Bribe VEV: Bringing Governance to the People

✍️ Author: 0xTac

There’s a well-known secret in DeFi that few talk about: current decentralized governance approaches are, in a word, broken. This view is echoed by many in the space, from project fanbois in Discord to some of the biggest names in the DeFi space. Take, for example, Kain Warwick, founder of Synthetix, who is on record saying

“It’s this unspoken thing at the moment in the DeFi space where the governance infrastructure that we have is pretty terrible.”

He went on to say, in the same talk, that

“DeFi protocols really do need to be as censorship-resistant as possible. And that depends in part on governance: You genuinely need to be governed by a community if you’re going to be a protocol.”

While he was talking specifically about governance tooling in that context, his statements are true in a broader context, beyond purely the tooling available.

Currently, protocol governance proposals are often dominated by whales, sometimes require far more technical knowledge about the product than most users understand, or are outright manipulable by sophisticated actors looking to extract value from a protocol where they’ve contributed virtually nothing. Major dApps and protocols aren’t exempt from these pressures: Many reading this may have heard about Uniswap’s 20 million dollar “DeFi Education Fund” debacle from earlier this year. Thankfully, there are brilliant minds working on building products that solve this fundamental problem that arises on decentralized networks.

Bribe Protocol (Website, Twitter) is working on addressing this problem directly by tackling core areas of governance failure:

• Apathetic users/broad participation
• Cross-layer governance
• Standardized contracts

Voter Extractable Value

Voter apathy is a condition that is reflected in low voter turnout and low quorums, which distorts the picture that gets painted of real market preferences and often leads to non-representative outcomes. Bribe’s flagship product Bribe VEV (Voter Extractable Value) lets governance token holders stake their tokens for use by a highest bidder in upcoming protocol votes, which resolves the voter apathy problem through open market incentives. By letting generally apathetic voters delegate their tokens, it nudges them into reading about the proposals and understanding which outcomes they wish to let happen, and delegating their voting power accordingly.

How does Bribe VEV work?

This is a natural two-sided market. “Bidder” refers to someone with an interest in a particular proposal outcome, and “Delegator” refers to an apathetic voter that wishes to earn value by providing their votes.

• A Bidder chooses a proposal to bid on, and sends stablecoin to the bribe pool for that proposal.
• Delegators choose to delegate their voting power to a bribe pool
• If the Bidder does not win, their stablecoins are returned to them
• Delegators get their payout in a mixture of stablecoin and bribe token
• Payout amounts are impacted by incentives defined by the Bidder, and the time spent staking

What benefits does VEV bring to integrated protocols?

We believe that this will ultimately lead to more competitive proposals for protocols that are forward thinking enough to integrate it. Bribe will be key for making influence accessible and governance marketplaces transparent.

For bidders that are highly-incentivized towards influencing the governance in a particular direction, they can do so without obtaining direct financial exposure to the governance token, as they are contributing stablecoin to the bribe pool rather than the underlying governance token. This in turn reduces volatility in the underlying governance token, as bidders use delegated tokens rather than purchasing the governance token on the open market. Additionally, it redirects the benefits of the current open market purchases away from large ecosystem players like exchanges and lenders towards the actual delegators of the governance token, which increases voter turnout.

Looking towards the future, Bribe V2 will also assist with flagging and blocking clearly adverse proposals, as well as taking into effect more quantitative impacts on voters’ open positions, such as the dilution impact of minting new tokens.

Why do we think a system like this will work? There is solid precedent that bribing voters works, as we’ve seen with Curve & Convex’s Votium, and Tokemak’s Votemak bribing mechanism for voting. Turnout is high, the amount of revenue brought in via bribes is high, and we think the economic case is there for this to be a wider model across other protocols as well.

Cross-Layer Governance

Beyond their flagship product VEV, Bribe is utilizing an extraordinarily promising cross-chain, cross-layer infrastructure stack to enable cross-chain, cross-layer protocol governance. A problem with the few Ethereum protocols that have set up cross-layer governance is the necessity for Layer 2 voters to bridge tokens to the target L1 and compete with L1 voters to impact governance proposals on their implementation.

Bribe’s cross-layer governance solution allows protocols to engage in cross-chain message passing, which enables vote messaging, eliminating the need to bridge tokens to the underlying Ethereum network to register votes. It also has built into it support for layer-specific proposals!

Bribe is built on a radically interoperable blockchain called Picasso, on the Kusama network, from Composable Finance. Picasso’s primary purpose is enabling cross-layer, cross-chain interoperability with native runtime pallets, which can serve the same function as smart contracts but don’t require network calls to engage with. They are built into the runtime of the blockchain itself, so they always execute with each block. Pallets allow for more flexible capabilities as the finality layer and are the underlying technological stack that enables these sorts of inter-ecosystem communications.

Thanks to the pallet-driven capabilities of the substrate-based parachain, implementing on-chain actions like governance will be done via building and integrating several pallets into the Picasso runtime. These pallets include things like:

• Treasury pallet, which handles actions like vaults, distributions, treasury staking, payments
• DAO pallet, which enables creation of DAO’s, custom proposal/election processes, allocation of voting rights
• Autonomous governance, which enables ability for automated governance updates (such as algorithmic parameter modifications)

Ultimately, we believe that Bribe’s economic incentives for apathetic voters and their cross-layer governance tooling stack will provide such strong real, tangible benefits to protocols that it will become the clear choice for protocol governance. For protocols that aren’t cross-layer, integrating a toolchain that natively supports cross-layer capabilities is a solid choice for future-proofing your protocol; for protocols that are already cross-layer, Bribe provides strong benefits to your sharded user base in a way not previously possible. Integrating the Bribe protocol into your governance layer is a +EV move for all involved actors; apathetic users, the protocols that integrate it, and incentivized bidders all win with this approach.

Everyone participates and everyone wins with Bribe.