Incentivize voting

OLD GOV (LEGACY)
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Recent proposals indicate a relatively small number of people participating in voting.

Ideally, more people will participate in voting so that proposals can’t be pushed through without most people voting for or against.

One way to incentivize voting could be to reward vBNT holders who participate in voting. This should encourage people to vote (and also offset the time and cost associated with analyzing issues and voting).

What are the pros and cons of this idea?

Are there any other suggestions that might help reduce the risk of proposals being passed with a small number of votes?

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I think we can understand the issue better by treating voting as currently being disincentivized. Since voting costs gas, the balance sheet for individual Bancor holders is improved by refusing to vote. Sure, you could argue that participation is incentivized by keeping the protocol healthy; however, I am dubious that this provides enough drive to motivate 99% of humans do stuff, especially if it costs money to act. Drawing inspirationg from other DAOs, I think I have an idea for Bancor.

KyberDAO system
Incentivizing the vote with rewards is a good idea. The KyberDAO was built with such a policy in mind. Unfortunately, high gas fees have soured the experience for many KNC holders, as voting gas expenses are generally higher than the protocol rewards (break even around ~$10,000 KNC, depending on gas prices). This is a big problem from an economic perspective. It means that the total cost of running the DAO is greater than the revenue generated for the majority of users. Not a good business model.

Kyber does offer a way around this. The KyberDAO allows users to delegate their votes. The delegation costs gas once, and then after that the delegated address votes on their behalf. This is nice in theory, but there has been a consipicuous lack of information on whom can be delegated to, and how rewards are distributed. There a few trusted delegation options, but let’s say the area is still opaque at the time of writing.

The AAVE system
At the liquidity2020 conference, Stani Kulechov presented some information on the future of the AaveDAO. Interestingly, it looks like their voting system will be signatures-only. Kulechov said that this system alleviates the gas dependence of the DAO, at will make it easier for users to be involved in governance. I like this a lot, because it removes the disincentive. As long as voting is nearly free, I think participation will persist at sustainable levels.

Best of both worlds
What if Bancor combined signature-only voting with vote delegation? Normal users can participate in voting should they choose, while allowing others to nominate a representative to vote on their behalf. There are good reasons why a person may choose to delegate. For example, they may be too busy to educate themselves on all issues related to governance. The delegates would liekly be motivated on their own, driven by the potential success of Bancor in the long term. With a system like this, the protocol can keep every penny inside the protocol where they do the best work (rather than bleeding voting rewards). Moreover, DAO participation has every reason to thrive, as it will cost little-to-nothing to act on your own, or to delgate to someone else.

Just a thought.

2 Likes
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I would like to tackle two problems:

  • Lack of incentives to vote.
  • Lack of community-governed development fund.

Taking inspiration from YFI I would suggest the following solution:

Set up a community pool that would incentivize users to behave in a certain way

  • % of rewards would go towards participants in the voting.
  • You can stake vBNT but you do not get rewards unless you have voted for the last proposal.
  • % of rewards would be distributed via voting to developers and other relevant network participants that would be responsible for the curation of the Bancor Network.
  • percentage structure of distribution between voters and community would be decided and updated in voting based on the current protocol needs.

Fees collected:

There are two ways of fees collection:

  • 0.5% of the exit fee - applied to a liquidity provided when leaving the pool. With 0.5% exit fee, most of the pools should breakeven after week or two.
  • 2% annual management fee - 2% of all the fees collected on the network annualy would be gathered to community pool and governed by the community in voting.
    The biggest challenge here is fees collection, there is no problem with collecting exit fees, since Bancor Protocol can just confiscate Pool Tokens, withdraw TKN and BNT, convert TKN to BNT and transfer to Community pool.

In regards to management fee 2%, this might be more problematic, what comes to my mind is the same analogy as above, when the LP would withdraw his position, 2% out of collected fees would be transferred to the Community Pool.

I am 100% for delegation, people are busy and uneducated, sometimes they just vote to get rewards (really visible in Kyber).

From the other hand, providing signature only voting would lower the entry barriers for newcomers with lower capital resource, which is also relevant.

Summing up, both, delegation and low cost of voting is relevant for the Bancor Network development

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Thank you for discussing this issue.

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Think the delegation is a great idea if its possible; as long as people are free to pull their delegated votes either after X time or X amount of proposals. It’s a great way to counter voter apathy + still enables people to participate (even if its the minimum) by choosing a delegate. There would need to be a release component to the delegation though, otherwise a single person could amass way too much voting power.

1 Like
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I thought about this as well. Do you have a mechanism in mind?

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@MichalHerzyk I noticed from previous comments that you have a good idea of what is feasible vis-a-vis the contract code. Are you able to comment on what is practical with regard to some of the ideas raised here?

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Unfortunately, I am not a developer.

However, I do not see a problem with the delegation of vBNTs to other users.

All the projects from the Cosmos ecosystem, standard delegation withdrawal time is 21 days which I think is a good benchmark.

We can also limit the max of vBNT being owed by one user, however, I do not see this as a huge problem since attack like this is against the game theory logic, (as we saw on Steemit).

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A lot of the lack of voting has to do with how users obtain the vBNT in the first place. A lot of holders want to stake their BNT through single token exposure and due to the bottleneck in this process unfortunately many people are left on the sidelines. I’ve obtained all of my vBNT through providing double-sided liquidity and have a significant amount of BNT waiting to stake with single token exposure.

I also am unsure why we need to incentivize voting. I like what a previous post said about AAVE’s signature only approach but I do not feel we need to implement anything further besides eliminating gas fees for the process.

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I feel the same way. I would rather keep all the value inside the protocol, compared to bleeding value out via staking rewards. To support voting participation, all that is needed is 1) cheaper gas to vote 2) vote delegation and 3) an option to deposit single-sided BNT to generate vBNT as an interim measure until the token pools grow in depth.