Discussion: the Future of Governance

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We should discuss the future of PoolTogether governance.

I don’t think an immediate decision needs to be made, but I think it’s worth starting the conversation. I’ll open it up with some observations about the current state of governance, then highlight some directions we could go.

State of Governance

  • Gov no longer controls the protocol; it is fully immutable and autonomous! We no longer have any need to extend governance control across multiple chains.
  • The POOL token can no longer be minted. The POOL tokens in the treasury are a finite resource.
  • The treasury has no revenue. The non-POOL assets in the treasury are finite.
  • A lot of POOL has been bridged to L2s (~25% of total supply). Bridged POOL cannot be used to govern
  • The few voters on proposals are the old guard who’ve been around for a long time. They may not stick around forever; as they dwindle so will our defense against governance attacks.

Directions We Could Go

Below are some different directions I’ve thought of. Please comment if you think of another!

Option 1: Dissolve governance

We disburse the remaining funds in the treasury, finalize the LP positions, and renounce ownership of the Timelock.

Advantages

  • This would fully decentralize PoolTogether. We may even be the first to do so. All that remains would be the token and the protocol
  • It would not be possible to “attack” PoolTogether. We would no longer have a honeypot to attract governance attackers.

Disadvantages

  • We’d need to disburse the POOL in a final distribution. We could build a way for incentives to be dynamic, but we wouldn’t be able to have discretionary spending (i.e. incentivizing a vault proactively)
  • We wouldn’t have stables to draw on to fund frontends, builders or other initiatives that require resources.
    Counterpoint: our treasury is limited anyway so it’ll run out at some point. Perhaps doing a final budget for each frontend is inevitable.

Option 2: Upgrade governance to support L2 voting

We’ve been told by Scopelift, who upgraded our Governor contract, that it may be possible to allow L2 token holders to vote.

Advantages

  • All of the prizePOOL and POOL holders on L2s would be able to vote cheaply.
  • The risk of a governance attack is far less, since all POOL would be eligible to vote and defend.

Disadvantages

  • It’s unclear how much the capital and operating expense would be of the upgrade. When we simply upgraded the governor contract it was $50k: upgrading the contract again and adding L2 support would likely be much more up-front along with on-going costs.
  • The treasury is finite; so voting would eventually end anyway. Is it worth it?

Option 3: Spin up governance on a single L2

Tally offers the ability to easily spin up governance system in a no-code way.

Advantages

  • Voting would be cheap!
  • If the system uses staked POOL as the gov token, then the L2 treasury could fill with ETH

Disadvantages

  • We’d need to migrate all of the assets held by L1.
  • We’d need to finalize or withdraw our PoL LP position
  • We’d need to do the work to dissolve L1 governance
  • Some work would be required to make staked POOL the gov token
  • POOL on other L2s wouldn’t be eligible to vote. This means there is less active voting power, and governance would still be more vulnerable to manipulation (as it is now).
  • The treasury is finite, so voting would end some day anyway

Option 3: Spin up governance on each L2

We could spin up governance on each L2 that we’re deployed on.

Advantages

  • (same as option 2 above)
  • People could vote on any chain

Disadvantages

  • People could only vote on the chain they are on
  • (same disadvantages as option 2 above)
  • Coordination would be much harder. If someone needs budget greater than a single chain; it would have to draw from multiple proposals across chains.

Option 4: Create an off-chain entity to custody the funds

We could spin up a separate entity, such as the Marshall Islands non-profit, to hold the funds and spend them in support of the protocol.

Advantages

  • Reduces the coordination required of voters, but still allows for it
  • Eliminates the attack surface by having people with fiduciary duty manage the funds.

Disadvantages

  • Costly to set up
  • It’s a complex decision to choose what type of entity to use
  • Someone needs to KYC and lead the entity and become a potential legal target (even if the entity is a liability shield).
  • We’d still need to close down our L1 governance and transfer the assets to the entity.

My Thoughts

Personally, I believe Option 1 is best. The treasury is finite, so we shouldn’t spend resources and time coordinating on something that will eventually go away anyway. We lose the ability to offer discretionary funding, but gain deep simplicity in the protocol. That being said, if people want to combine their POOL staking returns and spend it on PoolTogether infrastructure, then they can spin up their own governance if they want to.

The steps we’ll need to take to dissolve L1 governance will have to happen anyway for the other options, so it’s the option with the minimum amount of work.

It’s also an opportunity to do what no other project has done; to fully eliminate governance and fully decentralize.

Your Thoughts

Please comment with your thoughts! I want to hear:

  • What direction you like
  • Whether there are other directions
  • Whether there are more advantages or disadvantages to discuss
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Proposal for PoolTogether: Decentralized Governance by Active Chain

Introduction
PoolTogether has revolutionized decentralized finance with its innovative “no-loss lottery” model. I know this term is frowned upon around here, so call it a “prize savings” model if you choose. However, expanding its gamification and governance mechanisms across active chains can further enhance user engagement and protocol adoption. This proposal introduces a multi-chain governance framework where each active chain operates an independent DAO with 100,000 POOL tokens as a treasury base, earning prize revenue from the respective chain’s vaults. Perhaps each chain gets to control 50,000 POOL in the Across LP as well to capitalize on POOL movement between chains. This structure transforms PoolTogether into a dynamic game of inter-chain competition, governance arbitrage, and strategic supremacy.

Key Proposal Points

  1. Separate DAO Governance per Active Chain
  • Each active blockchain where PoolTogether operates (e.g., Ethereum, Optimism, BASE, Polygon, Gnosis, Scroll etc.) will host its own independent DAO.
  • These DAOs will be empowered to govern the local PoolTogether treasury funds and can even engage in trying to earn their own incentives.
  1. Allocation of Treasury (100,000 POOL per Chain)
  • PoolTogether will allocate 100,000 POOL tokens to the treasury of each chain-specific DAO.
  • These tokens will be deposited into the respective vaults to generate prize revenue. Earnings from these deposits will be used to generate revenue that can be shared amongst holders and depositors.
  1. Gamification: Chain and Treasury Supremacy
  • By decentralizing governance between each chain, PoolTogether introduces a competitive layer where users can rally around their preferred chains.
  • Chains with larger treasuries and more active participants will gain a competitive edge, fostering engagement and loyalty.
  • The opportunity for governance attacks or alliances creates a thrilling layer of strategy, much like a decentralized financial game.
  1. Cross-Chain Arbitrage Opportunities
  • Users will be incentivized to identify and exploit arbitrage opportunities between chain-specific DAOs.
  • This activity will enhance liquidity efficiency across chains and increase user participation.
  1. Governance Wars and Security Implications
  • Chains can attempt governance takeovers of others through strategic coordination. This incentivizes DAOs to remain active, engaged, and vigilant.
  • To maintain fairness and security, rules and safeguards against malicious attacks will be implemented. For instance, time-locked voting mechanisms or quorum requirements can mitigate flash attacks.

Benefits of the Proposal

  1. Enhanced User Engagement: Users will actively participate in governance and strategize to benefit their chosen chain, boosting protocol activity.
  2. Decentralized Growth: Each chain-specific DAO can tailor strategies for its community, fostering localized growth.
  3. Increased Liquidity: Cross-chain activity and arbitrage opportunities will attract more users and liquidity providers.
  4. Scalability: By decentralizing governance, PoolTogether can scale across chains without a single point of governance bottleneck.
  5. Novel User Experience: The gamified “chain supremacy” model adds an exciting and unique layer of interaction for DeFi enthusiasts.

Implementation Plan

  1. Phase 1: Governance Framework Design
  • Develop and test the smart contracts required for chain-specific DAO governance.
  • Allocate 100,000 POOL tokens per active chain’s DAO treasury.
  • Establish rules for prize revenue distribution and security measures against governance attacks.
  1. Phase 2: Pilot Program
  • Launch the first chain-specific DAOs on a few key chains (e.g., Ethereum, BASE, and Optimism) to test the model.
  • Gather user feedback to optimize the framework.
  1. Phase 3: Full Rollout
  • Expand the multi-DAO governance model to all active chains.
  • Introduce tools for users to track chain-specific performance and engage in cross-chain arbitrage.

Conclusion
This proposal will redefine PoolTogether as more than a no-loss lottery—it will transform it into a gamified, decentralized, cross-chain governance ecosystem. By fostering competition, collaboration, and strategic gameplay, PoolTogether can attract a wider audience and solidify its position as a leader in decentralized finance. Imagine the power each individual DAO will have if Pooltogether becomes a Billion dollar prize savings protocol.

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I would like to see a foundation formed and custody the remaining treasury. Ideally the foundation deposits POOL into Prize POOL Vault to grow the treasury and fund future development of the protocol.

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1 makes the most sense to me. There’s no protocol left to govern. It’s just the treasury. Disbursing the remaining tokens is tricky but the top priority should be using the treasury to get more deposits into the protocol. Making swapping & moving POOL across chains more efficient is secondary but necessary.

Some combination of yield boosts (continue X% yields with POOL), prize boost (yolo $1m POOL prize?), airdrop 2.0, permanent LPing (pools & bridges, idk how/where), prefunded subgraphs (Is this doable?), funding for teams to market/build and more makes sense to me. All of these are much easier said than done though, dynamic markets movements can easily break static allocations and it could all be for naught.

That kinda just gets us back to where we are today though: waiting for votes to decide what the treasury should go towards.

“The Final Distribution” seems quite memeable.

Starting with simple breakdowns for categories and getting narrower rather than jumping straight to the use cases will likely be the most productive (Random numbers but: 40% to disbursement, 40% to permanent liquidity, 20% to teams. Loose snapshot signal vote to get alignment. Move forward with next breakdown (disbursement: 50% to yield boost, 50% to a prize)).

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Multiple Options

Being decentralized, it’s possible for us to pursue multiple options. While I believe it’s inevitable that L1 gov will shutdown, it does not mean that people cannot pursue other efforts.

If @TheRealTuna wants to create another governance system on L2s then he create one then submit a proposal to bootstrap funds there.

@tim You originally suggested the off-chain entity; would that be something you’d champion? If you want to pursue that option, it’s likely you’d need to do the work or find someone to do so.

Memetic Power

Nice to see you @dylan! I think you bring up a good point; that doing a massive distribution is very memeable. It’s a great narrative to build, and could include a lot of efforts: boosting POOL prizes, ensuring LPing for both AMMs and bridges, and distributing POOL to users.

Getting the word out there is half the battle among the noise of the bull market.

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@Brendan Yes, I’ll look into what it would take to set up a foundation and draft a proposal