Validation Pool

The Validation Pool is the mechanism for holding REP-weighted votes on every assertion made in the DAO. It's function is roughly similar to a betting pool, in that members may register their votes with REP tokens, then, in a binding vote, those voting for the losing side have their tokens redistributed to the winners proportionally.

Specification

Overview

Suppose a DAO with a total of ${\textstyle R_{T}}$ reputation tokens has $n$ experts $e_{k}$ for $0\leq k\leq n-1$ where an expert is defined as anyone who owns a REP token. Let $R_{k}$ denote the number of tokens owned by expert $e_{k}$. So ${\textstyle R_{T}=\sum _{k=1}^{n-1}R_{k}.}$

An instantiation of the Validation Pool Smart Contract (VPSC) takes as initial input a new post's address in the Forum, a cash fee, and a type of REP tokens to be minted. VPSC returns newly minted REP tokens. In addition each owner of REP tokens specific to the domain of the post may encumber their tokens and vote up or down on the post. VPSC redistributes the new REP and the encumbered REP as described below.

Mint new REP

When VPSC is called, the fee $\$f$ is encumbered, and $mf$ new REP tokens are minted of the type specified. The parameter $m$ determines the proportional number of REP minted to the fee, as set by the DAO.

Vote

VPSC then encumbers default $c_{2}=1/2$ of the newly minted tokens in the poster's name as an upvote, and encumbers $1-c_{2}=1/2$ of the newly minted tokens as a downvote, left unassigned to any owner until the completion of the smart contract.

VPSC then allows each member $m_{k}$ to encumber any of their REP tokens (of the proper type) with an input $v_{k}$ of upvote ($v_{k}=+1$) or downvote ($v_{k}=-1$) or default abstention ($v_{k}=0$). Once the voting period is finished, VPSC counts the votes by calculating the vote total ${\textstyle V_{T}:=\sum _{k=1}^{n-1}v_{k}R_{k}.}$ If $V_{T}\geq 0$ that means the total REP used to upvote ${\textstyle R_{U}:=\sum _{\{i|v_{i}>0\}}R_{i}}$ outweighs the total REP used to downvote ${\textstyle R_{U}\geq R_{D}:=\sum _{\{i|v_{i}<0\}}R_{i}}$. This means ${\textstyle V_{T}=R_{U}-R_{D}.}$ Therefore if ${\textstyle V_{T}\geq 0}$ the post is validated. If $V_{T}<0$ then the downvote wins and the post is invalidated. (The fact that ${\textstyle V_{T}=0}$ results in validation reflects the almost arbitrary decision that ties will always favor the upvotes.)

Binding vs. non-binding

A VPSC can be binding or non-binding. If an instantiation of the VPSC is binding, that means the REP tokens of all those who voted against winning side lose the tokens they encumbered to those who won, proportionally. E.g., if the post is validated, then all the REP used to downvote ${\textstyle R_{D}}$ is redistributed to those who upvoted, meaning each voter $m_{j}$ with $v_{j}>0$ receives ${\textstyle {\frac {R_{j}}{R_{U}}}R_{D}}$ new tokens.

Finally, a VPSC can be $p$-binding for any $0\leq p\leq 1$. A $p$-binding VPSC redistributes the fraction $p$ of the losers' tokens to the winners.

Consequences

The Validation Pool can be set to binding or non-binding votes to serve the function of executive or legislative governance. A binding vote means the REP tokens are tightly-coupled with the voters' assertions about the post--if their assertion fails, the voter loses their tokens. For stability, this should only happen when the voter is violating the previously determined will of the DAO.

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Binding Non-binding Rigid Non-contentious post & tightly-coupled (E.g., work-evidence post, mandatory plebiscite) Non-contentious post & loosely-coupled (E.g., poll of consensus on established precedent) Flexible Contentious post & tightly-coupled (E.g., forcing consensus on protocol development) Contentious post & loosely-coupled (E.g., protocol development poll, advisory referendum)

One post can be reposted with different fees for different types of REP.