KIP-78 Disincentivize Coop from continuing Curate (Scout) Incentives of 300k PNK

[greenlucid]

Summary

This proposal incentivizes Kleros Cooperative into stopping the monthly Curate (Scout) Incentives.

Abstract

This proposal decreases the funding in the form of PNK minting by the DAO into the Kleros Cooperative, by double the amount that is delivered via Curate Incentives, or 600,000 PNK, whichever is greater for that month. The ATQ rewards are not taken into account.

Motivation

Every month, 300,000 PNK are delivered from the Kleros Coop treasury in the form of Curate Incentives, to submitters of items in the registries of Kleros Tokens, Address Tags, and Domains registries, calculated by a script located in kleros/tag-registry-rewards. This a monthly expense and effort the Kleros Coop has been making ever since May 2022, in various forms and amounts.

Originally, the information that got periodically included into the registry was key in bootstrapping the registries. Subsidizing the submission of items into the registry was seen as a temporary way to reach critical mass and have the projects’ extrinsic incentives to submit themselves into the registries, overpass the intrinsic incentives funded by Coop, and have the registries be self sustaining.

However, 3 years and 2 months later, this subsidy is still ongoing. The registries have evolved into a massive multi-chain effort. All the important submissions have been made. Some are outdated. There are no metrics that showcase why this subsidy is needed, or what value these registries are providing to anyone.

And even if these registries were actively providing value, the fact of the matter is the Incentives are actively bringing in useless submissions. These are, afaik, AI generated tokens, which have been the main submissions over the last few months:

The marginal utility of 300 monthly submissions into these massive registries is a record low, and getting lower every month.

If these values provide real value, they have already attained critical mass and the clients, or new legit projects are already extrinsically incentivized to submit new information to them. If they don’t, they should no longer be invested in.

Current costs this entails is: 300k monthly PNK, currently valued 6.9k USD. Plus, having a developer part time update the rewards and deliver them.

Specification

From the moment this KIP is accepted, for every month that a Curate Incentives distribution is made to reward submitters for having made submissions in any of the following three registries:

• Kleros Tokens
• Address Tags
• Domains

The Kleros DAO will consider the Kleros Cooperative to have incurred a debt to the DAO, equal to the max between these two values:

• 600,000 PNK
• Double the amount that was delivered as incentives to those registries for that month.

This debt will non-authoritatively be tracked in this thread, with links to the transactions. This debt is extinguished or decreased by:

• Either voluntarily by the Kleros Cooperative sending the owed funds to the Kleros Governor, explicitly noted as paying back this debt.
• As much as possible, MUST always be deducted or extinguished in the form of the next transfer from the Kleros Governor into a Coop multisig, or minting of value from the Kleros DAO to a Coop multisig.
  • For example, if the DAO is owed in the concept of this KIP the amount of 600,000 PNK, and is about to mint 10M PNK in the concept of PNK staking rewards for the period 2026-2027, it will instead mint 9,400,000 PNK and extinguish this debt.

Example of how this debt would grow depending on the timing of the approval of this KIP:

• Curate Incentives are disbursed in August 7, but this KIP is approved in August 15: those Curate Incentives are not taken into account for this debt.
• This KIP is approved in August 1 and Curate Incentives are disbursed in August 7: those Curate Incentives will be taken into account for this debt, even though they are rewards for submissions made in the July → August period.

Rationale

• Disincentivizing the Coop by only an additional 300,000 PNK per month is not very impacting, as 300,000 PNK might just be peanuts for the Cooperative, particularly in the context of the growing PNK staking rewards.
• Using the max of the two values, is used to guarantee a disincentive of 600,000 PNK per month. This is because there are additional costs associated with this program other than the PNK that is delivered, mainly the adjustment of rewards, delivery of rewards, and Telegram support. The intent of this proposal is not to decrease the rewards of the program, but to stop it altogether.
• The DAO is not able to force the Cooperative into stopping the rewards, but can pressure the Cooperative by refusing further transfers of PNK if there’s general agreement they’re not being properly allocated, so this is why this KIP is a disincentive and not a hard rule.

[clesaege]

@greenlucid

Originally, the information that got periodically included into the registry was key in bootstrapping the registries. Subsidizing the submission of items into the registry was seen as a temporary way to reach critical mass and have the projects’ extrinsic incentives to submit themselves into the registries, overpass the intrinsic incentives funded by Coop, and have the registries be self sustaining.

I’m not aware of this justification. Curating data which is then used by other projects is definitely worth it. Actually just seeing the “submitted by Kleros Curate” on etherscan is worth way more in advertisement than the 300k PNK.

@greenlucid

And even if these registries were actively providing value, the fact of the matter is the Incentives are actively bringing in useless submissions. These are, afaik, AI generated tokens, which have been the main submissions over the last few months:

If this is the case, that’s a different problem, and to the best of my understanding the rules were changed (or are going to be, that’s more on Fortunato focus) to avoid that.

@greenlucid

The Kleros DAO will consider the Kleros Cooperative to have incurred a debt to the DAO, equal to the max between these two values:

@greenlucid

For example, if the DAO is owed in the concept of this KIP the amount of 600,000 PNK, and is about to mint 10M PNK in the concept of PNK staking rewards for the period 2026-2027, it will instead mint 9,400,000 PNK and extinguish this debt.

This is the most crazy part of the proposal (and it’s great we now have futarchy as it’s definitively something I’d sell a significant share of my PNK conditionally on it being approved).

It’s one thing to made requests, advice to an external entity, or even conditioning a grant on some action, but “creating non consensual debt” or refusing to pay for some amounts which are due would really be killing Kleros.
That’s not an exaggeration, Kleros is a dispute resolution system and thrive by being fair and trustable. Refusing to pay for expenses already voted on and already incurred by an external entity would be:

• A violation of trust.
• Illegal (under French law “abus de confiance” = breach of trust, up to 375k€ fine and 3 years of jail).
• Immoral.
• Likely to lead to some integration going away and preventing new ones.

The proposal may actually be great as it points out our need for a constitution offering protection to entity the DAO contracts with.

In addition to that, I am not aware of the cooperative being contacted on concerns of overspending on curate rewards. An entity (or a part thereof) wanting something from another entity should first try to talk to it and convince them, not go on “Hey do this, otherwise you are indebted to me and we won’t pay you what you owe us”.

[greenlucid]

@clesaege

It’s one thing to made requests, advice to an external entity, or even conditioning a grant on some action, but “creating non consensual debt” or refusing to pay for some amounts which are due would really be killing Kleros.

Ok, the problem here is that the KIP is unilaterally creating a debt. In this case the Coop as recipient of PNK minted for staking rewards, is obligated to use those PNK for the staking rewards, most of the minted amount already spent as the Coop has been using PNK treasury holdings to fund the different until next year. So that would be DAO refusing to pay something it obligated itself to do.

conditioning a grant on some action

This was the intention with this KIP, but not understanding how that could possibly be done or accounted for, I thought that a debt was exactly equivalent. But as you pointed out, making it unilateral debt is NOT equivalent.

I’m thinking at how could the DAO possibly register it without making it a debt, since a debt would be expected to be paid from Coop into DAO, or DAO would have the right to settle it, and that constitute theft.

I guess the alternative would be, for the DAO have an internal ledger of “funds the DAO considered Coop misused”, as something that’s “not actually debt”, and more like a “grudge fund”? Like, if in the future DAO wants to provide grant money to Coop for anything, it can check this ledger and settle it from there. That wouldn’t be debt or theft, but a delayed conditional (un)grant that executes later on.

@clesaege

In addition to that, I am not aware of the cooperative being contacted on concerns of overspending on curate rewards. An entity (part part thereof) wanting something from another entity should first try to talk to it and convince them, not go on “Hey do this, otherwise you are indebted to me and we won’t pay you what you owe us”.

I have had many (private) discussions with members on the team on this. It’s not obvious the next step is being public-without-making-a-proposal, thought it would be to go straight for the proposal.

[clesaege]

@greenlucid

I guess the alternative would be, for the DAO have an internal ledger of “funds the DAO considered Coop misused”, as something that’s “not actually debt”, and more like a “grudge fund”? Like, if in the future DAO wants to provide grant money to Coop for anything, it can check this ledger and settle it from there. That wouldn’t be debt or theft, but a delayed conditional (un)grant that executes later on.

If you wanted to condition future PNK allocations on the coop doing (or not doing) some stuff with, this would be legal. But keep in mind that the DAO is not the unique source of funding of the coop (public funding, Uniswap airdrop + yield farming, investment).

Maybe next PNK minting proposal should come up with some “advisory orientation” vote.

If you think the current mode of reward distribution is not optimal, this can be a reasonable opinion (I’m pretty convinced it’s better than no rewards at all, but there may be a better amount/mode of distribution).

[greenlucid]

@clesaege

The proposal may actually be great as it points out our need for a constitution offering protection to entity the DAO contracts with.

I think I’ll wait for a constitution that adds some basic ground rules and common sense legals (like e.g. preventing DAO from generating unilateral debt) before creating another proposal like this.

As some discussion in Curate Telegram was started over this and it seems to be a misunderstanding, the situation doesn’t appear to require involving the DAO at all so I’ll keep this KIP as a draft.