Judicial governance proposal

A primary type of judicial governance in DGF is achieved by proposals in the Forum. A judicial governance proposal combines Forum reference mechanisms with the legislative governance process. These proposals allow a DAO to express more complicated intentions of its will, by revaluating its past REP distribution. Some initial basic example proposals are collected in this page.

Mechanism design

A judicial governance proposal is a proposal to revaluate the Forum, that is, to change the fundamental REP distribution in the DAO. In the following example proposals, we make some assumptions about the particular culture of an example DAO for the purposes of illustration. These assumptions are not required and will change depending on the purpose of the particular DAO.

First we assume the DAO enforces a ${\textstyle 10\%}$ global tax on all new REP value minted in the DAO. This number is not necessary for any particular DAO and the percentage is arbitrarily chosen for the purposes of illustration. By a ${\textstyle 10\%}$ tax, we mean that whenever new fees enter the system the amount of new REP minted is ${\textstyle 1.10*fee}$. In this case, ${\textstyle 1.10}$ is the minting ratio and the extra ${\textstyle 10\%}$ is the governance tax. We call it a tax, because if the newly minted tokens are not burned (see below) then they dilute the power of previous REP tokens, so that all members are affected, since their REP salary is diluted.

By fiat, the DAO requires that every new work smart contract (WSC) post which earns fees and REP must donate ${\textstyle 10\%}$ of the new REP to give power to posts dictated by the governance process. Governance posts are called proposals. New posts automatically reference approved proposals because the UI automates the process of fulfilling proposals. Posts which do not follow reference protocol are downvoted automatically in the Validation Pool.

The governance process is as follows. A proposal is submitted. If accepted the proposal becomes a promise. Future work posts donate their ${\textstyle 10\%}$ REP to fill all promises. When a promise is filled it becomes a fulfilled promise.

In greater detail: A proposal is a post submitted to the Validation Pool for gREP owners to consider. A proposal typically has 0 value at initiation and will only gain REP value after subsequent references give it power. A proposal references other posts, donating and/or leaching, which entail a suggestion for redistribution of REP. In other words, a proposal has a set of references and number called its full potential. The full potential is the value it proposes to eventually receive by future work posts. The full potential and the references determine the actual value of REP redistribution of a proposal.

If the proposal is accepted by the DAO through a Validation Pool, then it becomes a promise. That is, a promise is a validated post in the Forum which has a set of references and a specified full potential. Typically a promise starts with 0 value, then subsequent work posts donate REP value to it until it reaches value equal to its full potential. Then the promise becomes a fulfilled promise. Before a promise is fulfilled, it is an unfulfilled promise.

The current WSC is continually updated to hold the set of unfulfilled promises. The worker UI parses the difference between the sets of fulfilled and unfulfilled promises. If there are no outstanding unfilled promises, then the UI automatically donates the ${\textstyle 10\%}$ governance tax from the work post to the incinerator.

Governance tax

The parameter $p=10\%$ in the above example is the governance tax. From the DGF model, the parameter $p$ is included in the minting ratio $m$. It can be chosen by the DAO to be any number $0\leq p<\infty$.

The governance tax is particularly equitable, since every worker pays precisely the same amount, relatively. Since every WSC donates the same ${\textstyle 10\%}$ to governance references, then the remaining REP every worker receives from a WSC has the same value by the quantity theory of money in economics. To illustrate this point, notice that if every members' REP holdings were arbitrarily doubled, then the salary each member receives would be unaffected.

The REP salary is unaffected by the ${\textstyle 10\%}$ of REP tax whenever it is incinerated, because there is no actual loss in REP salary, because everyone has the same governance tax for every WSC.

Similarly if governance equally redistributes REP within the Forum – meaning the amount leached from posts is equal to the amount donated to posts – then any member whose posts are not affected will not have any change in their REP salary.

The only time general REP salary is affected by the governance tax is when the reference donation and leaching is not equal. When donation is larger than leaching, then the REP salary of other members is decreased, since the total REP is increased, diluting the power of REP. When leaching is larger than donation, then the REP salary of other members is increased, since the total REP is decreased, which concentrates the power of REP. Therefore the effect on the salary is bound by the size of ${\textstyle p}$ and is typically much smaller. It is worth reiterating: governance tax REP sent to the incinerator is good for every member of the DAO.

So a tax of ${\textstyle p=10\%}$ does not affect the value of REP unless it is used to donate to new posts in excess of leaching, which should only be done to redress past mistakes.

Fairness

Regardless of the change in REP total, the tax affects every REP token equally, since the tax dilutes REP universally. Since every WSC post is required to donate at least ${\textstyle p=10\%}$ of its REP to governance, then that REP is available for revaluing the WDAG in response to governance proposals that the DAO approves, as long as the DAO is actually earning revenue.

Governance agility vs stability

Finally, the ${\textstyle p=10\%}$ parameter is arbitrary. Governance can decide to make ${\textstyle p=1\%}$ if the DAO wishes governance to move slower, or ${\textstyle p=200\%}$ if it desires faster governmental responses. A smaller number gives greater stability and less responsive regulation. A larger choice destabilizes the DAO and is a threat to security, but also makes the DAO more nimble and responsive to changes in the market and makes policing more effecting.

Example judicial proposals

Proposal to swap value from one post to another

??Fix:

The figure displayed illustrates a scheme for redistributing power from Post1 to Post2.

In this case we can imagine governance concluding that Post1 was bad and Post2 was good. Then governance makes Post3 with power 10 REP and validates it. Then in the displayed example the Forum WDAG has been revaluated, i.e., re-weighted. This is the primitive that allows governance to review previous judgements and correct mistakes made in the past. The incinerator is a complication that allows this re-weighting action to keep the total graph weight constant.

This isn't the only way to achieve re-weighting. Every approach has its own advantages and disadvantages. This approach encourages stability because it is particularly inefficient. E.g., it costs 10 to move 10, and 10 REP is destroyed. So conscious effort is required to reweight the Forum to correct past mistakes. This effort requires the sacrifice of 10 REP on the part of those who make the change (the 10 REP from Post3 was governance value).

However note that in this case, the 10 REP "sacrifice" will not burden any particular member to achieve the revaluation, if it is done in concert with the governance tax. In this case the governance tax is free since the total amount of REP in the DAO before and after the revaluation is unchanged, because the excess governance tax is incinerated.

Proposal to punish postK by slashing its REP, but not affect the posts it references

(The imagined context is that the owner of postK violated a tenet of the DAO so we want to punish them, but we don't specifically disagree with the actions and consequences of the particular postK – we just want to take away their REP without punishing anyone else who was historically involved in the work that led to the creation of REP associated with postK.)

Answer: slash postK and simultaneously donate the same amount to its positive references.

Proposal to create a bounty

The bounty can then be leached by an approved claimant. The bounty promise can be fulfilled before or after the approved claimaint leaches from it.

This example shows how some of the specific instantiations of governance proposals can be convoluted because we rely on basic primitives. However the completeness of the primitives guarantees any logical process desired has a rigorous solution.