Eliminate zero cost vote power in consensus and governance

Currently, due to POL arrangements with Stride and Persistence, the cosmos hub’s governance and consensus mechanisms are broken.

  • Individual users pay for atom to access consensus and governance vote power.

  • Investment funds pay for atom to access consensus and governance vote power.

  • Validators work to earn atom in commissions and grow their consensus and governance vote power.

  • The founding organizations, interchain.io and AllInbits, worked for years to earn consensus and governance vote power.

And along the way, we made a tragic mistake. The community chose to give away consensus and governance vote power, using governance, at no cost. What wasn’t well understood, including by myself, was that once the governance proposals that granted additional stake to liquid staking protocols passed, votes no longer needed to be earned or bought.

Instead, governance itself participates in both governance and consensus.

We must stop using community pool funds to subsidize liquid staking, not because liquid staking is bad, and not even because the protocols are bad, but instead because

  • every block since those proposals passed was created with unearned vote power.
  • Every governance proposal that has passed or failed since pol agreements were made with liquid staking protocols, has had unearned vote power supporting or voting against them.
  • Legitimate stakers whose stake had a cost are diluted by protocol owned staking. Every single end user and every single fund and every single founding team earns less because of these arrangements.
  • It should be impossible for validators to vote to increase their vote power. These practices most resemble the real world practice of gerrymandering, or of encouraging illegal immigrants to vote. Governance funds ought not vote.

Staked protocol-owned liquidity makes up 2,138,768ATOM of the hubs 253,000,000 bonded supply. I need to do additional math, but I believe it is very fair to say that every block is currently off by about 1%, as is every governance proposal.

There’s no allowable threshold of free vote power. Stake is either valued or not. We did not do all of this work to create a consensus mechanism based on lobbying. We did all of this work to create a consensus mechanism based entirely on stake, where stakeholders voices become the consensus on the next block, and collaboratively make decisions in governance.

The persistence team has indicated support for this proposal.

vote options

  • Vote YES to terminate all staked POL in order to protect governance and consensus
  • Vote NO to take no action
  • Vote ABSTAIN to Express no opinion, but contribute to quorum
  • Vote NoWithVeto to cast a no vote and a veto vote. If the veto vote reaches 1/3, this proposal will fail and the deposit on it will be burned.
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I’ve started a parallel conversation on Osmosis, and want to share my strong opinion that even small distortions to consensus and governance are simply unacceptable. I will work to take action on this matter as rapidly as possible.

currently, the cosmos is a conspicuous validator scam where the same validators farm investor capital through a myriad of schemes. for the cosmos to regain trust as a network, user capital needs to be protected from changes to the protocol and made more resistant to adversarial validators.

a significant step toward regaining trust as an ecosystem would be eliminating the community pool. this removes the incentive for validators to aggrigate free delegations and VP to award themselves grants. This can be done by removing the 10% tax that validators unilaterally implimented onto users in prop88, forcing all users into whatever common enterprise that validators aggrigated VP to fund themselves with, and implimenting an opt-in only funding scheme.

This can be done by democratizing liquidity flows with opt-in only funding, turning forced taxation into voluntary contribution for public goods funding, or whatever DAO a user chooses to support.

similar to how you can divert sale proceeds to a different address on stargaze, users would be able to choose the % of their staking rewards and which DAO they would like to contribute to when they claim their staking rewards. DAOs compete for funding by offering incentives (airdrops, rev share, NFTs, etc.) and establishing themselves as a valued member of the community.

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Disagree, but I do think that if we keep placing validators at odds with stakers like staked POL schemes do, we’re heading down that path all too fast.

https://forum.cosmos.network/t/proposal-88-accepted-increasing-hub-community-tax

Validators pay this tax, too. I think that another way to reduce the problem you’re describing here is to make representation by validators optional.

When we surveyed our delegators, there was overwhelming support for us to represent them (about 90%) but it makes sense to give a choice when users delegate.

I think it’s all about choice.

This is interesting but would somehow need to be attached to a way of getting a return, and then at that point I think that we re-create in small form the issue of “atom value capture” as value may well flow to the “way of getting a return” instead of ATOM.

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fair point, i meant inconspicuous.* and I was under the impression that voting mechanics wouldnt change, just validators wouldnt be able to pool funds they harvested from users if it isnt there to require elaborate liquidity fracturing schemes and cross chain quid pro quo… perhapse a dual funding model.

validators should have to contribute some % of their rewards (skin in the game) to fund public goods (aka validator’s side projects) and help with costs associated with additional ICS chains for the lower set. people cant be expected to believe ATOM is a good investment if validators are unwilling to maintain it. validators can distribute validator funding however validators choose. voluntary opt-in funding for delegators.

There are no promises of return for your voluntary contributions, no common enterprise or money making schemes promising an 18% return like Prop912 or other PoL ventures that delegators are forced to support.

to clarify: i say validators, because validators control over the chain. i dont mean to imply validators are acting maliciously. I am simply pointing out the effects of misaligned incentives within $ATOMs economic system as percieved by a delegator.

What about community pool owned stATOM and stkATOM that isn’t part of any protocol owned liquidity?

I don’t think that exists, could you explain more?

If you’re referring to the agoric matter, I think that gets staked, and should be thought of as protocol owned.

Whole goal here would be to ensure that validators do not control the chain.

You’re right that it’s staked, and that it’s protocol-owned, but stATOM getting locked up as collateral in a lending protocol isn’t “liquidity” like a stATOM-ATOM pairing is it?

But I guess it is part of a proposal to mint+provide IST-USDC POL, so it’s enabling POL even if it isn’t itself the liquidity.

Altering the Agoric proposal to use unstaked ATOM collateral, or ending the proposal early before it has a chance to earn any swap fees, won’t be as frictionless as withdrawing POL from a DEX is though. Minting new IST charges a 0.5% mint fee, from day 1 you start out owing more IST than you have. So changing to an unstaked collateral type, by closing one Vault to open another Vault, requires paying off the first debt in full, and somehow making up that 0.5% shortfall to withdraw all of the Vault’s stATOM.

not sure that validators will ever not control the chain. Id settle for a more fair system and validator culture that disparages pooling funds taken from delegators to subsidize validators.

Problem: arbitrary taxes to pool delegator funds spent by validator controled governance
solution: stop validators from being able to non-consentually divert delegator funds & levy tax increases. allow delegators to voluntarily contribute to initiatives during rewards claim.

If validators arent spending funds they took from delegators, the system is definitionally less corrupt.

The issue @jacobgadikian is referring to is use of LSDs to grow VP amongst validators to centralize say over the CP while reducing delegator rewards & value of $ATOM the token. Apparent in ATOM price action.

Just a thought: should we just make it that liquid staking does not provide governance voting power to validators at all (still providing consensus voting power though)?

Indeed, for a large majority, the liquid staking is made through protocols like Stride, Persistence, and Quicksilver, which users have very little to no control over.

Also, thanks to the LSM, it’s easy to keep track of what is liquid staked (at least on Gaia): We are doing it on our app Liquid Staking Wallet | Moonkitt.

This way, there’s no question left. Liquid staking already provides additional rewards to validators receiving stake through LS providers. But we can prevent it from providing additional governance power.

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