DigixDAO Governance Model — Update #3

DGX Rewards System

DigixDAO receives one third of demurrage fees and all of the transaction fees of the DGX token to be given as a reward to dgd holders for work done in the DAO. These fees will then be distributed amongst DAO participants at the end of every quarter. In order to calculate the distribution, we introduce the notion of Rewardable DGD Balance.

The Rewardable DGD Balance depends on (in order of importance):

  1. Locked DGD Stake

The DGX that the DAO receives for that particular quarter will be distributed proportionally to this Rewardable DGD Balance.

Through the notion of Rewardable DGD Balance, we wish to address the following desirabilities:

  1. First, for a participant who does not participate in any governance activity (effectively contributing nothing at all to the DAO), the Rewardable DGD Balance, and hence DGX rewards, should be zero.

Please note that the Minimal Participation Point is just a fixed and small threshold that we expect most participants to fulfill (something like doing 5 votes for the whole quarter). It is there to ensure that those who do not participate at all, or participate very minimally, will get significantly less than those who participate more than this minimal threshold. Among the participants who participate more than this minimal threshold, the difference among their Rewardable DGD Balance will not be too significant. Please refer to The Math section for more details.

Also, note that in case 3 from the above mentioned cases, the Locked DGD Stake is only “buffed” in terms of a small percentage based on Quarter Points and Reputation Points.

The Math

This is how the Rewardable DGD Balance is actually calculated:

  1. Calculate the Base

If Quarter Point is greater than Minimal Participation Point,


2. “Buff” the Base based on excess Quarter Points and Reputation Points

The scaling factors will control the fine-tuning of the “buff”.


Example parameters: 1 vote = 1 Quarter Point. Minimal Participation Threshold = 3. Scaling Factor for Quarter Point = 30, Scaling Factor for Reputation Point = 200

  • Participant N has 10 DGDs locked, Quarter Point = 0, Reputation Point = 100 (Used to participate a lot but doesn’t do anything this quarter)
  • Participant X has 10 DGDs locked, Quarter Point = 1, Reputation Point = 10 (Lazy, only did 1 vote)
  • Participant Y has 10 DGD, Quarter Point = 3, Reputation Point = 10 (Participate just minimally enough to get past the Minimal Participation Threshold)
  • Participant Z has 10 DGD, Quarter Point = 5, Reputation Point = 10 (Relatively active participation)

DigixDAO’s smart contracts

After coming up with the draft for our governance model, we have already started writing the DAO smart contracts. The ETA for the contracts and some basic tests is 22nd of June, after which we will open source the repository for community review and contribution. In the meantime, any suggestions regarding the governance model would be well appreciated.


Q1. Does DigixDAO make use of side-chains?

Ans. The current and first implementation of DigixDAO is fully on the Ethereum mainnet. Every participant has to pay for their own gas for all transactions. We have tried to minimize the gas requirement for a single vote. We are actively researching cost-saving solutions and using a sidechain is definitely one of the directions we are considering.

Q2. Can DigixDAO fund a company to market make DGX?

Ans. Financing market making is not allowed, but a proposal won’t be rejected solely on the basis that the provider of service might also be a liquidity provider.

Q3. Will my DGD tokens be locked before I vote? After voting will I be able to withdraw my tokens?

Ans. DigixDAO functions in quarters, where each quarter is divided into a Locking Phase (for locking DGD tokens and locking badges) and a Main Phase (locking DGD tokens and governance activities). Before voting, the ethereum address would have to be a valid participant, i.e. will have to lock up at least a defined minimum amount of DGD tokens. These tokens will be locked in a smart contract, and can only be withdrawn in the Locking Phase.

Q4. Where does the DigixDAO contracts receive DGX tokens from?

Ans. The DGX token is charged a demurrage fee (0.6% per year, among which one-third would go into DigixDAO) for safe storage of gold bars, as well as a transfer fee (0.13%) every time DGX is transferred between accounts. These fees (one third of demurrage fees and all of transfer fees) will be collected for every quarter and transferred to a contract, which would then be distributed amongst the DigixDAO participants.

Q5. I have already locked some DGD tokens for a quarter. Will the tokens automatically be locked up for the next quarter?

Ans. Based on the current implementation, participants will have to confirm their participation for a new quarter by a transaction. This heartbeat transaction is there to ensure that the user is still in control of the account. Failure to make this transaction will lead to the tokens still being locked, while the address is also not a participant in the new quarter. Tokens will have to be withdrawn during the next Locking Phase. Note that the user can always send this heartbeat transaction anytime during the quarter (just that if they do it after the Locking Phase, they will not get the full DGD Stake)

Q6. How and when do I redeem the DGX that I have received for my participation in the DAO?

Ans. After each quarter, the DGX rewards for each participant will be calculated and their claimable DGX rewards will be updated accordingly. If not claimed, this claimable DGX rewards will decay overtime at the same rate as demurrage. Users can claim their DGX rewards directly to their address whenever they want to. Please note that while DGX are directly claimable as the reward for the duration of initial testing, this may be subject to change in the ongoing discourse with regulators.

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