DIP - Reduce the Proposal Threshold for Short Timelock Executor Changes to 0.1% of Total Supply and Long Timelock Executor Changes to 0.5% of Total Supply

[0xCLR]

Summary

Currently most on-chain proposals need to go the short timelock executor, requiring 0.5% (5m DYDX) proposal power. Changes such as this to governance consensus require 2% (20m DYDX) proposal power.

This proposal suggests reducing these to 0.1% (1m DYDX) for the short timelock executor and 0.5% (5m DYDX) for the long timelock executor. Additionally reduce the long timelock quorum and minimum yes votes from 2% (20m DYDX) to 1% (10m DYDX).

Starkware and merkle proposer thresholds as well as snapshot proposal thresholds stay the same.

Abstract

This proposal is intended to empower community development.

To create an on chain proposal for DYDX currently requires 5m DYDX in proposal power for most changes and 20m DYDX for changes affecting governance consensus such as this one. These requirements are far more onerous than needed to repel governance attacks and spam. They block community contribution and progress while creating the potential for governance censorship.

Reducing these thresholds will allow more delegates and large holders to sponsor proposals. This is important in creating a decentralised DAO and empowering delegates. Contributors will have more options to sponsor their proposals allowing those taking initiative to create an impact.

Context

DYDX governance consists of two phases, a snapshot vote for signalling general consensus (or where no changes to the protocol or treasury are required) and an on-chain vote with appropriate payload to execute.

The DYDX on-chain governance contracts are based on Aave’s. At a high level this separates proposals into those affecting governance consensus, the most critical and sensitive, that go through the long-timelock executor and proposals making other changes to the protocol that go through the short timelock.

The short timelock executor controls the following:

• Incentive contracts including the Liquidity Module, Safety Module, and Merkle Distributor Module
• funds in the Rewards and Community Treasuries
• minting new tokens
• all proxy contracts except the safety module
• guardian roles on stark proxy contracts

The long timelock is designed to have stricter a proposal threshold and a longer voting duration because of its importance.

Aave has recently also voted to reduce the requirements on its version of the long timelock contract. We believe, given the significantly smaller circulating supply percent of DYDX that the short timelock also needs less strict proposal thresholds to allow the DAO to develop.

Motivation

Over the 22 epochs of the DYDX DAO there have been 11 successful on-chain proposals and 1 unsuccessful. Over the past 12 months only two entities have proposed on-chain DIP’s. For a truely decentralised DAO we need more diversity in those able to participate by sponsoring DIPs.

In preparation for v4 the DYDX DAO will need subgroups to be ready to take over certain functions currently handled by dYdX Trading Inc. This will require short timelock proposals to access funds in the community treasury and 5m in proposal power. I believe there should be a wider range of potential proposers to reduce frictions in this process during this crucial period for the DAO. More proposers also means more action and more impact.

Specification

This proposal is focused on enabling a broader number of community members to sponsor on-chain proposals affecting tokenomics and use of tokens. The adjustments to the long timelock are included to make future proposals of this nature possible without needing help from the small number of organisations with 20m+ DYDX.

• Reduce short timelock executor proposal threshold from 0.5% of total supply to 0.1%. No change in Minimum threshold and vote differential.
• Reduce long timelock executor proposal threshold to 0.5% of total supply. Reduce Minimum threshold and vote differential to 5%.

Next Steps

Should this proposal receive general consensus support the idea is to create a snapshot to go live on Monday 29 May 2023.

Links

https://docs.dydx.community/dydx-governance/voting-and-governance/governance-guide

https://docs.dydx.community/dydx-governance/voting-and-governance/governance-process

https://governance.aave.com/t/rfc-aave-governance-adjust-level-2-requirements-long-executor/8693

[fig]

Hey @0xCLR -

It was great to meet you and learn more about this proposal in the call earlier today. Seems like a reasonable change and is something we have supported in past communities.

Lower proposal thresholds usually equate to more empowered stakeholders. Let’s take a look at the difference among the 0.01% supply levels and bands even lower:

The table illustrates the lower the range is the more accommodating it is for token holders to meet this threshold; this is true for most DAOs.

Looking at past dYdX Snapshot voters, this number is even lower with 34 voters with > 1mm DYDX, and 13 > 5mm. This data set suggests lowering the threshold expands the active participants set by 2x.

Lastly, trend in token events, including delegations:

As delegations spiked in January and slowly diminish towards the introduction of V4 – this activity may mean that reaching the threshold of 5,000,000 is becoming less attainable (if not already reached).

As dYdX iterate its next stage of Governance, we are in favor of lowering the proposal threshold and experiments which make governance more accommodating for to a wider set of stakeholders.

[0xcchan]

Thanks @0xCLR for this initiative, as mentioned in the call yesterday, this is definitely a step in the right direction to make governance more accessible for token holders!

However, I have some concerns and questions for the aforementioned suggestion:

While I agree that proposals have been primarily created by just 2 entities, they have been acting in the best interests of the protocol. And in fact, I feel it doesn’t solve the primary issue of governance.

Possibly more confusion at this stage

Yes, more proposals can be created by more members. But as we’ve seen from other protocols, it creates an endless list of proposals where majority of it are left behind. At this critical stage of transition, rather than creating an easy to read interface on Discourse, it may potentially become a long list of proposals that confuses the community and makes it more difficult to catch up with the latest developments.

Too early to tell of v4’s governance structure- eg. subDAOs

Currently, I don’t see the urgency and need to reduce the threshold. Subdaos etc will naturally find its place (eg. potentially having rights over certain parameters? Expedited proposals for emergency cases? etc ) once we can fully understand how dYdX’s governance works in a COSMOs world.

Likewise, in Osmosis’s structure, members with at least 500 OSMO can initiate proposals too. This will also have a larger number of eligible holders. Hence, the figures can be determined again once more information available.

After all, this current revised proposal also means that subDAOs need at least 1m in proposing power and the threshold will likely change.

More proposals != Higher Success Rate

Furthermore, as seen from the forums, the community has been extremely active and vocal with regards to their aspirations for v4. In this case, even if members are able to create a proposal, it doesn’t necessarily pass and this relates to problem 1 of the possibility of having too many proposals.
As such, IMO, the voting model / differential has always been an issue. For instance, the ambassador programme was discontinued as it failed to reach the min vote differential of 67%. We could have come up with another 2/3 proposals with the proposed revisions, but I’m not too sure if this is necessarily a game changer. The key question perhaps is - can the protocol find a balance of levelling the playing field for proposal voting, rather than merely expanding the circle to have more members put forth proposals.

Till more information is available, I was wondering if this can be revisited again in the future to have a more robust discussion. After all, v4 is supposedly aimed for next quarter and I don’t foresee a huge number of governance proposals coming up until there’s more clarity.

[0xCLR]

Revisiting the responses so far.

@fig Thanks for the response ser, agree with everything.

@0xcchan thank you too for the thoughtful points . It’s always good to receive well reasoned feedback. I’ll attempt to go through your points one by one.

Firstly, this proposal is definitely not meant to imply anything negative about any entities holding large proposal power currently. I have used one to pass a proposal last month and got a full service treatment even creating the payload for me.

In a nutshell the intention is to unblock the 10 or so other delegates with large delegations from making proposals. This offers more choice around the choice of sponsor for proposals over the next 4 months or so. Beyond that, of course v4 offers the chance to start over with a governance design that will look very different.

Possibility for endless proposals: I doubt unblocking the delegates will result in an endless list of on-chain proposals. The bar to create a snapshot remains the same and this proposal suggests setting the threshold for on-chain at 20x that.

Too early for v4. This proposal focuses on v3 now as the DAO takes shape ahead of v4. This affects the period leading up to v4 and agree in v4 the thresholds will likely change.

More proposals does not equal higher success. The example of the ambassador program was not an on-chain vote so would not have been affected by this proposal.

This is not just about successful proposals but about offering a very slightly broader range of options to sponsor a proposal. I do agree at this point there are other governance issues to tackle in conjunction, this focuses squarely on putting a vote on-chain. This proposal does not affect voting (except the long-timelock bit which is optional).

I’m going to be honest, given the requirements mentioned in the OP passing this proposal will be a massive challenge. If the community is not extremely motivated to make this change now then it is not worth everyone’s time and effort. Unless there is significant support, especially from delegates it is best to leave things as is. If anyone believes this is important to do now make it known here, otherwise consider this on hold.