2023 Crypto Compensation Report

Notes and Demographics

This analysis is based on a survey conducted across 49 portfolio companies in 2023. Insights are based on available data and indicate trends rather than definitive sector-wide practices. They should be viewed as indicative rather than conclusive.

Further research with larger sample sizes would help confirm these trends, which we’ll remain mindful of with future, compounding versions of this report. We advise that findings be interpreted with consideration of listed respondent rates and the following:

•Roles: “Crypto engineering” refers to engineers specializing in protocol or blockchain development. “Go-to-market” encompasses sales, marketing, and business development; and salaries reflect total on-target earnings, including commissions.

•Reporting Methodology: We asked companies to choose from preset salary ranges for employees at various seniority levels, allowing us to report average lower and upper salary bounds. However, for founder compensation, we’re using median values based on freeform responses from the survey.

•Founder Ownership: Founders were asked what percentage of equity / the token pool they own, and the Founder Compensation section of this report does not delineate between the two.

•“International” Definition: “International” refers to companies not based in the US.

•“Non-traditional” Definition: Companies with “non-traditional” funding either had a public token sale or are DAOs.

•Rounding: Due to rounding, certain figures (e.g., demographic information) may have a very small margin of error.

Salary, Equity, and Token Compensation Bands

Below are salary, equity, and token compensation bands for the following roles, broken out by US-based and International-based companies: Software Engineer, Crypto Engineer, Product Manager, Product Designer, and Go-to-Market.

US-based companies offer higher compensation across nearly all roles and seniority levels when compared to international-based companies. On average and approximately, this translates to 13% higher salaries, and 30% higher equity and token packages.

Some interesting data points and outliers:

•International-based companies’ Product Designer equity and token packages align more with US-based figures than other roles.

•International-based companies’ Product Manager roles stand out with significantly higher equity compensation across the board, which is unique among all roles.

•International-based companies’ GTM roles at the executive/director level report higher salary and equity than US-based companies’ roles.

Observations on Robustness and Reliability

•Salary Insights: The data backing these insights is generally robust across roles and seniority levels, making them particularly effective for comparing US and international markets.

•Equity and Token Insights: Equity data is moderately robust and more reliable in the US context. Token compensation insights could be more robust, particularly for international data and lower seniority levels.

Founder Compensation

As one might expect, founders’ salaries increase as companies raise additional capital, while equity/token ownership decreases, likely due to dilution. Most founders report below-median salary leading up to Series B.

The absence of international data at Pre-seed, Series B, and Series C stages makes comparing US and international founders difficult. Interestingly, though, when comparing them at Seed and Series A, US founders generally command slightly higher salaries but significantly more ownership. This is especially true at Seed.

Cost-of-Living Adjustments and Methodologies

Most companies are not adjusting compensation based on cost of living (COL).

Of the companies that are adjusting, we see two common methodologies:

•Adjusting based on local market rate (which is heavily favored); or

•Adjusting within a tiered geographical framework. With this approach, companies start with a compensation benchmark from a specific (generally highly competitive) locale, and adjust each individual’s offer by a certain percentage based on geographical tiers, sometimes developed using a radius from major metropolitan areas. This aims to balance internal compensation equity with external competitiveness across diverse regions.

Those who don’t adjust for COL typically think of their compensation as being strictly tied to the value someone generates for the business, regardless of where they’re located. This will remain a competitive advantage in terms of hiring speed and attracting the top percentiles of talent. With that said, we always encourage companies to consider the most sustainable way to build a high-performing team within their budget.

Teams might also decide not to do COL adjustments due to fairness around overall purchasing power in different areas of the world; not everyone who lives in a high cost-of-living area can uproot their lives and move somewhere cheaper to reap cost-delta benefits.

We hypothesize that we’ll see more of a middle ground in the future, with some companies shifting from cost-of-living towards cost-of-labor adjustments. You can think of it like this:

•Cost of Living: “We’ll adjust your compensation based on rates in your locale.”

•Cost of Labor: “We’ll adjust your compensation based on demand for your role in your locale.”

As an example, certain remote areas in Texas may have a low COL, but because the demand for Petroleum Engineers there is high, it drives up compensation for those roles.

There isn’t yet sufficient industry data to easily employ cost-of-labor adjustments (especially within crypto [e.g., protocol engineer demand in specific cities/countries]). However, many compensation experts and data providers are considering this model, and we do think teams can benchmark and adjust against more standardized/generalist roles. Having real-time compensation and hiring demand data is key, and augmenting what’s available in the market with compensation data you collect from candidates can be helpful.

We may explore trends around this with our next compensation survey, although we haven’t yet seen many teams adopting this approach.

Overall, we expect hiring strategies will vary across the differentiation of roles: For example, if you’re hiring an undifferentiated engineering role (e.g., a generic frontend engineer), you’ll pay adjusted compensation for that candidate; but if you’re hiring for a globally competitive differentiated role (e.g., a Solidity engineer), you may need to pay strictly based on the value of their work.

At the end of the day, this comes down to a hiring trilemma that we often discuss: speed, cost, and quality. You’re likely only going to be able to optimize for two of the three at any given time.

US and international companies both adjust for cost of living at a similar rate, with international companies slightly favoring local market rate methodology.

75% of all companies surveyed are hiring outside of the US, regardless of their size, stage, or funding.

US companies that are only hiring domestically are very unlikely to adjust for COL — a potential statement about the competitiveness of the US hiring market and/or the relative stability of cost of living when compared to international locales. For US companies hiring internationally, the split is even, with half adjusting and half not.

All internationally-based companies are hiring outside of the US, and the majority are not adjusting for COL.

Companies tend to hire less outside of the US at later fundraising stages. It’s worth noting, however, that the majority of respondents in this specific analysis are based in the US.

While most companies adjust based on local market rates, infrastructure companies — which are all hiring internationally and are among the largest and most well-resourced companies in the survey — are most likely to use a more intensive tiered geographic approach.

There’s a clear trend here: Most companies do not adjust for COL in the early stages, but it becomes more likely as companies mature.

Pre-seed and Seed companies with 1–10 employees are less likely to adjust for cost of living. This allows them to be more competitive in hiring at a time when building a solid core team will have reverberating effects throughout the life of the company. Moreover, they might not have operational expertise or resources to deploy more complex compensation structures and budgeting strategies, nor may they be hiring in as many locales. The increased likelihood of adjusting for COL over time is especially evident when looking at company size.

Paying local market rates is preferred across nearly all company sizes, stages, and levels of funding, signaling its appeal as a fair, competitive approach to COL adjustments. (It’s also the easiest thing to do, beyond winging it [“not defined”]).

Note that it’s very challenging to reverse cost-of-living decisions and remain equitable once practices are established. Doing so can affect employee morale, perceptions of fairness, and employer brand.

Payment Methods (Fiat versus Crypto)

In most cases, companies pay in fiat.

International-based companies lead the charge in paying in crypto (e.g., USDC), especially for internationally-based workers. US-based companies are more likely to use crypto to pay contractors than employees, regardless of location, and they’re also more likely to pay international workers in crypto, regardless of whether they’re employees or contractors.

Companies often pay with crypto internationally to streamline cross-border transactions, mitigate exchange rate fluctuations, and/or take advantage of tax considerations in certain jurisdictions. It’s also useful for teams with workers in areas that have limited banking infrastructure or those needing privacy, such as companies with anonymous contributors.

As crypto regulations and the legal distinctions between paying employees and contractors evolve, global payroll providers (e.g., Liquifi) are streamlining adoption by incorporating compliance into their services and natively supporting crypto transactions. We wouldn’t be surprised to see this have an impact over time.

Company Likelihood of Having a Token

Our portfolio strongly considers token adoption, with only 14% of companies definitively claiming they’ll never launch one.

International companies are more likely to adopt tokens, with a higher percentage that have one or plan to launch one. While some are unsure of future plans, none categorically rule out the idea.

US-based companies—potentially in light of the regulatory landscape —show a more varied response, with fewer live tokens, more teams undecided on their plans, and more teams opting out altogether.

Overall, infrastructure companies lead in token adoption, with over three-quarters either having a live token or planning to launch one. These companies may use tokens as base currency (especially L1s and L2s).

Gaming companies follow closely, underscoring tokens’ increasing significance when it comes to in-game assets, currencies, rewards, incentives, gated content, and occasionally, governance. DeFi is also prominent, with tokens integral to their governance, staking, and rewards business models.

Consumer-focused companies show a nascent interest, often integrating tokens into more traditional business models, and the “other” category has significant uncertainty.

Although the data generally suggests that companies are more likely to plan and launch tokens as they advance in capital raised, stage, and size, these factors don’t coalesce into a straightforward narrative.

Small startups, particularly in Seed and with $1–4.9M in funding, are interested in exploring tokenization, but very few launch this early on. As companies grow in employees and secure more funding, there’s a noticeable shift toward launching, which becomes especially clear in Series A and B.

Companies with $20-40M in funding are an outlier in that they’re highly engaged in planning token launches, but none have launched a token. They fall into the Seed, Series A, and Series B categories.

For the largest companies, with funding over $40M and more than 100 employees, engagement in token activities is significantly higher. An interesting counterpoint arises with Series C companies’ uncertainty; they may be reflecting on how a token might fit into an already mature product or considering a token in a new project/venture.

Relatedly, 75% of all companies that raised over $40M (the highest reported funding bracket) are focused on infrastructure development — a sector that inherently requires substantial capital and frequently integrates tokens into their products.

Token/Equity Compensation Offerings

Companies generally offer salary plus equity, tokens, or some combination of the two. When planning compensation or evaluating offers, it’s crucial for both founders and candidates to think about how and where the company accrues value, whether to tokens or equity.

Nearly half of all companies are paying only equity. Note, though, that the majority of companies that indicate they may launch a token in the future (but don’t yet know) are offering only equity, and all projects that currently have a live token are offering tokens as part of compensation. It’s important to consider that companies that are unsure may eventually change their response.

We’ve seen other reports observing a trend of less companies offering token comp over time, and we’re curious to see what this looks like as we have our own compounding data.

A considerable percentage of both US and international companies offer a combination of equity and tokens; however, preferences diverge beyond that: Far more US companies offer only equity, and far more international companies offer only tokens. (As noted earlier, international companies seem more inclined towards tokens, overall.)

Although infrastructure companies are the most likely to have or to be planning a token, the majority of infra companies offer only equity, rather than only tokens or a mix of both.

DeFi — another area in which tokens are more commonplace — follows a similar trend, albeit a bit more balanced in modes of compensation.

Gaming companies demonstrate a strong preference for offering both equity and tokens, and notably, no gaming companies offer only tokens.

All consumer and “other” companies either don’t know whether they’ll launch a token, or they ultimately plan not to, and so it makes sense that an outsized portion offer only equity.

We notice a few things when considering capital raised, company stage, and company size.

Firstly, the earliest-stage startups heavily employ equity, and compensation strategies diversify as companies go on to raise more substantiative Seed funding.

At Pre-seed, we see companies exclusively offering equity (and as noted earlier, all Pre-seed companies surveyed don’t yet know whether they want to launch a token). A select few that raised a Seed round with funding between $1–4.9M begin to offer token compensation, but generally, they remain equity-heavy.

Companies who’ve raised $5–19.9M are often still in the Seed stage and have more than 10 employees. More of these companies begin to offer token compensation, overall, and also begin to more frequently offer a mix of equity and tokens.

Secondly, companies are generally more likely to offer both equity and tokens as they grow in employee count.

Relationship Between Tokens and Equity

The majority of companies offer tokens proportionally to equity. (This may indicate that they’re using the “percentage of tokens” calculation method, covered in the next section.)

Both US and international companies show a balanced distribution, with a slight preference for proportional relationships.

The preference for proportionality is also relatively balanced across company types, with infrastructure and “other” companies being evenly split.

Early, smaller teams (Seed and 1–10 employees) are more likely to have a proportional relationship between equity and tokens. (This trend, however, isn’t consistent across all early-stage funding levels.)

The preference for proportionality moderates as companies grow, and no clear, dominant strategy emerges.

Token Calculation Methodologies

In a prior blog post, we researched and outlined the methods that companies use to calculate the amount of tokens to give employees. This report is not intended to be a thorough exploration of the best methodology, nor does it cover all approaches.

With that said, the most common, well-defined approaches that we see are:

•Market-value Based: Teams with an active token that employ this method begin by determining the total dollar value they intend to offer an employee. They then calculate the number of tokens to be granted based on the token’s fair-market value at the time of calculation, grant, or vesting.

In the referenced blog post, we observed that most teams preferred this approach due to its simplicity and ease of implementation. However, we advise caution with this method, as the value of token grants can fluctuate significantly due to market volatility, leading to disparities across the token cap table. Tokens, in this sense, are somewhat similar to public equity, but they lack the same protective measures and stability.

It’s uncommon for teams without an active token to adopt this valuation method. Most often, we see them rely on handshake agreements, offering future tokens proportionally to equity distribution. Another approach would be to employ a market-value calculation against the token’s fully diluted value, determined by VCs who’ve secured rights to future tokens. Given the VC’s token price is fixed, this provides a fair basis for compensation until the token becomes publicly available. (Interestingly, we’re not aware of any companies that have yet done this. If you are, let us know!)

•Percentage of Tokens: This approach attempts to create an analog for how traditional startups calculate their equity-based rewards. It’s the only method that accounts for market volatility and mitigates employee pay inequity, while minimizing unnecessary token dilution and preserving an employee’s asymmetric upside.

Being effective with a percentage of tokens approach requires diligent planning, ideally from early stages. In broad strokes, you take the same bands you’d use for equity and adjust them to account for token-specific nuance, ultimately granting a fixed percentage of the token pool.

“Other” approaches may include annual grants, performance-bonus-based structures, employing a sliding scale between equity and tokens, and indeterminate methods.

Overall, most companies use the “percentage of tokens” approach.

There’s a stark difference regionally, with US teams being far more likely to use the percentage-of-tokens approach.

Gaming and “other” companies are more likely to use a “percentage of tokens” approach, whereas infrastructure is more likely to use a market-value based approach.

More companies adopt a market-value based approach at later funding stages and with greater capital raised.

Seed companies and those with funding up to $40M primarily use the percentage of tokens method. Market-value based calculation becomes more favored starting from Series A, especially in companies with 21–50 employees, and even more common still at Series B and in companies with over 100 employees. As an outlier, companies that have raised more than $40M tend to use a balanced mix of market-value based calculation and other less-defined methods.

We recommend early-stage teams use the percentage of tokens method. Although we have some intuition on why later-stage teams lean towards the market-value based approach (e.g., their token price may be less speculative once established [and there’s more data to use time-weighted or volume-weighted averages]; and/or it might afford them more flexibility with their remaining token reserves), we’re investigating the reasoning for this trend with teams now.

Future Considerations

As a two-person team working on this report, we learned a lot. With future iterations, we’ll refine and expand our approach in several key areas:

•Enhanced Participation: We aim to broaden the scope of survey participation to ensure the data we collect is statistically significant and offers deeper insights (e.g., narrowing down to more specific geographies), while remaining verifiable and trustworthy. We’ll deliberate whether it makes sense to include data points from outside of our portfolio.

•Comparative and Longitudinal Data: By providing year-over-year data, we can better track the evolution of our portfolio and/or the market. This is particularly relevant as our portfolio diversifies to include a larger number of growth-stage companies.

•Flexible Range Reporting: To capture a more accurate representation of compensation distributions, we’ll likely allow respondents to input their ranges in a freeform manner rather than using predefined brackets.

•Mandatory Responses: We’re considering whether to require answers to all survey questions. While this may reduce the number of overall participants, it could significantly enhance the depth and reliability of insights.

•Founder Compensation: We plan to separate founders’ token and equity ownership.

•Expanded Roles: We may refine and broaden the roles we’re reporting upon.

•Token Calculation Rationale: We aim to better understand what token compensation calculation methodologies are working well at what stage companies, and why.

•Web2 versus Web3 Data Comparisons: We intend to standardize data formatting to enable easier comparisons with Web2. This includes potentially working more closely with Pave or other data providers on our survey.

Disclaimer：

1. This article is reprinted from [dccr23.dragonfly], Forward the Original Title‘2023 Crypto Compensation Report’, All copyrights belong to the original author [ZACKARY SKELLY AND CHRIS AHSING]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.

2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.

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