Thread by @banker_defi

Some thoughts and explanations on @FlareNetworks novel and decentralised governance structure involving use of #Songbird network with interesting game theory mechanics:

Quite a long thread 👇🧵

https://twitter.com/FlareNetworks/status/1584906445748899842

The Flare network is organised as an open ecosystem of #dApp providers, infrastructure providers (#FTSO, #Validators, #APs) and its #Citizens (FLR holders) all interacting through the network’s pre-defined contract logic.

When it comes time the need to implement changes to the network parameters, a system for governance or “rule making” is required in order to coordinate the interests of the most amount of participants in the ecosystem.

Failing to coordinate within an ecosystem limits growth of the network; results in an underserved community where value is extracted; or in some cases a complete forking of the network (e.g. Bitcoin has no governance model --> hard-fork).

So how is decentralised governance designed on Flare?



What: The intent is to coordinate change to a network parameter or contract/s on Flare through voting on proposals on-chain.

Below shows some of the changes that may be relevant to Flare in the future.

Different implementations impact the network differently, so their voting criteria for passing is different.


Simple majority: Min. 30% circulating $FLR voter turnout, 50% in favour to pass

Super majority: 50% turnout / 66% pass

Super super majority: 70% turnout / 80% pass

Who: If you’re a $FLR token holder, you can vote. Anyone with $FLR, except for those tokens held by the Foundation, can vote. Each token equals one vote.



How: Any wFLR holder may connect their wallet with the governance dApp website to cast their votes (stake $wSGB).

A gov. proposal would indicate the specified change to be implemented, along with its rationale. A guide for validly forming a proposal will be released after Flare Beta.

There may be open forums for community discussion relevant to any proposal. Voter actions may be a YES/NO.

Foundation originated FIPs:

On Flare, the Foundation has the ability to submit a proposal (FIP) at any time. Foundation generated FIPs, for the “purposes of security and expediency”, are passed with a simple majority vote... An example of this is FIP01:

FIP01 - a significant change to the token distribution and $FLR incentives for the broader cross-chain communities (flare.xyz/fip01/)

With the team having close to the majority tokens after TDE, this will undoubtably pass.

Community FIPs

Although anyone w/ $FLR can vote, its important to filter out poor proposals & only bring to Flare proposals that are valid; have a basis for its implementation + a clear voting outcome.

The process for our community to bring proposals to Flare is thru Songbird.

There are 4 voting periods on Songbird each yr. Every 3 months, a set of community proposals are open to stake into. Staking your wSGB into a proposal contract locks away your FTSO rewards until end of voting period (pro-rata basis). There is no risk to your capital (wSGB locked)

The FTSO rewards however, accumulated to your staking contract is lost if you staked to any community proposal other than the candidate FIP that passed on with Flare’s voting.

If that candidate FIP failed to pass on Flare however, you would earn additional FTSO rewards

There are interesting game theory mechanics at play here. This also depends on, importantly, whether any voter knows what the current amounts of staked wSGB are on each proposal (i.e. probability of being the winning candidate FIP on Songbird)..

Game theoretic voting on FIPs 👇

A. Suppose a voter knows the amount of wSGB staked to each proposal:

Proposal A - 55% (of wSGB)
Proposal B - 15%
Proposal C - 15%
Proposal D - 15%

Assumption: Any wSGB staker votes only to earn additional FTSO rewards AND/OR support that proposal for implementation on Flare...

Explanation: Even if a voter wants to support proposal A, if proposal B has apparent overwhelming support (on both Songbird and Flare), that voter MAY vote with B to earn additional yield, and hope for proposal A to perhaps win in the next voting period.

Here, the leading candidate is proposal A. Slightly over half the community that staked, staked with A. If the Flare holders/community were identical to Songbird holders, it would make sense to stake with proposal A since there is a 55% probability of it passing on Flare...

I say probability because when voting includes stake, a prediction market forms where the betting ratios reflect probability. I.e. There is a 55% chance of A passing, with a a reward ratio of 45/55 (i.e. win 0.82 SGB for every 1 SGB FTSO reward at risk by staking to proposal A).

On the other hand, if a voter choses to stake with either B, C or D, their probability of winning (i.e. A doesn't pass on Flare) is actually 45% with the reward ratio of 55/45 (i.e. wins 1.22 SGB for every SGB FTSO reward at risk)

The fact of the matter is that the cohort of token holders of Flare is very much different to that of Songbird. The other fact is that if any FIP was urgent and necessary it would have been generated through the Foundation on Flare. Although the Flare team and the Foundation...

are separate distinct entities, they do overlap.

Hence, any winning candidate FIP from Songbird may not necessarily be supported by @FlareNetworks (whom initially hold a large portion of the circ. supply).

Knowing this fact will affect the game theory mechanics further.

Lets take the other scenario B: Voter does NOT know the amount of wSGB staked to each proposal

Proposal A: 🔴
Proposal B: 🟠
Proposal C: 🟡
Proposal D: 🟢

Because staked amounts are not known, the probabilities of each candidate proposal winning on Songbird is also not known...

A voter could research extensively and identify where the community interest lies w/ proposals, however that may not be a reliable data point to use

Therefore, as in the Prisoner's Dilemma, voters would vote for the proposal that would most benefit Flare if it were to pass ☀️

TLDR:
- Flare's novel decentralised governance system involves use of voting on SGB L1 network with incentives
- Game theoretic design through FTSO rewards as a way to incentivise only wide community supported proposals to be passed on Flare
- Know what you own 👀

End/

Thanks for reading. 🙏🏻

I'm excited to see how FIP's initiated through community on Songbird play out on Flare. I am genuinely impressed by this governance model and hope many else in the community appreciate its design.

After all, it is us that governs this world ☀️