Introducing Swing Protocol 🗳️
On-chain vote markets
We are excited to announce Swing — a protocol that allows users to buy and sell votes. We are developing fluid voting markets on top of existing coin voting systems where users can sell their votes for DAI in order to extract value from their governance tokens. 👇
SWING [verb] / swɪŋ / have a decisive influence on (something, especially a vote or election). “an attempt to swing the vote in their favour”
Our aim is to gamify coin voting and completely transform the way voting is conducted on the blockchain.
We are launching as a DAO in order to facilitate open participation in protocol development and discussion around various governance models. We also aim to promote coin voting reform by highlighting the need for transparency in currently existing — and unavoidable — bribing practices.
Background
Thanks to @AndreCronjeTech for inspiring parts of our project by launching a product that allows LPs to bribe CRV stakeholders to incentivise certain pools, and to @VitalikButerin for diving a little deeper into the topic earlier this week as a result:
In his blogs, Vitalik has criticized on-chain voting mechanisms as “plutocracies,” whereby the wealthy — those that own more coins — rule, which also opens up the protocol to vote manipulation.
We agree, but it’s important to point out that the inherent issue is control and not on-chain voting — vote selling cannot be prevented since it can always happen off-chain. In our opinion, it is more productive to embrace and elucidate this practice.
Governance Token Extractable Value
Shareholders in traditional companies can extract maximum value from their shares in a way they seem most fit. This follows the universal principal in capitalist societies that everyone has the right to own, use, dispose of of their lawfully acquired possessions — in this case, governance tokens.
Similarly to shareholders in corporations, tokenholders owe no duty of care to the protocol whose governance tokens they hold. Shareholders routinely vote on matters that directly affect their stock ownership, such as mergers and acquisitions. Similarly, Swing can also be used for M&A as an effective friendly or hostile protocol takeover mechanism, where competitors could “buy out” existing protocols by introducing and passing governance proposals that, notwithstanding potential forks, effectively renders them unusable.
Vote Sellers can choose to accept the incentive payment in exchange for the inherent reduction of their token’s current value. They can also choose to decline the incentive payment which will ensure their token will retain its full value. We call this Vote Extractable Value.
Vote extractable value (VEV) is a measure of the profit a governance token holder can obtain by getting paid to vote in favour of specific governance decisions. VEV is positive if the value of the incentive payment is higher than the corresponding price decrease of the governance tokens held.
Using this model, we believe that eventually most active governance token holders will register their interest to sell their vote if an attractive opportunity presents itself.
How does Swing work?
Swing 🗳️ intends to integrate with application layers with verifiable coin voting that takes place either on-chain or off-chain. The protocol design follows this preliminary model:
Swing Vote Mechanism
Here are the detailed steps:
Step 1. Vote Seller Registration
Vote Sellers register their intention to receive incentive payments in return for voting in favour of, or against, proposals for a certain project.
This verification is crucial to avoid the dilution of the price per vote, which would happen if Vote Buyers were going to distribute incentive payments among everyone. It’s more much more effective for Vote Buyers to target swing voters.
Step 2. Governance Proposal Published — Voting Begins
Step 3. Bidding Process
- Vote Buyers select whether they want to support a Yay Vote or a Nay Vote.
- Once selected, Yay Vote Buyers deposit DAI to the Yay Pot and Nay Vote Buyers deposit DAI to the Nay Pot.
Step 4. Voting Finalized
There is no need for Vote Sellers to confirm which way they would be voting as that could be verified either on- or off-chain via oracle integration.
If Yay passes, Yay Pot can be claimed by Yay Vote Sellers and Nay Pot can be re-claimed by Nay Vote Buyers. Adversely, if Nay passes, Nay Pot can be claimed by Nay Vote Sellers and Yay pot can-be re-claimed by Yay Vote Buyers.
New Proposal Mechanism
We are also implementing a similar — albeit much simpler — feature that allows Vote Buyers to pay Vote Sellers for making certain governance proposals. We will cover this in a future blog post.
What’s next?
We envision a future where Swing 🗳️ becomes the primary marketplace for buying and selling governance votes.
Swing is launching as a DAO — a fully decentralised community of Swing 🗳️ users known as Swingers.
The purpose of the DAO is to start a public discourse about the real value of pure governance tokens and current coin voting systems, and to minimise potential harm by creating transparency and legitimacy around currently existing, unpreventable bribing practices.
Stay in touch for future updates 📅 — join our Discord and follow our Twitter. We are looking for contributors so please reach out if you’re interested.
Happy swinging! 🗳️
