Proposal: Increase Votable Supply with Incentivized Delegation Tracking (IDTs)

[EventHorizon]

Proposal Type:

Governance

Summary

• Fund Incentivized Delegation Tracking (IDTs) to give incentives to attract real delegations (not treasury delegations) from sidelined token holders to permanently increase the votable supply. This solution does not require staking, smart contract interactions, or custody. New delegations are sticky and likely to remain once incentives finish.

• 320k SCR for reward emissions with a capped APR of 15%, 137k SCR for build costs, estimating 3-6 months of duration subject to demand fluctuations.

• Key stakeholders: token holders receive yield on SCR, and active delegates are rewarded with delegation from real token holders.

Motivation

A recent quorum near miss has brought to light an issue which looms over most DAOs in the space, namely, the issue of low votable supply.

The idea of dropping quorum or having an auto-abstain wallet has been floated as a potential solution on a recent delegate call. While it is true that security (the main reason for quorum) is not an immediate issue, dropping quorum only kicks the can down the road and sends a signal that quorum is something that can be tampered with, which does not bode well for trust in the DAO long term. We would like to see a durable, future-proof solution.

An additional issue also starts to rear its head as this DAO matures, namely, delegate drop-out. This further carves up the votable supply into two subsets: active and inactive (more on this below).

Instead, we should aim for a high leverage mechanism which results in a constant increase in the votable supply from token holders so that the DAO can robustly and reliably reach quorum and filter out inactive delegates. Such a mechanism should serve as a core, yet lightweight, bolt-on infrastructure layer ensuring that quorum is not only always met, but that inactive delegates are slowly filtered out without harming participation.

Redelegation campaigns are people’s first go-to solution. Unfortunately, redelegation campaigns are notoriously unsuccessful. Matters are made worse when one considers that even if these campaigns were to prove successful against precedent, DAOs typically suffer from what we call the “Satoshi Wallet Effect.” In short, once tokens are delegated, they are rarely redelegated.

This, paired with the fact that over time, many delegates begin to drop off due to voter fatigue, low compensation, etc, and you’re left with a situation where though the votable supply may be temporarily high, it’s functionally lower when you account for inactive delegates. Aave serves as a case study.

Incentivized Delegation Tracking (IDTs) serve as an elegant solution to all these problems.

Incentivized Delegation Vaults

The standard APR on DAO assets is 0%. There’s simply no incentive to do anything with your DAO tokens, including delegating to active delegates. But as everyone makes the rational decision to be lazy with their assets, everyone is collectively worse off, resulting in the votable supply/quorum problem we’re now facing. Further, if governance tokens cannot govern effectively, where does SCR’s value lie?

IDTs function similarly to LP yield farms. Users can delegate, not stake, their tokens to selected delegates. Event Horizon tracks who delegated their SCR tokens and emits rewards (in this case, SCR tokens) to users. This is done via a weekly airdrop; no claiming is required on the part of the users. Rewards are distributed pro rata based on each user’s dollar-valued delegation. For example, if 10 users each delegate $10, each receives 10% of the emission.

There are several benefits to this solution.

1. Non-custodial: because yield is earned via delegation, only a signature is required. We never take custody of users’ tokens at any point.

2. Low touch: all token rewards are automatically sent directly to delegators’ wallets, so no gas is required.

3. Counterpart to Delegate Reward Programs: We often see delegate reward programs as a standard function of DAOs, yet we completely neglect delegator reward programs. For a holistic solution, both should be incentivized as neither can exist without the other.

4. Stickiness – turning lack of delegation engagement into a solution: Through this model, the friction around delegation actually becomes a benefit. Once these tokens are delegated into the ecosystem for their initial APR, they tend to stay delegated even as future APRs may compress as there is no cost to continuing to delegate.

5. No smart contract risk: since the only interactions are a signature, and all tokens are airdropped, no smart contracts are involved in the process.

6. No treasury delegation / Mobilization of Airdrop and Exchange Tokens: Newly acquired delegations do not come from the treasury but from actual token holders. The treasury emissions are used to bring actual token holders off the sidelines and to participate in governance via delegating to active delegates. Keep in mind that there are three groups of token holders: the treasury, investors, and airdrop/retail holders. The latter two, investors and retail holders, hold a tremendous sum of supply (largely on exchanges or undelegated in wallets). This solution brings those two groups off the sidelines and into the votable supply.

7. Legitimacy is maintained: quorum is not arbitrarily changed for temporary solutions. This is a solution that allows for constant turnover of new, additional tokens delegated to active delegates.

8. Solves quorum now: The quorum issue can be solved now and sustainably into the future without having to whip votes to adjust quorum to a potentially sub-optimal new level. In fact, in only a few days after a proposal’s near miss of quorum, the votable supply dropped an additional 500k SCR. What if we changed the quorum just prior to that drop?

9. Capital efficient: given the lack of yield opportunities for SCR tokens (near-zero opportunity costs), this is highly capital efficient. A more comprehensive write-up can be found on our blog and our docs. We estimate $100k of emissions can attract around $1.5m in delegations depending on a few assumptions modeled below:
   

   

10. Rewards active delegates: Only active delegates will be included as options to delegate to in these IDVs, meaning that over time, as inactive delegates drop out and are removed from the IDTs, the newly entered delegates will replace them, and receive the incoming rewards from incentivized delegators.

11. Adjustable: Once a market rate for SCR delegations is established, the reward amount can be scaled up or down depending on quorum needs. If the votable supply drops, we scale up emissions, and vice versa.

Should this initiative prove successful, this can act as a bolt-on governance infrastructure, an “interest rate” for maintaining healthy levels of the votable supply and active delegates.

Execution

Operational

The current instantiation of IDTs has delegations go to the Event Horizon public access voter pool. Essentially, token holders delegate to Event Horizon, and we give this voting power to retail. But for this solution to benefit not only the Scroll ecosystem generally, but active Scroll delegates specifically, we need to expand this system to ensure that token holders have an incentive to delegate to all active delegates.

Further, we’d like to leverage the community’s decentralized distribution channels. The more people know about this new yield opportunity which benefits the DAO the better. To that end, we want to build a referral system so that anyone who brings in new tokens to the votable supply can be rewarded for their distribution.

We will set an APY cap of 10% after the first month. The program will run until emissions are exhausted. We will also allow the ability for current delegators to easily opt-in through the front end to minimize friction. Further, we will give a flat rate and a modest bump to whales ($50k or more) to avoid needless arbitrage. Thank you to @sinkas for these suggestions.

The tech stack is mostly developed in-house but includes: React Native, AWS, NodeJS, MongoDB, and RPC calls via Metamask and other associated wallets.

Updates will be posted on the Scroll forums with performance metrics half way through the program and at program conclusion.

Personnel and resources

The Event Horizon team includes 7 individuals.

Christian Gonzalez and Jordan Karstadt help with delegate outreach and DAO related operations. Krishna Yadvav works on social media and community. Lewis Sheeran and Angelo Pavilando are our front-end developers. Mig Debril is our back end developer. Jed Duffield works on marketing.

We would appreciate some support from the Scroll community and/or foundation on co-marketing efforts to get the word out to as many token holders as possible.

Technical

tl;dr: APY will be calculated to preserve the relative standing of included delegates to avoid arbitrage games and “robin hood” effects. You can skip this section without a loss of context or content

This suggestion was prompted by feedback from @olimpio

The goal is that the APY for each selected delegate incentivizes rational actors to delegate in proportions which maintain the relative standing of each delegate. To do so, let’s first define some terms:

We want to preserve the relative ratio of each delegate’s delegation at the time of snapshot T_0 . We can express this relative ratio of delegate i as the ratio of tokens that delegate i has delegated to them out of the total tokens delegated to all delegates included. Formally, the target weight of each delegate i can be expressed as:

Contrast this with the actual weight of each delegate i at time t once IDTs are live:

So the difference between the target weight, and the actual weight of delegate i can be expressed as the following quantity which indicates to us how far off we are from the ideal delegation ratio:

With the previous definitions in hand, we can adjust the base rate APY r_base to an updated rate r_i(t) at time t by the following model:

K is a parameter ranging from 0.01-0.05 indicating how sensitive we want this model to be to changes in delta_i(t)

To build intuition about this model, see this forum comment.

Financial

457K SCR = $165k

– 320K SCR = $115k for Season 1 reward emissions

– 137k SCR = $49k for build efforts mostly including personnel and some technical infrastructure

A rough model of expected delegations can be found below:

Evaluation

At the mid program and end-of-program reports we will include that most pertinent data specifically: SCR delegations made through IDVs vs. SCR tokens emitted.

Conclusion

IDTs provide a long-term solution for low votable supply issues. There are at least 12 distinct advantages to IDTs as outlined above. Of note is the fact that this solution does not require treasury delegations, is non-custodial, provides a strong reason to hold SCR tokens due to yield, leverages the stickiness of delegations which will result in mostly permanent gains in votable supply even post token emissions, and more. Any and all suggestions are welcome.

[eugene]

Overall reaction

My gut reaction (not reflecting governance team view at this stage, personal opinion) is that in the long run, it makes more sense to figure out how to be able to have delegated tokens still be able to access DeFi/staking. I appreciate the intent but I believe the various versions of offering yield for delegating is a temporary fix until that adjustment is made. Without a lot more data, I wouldn’t feel comfortable arguing for pursuing this over using the 457k in a wallet that auto-abstains or delegating that amount equally to delegates. Interested in hearing thoughts from those who are excited about IDVs and how they see the risk/rewards relative to the other votable supply ideas.

I’m also going to move this over to ‘General’ from ‘Proposals’ as it’s not in the official proposal format (forum, google doc version). I think this is better to have an initial discussion, and if there is interest, then adjust to the formal proposal structure.

Comments

@EventHorizon

IDVs function similarly to LP yield farms

To be explicit, the funds that go into the IDV, do they interact with DeFi and actually earn yield? Just reading this I get that the sense that the yield the delegator earns is covered from the ‘320K SCR for Season 1 reward emissions’ bucket. Let me know if I’m misunderstanding something.

@EventHorizon

No treasury delegation

Aren’t the funds coming from the DAO treasury for the emissions?

@EventHorizon

Event Horizon accrued $1.5m in new delegations in exchange for $1,500 in emissions

Can you help unpack this a bit more and provide more details. Can you share with which DAO? 1.5m USD value or 1.5m of the relevant token? Why not start with a much lower amount if 1.5k can lead to 1000x results to just see if we would have any initial traction?

@EventHorizon

we give this voting power to retail

Can you please clarify what this means?

@EventHorizon

The program will run until emissions are exhausted.

How do you see this going beyond the first proposal? How sustainable is this approach over time?

@EventHorizon

– 320K SCR for Season 1 reward emissions
– 137k SCR for build efforts

Can you provide some more color on how the funds would get used?

[EventHorizon]

@eugene

I wouldn’t feel comfortable arguing for pursuing this over using the 457k in a wallet that auto-abstains or delegating that amount equally to delegates.

The key benefit here as it pertains to IDVs is the ratio of emissions to delegations and the source of delegations. We have seen a 1000x dollar-to-delegation ratio. Of course, at greater scale this may compress but in any case it’s highly efficient. From a sourcing perspective, this is bringing new votable supply from currently circulating and non-participating tokens. It’s a stronger solution in that it doesn’t increase circulating supply to solve the problem (minus emissions), but makes the existing token base begin to contribute to governance finally.

@eugene

To be explicit, the funds that go into the IDV, do they interact with DeFi and actually earn yield? Just reading this I get that the sense that the yield the delegator earns is covered from the ‘320K SCR for Season 1 reward emissions’ bucket. Let me know if I’m misunderstanding something.

Yes, the rewards are funded by the program itself or perhaps sequencer fees as would any staking solution. Notably, and perhaps ‘vault’ is misleading here, there is no deposit required. It operates similarly to Merkl in that rewards are emitted by checking on-chain participation not by requiring transference of tokens into a contract.

@eugene

Aren’t the funds coming from the DAO treasury for the emissions?

The rewards are but the delegations (the overwhelming majority of tokens entering the votable supply) come from token holders not the treasury. These delegations are also highly sticky: once delegated, it’s rare for token holders to redelegate. Traditionally this is a problem (as delegates tend to drop out over time). But IDVs turn this problem into a solution: if emissions are cut, the delegations stay and the votable supply remains ~permanently higher.

@eugene

Can you help unpack this a bit more and provide more details. Can you share with which DAO? 1.5m USD value or 1.5m of the relevant token? Why not start with a much lower amount if 1.5k can lead to 1000x results to just see if we would have any initial traction?

Event Horizon emitted broad sweeping rewards and garnered $1.5m worth of tokens including $ARB, $OP, $MORPHO and a couple others. We could start smaller. This was just a launching number. We wanted to double the votable supply or more. If that’s an overreach, we can correct downward.

@eugene

Can you please clarify what this means?

Previous IDVs we’ve launched attracted delegations solely to Event Horizon. Retail users could then mint a free soul-bound NFT to vote on how Event Horizon’s voting power votes on underlying DAOs. The % increase for retail is significantly higher than for whales so this system disproportionately benefited retail. This proposal, however, is not to attract delegations solely to Event Horizon, but to active delegates.

@eugene

How do you see this going beyond the first proposal? How sustainable is this approach over time?

As mentioned above, IDVs turn the rigidity / immovablity of delegators into a solution. IDVs tend to benefit from the stickiness / rigidity of delegations once they are established. So, delegations earned through the program are likely to be durable. Future rounds would be used to further increase Votable Supply to either further expand participation or accommodate for future circulating supply expansion.

So after the program concludes, we can leave the votable supply as is forever, or we could continue to further increase the votable supply thereby making Scroll governance even more secure and robust. A point in favor of this latter option is that as delegates begin to drop out, each successive round of IDVs would redirect delegations to only those delegates who remain active. So program renewal not only leads to more votable supply, but also increases the % of the votable supply that’s actually being used by active delegates.

@EventHorizon

– 320K SCR for Season 1 reward emissions

– 137k SCR for build efforts

The overwhelming majority goes towards attracting new delegations and providing essentially the sole yield source for SCR tokens in the ecosystem, not to Event Horizon. The funds for the team are for build efforts, to expand the back end and front end to support referrals, multiple delegates, funding the team of 7, maintenance costs, in addition to allowing us to function as a builder and service provider for the Scroll ecosystem.

Appreciate the feedback as always, Eugene.

[bitblondy]

Thanks @EventHorizon for explaining for proposing this alternative and explaining IDVs. Do I understand correctly, that his is an addition to your main product, which is already active on Scroll?

While I think this could be an interesting experiment, I’d generally prefer an internal solution regarding the low quorum. I guess there are also a couple of risks associated with having yields on delegations and handing (more) voting power to potentially uninformed voters.

[DonOfDAOs]

Hey @bitblondy to clarify these IDVs would be created for a list of eligible and proven delegates already in the ecosystem (perhaps yourself included) — separate from the EH community. But also broadly, the EH community is quite well informed through highly trained agents.

I’ve met most of the delegates and stakeholders here, but we’ve yet to connect. Would you be open to chatting sometime next week? About this but also about EH / Scroll in general?: Calendly

[mel.eth]

Appreciate the clarity and compositional rigor of this proposal. From the perspective of legitimacy theory—as framed through both my work on Oxcart and broader participation frameworks—this is a highly promising mechanism to resolve structural underrepresentation in votable supply without compromising the procedural integrity of the DAO .

Legitimacy Function Formalism

The question here is: Can we use incentives without undermining legitimate governance? Mathematically, we model legitimacy as a dynamic function of participation and trust:

By tying delegator incentives to active delegation , the IDV mechanism increases Pj(t) for active delegates—raising their legitimacy without any artificial inflation of voting power. Inactive delegates, seeing withdrawals or disqualification from IDV eligibility, **experience Nj(t)↑ and thus legitimacy erosion over time. This is exactly the behavior we want in a live governance equilibrium: a continuous recalibration based on signal-aligned trust .

Delegation Incentive Dynamics

This function respects:

• Non-custodial delegation (no transfer of capital ownership),
• Proportional fairness (no disproportionate advantage to whales),
• Temporal consistency (APR reflects live market balance).

Importantly, this design does not mint legitimacy —it mobilizes latent legitimacy by converting inert capital into delegated capital. That is, it increases the Delegational Voting Capital (DVC) component of the total legitimacy score:

Legitimacy Preservation Through Design

Rather than adjusting quorum thresholds—a static parameter that weakens confidence in process—this model uses soft incentives to reshape delegation behavior while preserving the hard rules of the governance system. That is a fundamentally legitimacy-enhancing design choice .

This structure also supports anti-centralization through APR decay . If one delegate j accumulates excess DVCj​, their relative yield Ri​ drops, pushing marginal delegators to other active delegates—a negative feedback loop that stabilizes plural representation.

Final Assessment

This mechanism:

• Aligns mathematically with the Oxcart legitimacy function
• Respects voluntary consent and trust as the basis of voting power
• Does not distort representation via coercive or synthetic delegation
• Provides a clear incentive signal to correct under-delegation
• Self-corrects over time through APR market dynamics

In short, this is a mathematically sound, politically legitimate mechanism for reinforcing quorum and filtering inactive delegates without weakening foundational trust in the DAO’s governance process.

Would support this proceeding to pilot with clear delegation analytics and public dashboards to ensure transparency of impact over time.

— mel.eth | StableLab

[bitblondy]

Hi @DonOfDAOs, thanks for clarifying.
Sure, I’ve booked a meeting.

[SEEDGov]

Thanks @EventHorizon for crafting this detailed IDTs explanation and providing an alternative avenue towards the incresing votable supply topic!

Moving directly to the proposal, several points mentioned throughout the post have certainly caught our attention. Undeniably, incentivising SCR delegations with a non-custodial solution whilst avoiding smart contract risks sounds like a good approach. Moreover, incentivising delegations to be distributed as equally as possible amongst delegates sounds beneficial, particularly for smaller ones. Another well-spotted point is that such a proposal would increase SCR use cases, something we’ve mentioned before as worthy of consideration, not only in the context of increasing DAO participation but also to improve the current SCR’s liquidity situation.

Of course, there are some concerns as well. Whilst the argument of delegation ‘stickiness’ was raised, one could argue the opposite. That is, once rewards are over, those delegators who delegated just because of the rewards might move on looking for the next yield opportunity. Such a scenario would require deploying new ‘rewards seasons’, consequently becoming a constant expenditure for the DAO treasury. Given current market conditions and the lack of a constant DAO treasury income source, delegates have been ‘quite picky’ when it comes to deploying funds from it.

Therefore, we believe that this type of programme should be combined with a mechanism that makes it, if not self-sustaining, at least close to it, by generating revenues that can aim to cover both the programme’s operational costs and incentive expenditures. Furthermore, we think this should be coupled with clear strategies to attract SCR holders keeping their tokens on CEX, which represents perhaps the hardest users to bring on-chain and somehow involve in DAO governance through delegations.

Nevertheless, we think programmes like this are precisely the type of initiatives that should be leveraged in the mid-term by whatever structure is set.

[cxgonzalez]

tl;dr: make the APYs persevere the relative standing of delegates before IDTs go live to avoid a “robin hood” effect

In my conversations with various delegates, a potential issue was flagged with even distribution of delegations which I would like to suggest a correction for.

Imagine if a whale is delegating to a delegate. Once IDTs go live there is incentive for them to undelegate, and redelegate through IDTs to collect some additional yield. This would not be problematic if they redelegated to the same delegate they did before*. However, if token emissions are spread evenly between all qualifying delegates, then they have incentive to spread out these delegations evenly. This would result in a redistribution of delegations from single delegates to all delegates. This “robin hood” redistribution is not the objective of this proposal so the following mathematical model is suggested.

*(There is likely to be some APY being distributed to token holders who have already entered the votable supply but this is likely to be a small percentage of the overall delegators tracked in IDTs as these redelegators didn’t need incentive to delegate in the first place. Sidelined tokenholders, by contrast, are more likely to respond to economic incentives by comparison.)

So in order to preserve the relative weighting of each delegates voting power prior to the launch of IDTs a snapshot of the delegations of all included delegates will be taken. The objective of this proposal is to preserve the relative standing of each included delegate while increasing the votable supply. The purpose of this proposal is not to boost small delegates. This is a worthy initiative but out of scope for this proposal, for now at least. Now onto the model:

The Model

The goal is that the APY for each selected delegate incentivizes rational actors to delegate in proportions which maintain the relative standing of each delegate. To do so, let’s first define some terms:

We want to preserve the relative ratio of each delegate’s delegation at the time of snapshot T_0. We can express this relative ratio of delegate i as the ratio of tokens that delegate i has delegated to them out of the total tokens delegated to all delegates included. Formally, the target weight of each delegate i can be expressed as:

Contrast this with the actual weight of each delegate i at time t once IDTs are live:

So the difference between the target weight, and the actual weight of delegate i can be expressed as the following quantity which indicates to us how far off we are from the ideal delegation ratio:

With the previous definitions in hand, we can adjust the base rate APY r_base to an updated rate r_i(t) at time t by the following model:

K is a parameter ranging from 0.01-0.05 indicating how sensitive we want this model to be to changes in delta_i(t)

Intuition building

To build some intuition for this model consider the following cases:

This model ensures that APY creates incentives which results in rational agents delegating to each delegate in proportion to the standing they had prior to IDTs.

[EventHorizon]

Several suggestions were made by @Sinkas in our conversations with L2Beat

1. Opt-in services: for those already delegating, add the ability to opt in to begin receiving rewards. This makes it easy for those who have explicitly chosen to delegate to their favorite delegates to receive rewards while avoiding having to go through a front end, or deal with slight differences in APY rates. This also incentivizes delegators to be active in their redelegations, prompted by IDTs.
2. 2-tier model: whales (say $50k or greater) receive a flat rate APY with a slight boost. This is to avoid whales playing games optimizing for slight APY differences for arbitrage. This ensures large token holders delegate to who they want without the need for consideration of block-by-block differences in APY.
3. Finally, we’re modeled out some expectations for delegations we can expect to attract via IDTs. This rough sketch can be found in the table below
   
   

These are strong suggestions that we’ll be adding to the proposal above.