[CMP #3] - Protocol Compensation Overhaul

[CMP #3] - Protocol Compensation Overhaul


Aligning team compensation with token holders primarily by referencing changes in token market value and clarifying reporting responsibilities of the Financial Officer (Herein “FO”).


[CMP #3] - Protocol Compensation Overhaul

Provide a High Level Overview:

This Community Proposal changes the performance fee from being based on an increase in per token backing (Herein “backing”) to being based on increases in the market price of Volta Club tokens (Herein “token price”) in order to better align paid incentives with token holder’s improved positions. Further it will clarify the timing and distribution of the management fee and elucidate the reporting responsibilities of the FO to the DAO per WIP-32.

Provide Low Level Details:

Currently, performance fees are paid by computing the change in backing. The backing is computed by the treasury’s market value divided by circulating tokens. Increases in backing, while beneficial, do not directly benefit token holders unless the token price also increases. WIP-32 set the 2&10 management/performance fee schedule. This CMP does not change that schedule. WIP-32 based the performance fee calculation on the price difference of (the now deprecated) wMEMO “liquid redemption price”. Volta Club does not currently have a redemption mechanism; the only way to ‘redeem’ Volta Club tokens is to trade them on the market. This CMP not only better aligns the Volta Club Team with its token holders, but also more closely aligns with both the intent and spirit of WIP-32. WIP-32 further defines High Watermark (Herein “HWM”). Due to the current practice of referencing backing for performance fees, this CMP will define the first HWM as equal to the previous market price of the Volta Club token at $195. The performance fee will be capped at 80% of the liquid backing of Volta Club token in order to protect the interest of long term holders. Subsequent watermarks will be calculated at the end of a given fiscal quarter by the time weighted price average (Herein “TWAP”) for 10 days before the close of the quarter. If this end-of-quarter watermark exceeds the HWM, a new HWM is set and performance fees will be paid. The market price of Volta will be determined by the average of the two largest liquid markets determined by total trading volume over the time period.

Performance fee will be paid in out of circulation Volta Club Tokens currently held by the treasury to further align the interests of the team and the DAO providing a fair and equitable system of distribution from the DAO treasury to the team, and reducing frictional costs. The price ascribed to Volta tokens used to calculate payments to the team will be done using the same TWAP calculation for holders over the preceding 10 days before quarter close.

These changes will take effect immediately with the computation of Q1 results on April 1, 2024 00:00 UTC. The immediacy of the change is necessary to maintain liquidity and preserve the value of the treasury.

Starting with Q2 2024 (Apr 1), the team management fee will be taken each quarter at a rate of .5% of the treasury’s liquid backing of Volta Club. The management fee will continue to be paid in stablecoins to the team multisig.

WIP-32 provides insight on the management budget as follows: “Operational costs include but are not limited to team member salaries, legal expenses, marketing, payments for required personnel within departments, technological maintenance, enhancements and security, and any other expenses required for protocol management. An expense report will be published on a quarterly basis to provide transparency on how the management fee has been utilized.” To clarify the expectations of the DAO, the quarterly report should include the txIDs of payments made to the team multisig for purposes of the management fee and the txIDs of payments made in accordance with the performance fee. Along with the currently provided budget breakdowns for each department.

1 Like

I don’t see operating costs described in this, which is part of the management budget… So a little rework is needed here I think unless I’ve missed something. The department wallets are available on request already yet no one’s ever asked for them. Also the perf fee does NOT go to the entire team so not sure a lot of this is accurate?

1 Like

I feel like the calculation on how the new performance fee would be calculated could be more explicitly explained. After reading the proposal a few times I think the performance fee would simply be based on TWAP - HWM.

But I feel like it is a more efficient to keep using the buyback mechanism, since then the TO’s can use the low market price to as an arbitrage possibility (with the higher the difference the higher the arbitrage). This would reward long-term holder the most (and imo those users are most valuable to the project), instead of users looking for short term profit.

I like focusing on organic treasury growth. That ultimately will grow the protocol and it will bring in more investments. I know patience is in short supply and we all want to see higher market value on Volta but I think we should compensate more of a long term view.

To go further: Buybacks cost treasury capital. It doesn’t mean that the treasury shouldn’t pursue them but I wouldn’t pursue them unless the treasury managers do not have better things to do with that capital. (Now, I think we’re still trading at a 50-% discount to market price. They should probably think about buying and I’m sure they will sometime before quarter end).

Keep in mind: There was a massive payout because of amount of burns in the 4th quarter. Now, they will get another huge payout when they push the price from $195 to $400ish. I’m not sure the short termism is the right way to go. I’d rather reward organic growth of the treasury rather than buybacks. Buybacks are the easy thing to do but it’s not value creation. Price will rise as the market trusts the teams ability to find and execute on projects.


Voting has now closed for CMP #3.

[CMP #3] - Protocol Compensation Overhaul has passed , with 94.73% of votes in favor .

The Management Performance fee will now be paid in Volta tokens and based on the growth of the market price of Volta rather than the token’s backing price. The beginning high watermark for this change is set at $195.