balancer contributors.

VIII. Specification

If this proposal passes, the following will be in effect:

Any future funding proposals must adhere to the guidelines as described above. Please find an example template here 18.
The Ops subDAO will dissolve at the end of the second quarter. After salaries are paid for June, any remaining funds will be returned to the DAO Multisig. All powers held by Ops will return to veBAL governance.
This proposal will mark the start of a new tracking system, BIP or Balancer Improvement Proposal. When a proposal is added to snapshot it will be given a BIP number - consider this proposal to be BIP-1.

[BIP-1] Operating Framework for Balancer DAO