Recently, @LauNuMu was talking about the problem of the low votable supply in Scroll DAO.
My understanding is that currently only ~0.24% of the total token supply participates in any given vote. That’s an extremely small representation rate. This is also why the constitution has a quorum of only 0.21%, there hasn’t been enough delegation.
Lau recommended a mechanism which seems really promising (and has the added benefit of being extremely simple). I’m naming it the NuMu Mechanism in her honor.
Here’s the idea:
Every year, on Delegation Day, a token holder can claim an airdrop by delegating their tokens.
The airdrop is scaled depending on the amount of tokens delegated. The larger the number of delegated tokens, the larger the airdrop, up to a cap.
In year 2 of the program, the token holder gets an extra airdrop based on the performance of their delegations. So, if they had delegated to LauNuMu in round 1, and she had consistently voted and contributed meaningfully to the forums they would get the maximum bonus airdrop from their previous delegation, in addition to the delegation for redelegating.
What I like about this idea is that:
- It directly incentivizes token holders to increase votable supply by offering an incentive they respond to (airdrops)
- It’s very simple
- It’s fair, both to large and small token holders
- It maintains an incentive for selecting quality delegates (not just random choice)
This also is how other ecosystems with large votable supply achieve their participation, see for example this post about Internet Computer’s incentivized governance.
Details of Implementation
As for the payout curve, I recommend something that grows as the token quantity delegated grows, up to a maximum value.
One option for achieving this is an exponential saturation curve.
Where
- X is the maximum airdrop payout
- a is the attenuation of the curve; larger numbers mean Airdrop sizes keep growing even at large amounts of delegated SCR.
You can play with a desmos of this function here:
With the parameters I selected in this example (X = 3000, a = 370,000), it says that when someone delegates their ~500k USD worth of SCR (at today’s prices) they get an airdrop of about 800 USD worth of SCR.
This incentive might seem small, but I think it makes sense to keep the incentive quite small for an initial pilot. We could always run the rounds more frequently if we want to increase the incentive for token holders.
Concerns
I could change my mind about this approach if:
- This approach has been tried in other DAOs and it resulted in very little increased delegation or was prohibitively expensive
- For me, prohibitively expensive is hard to define, but certainly if the cost of incentivizing a token holder to delegate to a delegate was anything close to the amount it costs to pay a delegate then that would be too expensive
- If there’s a simpler or cheaper approach to increasing delegation that could achieve the same amount of delegated SCR
I would have liked to have added a minimum airdrop to ensure that small token holders aren’t left behind, but that would incentivize people to break up their wallet into tons of small wallets and delegate each of them individually. Even as it is this this incentivizes participants to break up their wallets into smaller ones, but given the size of the incentive it’s unlikely it’s worth the hassle to get the small additional amount of SCR by breaking up the wallet. If incentives were much higher though this should be revisited.
Data that would be helpful in answering this is:
- What’s the distribution of token holdings of SCR holders?
- About how many SCR holders are there?
Maybe @cerv1 or @eugene could help me access these data.
Thank you! Curious your thoughts!