Bribe — VEV & Participatory Governance Tooling for Cross-Layer, Polkadot, and the Web 3.0 Ecosystem
Bribe aims to improve upon DeFi’s governance model and expand it to retail use across Web 3.0, incentivizing participation by a broad range of users who hold governance tokens — not just those with the audience or capital to influence the outcome of proposals. The first product that Bribe introduces to incentivize participation is Voter Extractable Value (VEV) which compensates retail holders of governance tokens by delegating their votes to a highest bidder.
Decentralized governance was created with the intention of allowing an equitable, democratic means of running blockchain and DeFi networks. The ultimate vision is for decentralized governance to allow all those actively involved in a particular platform to have a voice reflective of their domain expertise, stake in the platform, and values/beliefs about the future.
Unfortunately, the current state of decentralized governance falls short of these aims.
To start to understand why, we should explore the common thread of governance for almost every DeFi protocol: Governance tokens. Named to reflect their usage as votes for predefined ‘on-chain’ governance decisions on an issuing protocol, they typically also generate yield and/or a specific utility in the context of their issuer.
We posit that governance tokens have largely failed to achieve their purpose of promoting decentralized voting as a way to shape an ecosystem’s future. Their valuation is so wrapped up in speculation and protocol-specific utility that the value of their ability to influence broader objectives like protocol development is poorly measured and poorly understood. Moreover, speculation and utility have led to inflated token valuations, limiting meaningful participation in governance to influencers, whales, and VCs.
Note: % of wallet addresses participating in a given vote is, without known exception, much lower than the vote participation rates in the table above; for example, a typical Aave vote only sees ~20 addresses participating
To start down the path of decentralization, we must address oligarchy in governance by increasing retail participation. That means reducing opportunity costs for voters, adding use cases for voting, and keeping governance on-chain.
Recent innovations in governance are somewhat siloed, but address low participation in some way. Yearn Finance’s DAO model — ‘constrained delegation’ — adds a new use case to YFI in electing ‘yTeams’ to run the platform. Aave has created ‘stkAave’, a vote token provided to users who stake Aave for APY, which reduces the opportunity cost of voting. Polkadot’s ‘vote token locking’ is meant to give voters more buy-in to proposal outcomes, but also reduces opportunity costs for long-term participants in governance (similar to ‘veCurve’).
Bribe introduces a novel, protocol-agnostic use case for voting with Voter Extractable Value (VEV).
VEV allows anyone to lease the voting power of their governance tokens by staking them in a protocol-designated pool. Highly incentivized users then bid on specific decisions they want to approve or reject related to the protocol.
Our first integration is with Aave to highlight the benefits of collateral-governance tokens like stkAave. Soon, Aave token holders will be able to stake on Aave and stake with VEV all while maintaining exposure to the underlying AAVE token.
We expect that adoption of VEV by a protocol will have the following effects:
- Drawing more participation to proposal voting (which enables higher quorums)
- Increasing capital efficiency for protocols which split governance tokens out into their specific use cases (e.g., stkAave)
- Increasing penalties for adverse proposals by requiring bad actors to pay bids
- Forcing governance off-chain for protocols with low participation
Wait… VEV is supposed to be good for protocols?
Our premise is best stated by Vitalik in ‘Plutocracy is still Bad’:
Cryptoeconomics is about trying to reduce social trust assumptions by creating systems where we introduce explicit economic incentives for good behavior and economic penalties for bad behavior, and making mathematical proofs of the form “in order for guarantee X to be violated, at least these people need to misbehave in this way, which means the minimum amount of penalties or foregone revenue that the participants suffer is Y”
It’s pretty clear how VEV introduces a ‘minimum amount of penalties’ for adverse actors: the bid requirement. A bad actor with enough votes to unilaterally pass a proposal in a low-participation environment would also need to compensate governance token holders staking with VEV by outbidding all good actors. By providing them another monetizable use case, VEV also generally increases the value of governance tokens — making attacks more expensive.
Practically speaking, there are three types of scenarios we expect to see from VEV in the current low-participation environment:
- No-contest proposals are typically necessary protocol upgrades and maintenance, and can be voted through as many times as required to exhaust the warchest of ‘reject’ bidders
- Competitive proposals are the heart and soul of Bribe, typically representing major product changes and external integrations / partnerships. The outcome of these proposals reasonably should be determined by the excess value the proposers can provide to apathetic governance token holders (i.e., the size of their bid)
- Adverse proposals are typically poorly-scoped passion projects but could also be traditional governance ‘51%’ attacks; for these proposals to fail, governance token holders may participate by voting and removing tokens from VEV, or may otherwise pool funds to out-bid the attacker. If a protocol is unable to convince token holders to vote against an existential attack, we would suggest that perhaps that protocol is not yet ready for on-chain governance, but veto mechanisms also work here.
We will improve VEV to help ensure voters staking with VEV aren’t voting against their best interests (and those of the protocol).
The first improvement entails sending notifications to stakers when certain kinds of proposals have entered voting. These notifications can be improved to respond to a user’s stated preferences for when they might want to remove / add tokens to VEV.
A second improvement allows stakers to pool resources on the VEV portal to create pooled bids. This helps solve coordination problems between smaller bidders with more distributed incentives than a single actor.
Our long-term roadmap for VEV involves letting users stake tokens along ideological bases. Consider the following alignments, where voters automatically assign votes to whatever proposal fits their alignment and offers the highest bid APY.
Such an alignment-based voting aggregator allows Web 3.0 users to vote their values, potentially across protocols, without having to keep up with daily developments in governance.
Democracy doesn’t end with Bribe. But it starts there.
To borrow again from Vitalik:
There are two key problems inherent to [protocol governance] that need to be solved:
1. Funding public goods: how do projects that are valuable to a wide and unselective group of people in the community, but which often do not have a business model (eg. layer-1 and layer-2 protocol research, client development, documentation…), get funded?
2. Protocol maintenance and upgrades: how are upgrades to the protocol, and regular maintenance and adjustment operations on parts of the protocol that are not long-term stable (eg. lists of safe assets, price oracle sources, multi-party computation keyholders), agreed upon?
Bribe makes incremental improvements to the ability of protocol governance to address both problems.
- Bribe increases the value of governance tokens irrespective of their business model
- For maintenance decisions, protocols may send nominal bribes to encourage long-term staking in VEV, thereby increasing the reasonable quorum on the protocol and increasing the cost of adverse attacks. For competitive decisions, the VEV bidding process helps protocols arrive at utility-maximizing outcomes, where apathetic voters benefit from the politics carried out on their protocol
VEV is not the apex of decentralized governance. Rather, it is an incremental improvement on current models, as well as a catalyst for additional participation and buy-in for governance token holders.
The next frontier for governance is disaggregated government structures enabled by open-source smart contracts and tooling. Bribe will create a DAO around VEV to fund new ways of organizing and incentivizing the use of governance tokens on Ethereum layer 1 and 2, Polkadot, and the broader Web 3.0 space.
New protocol environments (namely, cross-layer ETH and substrate) are in an even less developed state than Ethereum mainnet, with more primitive governance capabilities and cultures of participation. We believe that these projects are part of the future of DeFi and blockchain generally; layer 2 provides essential scalability to the Ethereum ecosystem, and Polkadot is positioned to unlock cross-blockchain interoperability. There are many potential applications for governance infrastructure in Web 3.0, and VEV alone will not get us those.
Let’s start with ETH layer 2 (L2). Instances of a protocol on layer 1 and different L2s like Arbitrum, Polygon, and Optimistic rollups will likely always operate in slightly different contexts deserving of semi-independent governance. For example, L2s today tend to be more heavily retail-oriented than Ethereum mainnet (due to lower gas fees); hence, requiring L2 users to amass a quorum of votes on Ethereum for every instance-specific decision (e.g., supported collateral types, risk parameters, etc.) is unreasonable.
Our cross-layer governance aspirations require effective tooling. Bribe is developing a solution to facilitate voting across blockchains and Ethereum L2 through non-custodial vote messaging, in addition to a framework for protocols with on-chain governance to manage semi-independent governance on other instances.
Moving on to Substrate, governance challenges primarily derive from the unique quality of substrate for applications to take the form of ‘pallets’ which are plugged directly into the run time of a chain. This situation warrants at least two infrastructural solutions on Bribe’s development roadmap.
First, DAO and treasury pallets on Bribe must be embedded with cross-chain messaging and transaction services that facilitate sending funds off-chain. Second, pallet developers incorporating pallets onto multiple parachains should have a semi-independent governance mechanism for updating and improving their pallet code. This tooling, working in tandem with VEV on Substrate, will position ecosystems like Polkadot for decentralized governance in the long-run.
Conclusion
Effective governance paves the way for true decentralization. Effective here means efficient — maximizing ecosystem utility for all participants, not just oligarchic voters. It means disaggregated — giving appropriate autonomy to delegated domain experts and distinguishable communities. It also means idealistic — composing a lasting democracy from transitory hopes, desires, and ideas. Governance must evolve for this democratic future to be realized.
Bribe introduces a market (VEV) for the value of governance tokens as voting mechanisms. This market funds our roadmap to incubate a universe of governance infrastructure powered by collaboration and markets rather than off-chain decisions and centralized decision-making. This is decentralized governance as it was meant to be — participatory, market-driven, and accessible on all platforms.
Make sure to Join our Discord for more updates from Bribe — we’re excited to share our journey with you.
