DAO governance voting - One wallet, one vote?

Shade Protocol Governance
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Governance proposal: One wallet one vote (As opposed to: One SHD one vote)

I have had a few conversations on this topic in the Discord and thought I would aggregate some of the things brought up into a forum post for more long form discussion. I want to have a conversation around this topic before governance is launched, as once it set in motion it will probably be very difficult to change. This is intended as a general outline to inspire more ideas and discussion, and not some sort of concrete solution.
I would note that a one-wallet-one-vote governance system is completely new territory for a DAO, I donā€™t think it has ever been seriously attempted before in defi. It is only made possible by the power of data encryption that Secret Network provides, and would be a marquee governance system not only for the Secret ecosystem but for the entire crypto space as a whole. Shade protocol is pushing the frontier of innovation in defi in a lot of ways, and the below-outlined idNFT system could potentially end up setting the standard for decentralised governance in defi going forward.

How? (roughly)

  • Person connects their wallet to the DAO home page
  • Person does a captcha, and a small quiz that shows them how the DAO works/some principles of decentralisation/self sovereignty etc.
  • Using an automated, off the shelf system, person verifies their government ID.
  • Upon completion, the protocol mints an NFT stating that you, wallet xyz, are person #xxxxx to have completed induction into the DAO.

This NFT is then an idNFT, proof of humanity. It is a unique identifier of a wallet, by virtue of its non fungibility.
Only wallets with a Shade DAO idNFT can vote in governance. Kind of like citizenship. Ownership of an idNFT would be publicly visible, but the personal data would be private. I would imagine that to avoid spamming, the persons name would need to encrypted to stop them re-using the same ID multiple times. (The exact specifics surrounding which bits of metadata could be public/private are better discussed in detail by more tech-savvy people).

Why?
-I would wager that a large majority of people who are interested in defi have a strong motivation to get away from being controlled by capital-rich oligarchies (ie. The legacy banking/financial sector).
-Having a one-wallet-one-vote system is inherently democratic (rule by popular consent), and tends towards decentralisation. Having a one-SHD-one-vote system is inherently undemocratic (rule by the wealthy), and tends towards oligarchy.
-The above proposed proof-of-humanity/induction idNFT could be used to lay the foundation for merit based community/forum membership (peg-gang NFTs for access to peg governance etc).
-Side bonus of familiarising community members with public/private data of SN NFTs.
-Increased inclusion & sense of meaningful contribution to governance. We canā€™t ignore that we live in a world where, even in the wealthiest nations (on a GDP/Capita basis), the majority of people live pretty much paycheck to paycheck. So a one-shd-one-vote system is quite an inhibitor for ordinary people who want to get involved in the DAO and feel like their decisions actually matter.

Some criticisms and possible responses: (I invite more scrutinty of idNFTs in the below thread)
Why government IDs?
-It is probably the widest net. I would wager that 100% of people who would be interested in Shade protocol governance over (at least) the next 3 years have some form of government ID.
-They are the hardest to fake.
-A lot of systems available to verify them.
-There will be some sort of third party risk involved with verifying the IDs, and systemic (layer 1 protocol) risk that could come with encrypting the data on the IDs, but hopefully someone reading this can provide some more insight there.

Couldnā€™t a large institution/entity get all of its employees to make idNFTs and manipulate the DAO that way?
-Alameda research (probably the heaviset hitting crypto investment fund) only has around 50 employees. They could probably instead simply buy their way into controlling the DAO. It would probably cost them a lot but there is nothing at all to stop a hostile economic takeover really, and it would be very valuable to someone like Alameda to control something like Shade protocol. The temporary price pump that the buyout would cause would probably just excite people and make them rejoice in the event.
-Even if a big government institution/commercial bank made all of its employees (and there could be thousands) make idNFTs to attack governance, voting is still private, so there would be every oppotunity to convince those people (who in all likelihood donā€™t like their employer, be it the government or JPMG) to choose the SILK road. There would all of a sudden be a large number of relatively well educated and trained people involved (anonymously) in Shade governance, which is quite close to a best case scenario when you think about it.

What do I think the easiest way to attack idNFT-based governance?
-If someone (a government entity/institution/hacker) gets access to thousands of legitimate government IDs and uses them to mint lots of idNFTs, and then attempt a takeover that way.

Final notes:
-Would be very beneficial for Web 3 in general if there was an open source program that verfied government IDs.
-I am aware that governance/control probably currently resides with whoever is funding the core team, and to move to a one-wallet-one-vote system may be against their interests. There is a possibility that there could be lawsuits filed if the utility of the SHD token is changed in any way, as there may have been assurances given to the investing parties.
-There could also be different types of governance votes; popular votes (idNFTs) Vs Executive votes ($SHD), for decisions of different impact levels for the protocol. The $SHD token could be used in governance as some sort of veto-power vote, so if there was some sort of popular motion that was very unattractive to $SHD holders it could be vetoed, that way decentralised and centralised interests could balance one another.
-$SHD weighted voting could also be carried out in conjunction with idNFTs, where the voting contract has some sort of logic that would read; ā€œdoes voting wallet have an idNFT? If yes-> accept vote, If no-> reject voteā€. In this context the idNFT would provide a proof-of-humanity function.

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This is a very well laid out presentation.

That being said, I am against it for the reasons outlined below.

I donā€™t think government IDs on Blockchain is practical right now. Additionally, if you use a third part to validate them (which w would have to do), that opens up an attack vector in the protocol. If the government where to order the third party to stop serving us, they would have to and then voting would get blown up.

Furthermore, and this is going to be unpopular, I feel like the 1 wallet 1 vote method isnā€™t fair to those of us that have been here the longest. Some of the people in early who own a ton of SHD have taken extreme risk. This voting model gives the same weight to someone who takes barely any risk to the ones who have taken the most. Additionally, i donā€™t believe that someone that buys .1 SHD and someone who has bought 1k SHD have the same level of care for the protocol (at least most of the time). Naturally, the ones who own more will be more interested in how the protocol is managed since they have more at stake. In fact, I would go as far as to say in many cases, their opinions will be be better for the protocol than those of someone who owns the .1 SHD.

I know this is likely a highly controversial opinion, but for these reasons, I am not for this voting method.

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I think requiring government ID to participate is antithetical to what weā€™re building, and I also donā€™t believe that one person getting one vote is a good system in the first place.

We have discussed a veSHD mechanic, where voting power is tied to how much you are staking as well as how long youā€™ve been staking uninterrupted, which I believe is an excellent middle ground.

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I do think that there should be some sort of voting right attached to the $SHD token.

I understand that someone who has invested heavily in $SHD may be more inclined to pay close attention to the goings on of the protocol and thus be better informed when making decisions, and maybe be a bit more cautious/conservative.

But it is also a possibility that someone can have a lot of capital and not engage with the protocol or understand the technology on any deep level, and simple waiting for their bag to increase so that they can leverage against it (without selling it) and make more money elsewhere. This persons vote would nonetheless be very impactful on the protocol, despite them having little to no interest in the goings on of the DAO.

I also think that once someone has invested a lot of money into $SHD, there is a real risk of them Smeagol-ing the protocol and treating it as their personal baby, and sidelining people with deep expertise but who donā€™t have much money in the bank to buy $SHD.

I think we should definitely have some way to recognise expertise/tenure within the DAO, but doing it on purely a Who-has-most-SHD rules basis is inherently unfair and in democratic imo.

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I donā€™t think that using a gov IDs is actually antithetical to Shade protocol, but do I think that there are a lot of libertarian types who reflexively reject anything associated with a government. Imo Silk is more about defending against crap monetary policy (central bank controlled) rather than politics (government controlled).

I think that given that there are (probably) already very large wallets that will stake immediately, weighing voting power based on both amount of $SHD and length of time staked just compounds the issue of a very small number of wallets effectively controlling the protocol.

I think it is good to recognise length of time as an indicator of expertise, but imo it would be better to do so as part of an NFT-based merit system that exists on chain. This way people could influence others and leverage their experience in a more decentralised and democratic way.

Maybe these sort of merit NFTs could be used as indicators of the wallets of representatives, and be used by them to attract more $SHD.

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Sounds similar to what StarAtlas DAO has in place

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an awesome way to get a more equalized community would be to equalize the remainder of the airdrop, eh?

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Skin in the game is the only way to get good outcomes. With that said, I do like this idea for something like an airdrop where you decentralize ownership to real people, rather than unique wallets (even tho itā€™s too late to implement this).

With regards to people passively investing in Shade, or having outsized control over the protocol I think that isnā€™t a real concern. If you look at any type of investment this happens and people with voting power put people they feel have the best capability in charge. I donā€™t view wisdom of the masses as being necessary to achieving good outcomes due to the complexity of the decisions being made. The people who have the most to lose will put the most effort into choosing correctly because they have the most to lose.

Agree with the comments about earlier investors taking more risk and forcing KYC to be against the core ethos of defi.

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The science and philosophy around voting as a whole isnā€™t even really settled, so in trying to discuss the merits of different voting methods, weā€™re trying to do something that people who specialize and devote their lives to political science havenā€™t figured out how to do over the last thousand or so years. I think itā€™s worth pointing that out because everyone generally has strong opinions about voting, but the fact is literally nobody has a good answer for how voting should be implemented, including me.

What I do know is that general democracy (one person = one vote) is pretty well explored and also pretty well documented to be really bad, particularly because of rational ignorance (which, interestingly, is less of a problem if the electorate is small, but i donā€™t know how large an electorate has to be before rational ignorance takes over), as well as the fact that the miracle of aggregation is completely bunk. Of course the alternatives to democracy are even worse, hence the famous words of Churchill :slight_smile:

Iā€™m not a big fan of Caplan overall, but The Myth of the Rational Voter is a decent and relatively short read about public choice theory, very relevant to DeFi DAO governance.

Corporate governance is strictly based on percent ownership, and the crypto world is really the only forum Iā€™ve seen where people take issue with that model, and I think that perfectly encapsulates Caplanā€™s idea of ā€œrational irrationalityā€ - essentially, there is what is actually true, and what we want to be true. Obviously people with small stakes in the protocol who want a louder voice will be in favor of a voting method that amplifies their voice (one person = one vote), whereas someone like me, who has a big stake in the protocol and trusts my decision making ability over others will naturally want a voting method that amplifies my voice.

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The thing is you donā€™t need to be exclusive with voting methods. If there was a representation of different types of voting methods we could determine which would be most efficient.

Daoā€™s are effectively extra-governmental organizations and are the dismantling pieces of traditional support systems. To say that a one person one vote representation should not exist in the next generation of power structures is preposterous.

To be clear I donā€™t think shade is responsible for creating that representation and I think percent ownership based voting system for the DAO is the best way forward. We should however encourage DAOā€™s with other voting systems to own shade and let their voice be heard in that way.

Shade would probably be the worst party to be responsible for the equality of humans and their well-being.

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I dont view the DAO as more close to a government of a country, but governance of a corporate entity. The step up from a traditional corporate government to a DAO is the speed at which collective decisions can be made.

In traditional world you vote every so often to elect a board. The board elects a CEO. The CEO makes decisions.

In DAO world holders are the board, and the CEO scope of decision making is limited so large decisions are decided by us as we go on. Itā€™s a much more active form of governance, but itā€™s not a government.

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I think of it even more generally than that honestly. I donā€™t think the spirit of decentralization is that every blockchain organization must have fair and equitable voting. I think the spirit of decentralization is that if you donā€™t like the rules imposed on you by an organization you and all your sympathizers are free to fork and do it your way, as has happened multiple times with Bitcoin, happened with the Eth DAO hack, etc. Same is true for us IMO - we agree on a governance structure, and anyone who doesnā€™t like it is free to take our open source code and all the people who agree with them and compete against us on their own merits.

Anyway, that said, Iā€™m still overwhelmingly in favor of tying voting power strictly to veSHD and having a representative system to delegate voting power.

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veSHD is vulnerable to wallets created by a smart contract creating a market for veSHD outside of the intended purposes. for that reason Iā€™m against veSHD and would like traditional SHD governance

to solve for a type of veSHD governance you first need to solve for on chain identity.

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In the Shade DAO world (as outlined so far), token holders are very much like shareholders, who elect board members (by delegating to DAO representatives), who then vote on protocol impacting decisions.
Itā€™s a system that is a close parallel to current corporate structure, which is easier for regulators understand and legislate for, which is both a good and bad thing.

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But you canā€™t simply overlook thatā€™ll fact that 99% of people in crypto cant just copy a code base and spin up their own blockchain at will. What you describe is an idealistic technocracy, which is not realistic. Itā€™s not feasible for a disaffected Shade community member to fork shade and go their own route without major VC backing, hence Shade is the only boat in town and to disagree is to be left out in the cold. Coding blockchain tech is a very niche skill set (developing on SN is a very small niche within that), and will probably remain so for a long time yet.
ā€˜If you donā€™t like it then just leaveā€™ is a very authoritarian approach to take, and unfortunately is exactly the attitude to expect from a one-token-one-vote DAO.

The amount of collective decision making and the distribution power/influence would be my measure of decentralisation of a protocol. Shade protocol (with its 1. Centralised core team, 2. Who are all doxxed, and 3. Funded by regulated VC entities, and 4. Has a registered company in Singapore) is far from decentralised, which was the main motivator for the above post.

IMO, if governance goes ahead as outlined, the words decentralised & inclusive should be removed from all documentation and whitepaper for the sake of not being accused of being misleading.

Itā€™s easy to just zoom out and take a helicopter view of the wider cosmo ecosystem, or crypto as a whole, and measure decentralisation from that perspective, but you could also apply the same thing to Appleā€™s App Store:
-Each app is made by a different team, therefore there is a decentralised app environment (although each app is a wholly centralised endeavour )
-Apple itself is controlled by token holders (AAPL) who all vote in a decentralised way for board members (although I donā€™t think anyone would even remotely describe Apple as a decentralised organisation)

Shade core team culture is a bit worrying as they seem to want to be more like Apple (where you have to ask permission to develop within the walled garden) than a decentralised organisation. But sure look

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There is no walled garden. People can freely integrate Shade protocol products into their own, this isnā€™t a permissioned L1.

I donā€™t really understand the point about why more votes is better in the one person one vote model? Finance is a complex topic and voting should be taken seriously. People who have skin the game should be taken seriously. It just makes sense to align the two.

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felt that one. Savino with the cold, hard, time honored realism. The problems of lack of representation and a republic prone to decay are often too theoretical to blockchain developers. Your technology could be used to help people in a very real way but without building tools for representation its current trajectory is massively harmful.

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In regards to balancing/aligning inerests,

-There could also be different types of governance votes; popular votes (idNFTs) Vs Executive votes ($SHD), for decisions of different impact levels for the protocol. The $SHD token could be used in governance as some sort of veto-power vote, so if there was some sort of popular motion that was very unattractive to $SHD holders it could be vetoed, that way decentralised and centralised interests could balance one another.
-$SHD weighted voting could also be carried out in conjunction with idNFTs, where the voting contract has some sort of logic that would read; ā€œdoes voting wallet have an idNFT? If yes-> accept vote, If no-> reject voteā€. In this context the idNFT would just provide a proof-of-humanity function.
(from original post)
A one-person-one-vote system, if nothing else, would be a good indicator of sentiment. But still would be about as impactful/binding as a discord poll.
In regards to skin in the game, yes investing money into a project will mean that the investor will (probably) pay closer attention to the output of said investment, but the focus will be on just that: the outcome of an investment, and not on any broader view of adherence to principles/ethics/culture etc. If you zoom out then Iā€™m sure the Federal Reserve has by far the most skin in the ā€˜gameā€™. Followed closely by all of the Web 2 oligarchs. With mercenary VCs (SoftBank, A16Z etc) hot on their heels. None of whom the vast majority of the ā€˜communityā€™ would want to be beholden to.

The walled garden I was alluding to are the Shade products themselves (Silk etc). People are free to contribute ideas but 99.9% of people have no ability to influence the adoption/inclusion of said ideas (beyond making noise in discord and on forums), and just have to trust that the core team is a perfectly rational/unbiased group of people who have time to scrutinise every idea in minute detail (Which is not realistic). The community is more of a fan club/marketing mechanism for Shade protocol Ltd than an actual impactful governance lobby.

Also: We still have no clarity of the extent of control that Shade protocol Ltd has on Shade protocl. No clarity on who the directors, management, sharehodlers are. Who their employees/contractors are. Or even simply on what the exact relationship between Shade protocol core dev team and Shade protocol Ltd is. Maybe the company is a benign entity, or maybe its owned by a corporation, wich is owned by a larger corporation, which is controlled by a trust, which isā€¦ (etc ad nauseum). I mean maybe Iā€™m crazy but I thought one of the most central philosophies of the whole web 3 space was transparency and not being beholden to unknown corporate interests.

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Itā€™s kinda poetic that you acknowledge 99% of people are completely incapable of operating a DeFi protocol, while at the same time argue in favor of letting the same 99% of people decide how to operate a DeFi protocol :stuck_out_tongue:

Iā€™m not really sure what the voting structure is going to look like. Iā€™d say the whitepaper is probably the closest thing to a ā€˜constitutionā€™ that we have, and the ā€˜shade protocol principlesā€™ are the founding principles. The principles donā€™t outline anything about representation and governance - except perhaps the principle of ā€œto earn the rewards of being a shade staker, you must take on some amount of risk on the protocolā€™s behalfā€. There is a precedent that your value to the protocol equals the risk you are willing to accept for the protocol, which would be undermined by perfectly equal representation. The SHD token is also explicitly identified as the governance token, so I think these ideas are congruent. I am happy to further discuss public choice, but based on my reading, I think that one wallet one vote is fundamentally against the protocolā€™s principles.

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