Rethinking EOS Referendum Game Theory: Why 15% Token Participation is Irrelevant
A definition of governance: the mechanism by which collective decisions are made.
A common statement within the community is that “EOS is a governed blockchain”. By our definition, all blockchains that are able to achieve consensus are governed blockchains. But, EOS is a better-governed blockchain because rather than a system where network validators are not directly accountable to network stake-holders (i.e. Bitcoin miners vs. Bitcoin holders) the Block Producers on EOS are the direct reflection of the stake-weighted votes of all voting token-holders from the last 60 seconds. Token-holders are in charge.
EOS Governance, the means by which we make collective decisions, can be broken down into two distinct pieces. These two distinct pieces are responsible for all decisions that are made that affect the protocol, and by extension, every EOS token-holder.
The Stake-Weighted Vote
To affect the Block Producers, Token-holders may vote for any Block Producer for any reason at any time without permission from anyone or any document.
The eosio.prods multi-signature approval by Block Producers
To affect the protocol, make updates, changes, improvements, etc. at least 15 Block Producers arrive at a consensus on the exact change to be made by proposing and approving it on-chain using their active key.
The Current Referendum Rule
What does it take for a referendum to be considered officially passed?
The constitution laid out the thresholds for referendums, and the relevant article reads as follows:
This Constitution and its subordinate documents shall not be amended except by a vote of the token holders with no less than 15% vote participation among tokens and no fewer than 10% more Yes than No votes, sustained for 30 continuous days within a 120 day period.
This means that a referendum has a period of up to 120 days to meet three thresholds in order to pass:
- A minimum of 15% of all tokens that have been issued must vote on the proposal
- At least 55% of all votes must be cast for Yes (this is what is meant by “and no fewer than 10% more Yes than No votes”)
- Sustain both of the above thresholds for 30 consecutive days
15% Participation Threshold Doesn’t Matter
Let’s walk through an example…
Imagine a proposal receives 14% participation of total EOS tokens in circulation and 75% voting yes.
That’s 108,316,787.03 EOS voting yes which nearly exceeds the total number of votes for the #1 block producer at the moment of this writing.
Now imagine if the top 21 block producers were to respond to this outpouring of support for this referendum with the following:
“We did not achieve the required token-holder participation. Therefore, we will not be moving forward with this proposal.”
Remember that EOS token-holders can vote for any reason at any time without permission. Standby producers, seeing an opportunity, could volunteer to support the referendum that missed the participation threshold. The active token-holders that participated in the referendum could simply shift their votes, the top 21 would change and the proposal would pass anyway.
A Vote for “No” May Actually Be a Vote for “Yes”
An important aspect of gauging token-holder sentiment is understanding the level of dissent of a specific proposal. Unfortunately, because no votes in the EOS referendum system contribute to the participation threshold requirement, a no vote may actually be contributing to the success of a proposal rather than impeding it. Therefore, voting no is discouraged and a participation threshold of 15% ultimately hinders the community and the block producers from ascertaining a more accurate measure of token-holder sentiment on a specific topic.
We recommend abolishing the artificial expectation that referenda must attain 15% of token-holder participation. As a result, both yes and no votes are encouraged which will more accurately display token-holder sentiment on any given issue. It will also allow all top 21 Block Producers and Standby Producers to campaign to the token holders for support on any given issue. The EOS Mainnet is a decentralized liquid democracy where token-holders are empowered to shift their votes to Block Producers that share their priorities at any time without permission. Any framework we build on top of the core governance of EOS should reflect that.