Web3 has taken a page out of web2’s playbook and we need to change it. We’ve ignored clear opportunities to improve the underlying ways in which employees and contributors are compensated. We’re still paying people in USD-based terms with “bonuses” or token-versions of “RSUs”. To create a truly equitable world, we need broad adoption of all-equity-based compensation.
The first concern is obvious: what about the downside? Receiving equity (or token) based compensation is risky because of volatile token prices. However, it’s easy to fix this: the organization simply agrees to purchase back the tokens at a guaranteed “redemption rate.” Rather than paying an employee in USDC, the organization simply holds USDC in smart contract escrow. At any time, the individual may redeem their token against the USDC assets. Even if the company wants to, it can’t take that money away from the contributor. That USDC acts like a compensation floor for contributors.
Downside Compensation: the transparent USDC-based compensation floor
Upside Compensation: as high as the token goes
Here’s the dirty secret: web3 founders and executives know that this type of compensation schedule is feasible. We can program money now! But it’s more advantageous for founders to compensate contributors in USD-terms, not token-based compensation with a compensation floor, because that would dilute their upside. We have not yet escaped the perverse incentive structures of web2: we need Regenerative Treasuries and Treasury Protected Tokens.
Most web3 organizations have successfully avoided the topic by preaching decentralization and equity– but do their words match their actions? Ask web3 contributors how they’re compensated. Ask yourself how you’re compensated. While the dollar amounts may be desirable, the methods haven’t changed. Instead of being wired USD in your bank account, you now have USDC sent to your wallet. The same type of aggressive wealth distributions famous from web2 have permeated web3
We can do better than that.
Imagine a world where contributors are given competitive compensation floors (in USD terms), but their upside potential is based on the success of the organization: talent will naturally flow to the most promising organizations. We will begin allocating human capital more efficiently because we’ve solved the challenge of “downside protection.” People will flock to the brightest organizations, we’ll allocate talent to the most promising technologies, and we’ll accelerate the rate of innovation.
UP NEXT: Introduction to Regenerative Treasuries, How Regenerative Treasuries Work, and Why Regenerative Treasuries are Better On-Chain.
You can also skip straight to the details with some explainers on the token mechanics: