Ideamarket for governance
Creating perpetual elections using skin-in-the-game
How it works
“There are no points for second place.” — Interest from all deposits is awarded only to those who voted for the current leader.
This means votes for the current leader pay interest well above the Compound rate.
However, interest rewards are offset by a potential capital loss from the leader’s replacement. Voting for a competitor also costs less.
Market participants must have a thumb on the community’s pulse. If a new leader is desired, the most promising competitors invisibly become “undervalued.”
The first mover on everyone’s unstated thoughts makes a profit. Late movers take a loss.
Example: If Rank 3 gets bought up to Rank 2, it tempts others into buying since it could overtake the leader.
What if everyone piles into the top token?
If everyone piles into the top token:
- There’s more capital risk in voting for the leader.
- There’s more potential reward in voting for competitors.
- If the leader’s behavior isn’t satisfying, people will want to vote for competitors.
- Therefore, the leader’s share should reflect market confidence.
How to set up
- Create an Ideamarket that accepts only ETH addresses (or ENS names) as listings. This can be achieved using a DomainStringCheck in the smart contracts.
- Give all interest to those who voted for the leader. Ideamarket’s current prototype distributes interest to holders of any token comprising over 1% of the total market cap, but you can customize. For an election, it makes sense to have interest from all deposits awarded only to those who voted for the current leader.
- Create a custom token and make it the only acceptable deposit currency. If you’re using Ideamarket for DAO governance, you probably don’t want anyone with a few DAI to come along and speculate on your governance. To prevent this, create your own custom token and distribute it to your community members. Set your Ideamarket contracts to accept only this token in exchange for votes.
- Create an access token for your DAO’s admin functions that automatically transfers to the market leader’s ETH address/ENS name. This way, when leadership changes, it changes instantly, automatically, and trustlessly.
- (Optional) Set up the interest donation contract. To incentivize participation, deposit DAO funds into your Ideamarket’s interest donation contract. This increases the interest rewards for market participants without putting DAO funds at risk.
Perpetual elections for multiple office-holders
To make DAO governance extra-secure, create a different access token for each admin function, or group of functions. (see Step 4 above)
This way, a malicious leader can’t catastrophically abuse his power.
A malicious leader would have to:
- convince all other “office-holders” to co-conspire without the voters finding out, OR
- trick the voters into electing only his co-conspirators, all at the same time
Both would be difficult.
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