[Constitutional] DVP Quorum for ArbitrumDAO: Implementation & Parameters

Abstract

The ArbitrumDAO recently expressed strong interest in moving towards a delegated voting power (DVP)-based quorum model. Consequently, this upgrade, if implemented, will define quorum as:

Quorum = min{max quorum, max{ɑ*DVP, baseline quorum}}

where ɑ, baseline quorum, and max quorum are constants.

This proposal aims to finalize the implementation and accompanying parameters of this upgrade - ɑ, baseline quorum, and maximum quorum. If this temperature check is successful, the proposal will move towards an on-chain vote in February.

Motivation & Context

As it stands, ArbitrumDAO's quorum is computed based on the total voteable supply, which has no relationship to the tokens registered to vote. This proposal introduces a better approach by basing quorum on delegated voting power (DVP) - a metric that more directly represents the amount of ARB participating in governance and available for voting.

All of the relevant context and motivation may be found in the previously published posts on this topic. The first report focuses on the rationale for the change, the historical performance of quorum, and the security implications of this upgrade. The second report is a comparative analysis of quorum across other large DAOs, as well as shareholder voting in public companies, aimed at presenting insights into ArbitrumDAO’s position relative to comparable systems. The motivation around this update is captured in the initial temperature check.

Specification

Definition

This AIP proposes upgrading to the following quorum computation logic:

Quorum = min{max quorum, max{ɑ*DVP, baseline quorum}}

where ɑ, baseline quorum, and max quorum are constants.

How the Formula Works

The proposed formula works as follows:

• When ɑ* DVP is lower than baseline quorum, baseline quorum applies.
• When ɑ* DVP is higher than baseline quorum and lower than max quorum, ɑ* DVP applies.
• When ɑ* DVP is higher than max quorum, max quorum applies.

In short, baseline quorum and max quorum form fixed lower and upper bounds for quorum.

Proposed Parameters

We suggest the following parameters:

For constitutional proposals:

• {ɑ = 0.5; baseline quorum = 150m ARB; max quorum = 450m ARB}

For non-constitutional proposals:

• {ɑ = 0.4; baseline quorum = 100m ARB; max quorum = 300m ARB}

A Trail of Bits audit of the proposed changes can be found here. Note that to initialize the running total, an estimate of the total DVP must be provided as part of the upgrade proposal. A followup proposal can correct any error in the initial DVP estimate, if needed.

Rationale for Parameter Selection

(i) Participation threshold (ɑ)

For non-constitutional proposals, our recommendation of ɑ = 0.4 ensures continuity with the current non-constitutional quorum. At the current DVP of 348.61m ARB, non-constitutional quorum will equate to 139.4m ARB, which is very close to its current value of 145.56m ARB.

For constitutional proposals, our recommendation for an ɑ value of 0.5 aims at creating a safer buffer between voter turnout and quorum while retaining a high voter turnout. Most large DAOs operate with quorum thresholds well below fifty percent of delegated voting power, and corporate and legislative systems rarely employ supermajority quorum requirements. As concluded by research report #2, when quorum is expressed as a percentage of DVP, its value at ArbitrumDAO (~62% of DVP) is roughly double that of the next highest DAO benchmarked. Even after the proposed upgrade, ArbitrumDAO’s quorum would remain higher than all comparable DAOs reviewed by the report.

(ii) Baseline Quorum

Historical participation data of ArbitrumDAO provides strong support for the baseline quorum values proposed. Over the last two years, the average quorum for non-constitutional proposals amounted to ~104m ARB, which motivates our recommendation of a 100m ARB baseline for non-constitutional proposals. For constitutional proposals, the average quorum, excluding periods in which quorum was structurally difficult to reach, falls around 156m ARB, motivating our recommendation of a 150m ARB baseline. These values preserve continuity with observed voting behavior while creating a sufficiently large lower bound for quorum.

Note that baseline quorum values will not apply until DVP drops below a certain threshold. For the constitutional baseline quorum to apply, DVP would need to drop below 300m ARB. At all values of delegation below this threshold, a constitutional proposal will require a quorum of 150m ARB. For the non-constitutional baseline quorum to apply, DVP would need to drop below 250m ARB.

(iii) Maximum Quorum

The implementation also includes an explicit smart contract setting to configure a maximum value of constitutional and non-constitutional quorum. This is a static parameter that can be updated through a DAO vote if needed. A maximum quorum of 450m ARB for constitutional proposals and 300m ARB for non-constitutional proposals are proposed. These values are fully consistent with the current maximum quorum values (where they are defined as 3% and 4.5% of the maximum voteable token supply) and as such aim to retain the status quo on the upper bound. For additional context, DVP would need to go over 750m ARB for the non-constitutional max quorum to be triggered and to over 900m ARB for the constitutional max quorum to be triggered.

Going forward, these thresholds may further act as checkpoints for the DAO to reconsider the DVP-quorum model’s performance in a high-DVP scenario.

ArbitrumDAO Constitution Adjustments

Due to the upgrade’s nature, the following updates will be made to the Definitions and DAO Proposals and Voting Procedures sections of the ArbitrumDAO Constitution, in order to reflect the new way quorum is calculated.

Change 1: Definitions

Old Text

Definitions:

• AIP: An Arbitrum Improvement Proposal
• ArbitrumDAO-governed chains: The Arbitrum One and Arbitrum Nova chains and any additional chains authorized by the ArbitrumDAO
• DAO Treasury: All $ARB tokens held in a governance smart contract governed directly by the ArbitrumDAO and/or the Security Council of The Arbitrum Foundation via on-chain voting mechanisms.
• Governed Chains: Any ArbitrumDAO-approved chains that are governed by the $ARB token
• Non-Governed Chains: Any ArbitrumDAO-approved chains that are not governed by the $ARB token
• Votable Tokens: All $ARB tokens in existence, excluding any tokens held by The Arbitrum Foundation and any unclaimed airdrops

New Text

Definitions:

• AIP: An Arbitrum Improvement Proposal
• ArbitrumDAO-governed chains: The Arbitrum One and Arbitrum Nova chains and any additional chains authorized by the ArbitrumDAO
• DAO Treasury: All $ARB tokens held in a governance smart contract governed directly by the ArbitrumDAO and/or the Security Council of The Arbitrum Foundation via on-chain voting mechanisms.
• Governed Chains: Any ArbitrumDAO-approved chains that are governed by the $ARB token
• Non-Governed Chains: Any ArbitrumDAO-approved chains that are not governed by the $ARB token
• Votable Tokens: All $ARB tokens in existence, excluding any tokens held by The Arbitrum Foundation and any unclaimed airdrops
• Delegated Votable Tokens: The sum of Votable Tokens currently delegated and eligible for governance participation

Change 2: DAO Proposals and Voting Procedures

Old Text

Phase 3: DAO votes on AIP, on Arbitrum One (14–16 days): During this Phase 3, the ArbitrumDAO will be able to vote directly on-chain on a submitted AIP.

An AIP passes if the following 2 conditions are met:

1. More Votable Tokens have cast votes "in favor" than have cast votes "against" ("Threshold 1"); and
2. In the case of a:
   • Constitutional AIP, at least 4.5% of all Votable Tokens have cast votes either "in favor" or "abstain"; or
   • Non-Constitutional AIP, at least 3% of all Votable Tokens have cast votes either "in favor" or "abstain" (collectively, "Threshold 2").

New Text

Phase 3: DAO votes on AIP, on Arbitrum One (14–16 days): During this Phase 3, the ArbitrumDAO will be able to vote directly on-chain on a submitted AIP.

An AIP passes if the following 2 conditions are met:

1. More Votable Tokens have cast votes "in favor" than have cast votes "against" ("Threshold 1"); and
2. In the case of a: - Constitutional AIP, at least 50% of all Delegated Votable Tokens, as well as a minimum of 150 million $ARB and a maximum of 450 million $ARB, have cast votes either "in favor" or "abstain"; or - Non-Constitutional AIP, at least 40% of all Delegated Votable Tokens, as well as a minimum of 100 million $ARB and a maximum of 300 million $ARB, have cast votes either "in favor" or "abstain" (collectively, "Threshold 2").

Voting Options & Timeline

This temperature check will include two voting options:

• For: Adopt the DVP quorum model, alongside proposed parameters
• Against: Do not adopt the DVP quorum model, alongside proposed parameters
• Abstain

We aim to take this proposal to a temperature check vote starting 05/02/2025. Following a successful temperature check, the proposal will be put to an on-chain vote.