SIP proposal idea: Decentralizing rewards rate decision

Bitocracy SIP | Sovryn Improvement Proposals
1

This has been discussed mainly on telegram before, so I would like to lay out my reasoning and how such a proposal could be formulated on this forum.
The problem in my opinion (and the opinion of others) is that rewards changes to the different lending and trading pools are decided by exchequer alone. I realize that the goal of everyone including exchequer, and also those opposed to the latest decisions, is to increase the token value. Exchequer wants to do that by reducing emissions, while I, and several others, think that emissions are a marketing cost at this stage to attract more users, and that after the end of SIP-24 (which I agreed with), the emissions to reward pool participants are already low enough overall, and a further reduction would be counterproductive. This is likely a minority view, which is fine. The problem is that those changes can be implemented by exchequer on short notice without community involvement, which creates the appearance of centralization.
I therefore would suggest a SIP along those lines:

SIP-XXXX

The SOV rewards rate for trading and lending pools is suggested by Exchequer after consultation with Circle of tokens.
Whenever a new or changed rewards rate is suggested, it shall be brought before the Bitocracy for a yes/no vote.
If the Bitocracy votes no, the rewards rate remains unchanged.
If the Bitocracy votes yes, the rewards rate will be changed as suggested by Exchequer.
If a quorum is not reached, the rewards rate also will be changed as suggested by Exchequer, so as not to paralyze the decision making capability of the protocol.
To avoid a multitude of proposals to overwhelm the Bitocracy, any number of changes can be bundled in one proposal.
If several changes are bundled, they will be voted on as one in one yes/no vote as stated above.

As you see, the purpose of this is to advance decentralization by essentially giving the Community a veto right, without paralyzing the decision making process. If the community members do not care enough to vote in sufficient number on a particular change, the rate will adjust as recommended by Exchequer. Also, Exchequer retains the sole right to recommend rate changes, to avoid clogging up the Bitocracy with multiple opposing community proposals.
This veto right would in my opinion further advance the cause of decentralization.

Your input would be greatly appreciated.

4 Likes
2

I want to congratulate you for the initiative. For me it is very valuable that you can defend your ideas in front of everyone.

I would like to make the following comments.

First, I understand your approach, but I do not share it, because I agree with the motivations and decisions of the COT and Exchequer, which by the way do not go against any previous SIP.

Secondly, letā€™s ignore the first point, and letā€™s assume that I think the same as you. Further, letā€™s imagine that together we have 10% of the voting power. We introduce the SIP. Letā€™s further imagine that 10% more think like us.

Finally, would you understand that the SIP we present will not succeed? In Sovryn all decisions have been made in line with SIPs approved by a majority in Bitocracy. The core team and decision makers are looking for the best for Sovryn. It is obvious that they will defend it with their voting power, if necessary.

In any case, I support that you present a SIP, even if the result is negative, because it will be a great bitocratic example, and will make Sovryn bigger.

3 Likes
3
  1. referring to the claim that Exchequer alone decides on the SOV rewards:

Exchequer does indeed have control over setting SOV rewards. However, Bitocracy controls a large part of the SOV reserves. Through SIPā€™s, the Exchequer committee is provided with portions of it.
See SIP-0048 - Strategic Investment in Sovryn - #3 by SOV_HOOLIGAN
and
SIP-0024: Liquid SOV Incentive Rewards for Staking By Choice
and
the exchequer budget SIP 34 Sovryn Improvement Proposals | S O V R Y N

Thus, the exchequer committee is already acting as an executive body within the framework made possible by the bitocracy. Accusations that this is done without the consent of the bitcocracy are false.

  1. referring to the SOV rewards:

the exchequer committee has been inactive for a long time regarding SOV rewards. As time went by, more and more voices in the bitocracy were raised that changes are important and demanded by the community.
This resulted in the Circle of tokens. Pretty much all changes to the SOV rewards, including SIP-24 staking rewards, were made at the instigation of the community and the Circle of Tokens. The Exchequer implemented the recommendations of the CoT. The important thing, in my opinion, is that these decisions were data-driven and carefully considered. The information and process for this can be found in this forum and was provided with a lead time for discussion.

However, the last two changes (ETH rewards from 5k to 0) and XUSD lending pool from 2.5k to 0, were made without data analysis and discussion, solely by the exchequer committee. I think this development is wrong and I am in favor of more transparency and room for discussion for such a process. I personally was against reducing the eth pool to 0, because this pool represents a lot of liquidity for a very low cost. Nevertheless, these actions by exchequer are consistent with the basic strategy of the CoT as outlined.

With the exception of the most recent amendments, there has been close cooperation between exchequer and the CoT, and the amendments have been mostly accompanied by consultations. As you requested.

  1. further thoughts:

creating SIPā€™s is complex. This is one reason why I have pursued a strategy with the CoT to make much needed changes to SOV rewards in such a way that SIPā€™s are not necessary. Of course, this method of implementation quickly reaches its limits. But I hope we were able to lay some important groundwork.

4: Rewards

Changes to rewards should not be made often. it is important for liquidity providers to be able to estimate rewards over a longer period of time. I think it is a good idea to vote on future rewards. Maybe a vote for each quarter. Maybe it is good to use SIPā€™s for this. Maybe this will also cause problems and an on-chain vote may not be necessary. The fact is that this requires a lot of work. It is good to have an executive body like exchequer at this stage to not slow down the processes even more.
The Circle of Tokens does not control SOV. We just provide data and analysis for discussion. However, if the bitocracy wishes to do so, we could consider providing the CoT or another organ of the bitocracy with SOV to be used for LM and other incentives. However, this already exists with the Exchequer committee.
Even if the status quo is not perfect, I think the current solution with CoT as analyst and Exchequer as executive body is actually good.

5: this SIP

I think this proposal could also be taken up in the next Exchequer budget SIP. If Exchequer wants to get new SOV from bitocracy for the coming year, they should also be able to show in what form the SOV will be spent on LM and incentives. If they canā€™t show this, bitocracy can still decide that they donā€™t want to provide this SOV. My point is that this yes or no vote already exists in a somewhat similar form, but in a higher framework.

Otherwise i find the vote proposed here for future rewards exciting. it also has a good presence to the outside world and i imagine bitocracy may be happy to be able to use the great voting system for such purposes as well.

4 Likes
4

first of all I really rate your professional and collaborative tone @lactarius

On Bitocracy: we can only learn by doing. I donā€™t care if we ā€˜looseā€™ 20 SIPs per year ā€˜againstā€™ core team in 2023, we have to test this tool, not talk about it. And document the decisions well. Why?

Imagine thisā€¦when the next strategic investor, or BTC whale with an interest in having a say or sway in a DeFi project (like Tetranode typically does in ETHereum-related DeFi), they will likely check the voting history as part of the Due Dilligence. They might then ask Yago and Team ā€œHey whatā€™s going on folks? Seems like you and the core community are not often aligned?ā€ Then they look at other topics like (uuuuhhh controversial) MARKETING and Adoption, and letā€™s say they decide not to invest. Thatā€™s when the pain might be big enough to listen moreā€¦

And if they keep the game of ā€˜knowing bestā€™ - well, they either actually do, or the pain isnā€™t big enough. Thatā€™s how change works!

2 Likes
5

if the process to create a SIP is too complex for frequent useā€¦then we shall find another process. There are dozens of DAOs in DAO-land building DAO tooling right now. I am not deep enough in this space to assess which one is of interest, but there gotta be a solution to this problem. There are literally 100s of serious DAOs out there which must have similar problemsā€¦