Centrifuge DAO: Token Delegation Research 2023

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Good day, Community!

I would like to share with you research for Centrifuge DAO: Token Delegation Research 2023

The Governance and Coordination Group (GCG) is always trying to improve and do our best. To achieve this, we need to compare our statistical data and approach with other projects and DAOs.

This research started as a personal curiosity and an internal report to understand the current situation of Centrifuge Governance, the pros and cons of delegation, delegation models and how to improve governance participation.

At some point, this report grew into something much bigger. So we decided to share it with our Community.

Objective:

The main objective of this research report is:

  • To understand the importance and implications the delegation in DAOs
  • To investigate how delegation impacts and changes governance participation
  • Different approaches to delegating
  • Present statistical data of the best projects in comparison with Centrifuge
  • Investigate ‘ghost token-holders’ and ‘ghost delegation’
  • Look at barriers relating to Quorums
  • Ask: what are the noticeable benefits and potential determinants that Delegation could have on the DAO

Researched projects: Optimism, dYdX, Polkadot, MakerDAO, ENS, SafeDAO, AAVE, Centrifuge

Questions:

  • What are the noticeable benefits that Delegation had on the DAO?
  • Can we describe a ‘standard’ model of Delegation?
  • Is anyone doing something surprising with Delegates?
  • What are the downsides that can be observed related to Delegation has created?

Conclusion.

  • Ghost delegates
  • Lack of delegation tools in Centrifuge and Polkadot
  • Communicate more on the importance of batched proposals (Centrifuge)
  • Low participation and lack of engagement

Suggestions for how to work with the community and DAO

The full research is available here: Centrifuge DAO: Token Delegation Research 2023

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Ciao Ivan! Thanks for this in depth-comparison of DAOs using delegation. Indeed delegation is a powerful tool in governance and it could increase the participation level as well

Is it the goal to implement a similar delegation-model for the Centrifuge DAO as described in the research report?

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Hello everyone! First of all I want to congratulate you for the great job you do. Just a few thoughts here after reading your great research. Regarding to quorum I think we don´t have a perfect Blockchain with a perfect balance to get more governance participation, however, Centrifuge could implement some ideas from success implementations from others blockchains considering the supply and the goal that the community would like to achive.

A quorum is the minimum number of tokens (threshold) used that need to be reached in an off-chain/on-chain voting. In case this threshold is not reached the proposal is considered to be failed.

Interesting things that Centrifuge could considering:

Avoid ‘fake delegation’ allowing an organic growing of the delegation.

This is very interesting from MarkerDao and GovAlpha:

Delegates can be of two types:

Shadow Delegates, who are permissionless, untracked, and uncompensated. They have no code of conduct to abide by.

Recognized Delegates, who must meet a series of requirements to be recognized as such.

Using a delegation based in reputation could be interesting.

Regarding to incentivized to Recognized Delegates for participating through monetary compensation. In my opinion maybe would be better do not incentivized both delegators and delegates at least in the beginning.

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KSM treasury available income from 2022-12-20 to 2023-05-19 after Open Gov implementation in Kusama we can notice the tendency. Not sure that all the approved proposals were necessary. That is why I think using a delegation based in reputation is interesting, and also some mechanims to focus the proposals only in relevant aspects for the Centrifuge Chain and avoid unnecessary expenses.

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The table above shows the last 10 results Off-Chain proposals.

Some examples of quorums:

• Optimism: 0.3% = 12m/4.3B total supply
• DYDX: 2% = 20,000,000 / 1 B total supply
• ENS: 1% = 1M / 100M Total Supply
• MakerDao: 0.5% = 50.000 /1,000,000 total supply
• SafeDAO: 1% = 10,000,000 tokens/ 1 B total supply
• AAVE: 0.5%= 80,000 /16,000,000
• Centrifuge: not introduced yet

For example both MarketDao and AAVE have 0.5% of quórums so Centrifuge could follow a similar way in order to achive governance participation.

Quorum Hypothesis

Centrifuge: 0.5% = 2,138,800 / 427.76M CFG supply available to be used in governace.
Centrifuge: 1% = 4,277,600 / 427.76M CFG supply available to be used in governace.

• Off-chain participation average: 5.64M CFG (1.319% Total supply) / 34 voters
• On-chain participation average: 6.68 M CFG (1.56% of Total Supply) / 75 voters

That means that the average participation both Off-chain and On-chain would be over Quorum set on 0.5% and even set on 1%.

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This is great research. Truly useful stuff, thanks @ImdioR and the team who contributed.

Takeaway for me is that delegation alone won’t solve any challenges on its own, and needs to be designed and implemented correctly. I appreciate the emphasis on communication and culture too. Seems like we could have a bigger impact just working on our communication skills and processes within the DAO.

This stuff is great and the data is an awesome resource to have. Thanks for sharing here.

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Good day LuisG and thank you for your comment

I think that in the actual state, Centrifuge is not ready to provide incentivised delegation.
But only paid delegation provided regular, constant and accountable participation in the governance process.

Agree with you and with the graph, that using of Kusama Treasury was not the best, but KSM treasury and Treasury request, in general, is a topic apart of the delegation that required additional research.

:hugs: I think that once Block Rewards will be implemented and Treasury will start to be funded Centrifuge Council should be careful with Treasury proposal. The Treasury proposals should be well managed.

Interesting. Which % you would suggest implementing?
I think, that % should not be very high and could be increased in the future once more Centrifuge Token holders will be active in governance.
Also may be worth considering a fixed amount due to inflation.
In general, what is your sentiment about the Quorum? Should Centrifuge introduce it?

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Good day @akhan and thank you for commenting.
Yes, agree with you that only the Tool will not help to increase participation and the main job, in my opinion, should be done via improving communication and culture.
Developing the tools, and introducing it now without other improvements/works will not help and only will be a waste of time and $ (IMHO).

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Good day @ImdioR and Thank you for your reply.

I agree with you regarding to Quorum % should not be very high and could be increased in the future, (Maybe starting from 0.5% to 1% is ok). In general I feel that in this moment is not urgent to implement it but if the community decide to implement it now is good as well. I am sure there are members with more experience than me in this community and I am just trying to put my grain of sand and help a good cause. :slightly_smiling_face:

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@LuisG in our proposal for changes to our governance process we are proposing a quorum of 4M CFG (~1%) for OpenSquare snapshots (off-chain voting).

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Hi @Rhano. Yeah. Great! thank you for the reply. I agree with your proposal.

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Okay, sorry for the delay but must have missed this conversation when I was at Bitcoin Miami back in mid-May. The research is thorough and well laid out. Here are few notable points from my humble perspective:

Quorum: I think 1% should be the mark for now considering that is already below current turnout for both off and on chain voting. Make no mistake, this is quite impressive when we take into consideration current DAO structures that have far lower turnouts (and only reach a quorum due to declining thresholds in the OpenGov system on Kusama and soon to be Polkadot)

Delegation Models: I was surprised that Cosmos wasn’t listed along with the other ecosystems, but they have an interesting delegation model in that it is directly tied to the staked ATOM tokens on validators. This creates the illusion of much higher turnout (but the quorum thresholds are also much higher due to this consideration) and stakers/delegators have a de facto alignment with how the validator aligns unless the individual votes on an issue (then sovereignty is reverted back to the individual and overrides the validator’s vote).

Having said that, the current system we have employed for ChaosDAO is akin to this (yet also slightly dissimilar); in essence, through the use of a pure proxy account, individual token holders can delegate their tokens (even staked tokens) to a trusted individual or organization to carry out votes on their behalf. Unlike Cosmos, the individual has no recourse to change the vote, but is delegating with the understanding that this person or group has the knowledge and foresight to vote on any given proposal with some understanding of on-chain history, wisdom, discernment, etc.

In the case of ChaosDAO specifically, we have an internal off-chain vote on any given referendum, and then after we have reached a certain period of time allotted (1 day for major things like root track or whitelisted caller; 3 days for lesser initiatives) we place the vote on chain through the use of a multisig (low threshold, 3/13) to issue the extrinsics from the pure proxy account.

Hopefully some of this helps, and I’ll leave additional thoughts in the GCG Slack as well :handshake:

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Thank for your research !