PGOV6 - Staker Specification

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Monetising governance has, so far, been a road to hell paved with good intentions. However, not recognising the productive role of POKT within the Pocket ecosystem has resulted in some of the community’s most thoughtful, pragmatic and invested contributors being excluded from governance.

Impact drives progress, so representing those deploying POKT to drive the core utility of the demand, supply, and now, liquidity sides of the network is not merely justifiable; it is necessary if we want to have a truly representative system.

Using this frame of what is impactful to Pocket, we believe we can sustainably integrate both financial and non-financial contributions into one holistic governance system for the first time. The guiding principle we hold is that governance must be earned, not bought.

By representing contributions of this type, the governance system becomes more representative of our ecosystem and perhaps counterintuitively makes the system more resistant to governance capture than before. We are excited to open the door to many old and respected faces across the community who will be recognised for the impact their deployed POKT has on the network.

Technical requirements

We propose a first iteration that recognises three productive uses of POKT with governance power within a single Staker House:

Supply-side path: a node runner or a validator staking POKT to serve relays or secure the network, represented by 40% of the power in the Staker House

Demand-side path: a Gateway transferring POKT to the DAO - via the Gateway Operator Fee (burn) - to pay for access to the POKT Network protocol on behalf of its end-user developer customer base, represented by 30% of the power in the Staker House

Liquidity provider path: a liquidity provider staking wPOKT/ETH (and/or future approved pools) to provide liquidity for the network, represented by 30% of the power in the Staker House

The total voting power of all Stakers can never be more or less than 45% of the total voting power of the DAO. To be explicit, this 45% power is distributed across Supply Stakers (40% of 45%), Demand Stakers (30% of 45%) and Liquidity Stakers (30% of 45%)

Technical specification

SUPPLY-SIDE POKT STAKER

This credential provides voting power to node runners or a validator staking POKT to serve relays or secure the network.

The requirements for the Supply-Side Stakers are:

  • Valid Stake: Defined as POKT Staked > 60 Days and NOT Jailed, Paused or Unstaking
  • Weight: A weighting (impact score) of the the square root of Token-weighted voting power for POKT tokens staked in the network
  • Automated: YES (Credentials are issued or weights adjusted daily to reflect the Valid Stake and Weight of each node/address/wallet)

Note:

Due to the nature of the Morse protocol design, with people sometimes running 100s of nodes, the most user-friendly option is to allocate governance power based on who owns the output for the nodes to which such address relates. This means that those staking their POKT non-custodially can claim governance power for all of the nodes/validators connected to each of their output addresses. For those staking on a custodial basis, only the relevant owner of the service domain to which the custodial output address is related can claim governance power for all of the nodes/validators connected to such custodial output address.

DEMAND-SIDE POKT BURNER

This credential provides voting power to Gateways representing the Gateway Operator Fee (burn) paid for access to the POKT Network protocol on behalf of its end-user/customer base

The requirements for the Demand-Side Stakers are:

  • Valid Address: We will whitelist a POKT Address from which POKT is sent to the DAO for burning
  • Weight: A weighting (impact score) of the square root of aggregate fees (POKT tokens) sent to the DAO for burning in the last 30 Days
  • Automated: YES (POKT only needs to be sent from the valid address for burning)

LIQUIDITY PROVIDER STAKER

This credential provides token-weighted voting power to Uniswap LP tokens representing liquidity staked in the Uniswap wPOKT/ETH liquidity pool.

The requirements for the Liquidity-Side Stakers are:

  • Valid Stake: Holding wPOKT/ETH LP tokens from Uniswap
  • Weight: A weighting (impact score) of the the square root of Token-weighted voting power of the Uniswap LP tokens
  • Automated: YES (we can verify the number of Uniswap LP tokens staked in the wPOKT staking contract from the voter’s wallet address)

Implementation Specification

Issuance of credentials to Liquidity Providers and Demand-Side (Gateway) Stakers will be automated and captured at the voting strategy level.

The implementation and automation of the governance issuance process for Supply-Side Stakers is as follows:

  1. Stakers register themselves in mygateway.xyz to receive a Gateway-ID
  2. Stakers will visit our Issuance site (a minimal client frontend) to CLAIM their staking credential. They then go to the issuer website (The client site is a minimal frontend for the validators to claim their credential, from now on, I refer to it as the issuer site)
  3. Depending on your staking approach you will:
    • Custodial
      • Copy your Gateway ID
      • Add to the DNS records: POKT_GATEWAY_ID=copied-id
      • Return to the issuer site
      • Input the SERVICE-DOMAIN name and request for check
      • The system checks the service domain for the Gateway ID, and calculates power of all wallets/addresses under the service domain based on POKTscan, and issues the PDA with the relevant WEIGHT
    • Non-custodial
      • Users connect their related POKT wallets to their Gateway ID in mygateway.xyz dashboard
      • They return to the issuer site and input their Gateway ID
      • The system checks for the wallets/addresses and issues a credential based on the correct WEIGHT

Implementation considerations

In light of the inherent complexity in the Morse protocol design, as well as the number of paths within the staker class, and the implementation requirements attaching to what is a valid stake and what voting power ultimately accrues to each stake via the automations, safety of the overall governance design is of paramount importance.

Consequently, we will not launch any path until we have reached a sufficiently high level of confidence that the testing process is producing the intended results and that all edge cases are satisfactorily covered off. This may result in a launching each of the 3 paths individually, sequentially or concurrently to ensure the resilience of each path as well as the staker house as a whole. We will provide further updates on the specific implementation specification for the first iteration, along with the Metagovernance specification at the beginning of January.

FAQ

Are token holders not staking in the network via these three paths represented? No. No governance power is provided to speculative HODLers. Only those deploying productive capital via the staking paths are represented.

How is my total weight/stake captured? Each wallet address is connected to a Gateway ID, which combines your governance power across wallets/stake as per the specific implementation details above. Once wallets are connected to your Gateway ID all weight/stake is captured automatically.

How does this avoid POKT becoming a plutocracy? Stake, or token weighted voting, only has 45% of the total governance power in the DAO. By definition, it is a minority power in the DAO. The Metagovernance specification will further define the limits of this power, to be shared in January.


We look forward to everyone’s input in helping us refine and implement this new Staker class successfully. Please do share your questions and feedback here for consideration and discussion.
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So, Grove will have ~12% of voting power (45% * 30% * 90% demand market share)?
It seems fair, given that they are absolutely dominating one aspect of this formula.

Could you expand on this square root weighting mechanism? A formula or a numerical example should be enough.

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Happily. The Impact Score is simply Sqrt(Tokens Staked). An illustrative example is:

Staker A : 900,000 POKT Staked: Impact Score Weight = Sqrt(900,000) = 948.68
Staker B: 100,000 POKT Staked: Impact Score Weight = Sqrt(100,000) = 316.23
Staker C: 15,000 POKT Staked: Impact Score Weight = Sqrt(15,000) = 122.47

This operates like a quadratic function - as more people participate in voting, the cumulative effect of their votes becomes more significant, meaning that a small group of whales has less power to control the overall vote.

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To unpack this further, in the last 30 days, 112,361.71 POKT was burned (as per https://poktscan.com/explore?tab=supply)

Assuming Grove has a 90% market share, and Nodies the rest, this results in the following impact scores:

Grove weight = sqrt (101,125.53) = 318
Nodies weight = sqrt (11,236.17) = 106

And the following power distributions:

Grove = 77% of the Demand-side burner path (318/(308+106)), resulting in 23.1% of the voting power in the Staker class (77%*30%) and 10.4% of the overall total governance power (45%*30%*75%)

Nodies = 23% of the Demand-side burner path (106/414), resulting in 6.9% of the voting power in the Staker class (25%*30%) and 3.1% of the overall total governance power (45%*30%*25%)

We hope to onboard at least two more gateways by the end of Feb 2024, with more in the pipeline, so we expect this path to become much more competitive over time.

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Great! I forgot the sqrt there.
Thanks for the detailed responses!

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Great work! The amount of thought going into this governance truly is awesome.

I have a few thoughts I think are worth considering, so bear with me. :point_down:

I don’t believe it is justified to give any single entity 10% of all voting power right off the top, or even another entity 3% percent. That may not sound like a lot of power, but there are hidden variables.

Supply Staking Power + Citizen Votes

Only 1 vote from these entities will have the 10% and 3% weight, however each entity still has employees who have citizen votes. I know that citizens are hardly given a vote with 10%, but it can add up on proposal with low turnout… let me explain :point_down:

Low Voter Turnout.

Let’s be real, there will be proposals that get less excitement and result in lower voter turnout. That is an inherent part of DAO social games, and one that we should absolutely take into consideration.

The last protocol upgrade brought out a lot of voters (31 to be exact), however, the recent community moderator proposal, only brought out 7 voters. This means that any vote in the community moderator proposal has 4.4x the power to influence the outcome.

With the proposed supply weight suggested here, if Grove were to vote with it’s single 10.4% voting weight, the actual effect of that weight would result in a 46% (10.4% x 4.4) voting power for that specific proposal. That 46%, with a few citizen votes from Grove, would mean Grove controls small proposals, if it decides to get involved. Or Grove could guarantee it passes with so much weight. That is counter to POKT’s entire DAO’s mission from the start.

Weight Per Proposal vs Overall Voting Weight

I’ve just shown that 10.4% may seem like little weight when compared to the whole pie… but when that weight is applied to a real world proposals with less DAO excitement, it would multiply.

We have to account for the fact that there will be low interest proposals, and even if they are low interest, we do not want only a hand full of entities able to heavily influence votes beyond what is proper. The purpose of the weight is to give folks contributors more of a voice, not create dynamics where votes really only depend on a few, heavily weighted orgs. This current model reduces the concept of “wisdom of the masses” and instead empowers “wisdom of a few orgs”.

Solutions

1. Simplify Staking Weight

Do not separate supply side staking from demand side staking at the start, and instead simplify it by having the weight correlate to the amount of POKT staked. Both Grove and Nodies have staked nodes, so they will still have weighted representation.

Once there is enough decentralization on the demand side to justify giving demand side it’s own weight, then we do so. Doing it now, only gives those orgs more of an advantage within the POKT ecosystem. Grove’s and Nodies were already given exclusive PNF funding to build their mostly closed source gateways (a notable advantage), and I don’t believe that extra voting weight should be an added perk. Once there a number of entities participation in the demand side, then we can evaluate a weight.

I say, start the weighting off in a simpler fashion, then add more complexity and nuance after we have seen it’s effect. All added complexities are gambles that will be hard to reverse.

2. Have low Impact Proposals Be Citizen Only

In the last community call, I pointed out how heavily weighted orgs could dominate proposals that are likely to get less eye balls. I suggested that for some proposals could have no weights and be citizen vote only. Example:

I already showed above how an entity like Grove would have the weight to mostly control a proposal, like the community moderators, due to lower voter turnout. For proposals like these, I don’t believe that weight is even necessary. It’s is a proposal focused on community development, not technical aspects of the protocol, having a citizen only vote would make more sense. When it comes to a protocol change, then it absolutely makes sense to have more involved parties have a weight.

I believe there should be a mechanism that allows some votes to be weighted, and some to not be weighted. This would prevent POKT from being a DAO where a few orgs and some back channeling communication can have dominating voting weight. Before POKT I worked for a DAO where my paycheck was determined by a few whales and most of the real conversations happened in back channels. It was not fun or a health DAO which is why I believe we should… :point_down:

3. Give Citizen More Weight

I haven’t agreed with citizens only getting 10% of the vote. I think they should at least be 20% to 30% to start with.

The benefit of the DAO we have now, is convos HAVE to happen in public since back channeling for every individual voter has a lot of complexity. No doubt today POKT does have back channel communication between voters… and nothing is wrong with that… but to really have an impact on the conversation, you have to do so publicly. Allowing select orgs to have anywhere from 10% to 46% of the voting influence, would absolutely make DAO decision making less public since a few orgs have notable weight.

Part of the game theory we need to consider is not just on giving the right amount of weight to a voter, but also how will that weight effect the social fabric and culture. I believe that the citizen vote is what will force convos to be public… therefore we should ask ourselves, “how much value should that be given”?

Projecting The Future

It is a fact that as ecosystems get more competitive, then there is likely to be consolidation of power. You can see how that has happened in real time with node staking. Many entities had to depart, no new ones have joined, and especially on the backend, more of POKT nodes rely on fewer chain nodes due to private chain node pooling. Consolidation has indeed been happening on the node side.

The gateway side is young, and there may be a number of entities that will come in… however there is still a possibility that once things get competitive, there will be a consolidation phase. If that phase were to happen, what effect would the current weighted system have? It’s easy to give a weight to a select group, but it’s even harder to take it away, because the new weight would effect the reversal vote.

This is why I believe we should be more conservative with weights if we want this DAO to be long term. Any of these weighted groups could see consolidation into a few orgs, therefore the DAO should be structure to expect consolidation. The citizen vote is the check on consolidation within a voter group.

Great Work

Again, great work PNF. Thanks for not only thinking through these initial structures, but also providing it in a format that makes it possible to contribute. Much thanks :+1:

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I think there is some truth here. I do believe that a large organization dominating one house is not ideal, but is also truth that even moderating the voting power of them wont change the dependency that we have on them.
In other words, you can give zero voting power to Grove, but that wont change that we are completely dependent of them. This is expected since we are not yet a fully developed protocol, with time more gateways will join and this will fix itself.

Maybe we can tune the voting power of the different houses, I’m open to that, but I don’t feel that it will solve the current vote dominance problems.

Regarding citizen-only proposals, I think this will only create more discussions on what is a technical proposal and whats not, it will be hard to manage. I think voting power should be the same for any proposal

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True, there very well may be times where a house is dominated by an entity or two, which does put network reliance on them, but that reliance should not turn into DAO control.

DAOs should be designed for the hard time, not for the optimal times. Hard times lead to power consolidation, like it has with node running, but gateways are unique because that consolidation also would give them more voting power. Many DAOs have fallen in the hard times, because parties were able to accumulate control, so I would prefer that POKT be intentional with it’s design to ensure that it is built for the hard times.

Also @b3n, with Grove and Nodies having 100% of the Supply Staking house now, wouldn’t they also get a percentage of the Demand Staking house, and the Builder house (since both are working on ecosystem projects)? My understanding is that voting weight does stack, so Grove and Nodies would be substantially more than any other entity in POKT because they get more weight from each house. Correct me if I’m wrong though @b3n.

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Lot’s of good questions… I would define them mostly about “tuning” the system which is 100% what we want to get right as well.

A couple of points I think need to be clarified first:

I strongly disagree with this. Future decisions to enfranchise the “demand side” would need to be enacted by the existing governance system, meaning it would essentially then be at the discretion of the already enfranchised “supply side”. This is untenable imo. People have chosen to focus on Grove but we are talking about setting an upper-bound on gateways and the plan is to have vastly more gateways asap. I think this is a glass half full/empty question… if I said is it good that a single Gateway can never have more than 13.5% of the total vote I think most people would agree.

I’m struggling to understand where this 4.4x number comes from, but generally I think low turnout works inverse to what you are implying. If low turnout is only one citizen were to vote in the citizen house, they as an individual would have 10% of the total voting power (given that is the total applied to that house). In the builder house, if only one builder was voting they would have 45% of the voting power (given that is the total applied to that house). Low Voter turnout ultimately empowers individuals far more than Gateways.

I expect that over time the DAO may explore how it leverages the governance model in different ways. The DAO may choose to delegate additional responsibilities to certain houses but that is outside the scope of this MVP implementation and all decisions of that nature need to happen through the metagovernance levers which will be shared soon. And I agree strongly with Ramiro’s point which is that each action has second order effects that need to be considered before further delegating responsibilities to individual houses.

This is always an option.

And not to diminish these great questions and perspectives, but I just want to remind all that the system is built on Proof of Personhood. People vote in this system - not “orgs”. I don’t accept the idea that people from Grove being Citizens or Builders gives Grove or Nodies, or the many other orgs not named, more power. Individuals still vote as they do in the current system, and it does a huge disservice to them to imply they are in the bag when I have no doubt they will vote their own mind and conscience as they are enfranchised to vote as citizens or builders or liquidity providers for the first time.

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Hey @b3n, thanks for providing some more clarity.

It’s great that we plan to have many more gateways. However, I’d prefer not to structure the DAO so that balance is achieved only at optimal gateway conditions.

I personally believe that demand side weights should only be applied once we hit that “optimal” scenario, and do that conservatively. We could hit that optimal scenario super fast, which would be great, but with something like gov, I think progressive house weighting would be best.

I do not understand why we need to move fast in a manner that would give specific entities imbalanced voting power with today’s conditions.

We seem to be missing each other so let me explain with some more clarity using an example.

Say the DAO has a total vote power of 100. Grove has 10.4% of the voting power, which is a weight of 10.4.

Let’s say a Protocol Proposal draws out the total voting power, which is 100. Grove’s 10.4 weight is 10.4% of the total voting power. However, let’s say a moderator proposal only draws out a total vote power of 23, then Grove’s 10.4 weight represents 45% of the power.

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In both of these cases, if there are a total of 30 citizen voters, the entire citizen house (10% of the total voting power) can’t even outvote Grove with their 10.4%. Not even sure what the purpose of the citizen vote is if 1 org is more powerful then all of them combined. It would make citizen less likely to contribute at all, and POKT becomes a DAO dominated by heavy weighted voters.

I’m curious if most would agree with your statment. I know I don’t agree. If 1 voter is more power than all citizen votes combined… then that does not provide proper checks and balances.

Again, I’m all for the weighting. I’ve been saying weighted vote is the way to go… but not at this level. The Citizen vote is technically the only check against any org, faction, or cabal, from dominating the DAO. Citizen vote can’t be that with only 10% of the vote.

True, but one person can have all the power of an org. Michael would likely command the 10.4% of Grove’s voting power, and Blade would have Nodies’.

I think it’s worth considering that many orgs do typically have a shared psyche. How often has PNF members voted differently on proposal? I’m sure it has happened, but it is not the norm. Though PNF is comprised of individuals, there is a knowledge share and shared perspective that tends to lead to team alignment. That is not a bad thing, but it is a reality of human nature.

So for myself, it’s worth considering these human characteristic into the game theory of the new DAO.

Stacking Voted Weights

@b3n could you provided clarity on this question I asked :point_down:

Grove could max out it’s demand side vote at 13% (as you mentioned), but couldn’t they also claim their staked POKT on the supply side, and the builder contributions?

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Hey Shane, I think most of it is just the POV you choose to take but I want to make something really clear about this:

This is wrong. The total weight of the vote is always 100 because each house has a % of the total power unaffected by the other houses (10%, 45%, 45%, or whatever weights we go with).
The total vote is a weighted average of each house (% Yes Vote of Citzens House Power + % Yes Vote of Builders House Power + % Yes Vote of Staker House power).


And just to clarify on this question:

Each individual person has the opportunity to be represented in the DAO based on the impact or reputation they earn across any of the 3 dimensions. Individuals gaining power in multiple dimensions is a specific property we are pursuing. A key design principle is impact = weight and I think it’s better if you frame your argument against where you think “Grove” impact is significantly outsized by its weight.

I appreciate the adversarial mindset but the main game theoretic and a better framing imo is whether any individual house is open to 51% attack. The staker house has been specifically designed with this in mind and I do not see Grove (or anyone) having that power in any house.

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Just to expand on what Ben said, this is flawed - Voting power has a fixed % in each house and each vote, regardless of voter turnout. If Grove has 10.4% of the total vote as a result of their share of the Gateway market, this will be true in every vote. There is no scenario where this becomes 45%. Lower voter turnout in the Citizen or Builder houses does not impact on the voting weights of the Staker house. Gateways will be collectively capped at 13.5% regardless of turnout in other houses, and an individual gateway’s share of that 13.5% will be determined by how many relays they send to the protocol, which means it will be meritocratic. If another gateway comes along and sends 5B relays to the protocol, Grove’s ~500M relays becomes ~10% of the Gateway market, and their vote becomes 1.35% of the total.

You can read more about how the caps will work in this Voting Specification which I just published.

There is a separate argument in your responses which is valid and worth considering - that the 13.5% allocated collectively to Gateways should not exceed that allocated collectively to Citizens. I would be open to considering increasing the Citizen house to 20% and decreasing the Builder/Staker houses to 40% each.

As for whether Grove would have extra power in other voting classes, i.e. Citizen/Builder/Node/LP, it is likely that they would have some voting power in these but they would not have any more of an advantage in these classes than others in the ecosystem. Also, as we’ve alluded to in other comments, I wouldn’t assume that any Citizens/Builders who are part of Grove would vote as a bloc. We have previously seen preferences vary depending on the proposal.

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Ah, so it’s fixed to each vote, regardless of voter turnout. I did not know that. Thanks for explaining :+1:

To be honest, it is a real struggle to really see how this weighting system works in the real world. I’m just banking that PNF knows how all these ranking will work out with real world voting power. Something like a “voting weight calculator” would probably be the best way to show how weights would work, across individuals, and across houses.

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Great explanation,Thank you.

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