Balanced Governance for Proof of Stake Networks

Introduction

Decentralized networks (and apps) are increasing in popularity and often utilize a form of
community governance to decide the future direction, features, and incentives for its ecosystem.
Many of these systems of governance, however, have flaws that make them vulnerable to a
form of centralized control or overwhelming influence, especially from those who are the most
financially invested. In other words, the rich get to exert a disproportionate amount of influence
in the community governance.

Centralized Governance is the Biggest Threat to Decentralized Networks

The best method of governance is one that is balanced in as many ways as possible. In
essence, it is to ensure that the majority can not easily harm the minority. Stated another way,
minority interest is properly voiced and weighed within the governance model. The right to rule
by the majority is balanced by the right to be heard by the minority.

Overview

Not all token holders have voting rights. Only network addresses which have staked tokens
during the election period will have voting rights. Those who have staked and earned voting
rights during the election are referred to here as stakeholders. Additionally, all stakeholders that
cast a vote in an election period are required to stake for at least the minimum duration of the
following election period. The requirements of being a stakeholder and of post-election staking
ensure the coupling of rights to make network changes with the responsibilities to make
changes that will benefit the network.

Within this proposed solution, there are three types of voting frameworks:

1. Proposal Voting

2. Binary Voting

3. Rank Order Voting

Proposal Voting — Creating a quorum for new proposals and establishing which

proposals will be put up for a vote.

This would be simple majority voting with a logarithmic decay function applied to all addresses.
The decay would help ensure that all proposals have an opportunity to be approved, instead of
just proposals issued by large stakeholders.

Binary Voting — Casting a ‘Yay’ or ‘Nay’ vote to approve or reject a proposal.

This vote would be cast by the nodes themselves, rather than by the stakeholders directly. Each
address on the node would cast its vote with a majority vote determine the node vote of ‘Yay’ or
‘Nay’. The number of votes assigned to each node is determined by calculating the total number
of staked tokens on its node and the total tokens currently staked on the network.

Rank Order Voting — Prioritizing approved proposals to determine their order of

execution.

With this vote, we would again leverage the majority vote with a logarithmic decay to now
prioritize proposals that have passed via the Binary Voting. The network would allow for each
stakeholder to produce a rank order vote of all items in the vote.