It all points out that inflation based funding will be implemented, despise my continuous moral based arguments against it. There is one governance issue nobody is mentioning, since there will be inflation based funding for development, the developers (proposal injectors) that submit or inject proposals to technologically improve KyberSwap either by scaling it or by making it more cost efficient to all parties (traders, voters and LP’s). The problem is that proxies since they are the ones that vote for their delegators, they don’t have a collateral requirement investment in KNC that would disincentivize them to make bad decisions or to collude with funding proposals injectors that would offer them Monero in exchange of votes, Proposal injectors will always be looking for proxies to offer them money in exchange of their vote. Proxies delegators won’t even realize this because all this will be done behind the scenes in private messages in telegram.
One solution, is to put a pre-requisite to proxy owners to own KNC collateral or bonds that they can lose by making irrational decisions, vote buying most probably will lead them to make irrational decisions. Setting up max delegators caps depending on how much KNC proxy owner put as a collateral. i.e if they own 10,000 KNC - they will be able to accept 100,000 KNC from delegators 1/10 ratio. That way their collateral will also be at risk, currently there is no minimum KNC collateral needed to operate a proxy, so they don’t have any incentive to make rational decisions and with collateral they would be disincentivized to collude with vote buyers.
or the other solution is obligue them to perform a verifiable internal on-chain voting within their proxies, so proxy delegators can participate directly on the DAO and not only be the will of the owner of the proxy who votes for all their delegators, and only allow these compliant proxies to participate.