Voltaire Update: Exploring an Alternative Voting Scheme for CIP-1694 and Goodbye Governance Action Deposit?
Following the merge of the CIP-1694 pull request, discussions surrounding the design choices of the proposal have continued. Two aspects, in particular, have piqued my interest.
First, there’s the alternative voting scheme proposed by Kenric Nelson. It’s aimed at improving the current “one coin, one vote” setup. Pi Lanningham, CTO at SundaeSwap Labs, describes it as follows: “… a DReps deposit imposes a ceiling on their voting power, which scales with the square of the deposit, while voting power instead comes from the ada delegated to you, which scales with the square root.” The objective of this plural voting scheme is to dilute the plutocratic tendency of CIP-1694’s current design. An initial analysis by Pi found in a separate GitHub issue clarified the proposed idea and showed that while it seeks to limit the voting power of ada whales, they can circumvent these restrictions by determining the ideal equilibrium between their deposit and the optimal number of ada wallets and stake, then simply dividing their wallets accordingly. Ada whales can balance their influence by splitting their wallets and finding the correct ratio between deposit, wallet quantity, and stake. As it stands, the proposed scheme could unfairly advantage dishonest actors with the technical abilities to distribute their votes over honest actors who merely wish to delegate their single wallet to a DRep.
Second, I was intrigued by a new pull request to CIP-1694, presented by Matthias Benkort. He suggests the implementation of a governance action fee instead of a deposit. In the current design of CIP-1694, each on-chain governance action requires an ada deposit, refundable once the action is finalized (whether it is ratified, dropped, or expired). Matthias proposes replacing this ada deposit (set by the protocol parameter govDeposit) with a fee defined by the new parameter minGovernanceFee.
The intriguing aspect of this proposal is that any amount exceeding the minimum fee would be used to proportionally compensate all participating DReps based on their stake that vote on the relevant governance action. This introduces a sort of fee market for governance actions while also addressing DRep incentivization. Proposers of governance actions who want to expedite their proposal could include a substantial fee to attract the attention of DReps. However, questions remain, such as what happens to the fee if a governance action is dropped due to a motion of no-confidence or if the governance action receives no votes.
If fees or any direct, quantitative incentive are introduced, it might prompt DReps to vote on as many governance actions as possible to maximize rewards. Consequently, the merit-based review of governance actions by DReps could become obsolete. The silver lining is that such behaviors would be visible on-chain, allowing delegators to assess their DReps’ actions and determine whether they make informed decisions or merely farm rewards.
We will continue to monitor and update you about the developments of CIP-1694, its ratification process, and every other news item about the Age of Voltaire.