KIP-26: Configuring the rewards distribution system for KNC delegators and delegates [FAILED]

KIP
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Summary

This proposal seeks KyberDAO’s approval to configure the current system of KNC rewards distribution such that delegators (KNC stakers who delegate voting power to another address) are able to directly receive and claim voting rewards proportional to their stake. This way, delegators do not need to trust their delegates to return rewards to them and their delegates can focus solely on governance and voting operations; encouraging more KNC stakers and delegates.

Motivation

Currently, a KNC staker can vote on KIPs (Kyber Improvement Proposals) to receive KNC rewards that are converted from a portion of KyberSwap trading fees, aligning incentives between KNC holders and KyberSwap adoption.

Alternatively, a KNC staker who lacks the time or ability to regularly engage in governance, can delegate voting power to another address to vote on his or her behalf. In this scenario, rewards are sent to the delegate who votes, and the KNC staker (the delegator) has to trust the delegate to claim and return the rewards owed.

However, this current system introduces two major governance blockers:

  • Operational inconvenience and costs: After every KIP, the delegate has to vote on behalf of the delegator, claim rewards, calculate rewards owed to their delegator, then spend additional gas costs to return rewards to their delegator.
  • Having to trust delegates for rewards: There is an element of custodial trust involved as rewards owed to the delegator after a vote are fully controlled by the delegate and there is no guarantee that the delegate would transfer back those rewards. Encouraging delegation within the community is thus not feasible, and naturally the delegation feature sees minimal use.

In order to remove these blockers, we propose that we enable KNC voting rewards to be directly and transparently distributed (via KyberDAO smart contracts) to delegators instead of delegates. Delegates are then able to focus solely on voting on KIPs with their voting power, while delegators can be assured that they will receive the rewards owed.

This convenience would in turn encourage more delegation, more KNC staked to be delegated, and broader governance participation, since any community member (including projects, key opinion leaders, and ambassadors) can now publish their Ethereum address and ask other users to stake KNC and delegate voting power to them, without users having to worry about not receiving voting rewards.

Proposed Configuration

Change the current rewards distribution system, such that after each KIP vote, KNC voting rewards get distributed proportionately to:

  • KNC stakers who voted on their own
  • KNC stakers who delegated voting power to a delegate who voted on their behalf

KNCs stakers who delegate their voting power to a delegate’s address can be assured that they will receive their voting rewards (assuming their delegate votes on the KIPs).

Example

  • Tom stakes his own 10,000 KNC.
  • Jerry stakes 5,000 KNC and delegates it to Tom. Jerry is the delegator and Tom becomes Jerry’s delegate.
  • Tom votes with 15,000 KNC voting power. But he only receives rewards proportional to his own 10,000 KNC staked.
  • Remaining rewards proportional to 5,000 KNC gets distributed to Jerry automatically, not to Tom (as Jerry is the delegator of that 5,000 KNC).

Conclusion

As KyberDAO grows in size and complexity, delegation becomes an increasingly important component of governance as it allows for broader and active governance participation, as well as more efficient decision-making.

The current delegation system has operational challenges which presents a high barrier for community adoption of the delegation feature. By simply redirecting rewards to delegators instead of delegates, KyberDAO would make the staking of KNC and the delegation feature a lot more appealing.

4 Likes
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Fascinating, this proposal to enhance KyberDAO’s reward distribution system by allowing delegators to directly receive voting rewards sounds like a game-changer.
Eliminating trust concerns and operational hurdles would greatly boost delegation and foster broader participation in governance.
It’s a great step towards a more engaging and inclusive KyberDAO ecosystem.

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Indeed, it will allow more people to stake in KyberDAO without the need of paying gas fees for voting and still receive the protocol rewards.
Delegation becoming more easy and trustless!

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Well, what that bother me is eth gas fees. can we make a vote without gaz fees?

i just have fews thousand stake knc and sometimes it cost me more to vote than getting reward.

5

When is this happening? Gas fees are too high to vote on Ethereum! It’s truly better if we can delegate our knc vote to a kyber or community member and just receive the reward. Even better if the reward is airdropped into address without needing to claim.

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Hey, we are actively working on a solution to avoid paying those Ethereum gas fees.
In the meantime, KIP 26 will be live for a vote soon, if the DAO accepts the KIP you will be able to delegate your voting power and earn your rewards with 0 gas fee.

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Hey the KIP will be live for a vote probably tomorrow, if the DAO accepts the proposal it should be live shortly after.

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Working diligently to serve the interests of users is a way to enhance the user experience and broaden user reach. You guys are doing very great, Keep up the good work :+1:

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Hi everyone, for transparency, I would like to comment in this thread my action.

I just voted No with my personal and my delegation on this KIP.

The reason behind it is that this KIP although aims to make it much easier for KNC stakers, it changes the narrative of reward system completely. In the past, when we designed and implemented the system, legal consideration was one of the big factor. We don’t want to make KNC too close to being a security in the sense that whoever stakes KNC and does nothing can get reward. This KIP basically allows stakers to get reward without actively doing anything, it can be seen as a very similar characteristic of a security token.

Since i’m one of the co-founders and a presentative of the legal entity, I’m personally sensitive to this movement.

I’m down to remove the friction where stakers have to pay too much gas to vote, however, i would like to wait for another KIP to suggest another approach to just focus on reducing the gas (via off-chain signing scheme for example).

I hope we can all keep the narrative “work for the DAO to get compensation” and KNC is the utility token for everyone to keep a ranking on where one can work for the DAO or not and how much they can influence the DAO.

I also want to say sorry that I didn’t join this thread earlier to express my concern. I should have done it earlier instead of waiting it to be a voting campaign.

3 Likes
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Congratulations @victor, your voting power has had a significant influence on the decision of KIP-26 :+1:. Your post provided me with valuable clarity about the proposal. I am hopeful that the actions taken subsequently will promote and cultivate a more engaged Kyber community.