teleo-codex/decisions/internet-finance/metadao-compensation-proph3t-nallok.md

type	entity_type	name	domain	status	tracked_by	created	last_updated	parent_entity	platform	proposer	proposal_url	proposal_date	resolution_date	category	summary	tags
decision	decision_market	MetaDAO: Approve Performance-Based Compensation for Proph3t and Nallok	internet-finance	passed	rio	2026-03-11	2026-03-11	metadao	futardio	Proph3t & Nallok	https://v1.metadao.fi/metadao/trade/BgHv9GutbnsXZLZQHqPL8BbGWwtcaRDWx82aeRMNmJbG	2024-05-27	2024-05-31	hiring	Convex payout: 2% supply per $1B market cap increase (max 10% at $5B), $90K/yr salary each, 4-year vest starting April 2028	futarchy compensation founder-incentives mechanism-design

MetaDAO: Approve Performance-Based Compensation for Proph3t and Nallok

Summary

The founders proposed a convex performance-based compensation package: 2% of token supply per $1 billion market cap increase, capped at 10% (1,975 META each) at $5B. Fixed salary of $90K/year each. Four-year cliff — no tokens unlock before April 2028 regardless of milestones. DAO can claw back all tokens until December 2024. The $1B market cap benchmark was defined as $42,198 per META (allowing for 20% dilution post-proposal).

The proposal included explicit utility calculations using expected value theory: Nallok requires $361M success payout to rationally stay (20% success probability estimate), Proph3t requires $562M (10% success probability). This drove the 10% allocation at $5B market cap (~$500M payout each).

Market Data

• Outcome: Passed (2024-05-31)
• Autocrat version: 0.3
• Key participants: Proph3t (architect/mechanism designer), Nallok (operations manager)

Significance

This is the first real-world example of futarchy-governed founder compensation. The mechanism design is sophisticated: convex payouts align incentives with exponential growth, the 4-year cliff signals long-term commitment, and the clawback provision creates accountability.

The explicit utility calculation in the proposal is remarkable — founders openly modeled their reservation wages, success probabilities, and effort costs, then derived the compensation that makes maximum effort rational. Proph3t estimated only 10% success probability, making his required payout higher than Nallok's despite both receiving equal allocation. This transparency is the opposite of typical startup compensation negotiations.

The proposal also honestly acknowledges centralization: "If Nallok and I walk away, probability of success drops by at least 50%." Futarchy governed the compensation decision, but the organization remained founder-dependent — the market approved this rather than pretending otherwise.

Relationship to KB

• metadao — founder compensation structure
• performance-unlocked-team-tokens-with-price-multiple-triggers-and-twap-settlement-create-long-term-alignment-without-initial-dilution — direct implementation of this mechanism
• token economics replacing management fees and carried interest creates natural meritocracy in investment governance — performance-based rather than fixed allocation
• time-based token vesting is hedgeable making standard lockups meaningless as alignment mechanisms because investors can short-sell to neutralize lockup exposure while appearing locked — this proposal uses milestone vesting instead of time-based, partially addressing the hedging problem

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Relevant Entities:

• metadao — parent organization
• proph3t — compensated founder
• nallok — compensated founder

Topics:

• internet finance and decision markets

Full Proposal Text

Source: futard.io, tabled 2024-05-27

Type

Operations Direct Action

Author(s)

Proph3t, Nallok

Objective

Align the incentives of key insiders, Proph3t and Nallok, with the long-term success and growth of MetaDAO.

Overview

We propose that MetaDAO adopt a convex payout system. Specifically, Proph3t and Nallok would receive 2% of the token supply for every $1 billion increase in META's market capitalization, up to a maximum of 10% at a $5 billion market cap. Additionally, we propose a salary of $90,000 per year for each.

Details

• Fixed Token Allocation: 10% of supply equals 1,975 META per person. This number remains fixed regardless of further META dilution.
• Linear Unlocks: For example, a $100M market cap would release 0.2% of the supply, or 39.5 META (~$200k at a $100M market cap), to each person.
• Unlock Criteria: Decided at a later date, potentially using a simple moving average (SMA) over a month or an option-based system.
• Start Date: April 2024 for the purposes of vesting & retroactive salary.
• Vesting Period: No tokens unlock before April 2028, no matter what milestones are hit. This signals long-term commitment to building the business.
• Illiquid Vest: The DAO can claw back all tokens until December 2024 (8 months from start). Thereafter, tokens vest into a smart contract / multisig that can't be accessed by Proph3t or Nallok.
• Market Cap Definition: $1B market cap is defined as a price of $42,198 per META. This allows for 20% dilution post-proposal. Payouts are based on the value per META, not total market capitalization.

Q&A

Why do we need founder incentives at all? I thought MetaDAO was supposed to be decentralized?

Whether we like it or not, MetaDAO is not fully decentralized today. If Nallok and I walk away, its probability of success drops by at least 50%. This proposal creates financial incentives to help us build MetaDAO into a truly decentralized entity.This proposal does not grant us decision-making authority. Ultimate power remains with the market. We can be replaced at any time and must follow the market's direction to keep our roles.

What exactly would this proposal execute on the blockchain?

Nothing directly. It involves a call to the Solana memo program. The purpose is to gauge market receptiveness to this structure. A future proposal would handle the transfer of the required META, possibly from a BDF3M multisig.

What would be our roles?

Nallok

• Firefighter
• Problem-Solver
• Operations Manager

Proph3t

• Architect
• Mechanism Designer
• Smart Contract Engineer

What would be our focus areas?

Frankly, we don't know. When we started work on MetaDAO, Vota looked like the most viable business for bootstrapping MetaDAO's legitimacy. Now it looks like offering futarchy to other DAOs. MetaDAO LLC, the Marshall Islands DAO LLC controlled by MetaDAO, states our business purpose as "Solana-based products and services." We expect this to hold true for several years.

Appendix

• How we picked 2% per $1B To be successful, an incentive system needs to do two things: retain contributors and get them to exert maximum effort.So to be effective, the system must offer more utility than alternative opportunities and make exerting effort more beneficial than not.

Methodology

We estimated our reservation wages (potential earnings elsewhere) and verified that the utility of those wages is less than our expected payout from MetaDAO. This video explains the process.

Utility Calculation

We used the square root of the payout in millions to define our utility function. For example:

• $100,000 payout gives a utility of 0.3162 (sqrt of 0.1).
• $1,000,000 payout gives a utility of 1 (sqrt of 1).
• $10,000,000 payout gives a utility of 3.162 (sqrt of 10).

Assumptions

• Earnings Elsewhere: Estimated at $250,000 per year.
• Timeline: 6 years to achieve MetaDAO success.
• Failure Payout Utility: 0.5 (including $90k/year salary and lessons learned).
• Very low probability of success w/o maximum effort: we both believe that MetaDAO will simply not come to be unless both of us pour our soul into it. This gives $1.5M in foregone income, with a utility of 1.2 (sqrt of 1.5).

Expected Payout Calculation

To estimate the utility of exerting maximum effort, we used the expected utility of success and failure, multiplied by their respective probabilities. Perceived probabilities are key, as they influence the incentivized person's decision-making.

Nallok's Estimate

• His Estimated Probability of Success: 20%.
• Effort Cost Utility: 3 (equivalent to $10M).

Calculation:

• 1.2 < 0.2 * (\sqrt{y} - 3) + 0.8 * (0.5 - 3)
• 1.2 < 0.2 * (\sqrt{y} - 3) - 2
• 3.2 < 0.2 * (\sqrt{y} - 3)
• 16 < \sqrt{y} - 3
• 19 < \sqrt{y}
• 361 < y

So Nallok needs a success payout of at least $361M for it to be rational for him to stay and exert maximum effort.

Proph3ts's Estimate

• His Estimated Probability of Success: 10%.
• Effort Cost Utility: 1.7 (equivalent to $3M).

Calculation:

• 1.2 < 0.1 * (\sqrt{y} - 1.7) + 0.8 * (0.5 - 1.7)
• 1.2 < 0.1 * (\sqrt{y} - 1.7) + 0.8 * -1.2
• 1.2 < 0.1 * (\sqrt{y} - 1.7) - 1
• 2.2 < 0.1 * (\sqrt{y} - 1.7)
• 22 < \sqrt{y} - 1.7
• 23.7 < \sqrt{y}
• 562 < y

So Proph3t needs a success payout of at least $562M for it to be rational for him to stay and exert maximum effort.

10%

We believe MetaDAO can reach at least a $5B market cap if executed correctly. Therefore, we decided on a 10% token allocation each, which would provide a ~$500M payout in case of success. Future issuances may dilute this, but we expect the diluted payout to be within the same order of magnitude.