As you are aware we promised increased decentralization of governance in Zcoin’s roadmap.
This is important especially as cryptocurrency becomes more mainstream and privacy coins become more controversial as they prove to be a compelling alternative to physical cash which is already being phased out. A centralized development team that receives funding from the block reward is a target and it is best that we make plans to move past this and give governance to the community.
I truly believe this governance mechanism to be revolutionary especially for a project which is already deployed. This is my personal proposal and doesn’t represent the views of the core team.
Mechanism
Zcoin can be destroyed irreversibly for a governance token. These coins just exit supply.
This governance token will be single-use. Once you vote, it will be gone OR gone to the general DAO fund.
One token one vote.
Votes are only ‘used up’ on successful proposal so if a proposal doesn’t pass, the voting token can still be used so that people would be more willing to vote No to shoot down bad proposals.
Governance tokens are used to vote on proposals that will have a minimum period to seek feedback (1.5-2 months?)
Block reward for development will be placed under the governance of the DAO.
There will be a fee that needs to be paid to put up proposals. This is to prevent spam and to make sure the proposals are serious.
Reasoning
Votes are actual stake in the game. You are burning valuable coins for votes that you will never get back and reduces the supply of XZC
Everyone has a say proportionate to their holdings but they have to be willing to destroy their money rather than passively just forever having the power to vote. This separates passive investors from people who actively care about the project (they are often different people).
Having the governance token as single use prevents the governance token from being used speculatively and discourages people from slowly acquiring more and more governance tokens. It also ‘resets’ power since you cannot slowly hoard governance tokens to start bullying people around.
The system is simple and easy to understand.
Exchanges and custodians of Zcoin won’t be able to easily vote at no cost. We have all seen what happened to Steemit where exchange balances were used to vote validators in.
Time Frame
This mechanism is not going to be immediate as we still need to figure out all the moving parts but if we get community support on this, we can probably start coding this next year after Lelantus v2.
Possible Alternative
With feedback from the forums and also in Telegram, some are not comfortable in ‘losing coins’ for voting. This is a possible alternative.
Zcoin to be converted to Governance tokens
Governance tokens are single use (should we allow them to re-use if failed proposal?)
There is a way to get back your Zcoin out after you have successfully voted but there will be a long cool down period.
Making a proposal costs a fixed amount of governance tokens that are destroyed for good.
Rationale:
Imposes time opportunity cost rather than actual loss of coins.
Encourages usage of the voting tokens rather than hoarding them since you only can get them back after you have ‘used’ them.
Cool down locks up capital that can’t earn Znode rewards.
Imposes real cost on proposals
Things to work on
What minimum thresholds of votes required for a proposal to pass should be set to prevent people from making proposals to enrich themselves? Perhaps a threshold based on number of governance tokens there are.
Would people be willing to vote if they’re going to lose coins? How do we incentivize this? Or can we have No or a separate Drop Proposal vote to cost less?
The best thing is that it is in theme with our concept of burning coins for privacy, now you can burn coins for governance!
Appreciate everyone’s thoughts on this. Note that this is still an early proposal with other details to be fleshed out but I’m personally very excited about this as I feel it ticks all the boxes of simplicity, alignment of incentives, fairness, maintaining privacy and decentralization.
Let’s not get too bogged down with the details first but would like to hear community feedback on the general idea of this proposal.
As a holder of Zcoin, I can’t imagine ever participating unless it’s for a proposal where I personally would benefit. This needs to be thought through more, there are a lot of initial issues.
As an example: (Voting to Profit) Let’s say I put a fake proposal up to pay myself work that I never intend to deliver, burn just enough coins before the governance closes to have it pass, but less coins than I’d profit from… get paid and exit. Others would need to potentially lose money on votes to stop me, most I expect would not participate and be prisoners to the drama.
Another example (Sybil Attack): Nothing is stopping from making a ton of proposals until basically anything can pass with 1 vote since they can’t all be fended off with real votes.
A third example (Moon Voting Cost): Zcoin goes to the moon because so many coins are burned, and this doesn’t scale. Do you think many people other than loaded whales will pay $1000 per single xzc to cast a vote? Power is consolidated once again. My stomach starts to churn thinking about what a vote like this on the BTC network would cost someone… and how they’d make that profitable to actually spend $11k risking on a vote for something.
I can see it’s a well intentioned idea but, prisoner’s dilemma where folks are at odds with each other
in governance systems and all that is very real. I don’t see the community coming together to govern under this system, it will be so expensive that only the wealthiest will be able to exploit and profit as winner takes all like a game of political poker. The game theory within this system essentially guarantees that one must be voting to increase their earnings. There are many ways it can go wrong where people don’t participate and I believe things go sideways quite quickly.
There might be min thresholds of votes needed for a proposal to pass. This number itself can be adjusted via voting too if need be.
There should be a proposal creation cost to prevent spam. Coupled together with min thresholds I think this will make it very unattractive for someone to spam proposals.
It won’t be 1 xzc. You can even burn 0.001 XZC doesn’t matter Market forces will regulate this.
But it is important that this proposal gets a deeper look into the ‘gamification’ aspects of this without being too cumbersome.
Another cool idea is to have different outcomes on the Zcoin used to vote whether it passes or fails. For e.g., if it passes, coins are burnt (to prevent the chance of getting reimbursed and gamification) but if it fails, coins go towards the DAO. So lots of failed proposals means a richer DAO.
I appreciate the idea and effort but sadly dont think this is a good idea.
To explain my thinking: For rich people with say 10 MN its easy to just throw coin from reward to get a vote but if you are having 1 mn or even 0 mn well it will not be possible to just through in money. Its always easier when u have allot of coin, sadly no easy way to change that so its a tricky problem.
Maybe if you could vote based on the weight of ur wallet …still not awesome but at least its proportionately lower amount of vote compared to buying vote coin…
I see your point though I don’t think it is wrong per se that people have more coins have more votes. It’s just to make it such that it’s not ‘free’ for them to exercise it all the time and they’re giving up real money to do it (and in fact making it redistribute back to other holders either by diluting their share or by having it gone to the DAO). Unlike in pure masternode voting where they can continue to vote with no cost to them and non masternode holders are totally excluded.
One way to make it more equitable is to have a separate Dismiss Proposal vote to be cheaper.
Or to make it two stages where to have a proposal to qualify to be voted on needs votes (but doesn’t burn coins), but voting on the proposal then needs to burn coins or giving it to the DAO.
Again this is all a WIP and appreciate ways to modify it to work as I think the basic idea is sound but needs tweaking.
Good points everyone has brought up. I’ve added some things to the original post:
Fee to put up proposals to prevent spam
Governance token is only burnt up for a successful proposal, proposals that don’t pass, their voting tokens are still retained (but are locked up within the proposal until it expires)
Instead of complete destruction of the coins that turn into governance tokens, there’s an option to have it go to the general DAO fund for funding.
Some of the idea of this is to make it low cost for people to vote against stupid proposals that shouldn’t pass anyway and the penalty is that the silly proposal loses the proposal fee (and also locks up his own voting tokens for the duration of the vote). We don’t want people to be reluctant to vote against a proposal that is bad.
This might encourage hoarding of some vote tokens to vote down stuff but there’s always a chance that something passes.
Again this is all a WIP and appreciate ways to modify it to work as I think the basic idea is sound but needs tweaking.
I’m in disagreement that the basic idea is sound. Fundamentally all the financial incentives focus on two areas which will drive behavior:
Exploiting the system for profit, with the rich playing a poker game of pay-to-win, winner take all.
Holders who don’t vote are rewarded with theoretically higher coin prices due to burnt supply. Folks are encouraged to not participate, it’s risky and unprofitable to do so.
Additionally, I don’t see it being possible/feasible to find the right “price” to abort a proposal that can’t also be exploited. Why vote “no” when you can abort a rivals stupid proposal for cheaper?
I’ll think about this some more, but I just don’t see it working with the currency. Possibly create a side chain instead, though it still has the problem of being paid out in the DAO fund. Folks will exploit to steal from the dev piggy bank, especially with a privacy coin.
I agree with pretty much all of the said points. And if your rich it dont cost your nearly anything if at all.
Imagine you run 20-30 MN. It dont “cost” you much or maybe nothing to vote when its beneficial for the whale.
As a small player every vote token cost you and it makes you to simply dont vote.
I still think 1 MN = 1 Vote is similar to the proposal and less complicated.
And as @Kenshin says putting all the coin in DAO can easily create “trouble” down the road. I’m all for funding devs but again if we create a situation where it can be exploited it will be sooner or later.
If i get a bit controversial , maybe we could find a good way to Id people who want to vote without asking for intrusive info. I would not mind to go on the record with my real ID just to vote. Just in real voting i think its the most fair system that people do some sort of verification. To be private and having a fair system is sort of impossible otherwise (or we have not figured it out yet).
And no one has to say how many coin they have , so 1 person = 1 vote.
ps. i remember reading Microsoft was going to do some ID system using bitcoin …
I would be very against ID as this is what makes us susceptible to being targeted. I also don’t agree that every single person should have one vote. We’re not a country. If I wanted, I could hire a whole bunch of sock puppets from randos willing to give up their identity who then have ‘stake’ in the system. This is very akin to shipping foreigners from other countries and then giving them citizenship so they can vote for you. It will happen if it becomes big enough.
A possible way if people are worried about ‘losing their coins’, is to have the coins redeemable back to Zcoin only after a long period of time.
So you don’t lose your Zcoin but it goes out of circulation and can’t participate in Znode rewards or so while it is in governance token mode.
This means there’s still a ‘cost’ to vote but it’s a lot less painful as you don’t lose the value of your Zcoin per se, just the opportunity cost of it. These votes will still be single use but once they have voted there’s a cooldown before you can convert it back.
The reason for encouraging single use is to not incentivize people holding swathes of governance tokens on standby that can just sway votes. Once you use it, you need to cycle in new coins to get new governance tokens after the ‘cooldown’ period to convert back.
Summary:
Zcoin to be converted to Governance tokens
Governance tokens are single use (should we allow them to re-use if failed proposal?)
There is a way to get back your Zcoin out after you have successfully voted but there will be a long cool down period.
Making a proposal costs a fixed amount of governance tokens that are destroyed for good.
Rationale:
Imposes time opportunity cost rather than actual loss of coins.
Encourages usage of the voting tokens rather than hoarding them since you only can get them back after you have ‘used’ them.
Cool down locks up capital that can’t earn Znode rewards.
I guess that is also one way to look at it. Still much harder to accomplish though.
I still do think if we can somehow ID people its a much more fair system but sure its not for everyone
And how is this proposal better than 1 MN = 1 vote?
I mean whales will still have much easier to vote with this proposal. As mentioned with “free” rewards they can buy the vote tokens without any stress while others are not even going to bother. Even if they can claim it back still i dont see how it will be any better.
Sorry dont want to be negative but i just dont get why we should add a complex system if its not really adding allot of value. Maybe i just dont see it …
Let’s put all votes into the DAO fund whether they pass or not, that way the money doesn’t just go out of supply. Not really a fan of the cool down period, just because people have skin in the game, but not really they know their money is coming back. However, let’s use a dollar value to determine each vote, I would say something like $50-$150 bucks. This allows all people to join in on the proposal voting (unless you are really really poor, but I think that’s a reasonable dollar amount- it needs to be an amount where people have skin in the game, but not going to break their wallet). Now we don’t want people to vote more than once. So we can have this done by location (it doesn’t have to be specific location) a mechanism where it picks up the computers location, and says in order to vote again you need to be in another country or have another computer (and something that can block against multiple IP addresses). This would make it difficult to vote twice, not impossible but difficult. I would say lets also do a fix amount of the initial propsal (maybe $500).
Note - The hardest thing is the mechanism to not have people vote twice, but I feel after tweaking this we can get it to hard to vote twice.
1.Is an Oracle costly? Maybe something in the code where it takes a however many zcoin equate that to $50.
2. Yea this is the tough part, but I think putting multiple mechanisms in place to make a difficult is the only solution. We can only make it difficult and not impossible to not cast a second vote (I feel like if somebody has to jump through multiple things to cast a second vote it would prevent most people from doing so).
My point with having some sort of identity was also that we could use several method to make it harder to fake. Like the app Keybase where you do Id using github, reddit, twitter etc. The more ways you Id yourself the more credential validity you get. We could do that maybe for each voter. Sure it can be faked but takes more effort.
Excellent post,
I personally am in favor of a 1 Coin = 1 Vote token model, as it allows for a significant amount of “skin in the game.” I would recommend a % burn rate vs a full release into a DAO fund or a complete burn as a disincentivization medium to prevent the hijacking of vote funds.
Perhaps something like a 40%-60% split on burning of funds. This would prevent attacks where a whale could potentially hijack control of the funds by making it unprofitable to take from the pot without significant personal loss in the buy in.
I would be against governing the development block rewards at this stage, as I’m not a member of the core team I can say this with impunity, but 99% of the time community reactions/interactions are either extremely low or near non-existent. Out of a community of 5000+ we get on average maybe 20 replies. Expecting quick action in DAO governance is not something I would want to risk developer payroll on. There are documented cases on DASH-governance chains where developer funds have been locked because thresholds haven’t been met due to holder apathy.
Also something to reference, the folks at devault have a 1 coin = 1 vote model without a token and it looks pretty cool
That makes sense to phase it to governance not on dev fund stuff but for other decisions to begin with and see how that goes before pushing it off.
Dash’s governance and other masternode coins often work because there are huge blocs of masternodes that will vote the way the dev teams want.
I think you bring up a good point on holder apathy that’s why threshold is important (and maybe everytime it fails without quorum it would reduce). But this is expected even if we have more ‘informal’ governance for e.g. whether people bother to attend the meetings and such.
I like the idea of this. I’ve kept an eye on the Dash voting system here and there and the initial idea of the burn at a % could help get the supply back down to the intended maximum. Next phase after that could implement the cool down method. As an added buffer there could be a community council of those not hired directly by Zcoin to be a sort of checks and balance against any obviously egregious proposals. We aren’t a country so I’m also against the one person one vote. I think this privacy project is important work and this idea of governance would stand out. It would be interesting to see it go through how it shapes up. Could see more community engagement due to this structure. People have a chance to let their ideas manifest. Mmm I’m also thinking we have the ZCS for that. If anything else if the community wants it then they could put it out there 1 MN = 1 Vote.
Yes perhaps it can be a combination of burn and cool down. The community council is a good idea but I think there should be max terms that people can serve on it.
Market forces will regulate this.
, maybe we could find a good way to Id people who want to vote without asking for intrusive info. I would not mind to go on the record with my real ID just to vote. Just in real voting i think its the most fair system that people do some sort of verification. To be private and having a fair system is sort of impossible otherwise (or we have not figured it out yet).