[2603] Introduce a 90% Maximum Allocation to Backers to Ensure Builders Retain Meaningful Rewards

Collective Rewards
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Overview

RootstockCollective is evolving its rewards system to better align incentives between builders, backers, and long-term ecosystem value for the good of the community.

Builders who attract backing and contribute to the ecosystem should retain a meaningful share of the rewards they help generate.

To support this, we propose introducing a maximum allocation to backers of 90%, ensuring that builders always retain a portion of rewards when they receive backing.

Why are we doing this?

As the Collective grows, it is important that reward mechanisms reflect both capital support and builder contribution.

Today, builders can allocate up to 100% of rewards to backers, which can:

  • Prioritise short-term competition for backing

  • Reduce the link between builder contribution and rewards retained

By ensuring builders retain a meaningful share of rewards:

  • Builders remain incentivised to build, contribute, and engage

  • Rewards better reflect value creation, not just capital attraction, supporting a healthier and more sustainable staking ecosystem over time.

  • The system moves toward a more balanced and sustainable incentive model

This helps create a more balanced incentive system where both builders and backers are aligned around long-term value creation.

This reinforces a simple principle:

Builders who create value and attract support should share in the rewards generated.

What is being proposed?

We propose to:

  • Introduce a maximum allocation to backers in Collective Rewards, set to 90%

This means:

  • Builders can allocate up to 90% of rewards to backers

  • Builders will retain at least 10% of rewards

How does it work?

The mechanism is already implemented at the protocol level.

This proposal does not introduce a new mechanism, but instead proposes to set and use this parameter via governance.

  • Builders choose how much of their rewards to allocate to backers

  • The system enforces a maximum of 90%

  • Any remaining rewards are retained by the builder

This proposal establishes the initial value (90%) for the maximum allocation to backers. Any future changes to this parameter can be made via another governance proposal.

Why 90%?

Setting the maximum at 90%:

  • Maintains strong flexibility for builders to attract backing

  • Ensures builders always retain a meaningful share of rewards

  • Introduces a clear and simple baseline for incentive alignment

This is intentionally a light-touch starting point, allowing the Collective to:

  • Observe behaviour

  • Gather feedback

  • Iterate over time if needed

Benefits to the Collective

  • Ensures builders retain meaningful rewards when they receive backing

  • Strengthens alignment between contribution and incentives

  • Encourages more sustainable builder behaviour

  • Reinforces a culture where value creation is rewarded

Future Evolution

This proposal establishes a foundation for future improvements.

Over time, the Collective may:

  • Adjust the maximum allocation via another governance proposal

  • Introduce dynamic mechanisms (e.g. based on contribution score)

  • Further align rewards with engagement and performance

Conclusion

Introducing a maximum allocation to backers is a simple but important step toward a more balanced and sustainable incentive system.

By setting a 90% maximum allocation, the Collective:

  • Ensures builders retain meaningful rewards

  • Aligns incentives with value creation

  • Prepares the ecosystem for the next phase of reward evolution

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Rootstock Collective Governance-at-a-Glance 26-03-26
Rootstock Collective Governance-at-a-Glance 26-04-10
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nice guardrail that builds on the original white papers.

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First of all, I’d like to thank Tamara for bringing this topic forward, as I believe it touches one of the most sensitive aspects of the Collective today.

In my view, the current incentive structure creates misaligned dynamics between builders and backers. It encourages a form of competition among builders that is not healthy — competing on how much of their rewards they are willing to allocate to backers. This ultimately comes at the expense of builders and weakens the connection between contribution and reward.

This is one of the aspects I find most problematic in the current voting and incentive model of the DAO, and addressing it should be a central priority — especially from a builder’s perspective.

Backing decisions should be driven primarily by the value a protocol brings — either directly to the backer or to the broader ecosystem, which ultimately benefits backers as well. When incentives are structured in a way that prioritizes reward allocation over real value creation, it introduces distortions that are not desirable for the long-term health of the ecosystem.

For that reason, I don’t think setting a 90% cap is the right approach. While it is a step in the right direction, it still allows this dynamic to persist.

Instead, I believe a fixed and lower allocation — around 50%, applied equally to all builders — would be a more appropriate approach. This would reduce incentive-driven competition and better align all participants around real value creation and long-term sustainability.

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I’m trying to better understand how prevalent this issue actually is in practice.

Do we have any sense (even directional) of how allocations have looked across funded projects so far? For example, whether high backer shares (e.g. >80–90%) are common or more of an edge case.

It would help contextualize whether a fixed cap is addressing a widespread pattern or a smaller subset of situations. This information will also help with the objective that the Collective observe and iterate on over time if needed.

Thanks!

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I think Tamara mentions, or at least the inference is that this is an incremental step, setting this to 90% is an indication of the new guardrail and helps move in the direction that you are keen on @Manu .

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Fixed cap is adjustable - so yes its fixed, but only until the next adjustment. Fully dynamic mechanisms are also certainly possible if that was beneficial - to reward the high quality builders as @Manu also mentions - those creating value should be aligned to the best rewards - baby steps.

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We support this proposal. While at first glance it may appear to limit builder freedom, particularly if a builder wishes to allocate more than 90% of their rewards to backers, a deeper analysis from an incentive alignment perspective suggests otherwise.

Allowing, as is currently the case, up to 100% of rewards to be allocated to backers may creates misaligned incentives, as it drives a competitive dynamic in which builders may be pushed to offer increasingly higher percentages to attract backing. This can lead them to give up the entirety of the rewards they help generate, even against their actual preferences, simply to remain competitive and secure support. This incentives misalignment could, in practical term, limit their freedom.

In this context, setting a 90% cap on reward allocation to backers appears to be a reasonable and well-balanced solution. It helps structure competition for backing by preventing a race to 100%, while ensuring that builders retain at least 10% of the value they generate.

In this way, incentives are not removed or undermined, but rather improved and structured: competition will continue to exist as it does today, but within a more balanced framework that protects builders while still allowing for a strong rewards allocation to backers.

This a first step toward moving away from the current 100%, it makes sense to start with 90%, see how the community responds, and adjust it again in the future if necessary.

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SEEDGov Delegate Thread
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That makes sense on the mechanism side, and agree iteration is important.

I was more trying to understand the current state though — specifically how common these high backer allocations are in practice. Without that baseline and data, it’s a bit hard to gauge whether introducing this constraint now is proportionate, in spite of the possibility of iterating further.

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Hey @tamlerner we have votedFOR this proposal, This structural change ensures that the teams actually building on the network remain financially motivated to deliver long-term results, rather than solely competing for short-term liquidity. At the same time, leaving the cap at 90% still provides builders with immense flexibility to aggressively incentivize backers and attract necessary funding.

Ultimately, this light-touch baseline perfectly aligns the interests of capital providers with active developers.

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We voted FOR this proposal.

We agree with @Manu on the core diagnosis: the current 100% ceiling creates the wrong competitive surface. Builders should compete on product quality, traction, and ecosystem value, not on how much upside they are willing to give away to attract backing. Where we differ is on sequencing. A lower fixed cap may be worth debating later, but as an initial governance setting, 90% is a reasonable place to start.

This is similar in spirit to Celestia’s move to raise the minimum validator commission. When a protocol leaves pricing fully unconstrained, competition can compress economics to the point that it undermines the very participants the system depends on. Here, the risk is a race to zero, or close to it, where builders increasingly compete on reward giveaways rather than value creation. A hard upper bound does not eliminate competition, but it does remove the most destructive form of it.

We also think @DAOstar_gov raises a fair process point on baseline data. It would be useful to publish current allocation distributions and revisit this parameter after a few cycles with actual usage data. But we do not think the absence of perfect baseline data is a reason to preserve an obviously bad boundary condition, especially since this proposal introduces no new contract risk and simply activates an already-implemented protocol parameter.

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Love to see the conversation around Collective Reward, as we have done some research on this program and think our findings could add value to the discussion for further development.

While we support this proposal, as outlined in our rationale below, we feel that in the long term a 90% cap may not lead to a meaningful change in the Collective Reward system but it is a good first step.

From what we found, there are 2 main points:

1. Incentive is still driven by reward %, not impact

The current program is designed in a way that encourages builders to attract backers by customizing their reward share, not by how much impact they create for the protocol. This is where we see a gap for improvement.

For example, adding an impact score next to the reward % could help backers evaluate both:

  • how much reward they may receive

  • how much value this builder brings to Rootstock

To answer @DAOstar_gov question. There are currently 18 active builders in the Collective Reward program. The reward share ranges roughly from 20%–75%, (None of the builders allocate more than 80%.) If we calculate the average, it is around ~57%, which shows that builders are generally balancing incentives between themselves and backers, rather than pushing toward extreme allocations.

So based on the data, high allocation behavior is not common at the moment and it echoes our earlier point that the 90% cap acts more as a guardrail in case builders over-allocate their rewards, which the current data does not indicate is happening in practice.

We also conducted a survey with several builders and found that most of them do not pay much attention to this Collective Reward mechanism, as their main focus is still on building their projects for the grants they received.

2. The Collective Reward is still early in adoption

If we look at the data, there are only around 2.3% of total RIF supply staked in Collective Rewards (23,135,985 / 1,000,000,000). Although the program started in late 2024, reward distribution visibility begins around October 2025 (Cycle 24), giving roughly 4 months of observable growth data.

Cycle 24 (Oct 3, 2025)
Total backing: 18,612,491 RIF
Rewards distributed: $163,476

Cycle 32 (Based on research we completed about a month ago)
Total backing: 23,135,985 RIF
Rewards distributed: $250,485

Total backing increased by 4.52M RIF, representing approximately 24% growth over 4 months.

If the trend continues to grow at this rate annually, simple annualized growth would be around ~70% (24% × 3 four-month periods). Under that scenario, total backing could increase from 23M RIF to roughly 40–45M RIF within 12 months, meaning staking participation could move from 2.3% to around 4–5% of total supply.

The data show growth is positive but gradual. The majority of RIF supply (97.7%) remains inactive. It has not yet reached broad RIF holder adoption.

Our take is that awareness is still low. Most holders either don’t know Collective Rewards exists, or they know about it but don’t fully understand how it works. The yield is not clearly visible, and there is no simple, transparent APY displayed on the dashboard. If users have to calculate returns themselves, most simply won’t do it. As a result, the incentive may not feel compelling enough.

To improve this, the program needs more visibility and clearer communication.

Our suggestions would be:

  • Promote it more actively on social media with consistent updates and simple explainers

  • Show clear examples like: “How much estimated would you earn staking 10K, 50K, or 100K RIF?”

  • Add a transparent estimated APY directly on the dashboard

  • Introduce bonus multipliers for long-term staking (e.g., 3-cycle or 6-cycle locks)

Hope this adds meaningful value to the conversation!

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Thanks @curia for highlighting that the data is available — very helpful. https://app.rootstockcollective.xyz/builders

Also agree on the importance of incorporating impact into this mechanism. Perhaps as part of a larger conversation about how we may evaluate success under two considerations: (1) ~$280k in rewards have already been distributed, and (2) the whitepaper positioned Collective Rewards as part of Phase 2 of the product roadmap, scoped through roughly Q1 2025.

Seems like a good moment to reflect and clarify how the program is evolving — including what success looks like going forward and how it is being measured against the capital being deployed.

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