Answering the call for feedback: I think the issue Nick raised about the dust exploit is a valid concern that hasn’t been addressed. I understand that the Blockful team might disagree that it is a big risk, so at this point perhaps all we can do is look back after the pilot has concluded and see if much exploitation took place.
I also feel like the plan is not very clear on how the expected outcome will benefit the community. Yes, simply increasing the amount of tokens delegated is a good thing, but if those additional delegations (and the new ENS tokens being paid out as awards) all just result in concentrating more voting power with the largest existing delegates, it seems like it would actually be a net negative to the health of the ecosystem.
All of these issues have been pointed out before, and since there isn’t currently a process for competing proposals to be evaluated, again I feel like all I/we can do is watch the plan roll out and evaluate after the fact how effective it was.
At the conclusion of this pilot, I suggest we also evaluate the Gini coefficient and/or Herfindahl-Hirschman Index of delegated voting power (both amongst all delegates and amongst the top X delegates) and see if the changes are considered positive.
All of these concerns are valid, because what is being attempted here is completely innovative and experimental, and no DAO has ever managed to implement such a system properly.
Directing DAO revenue only to governance participants is certainly more efficient than buybacks, but it’s neither practical nor previously tested. And in this specific framework, the revenue isn’t even being directed. What’s really happening is a redistribution of power created by diluting non-delegating tokenholders. Considering that the majority of tokenholders fall into that category, this framework could significantly decrease the value of the ENS governance token. (even in an optimistic scenario where no delegates sell, the perception of inflation alone can erode value)
So in the end, you get more governance participation, but the cost of acquiring governance power becomes lower, and the outcome ends up the same.
The safest, common, and non-experimental solution for preserving governance power is buybacks. But there seems to be a closed-minded stance toward this option, largely because the constitution was written based on an inaccurate perspective.
If this experimental approach fails, the value of governance power will eventually drift out of alignment with the protocol itself, and the DAO will likely be forced to revert to a multi-sig governor, effectively dissolving the DAO model.
I don’t think I’ve seen thorough conversation about buybacks in the time I’ve been participating in the ENS DAO.
Are there pros/cons to evaluate or examples of success with this in other DAOs? (Not as an alternative to this proposal per se, but more as conversation that should perhaps take place?)
It’s basically simple math at the end of the day. To avoid governance capture, you need to keep the value of 51% of vote-participating tokens aligned with the value of the DAO.
The first and most efficient method is to increase the percentage of vote-participating tokens, but(here’s the tricky part) it must be increased in a meaningful and high-quality way.
The second method is to increase the value of all tokens through buybacks. However, since the incentivized supply is much larger in this method, it is less efficient than the first.
The upside is that you preserve the DAO’s governance by aligning the value of its ownership shares with the value of the DAO itself.
The downside is that it impacts the budget available for development, so this approach is more suitable for mature protocols with excess revenue.
Lido DAO has already been discussing it: Liquid Buybacks
I don’t know if there are other examples.
Can you explain what buybacks and increasing the token value has to do with incentivizing dormant token holders to start delegating to active voters? I don’t understand the connection.
Greater delegation will not be sufficient to maintain robust governance if the governance token’s value becomes decoupled from the DAO’s financial value(this is not the situation today for ENS btw, it’s a long-term play).