Research

How to responsibly incentivize multisig signers?

Multisignature wallets serve as an excellent tool for enhancing the decentralization and security of shared funds and critical contracts. Recognizing the time and effort invested by signers is crucial for the long-term success of any multisig setup. In many projects, choosing the right approach can be a real challenge.

Unfortunately, there aren't many resources on the topic and most information is scattered across the web, frequently buried in lengthy forum threads, governance proposals, and Discord channels. Whether you are an existing or an emerging project, let's explore how others are approaching this challenge and how you can set up or improve your multisig rewards.

Supported by Safe Grants Program
Components

Evaluating your setup

For founders of smaller projects who are heavily committed to the project's efficiency and operability, and hold multisig owner roles themselves, is reward for their work nonessential. As projects grow and multisig participants get gradually more distant from the project's founding core, incentives become a reasonable tool for rewarding their roles and responsibilities.

A good reward system should compensate signers for their responsiveness and time committed to reviewing individual actions. It should also align reasonably with the value of managed assets and the frequency of multisig actions. As expected, all of this introduces a set of challenges, as numerous variables come into play, and risks abound from various angles.

Frequency

Many projects, when implementing signer incentives, choose regular intervals that align with the project's other payouts or the multisig owner's role term. However, for longer terms, it is not uncommon for signer activity to decline significantly over time, potentially hampering transaction processing and compromising the setup's efficiency. The key to finding balance and maintaining operability is continuous monitoring and evaluation of individuals' activities.

Mutant Cats DAO
Every month
Sushi
Annually

Currency

When defining the form of rewards, many projects choose to further increase individuals' investment in it by providing rewards in the project's token - if available. Considering the volatility of the market and the length of owner role terms, it is often preferable to define rewards in traditional currencies or stable coins. At the period of payout, the reward amount is converted into the token for the market value and transferred to the receiver. If a project is not associated with any token, rewards in stable coins are a sufficient option.

mStable
USD in MTA equivalent
Gearbox Protocol
Fixed GEAR

Amount

Arguably, the most intricate component of the reward system is the determination of the actual reward amount. This decision hinges on the financial resources available to each project and the importance it places on its security. Additional expenditures can originate from the extent of the duties and responsibilities connected to the role of multisig owner. While there is no universally recommended amount for these reasons, it is essential to consider the base workload of the role and the expected activity during the owner's term.

Ribbon Finance
225 USD
dYdX Foundation
1100 USD
Examples

Learning from each other

There is no universal guide on how to set up your rewards. The next best option is to draw inspiration from the community:

Aavegotchi
2000 GHST
per 90 days
Decentraland DAO
2400 USD in MANA
per month
Balancer
500 BAL
per 6 months
People DAO
1000 PEOPLE
per month
ParaSwap DAO
1000 USD in PSP
per month
mStable
1000 USD in MTA
per month
Sushi
10000 USDC
per year
Gearbox Protocol
50000 GEAR
per 3 months
dYdX Foundation
6600 USD
per 6 months
Hop DAO
2250 USD in HOP
per 6 months
Mutant Cats DAO
0.3 ETH
per month
Synthetix
200 SNX
per month
Education

Beyond signer incentives

Through our community research, we have engaged in insightful conversations, received valuable feedback from a survey, and even experienced the lack of resources ourselves. It became apparent that the topic of signer rewards is just one of many challenges that web3 projects face.

For these reasons, Multisight will continue to build on the foundation of this research and create an educational resource covering all aspects of multisignature wallets. This will enable both existing and emerging projects to design and operate their multisig setups in a secure and responsible manner that suits their needs.

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Acknowledgement

By the community, for the community

This research has been made possible by you, the web3 community. By participating and sharing your experience, you are helping others better understand the challenges of multisig signer incentive design and other related topic. Thank you!

The research has been generously supported by the Safe Grants Program: