Idea to incentivize "direct" voting in Kyber 3.0

Hi guys,

while a specific community member is on a personal rampage battling proxies etc. I made my mind up and came to the conclusion that it might make sense to incentivize “direct” voting in Kyber 3.0.

How could it work: it should be pretty easy to differentiate between “normal” DAO users / voters and the few big pools (Binance, XToken, etc.) by checking their adresses. Now what about adding a incentive to the reward system - e.g. 2% of all rewards are shared to users (the big pools excluded) who vote directly on Kyber DAO (instead of delegating their vote).

Keeping in mind that EIP 1559 is upcoming and several gas-saving solutions like OPTIMISTIC are due to launch soon this might offer enough incentives (especially for the “first movers”) for average users to vote directly on the DAO.

While this is no short-term fix to make sure that voting is really “decentralized” it might be a viable solution for the middle-term, especially if EIP 1559 comes into play or even a gas-saving solution like OPTIMISTIC etc. is implemented.

What do you think?


I like this, but this need to be combined with very cheap gas transactions (L2) in order for small guys to decide between laziness of using a proxy or voting because of rational self-interest. Because if transactions keep being that expensive and small guys still can’t afford, therefore they will still be obliged to vote through proxies.

Now, this solution is good, because it incentivizes solo voting, but the solution that I propose of making proxies own a skin in the game is more objective, because then we can stop completely worrying about proxies, since now they will be acting according to their own interests and not against KNC holders interests, because now they own KNC, kind of Self-evident.

I like this, @ShaneKyber but 2% is just too little, people will keep being lazy with such a low % and vote through proxies, the magical number is 3.33% :face_with_hand_over_mouth: :relaxed:

Better yet, The % of incentive rewards for direct voting should be dynamic and automatically adjusted based on direct-voting/proxy-laziness participation, the more direct voting is detected the fewer rewards proxies will get, until the point that there is very few lazy people left in proxies, and the whole community is all responsible and participating like it should be!

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quadratic voting offers some flavor of what the proposal wants to achieve. Basically if your stake is X, you are getting square root of X (sqrt(X)) as the vote power, which will then later on be used to measure your reward.
So you are actually better off voting separately. For example, if you split your stakes into two addresses, say 9 token each, and you will get sqrt(9) + sqrt(9), or 6, as the total reward. Now if you combine the two together as one address (or a pool), you will get sqrt(9+9), or 4.24 as the reward, which is much less than voting separately.

This will make life of the whales harder thou, cus they will have to split their stake into multiple portions to really optimise their total reward.


Personally I do not like the idea of “quadratic voting” - as you noted this will not only affect pools but also regular voters (bigger & whale ones). Besides that I think the “valuation” of KNC / its rewards should be strictly linear - no matter how much you hold. Same rights for everyone.

My idea on the other hand was to allocate a defined % of the DAO rewards to voters who vote directly on the DAO instead of delegating their vote.

Maybe an even “better” solution would be to distribute these defined % rewards only based on the KNC an address actually holds. Here a simplified example:

100 ETH total rewards in a epoch, thereof 3 ETH rewards for “direct voters”
10.000.000 KNC voted in total.

ETH address A owns 10.000 KNC and voted directly on the DAO.
ETH address B owns 20.000 KNC and voted directly on the DAO.
ETH address C is a staking pool. It owns 1000 KNC (on the ETH address) but voted with the remaining 9.970.000 KNC which are delegated to them.

The 3 ETH for “direct voting” are now distributed as follows.
3 ETH / (10.000 + 20.000 + 1000) =
3 / 31000 =
0,00009677 ETH per KNC

Address A receives 10.000 * 0,00009677 = 0,9677
Address B receives 20.000 * 0,00009677 = 1,9354
Address C (the voting pool) receives 1000 * 0,00009677 = 0,096
The voting pool only receives the reward based on the actual KNC which are on the ETH address and not based on the delegated votes. This would per se incentivize staking pools to add “skin to the game”.

I think this would be a really easy way (from a technical and logical point of view) to incentivize “direct” voting.


I also think they should be strictly linear. I don’t like the quadratic voting idea, is unfair to the rich (the genuine rich, not the proxies that hijacked the rich list with KNC is not even theirs) because it lowers their voting weight unfairly, the rich are the ones that have more to lose, they should have FULL voting weight, not making them to have to divide their KNC holdings into multiple accounts to achieve circumvent the quadratic voting restriction. The rich (the genuine) have more to lose, meaning they have more incentives to make rational objective decisions, is unfair you take away their voting weight for a few pools that hick jacked the rich list.

That “skin to the game” is so thin it would not matter, collusion would still happen. It is not a real skin to the game solution, the solution is to actually require proxies to own collateral in order to start giving delegation services, then from whatever collateral they own, you give them proportionally 10x their collateral as the maximum delegation capacity they can receive. Then they all will have a genuine skin to the game, they will all act according to their rational self-interest, and that interest will always be aligned with delegators interests too. The 10x maximum delegation capacity also prevents a single proxy being too centralized. Any delegate reaching maximum delegation full capacity, will no longer be able to receive more delegators, delegators will have to look for another delegate.

I mean, I like the 3% direct voting reward proposal, but is just a momentary band-aid, you are not treating the greater wound, which is converting proxies into legitimate owners, there must be a way via smart contracts to create the collateral/10X proxy design somehow.

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Quadratic voting is an interesting approach to addressing the issue of too much voting power. However, I strongly disagree with the idea of implementing quadratic voting for the following reasons:

  1. Everyone suffers, not just staking pools. Community members with alot of KNC would have to go through a lot of trouble and pay higher costs in gas fees to vote and obtain rewards on several ETH addresses just to increase their voting power.

  2. The Kyber team holds a sizeable chunk of KNC and I personally would feel more comfortable if the Kyber team maintained their voting power in the KyberDOA. Because at the end of the day, I trust the Kyber team to do what is best for Kyber and the community.

  3. Community members that have a lot of KNC are heavily invested and strongly believe in Kyber’s mission. It is important to maintain their voting power because they care about Kyber’s future in the long term and also want what is best for Kyber and the community.

If I had to choose between implementing quadratic voting or keeping the current governance system, I would vote to keep things the way they are.


That sounds good :grinning:

I’m in favor of quadratic voting. Take everyone’s opinion into account is more right, than giving all the power to few big ones.

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Linear also takes everyone’s opinions into account, each KNC is 1 vote. You are talking about rightness, this is the right way of running a business.

The big ones that got their KNC genuinely from the markets ARE NOT the problem, they have the right to have more voting power because they invested more money, they have all the intentions to make rational decisions that will also benefit the small fishes. In fact, they have more reasons to make rational decisions than the “poor”.

So please stop generalizing all the “few big ones” into a group, they are not the same, not all got their KNC the same way. Proxies are illegitimate KNC owners, we should not punish the genuine rich guys that did actually purchase their tokens from the market, just because the proxies are high jacking the rich list with KNC is not theirs.

You are generalizing all the “few big ones” into one group, like if they were all equally bad. Like why the genuine rich would want to sacrifice their investment by making bad irrational decisions? That’s why you want them to have less voting weight or power? What is this socialism within a private crypto company?

No, the rich guys are not a problem, they have all the best intentions to make rational decisions that will benefit us all, also they earned that voting weight by investing and actually buying KNC from the markets.

The only ones that are a problem are proxies, which are illegitimate KNC owners, that didn’t invest their money, they will not sacrifice any investment of their pockets from making irrational decisions, those are the ones that are a threat. Those are the “few big ones” that are a real threat.

We should not implement quadratic voting because is NOT right. It is the opposite of right.

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I get your point: rich have the right to have more voting power because they invested more money.

I have a question for you. Do you want to be in the ecosystem or live in the country, where all the laws are made by ultra wealthy individuals ?

I can answer for myself: I don’t.

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A major problem is that it can be somewhat bypassed. People with a lot of KNC can split them into several addresses to increase their voting power and reward. However, People with less KNC won’t be able to do that and will still have to delegate. This means that the little guy will have significantly less reward. For example, KNC holders that are staking at Binance have given it 20,000,000 voting/reward power in a single address. With quadratic voting/reward, the small KNC holders staking at binance would have significantly less voting power and reward. This would make it pointless to stake/delegate for small KNC holders and ultimately eliminate them from our ecosystem.

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Your argument is based on envy and resentment and hate for the rich.

This is NOT a country, this is a private company, like it would be apple or Microsoft. You can’t treat it the same, in private companies major shareholders that are at the shareholder meetings are the ones that decide what is going to be good for their shares to rise up in value, dragging the shares of the small fishes to rise up in value as well.

There are no laws to be made, there will be only inflation based funding proposals to be approved. You think the rich would want to sacrifice their own money by making irrational decisions?

You have something against the rich, you think major KNC holders are inherently bad, the only ones that can do bad are proxies, since they don’t OWN anything, they don’t have ANYTHING to lose, yet they have the voting power of the rich.

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They cant 't increase their voting power, only optimize it.
As you can see:
square root of 1=1
square root of 2=1.41…
square root of 3=1.73…
square root of 1000=31.6…

Big holders have a disadvantage in every way. The more you split the more you pay for transaction when voting.

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Well…they “optimize it” by increasing their voting power. You are basically saying the same thing, just using different words.

As you can see:
(square root of 10,000) = 100
(square root of 5,000) + (square root 5,000) = 141.42

That is a percentage increase of 41.42% in voting power/reward just by splitting your 10,000 KNC into 2 different addresses. Although you will be paying more fees for voting, the fees become less of an issue the more KNC you have. That will be the case because the cost of fees will be offset by the increased rewards.

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Why you want the big holders to have a disadvantage!? Is self-sacrifice behavior. They are NOT bad. They are incentivized to make rational decisions since they are risking their investments. Small fishes benefit from what big fishes decide, like is done with any of the top 500 companies, this is how it works.

There are just a few pools that are not incentivized because they don’t risk anything, they didn’t invest anything. You can’t punish the genuine rich just because a few voting pools high jacked the rich list. The only BAD actors are pools, not the major KNC holders that bought their KNC from the markets, they are not BAD.

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Let’s analyze the effect this will have on small KNC holders staking at Binance:

A lot of KNC community members are staking at Binance totaling 20,000,000 KNC on 1 single address.
square root of 20,000,000 = 4,472.14 voting/reward power

We will use a whale that has 1,000,000 KNC as an example. This whale decided to split his KNC across 20 different addresses.
(square root of 50,000) x 20 = 4,472.14 voting/reward power

A whale with 1,000,000 KNC was effectively able to match the 20,000,000 KNC voting/reward power of the small KNC community members staking at binance. Assuming that there was 100 ETH of rewards in one epoch and no one else staked/voted other than the mentioned parties, the whale would be rewarded with 50 ETH and KNC holders at binance would get 50 ETH.

In this scenario, KNC community members staking at binance would get 0.0000025 ETH per KNC as a reward. and the whale would get 0.00005 ETH per KNC. Not only was the whale able to match binance’s voting power, but the whale took in significantly increased rewards that would have instead gone to the KNC community holders staking at binance had quadratic voting/reward not been used. The increased reward will be enough to cover costs of gas fees.

Obviously, this is an oversimplification of the effect quadratic voting/rewards could have, but it displays how in the end the small KNC holder will ultimately be the one to suffer.

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If quadratic voting is implemented,it will be the straw that broke the camel’s back, and I will sell all of my KNC. Too much Keynesian economics that always leads to failure, too much proxy pools concerns about collusion, and now quadratic voting is going to make(as tezoswakenbake says) the genuine rich unfairly have less voting weight. This is looking like socialism making its way on a crypto company. Either you are unprofessional, you don’t have an idea on how economic’s works, or you just don’t care, because you guys are making a mess. This is a nonsense.


I agree - stop this bullsh* here in “my” post about ideas to improve “direct” voting. If you do have an actual proposal regarding this issue (and by actual proposal I mean something with figures etc.) then go on and post it but stop this nonsense about the poor and rich and so on - it is of absolutely no relevance and does not interest anybody here.

This is a forum about KNC, to discuss ways how to improve it & its governance, nothing else. If you do want to discuss such matters exchange to it in DM’s / in private.


I like your example. Let’s keep parameters the same and calculate my reward as I’m staking on my own 1000 KNC. I don’t split my KNC.

square root of 1000=31.6 voting/reward power.
I’m getting 0,00035… ETH per KNC. That’s 7 times more ETH per KNC when compared to whale.

Like I said. Big holders have a disadvantage in every way.

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That is a very good point. But, like I said, my example is an oversimplification. The whale can split their KNC to as many addresses to make it “optimized” and maximize their benefit. Who knows…it might even spawn services that will manage and optimize the whales addresses’ balances to maximize profits.

This is not a perfect example, but 32 ETH is what is used to stake on Ethereum and become a validator. Whales/Companies that have a lot more than that and want to stake and get rewards on the whole amount of ETH can do so with centralized and decentralized services that will help setup and manage all their validators. The point I am trying to make is by trying to address one issue, quadratic voting creates another.

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