Albedo idea in a nutshell

in #blockchain2 months ago (edited)

Token-weighted governance is the usual means for blockchains and DAOs to make governance decisions and select block producers. The problems with that are well known - centralization, inefficient distribution of network funds, etc [1]. Albedo whitepaper outlines how to reverse this trend on existing chains, using a democratic, human-run process (more specifically - fractally process), without requiring any changes to the underlying chain. Here's a summary, from a slightly different perspective.

Countering vote-buying using vote-buying

Intuitively, we all know that vote-buying (or bribery) in governance protocols is bad. It enables those who have wealth to exercise control selfishly over matters that affect everyone. It turns democracy into plutocracy. This is in fact one of the main woes that plague token-weighted governance mechanisms.

But let's do a thought experiment. What if the vote-buyer (or briber) is an entity whose will is determined by a decentralized, transparent (public), democratic process run by a large number of people? Is vote-buying still bad then?

Let's take it a step further. Let's say that the governance process in which votes are bought is much less democratic, fair, and transparent than the process that determines the will of a vote-buyer. More concretely, let's say we have governance system A, which is run by plutocracy and is suffering all the negative consequences of that, and a system B, which is a true democracy, formed by people who are in the system A, but lack a sufficient voice in its governance. Let's also add that joining B is sufficiently easy for any individual who is in system A. Isn't B buying votes in system A not only justified but actually preferable? After all, if B is truer democracy than A, it means that B expresses the will of the people better than A does. So vote-buying becomes means for people to take back their power.

Of course, the critical question arises: how can people who don't have a voice in a plutocracy, perform vote-buying? Plutocracy is run by the wealthiest and if you don't have a voice in it, it probably means you don't have sufficient wealth. So how can you buy a meaningful amount of votes?

You might not have enough wealth to buy meaningful amount of voting power directly, but people have something else: ability to produce value and choose what to sell this value for [2]. They can sell this value for voting power.

This is the reasoning on which the Albedo project is based.

  1. Create a democratic governance process on top of existing chain;
  2. Determine the value that it can provide;
  3. Sell the newly created value for on-chain governance power (buy votes), so that the new more democratic process gains influence in on-chain governance;

1. Create a democratic governance process on top of existing chain

This has already happened. In EOS ecosystem there's EdenOnEOS and EdenFractal, which utilize ideas of fractal governance to determine how to distribute funds in a democratic way. Albedo proposes using fractally process, which makes EdenFractal perfect for this.

2. Determine the value that we can provide: off-chain infrastructure for dApps

For a smart contract platform like EOS a great candidate for this is off-chain infrastructure for dApps. Typical dApp requires a lot more than just smart contracts, and that's one of the areas where the crypto ecosystem has a lot of room to grow (making all of this infrastructure decentralized and developer-friendly).

Storage, indexing, notification services, off-chain computation - all of these components are often needed for dApps, but currently, EOS does not provide them.

3. Sell the newly created value for governance power (buy votes)

Now that we have found some value that the network by itself does not have, we can aim to create it and trade it for the governance power in the network. This can be achieved using very simple tokenomics: create a token that would grant rights to resources of off-chain infrastructure, and issue this token only to those that delegate their governance power to us.

Now there're primitive ways of doing this, but in the Albedo whitepaper I propose a specific mechanism that I think can make the process fun, bring more attention to fractal governance, foster healthy competition between BPs and enable healthier collaboration between BPs and contributors.

Below is a short and simplified description of the mechanism from the perspective of EOS token-holder (Bob) and EdenFractal contributor (Alice). AER is a name for a token that would be able to buy rights to off-chain infrastructure.

  1. EOS token-holder (Bob) chooses a contributor (Alice) in EdenFractal meetings, which he thinks has the biggest chance of being ranked highly in the next consensus meeting of EdenFractal;
  2. Bob checks what BPs Alice votes for and sets his BP votes for the same BPs (this is required in order for Bob to advance to the next step);
  3. Bob signals on-chain that he "stakes" his EOS tokens on Alice being highly ranked in the next consensus meeting;
  4. Alice participates in the EdenFractal consensus meeting and gets some amount of Respect (determined by the rank she receives for her contribution; higher rank - more Respect);
  5. Bob receives the amount of AER proportionate to the amount of Respect Alice earned;
  6. Bob adjusts (or not) his choice of EdenFractal contributor and his BP votes accordingly and the process is repeated from the first step.

Bob is incentivized to guess who will gain the most Respect in the fractal meeting. In turn, the better and more consistently Alice performs in fractal meetings the more token-holders will stake for her and her BP choice will matter more. Thus best contributors will gain the most power in on-chain governance.

By rewarding AER tokens to EOS token-holders, which vote the way EdenFractal contributors vote, the system creates a mechanism in which token-holders trade their voting power for the value provided by AER token. This is vote-buying, except unlike in traditional settings, the vote-buyer is a decentralized democratic governance process.

Note also, that voting for BPs is also a contribution. Therefore, if Alice's BP votes are sub-optimal in the eyes of EdenFractal, the community can rank her lower. This will result in fewer token-holders staking for her and hence fewer votes for BPs she selects.

Redirecting network inflation towards public goods

Let's look at this from the perspective of BPs. If Alice chooses a BP, besides voting with her own tokens for this BP, everyone who stakes for Alice will be voting for this BP too. Therefore BPs are incentivized to convince Alice to choose them. Furthermore, they are incentivized to support Alice: more support for her can directly influence the quality of her contributions and hence her ranking in fractally meetings, which will increase the amount of AER she is able to earn consistently, which will result in more staking for her and finally more votes for BPs she chooses. This means that the interests of block producers and contributors are finally aligned toward bringing the most value to the ecosystem.

csp-tokenomics-loop-with-attr.png

If EdenFractal ranks contributions fairly and takes into account their BP votes, this will redirect network inflation to those that bring value to the ecosystem. Firstly by giving more votes to BPs that produce value or support valuable contributions, BP rewards for those BPs will be increased. Secondly, fractally process, as always, rewards contributors with Respect tokens. Thirdly, as mentioned in the previous paragraph, funding valuable contributions becomes a way for BPs to increase their own future EOS block producer rewards. And finally, any token-holder (including BPs and contributors) can earn AER tokens by directing their voting power according to the will of EdenFractal.

Utility of AER

As mentioned previously the utility of AER will be resources of the off-chain infrastructure (off-chain computation, storage, etc). Block producers are in a perfect position to provide these off-chain services. First of all, being BPs, they are very near related infrastructure already. Second, there's an incentive for them to do so, because more value they provided for AER (better off-chain services), means more EOS token-holders staking to earn it, which means more votes for BPs selected by contributors. And obviously, contributors benefit from the value of AER, because it gives them more power and support from BPs, so contributors are incentivized to select BPs which provide off-chain services in exchange for AER.

Implementation of contribution staking pools

If you understood this post up to this point, you understand the essence of the albedo idea. The rest is concerned with more technical design decisions, which are nevertheless worth mentioning.

The intent is to implement the staking mechanism (which we call "contribution staking pool smart contract (CSP)") as an off-chain smart contract. In simple terms, it means that transactions will be published on-chain as for any other smart contract, but the state for the smart contract will be computed off-chain. This makes the CSP smart contract a first-class citizen of the off-chain infrastructure for dApps provided to token-holders of AER. So if you can earn AER - it means that there's at least some minimal amount of utility provided by it.

Most importantly, this kind of design makes the system a lot more user-friendly. For example, there's no need to lock your EOS in a special on-chain smart contract; You can even keep them in existing interest-earning smart contracts assuming they preserve voting rights for your tokens (e.g.: REX). This means that you can keep earning interest with your EOS on-chain while being able to earn AER as well. Also, since the user does not have to lock up his on-chain EOS into any smart contract in order to stake in CSP smart contract, he does not risk anything. This alone is a huge deal, because knowledge of the risks involved when interacting with smart contracts, is one of the big friction points for the user. It won't be a problem for CSP smart contract, since the user won't be risking any on-chain value when participating.

Support and learn more

This is Albedo project idea in a nutshell. If you want more details here's the whitepaper. If you have any questions, comments, or would like to help please drop a message here in the comments or in a dedicated telegram channel. And finally, if you see the potential of this, please support it with a Pomelo donation.


Edit 2022-08-09:

  • Added a note about what happens if EdenFractal disapproves of Alice's BP votes;
  • Added a paragraph about how this mechanism redirects network inflation;
  • Link to the whitepaper in the last section.

  1. Vitalik does a good job highlighting issues with this kind of governance and the need for alternatives here.

  2. In fact, people who have less are typically more creative and hence, in a better position to bring new value to the ecosystem, than people whose power is only based on holding on to existing wealth.

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So, why did you get such a difficult name to pronounce such as AER? Why not REA or RAE?

In addition, if we take the Genesis Fractal or the Eden-Fractal as evidence. It's pretty simple to make predictions of the average level any given person will get. Also, predicting the group of people who will get the most respect is fairly easy: They are almost always the same. If, aside from the big respect they are getting, those people receive financing from BPs, then an unparalleled plutocracy could be being promoted. Add to that current flaws in the Fractally protocol that allow for multiple dipping of respect by teams and you would end with a ultra steep Pareto distribution of wealth.

So, I think the idea has promise. But before dedicating painful hours of coding to it, a lot of refinement and tuning its protocol needs to be done.

For example, in order to make things more fun, it would be interesting to make people "stake" not for actual ranking, but for some other indicators of performance and work: change in current weekly ranking as compared to personal average, level of attendance and the event of switching or disintegrating teams are some ideas the come off the top of my head.

Similar bets could be done, much more interestingly, on teams performance rather than individuals. Of course, this is provided that team compensation is fixed.

I didn't get in this document how off chain infrastructure providers would pay their bills? Only receiving AERs doesn't look too attractive to someone who has to pay servers and employees in dollars.

Thanks for your thoughts regarding this. You touched on some important points.

Aer means air in ancient greek. Considered calling it "air tokens" first, but there already seems to be some tokens with this name on CM. The reasoning for concentration on air is the overlay architecture for how I propose implementing it in the whitepaper. Overlay protocols (which are like off-chain computation services) and other off-chain infrastructure needed for dApps would in some sense be on top of blockchain and invisible to it (like air).

The fact that it might be fairly easy to predict the best performers in fractal meetings is a feature in my mind. We want EOS token-holders to stake the most for those contributors who perform best so that BPs that these contributors select get the most votes. Roughly speaking, the goal is to make the distribution of stake for contributors follow the average distribution of Respect. Also, while weekly rankings are predictable, it is not a sure thing, and I think that can make this game more exciting for stakers (for the same reason why betting games are attractive).

If, aside from the big respect they are getting, those people receive financing from BPs, then an unparalleled plutocracy could be being promoted. Add to that current flaws in the Fractally protocol that allow for multiple dipping of respect by teams and you would end with a ultra steep Pareto distribution of wealth.

It's not obvious that BPs will fund the best contributors. BPs will want to save and if they know that contributor is already sufficiently funded, they might not agree to give more. It's a negotiation between contributors and BPs. The best strategy for a BP might be to try keeping existing votes, while privately supporting and funding contributors who are not yet being ranked highly, but have a lot of potential. Then BPs can put a large stake on this contributor before everyone else and make more AER than everyone else. The genesis fractal rule to first select a contributor who contributes the most relative to their past contribution would be very helpful here. If this would indeed be the most profitable tactic for most BPs, I think it could actually help reduce Pareto effect among contributors and help new people rise in ranks, start working on their fractal projects full-time.

Nothing in this protocol is set in stone yet. Both this mechanism and fractally process can use refinement to make the best of this. A way for the community to update this protocol is key here, as it is probably impossible to get it perfectly the first time.

I didn't get in this document how off chain infrastructure providers would pay their bills? Only receiving AERs doesn't look too attractive to someone who has to pay servers and employees in dollars.

I propose that off-chain infrastructure providers be existing BPs of the chain (those who are willing to do that). They already have a chance to get BP rewards and if they additionally provide off-chain infrastructure, fractal contributors will be incentivized to choose them, which will increase the amount of votes they get and increase their BP rewards. That in addition to AER tokens. BP rewards can be pretty big once token price rises and we have a precedent for BPs doing more than just producing blocks. This was especially true in the early days of EOS - a lot of BPs were producing useful tools and apps for the community. They were the main source of initial dApps and other tools on EOS. Later this pretty much stopped, because these value-producing BPs weren't able to keep their BP positions where they would be paid enough. The mechanism here presents a way for BPs to increase their BP rewards by contributing more than just block production.