Proposal for SKALE Network's On-Chain Governance System

Overview

As the SKALE Network continues to grow, it is important to establish a transparent and decentralized governance system that allows token holders to have a say in the network's technical development and future direction.

There were two key driving factors behind the strategy of this voting structure:

1 - A focus on simplicity with the goal of remaining flexible. The most prominent feedback received was to keep it as simple as possible at the start while leaving room for growth and greater specification as the network naturally evolves

2 - The second piece of key feedback received was to NOT reinvent the wheel. We selected a setup that is proven to work and modeled it to fit the specifics of the SKALE Network. DAOs and governance will continue to be innovated on and the flexible structure of this proposal will enable the network to adopt and change over time to embrace more beneficial techniques.

The following proposal outlines a voting system for the SKALE Network through on-chain governance, with an initial focus on adjusting economic parameters of the network.

Scope

The initial scope for SKL on-chain voting will be focused solely on technical components that impact economic parameters of the SKALE network. Examples include but are not limited to:

• SKALE Chain Pricing
• Network Inflation
• Slashing Conditions & Penalties
• Minimum Stake Requirement
• Staking periods and Variable Returns for Variable Period
• Validator Incentivization

The primary goal is to get an on-chain voting system up and running while simplifying execution and minimizing risk and complexity.

Voting at this stage will NOT encompass the off-chain items listed below, but can be expanded in the future to cover a greater scope.

Voting will NOT have any direct control over governance of any one chain in the SKALE ecosystem. They will be independently governed based on their own DAO processes and rules.

While this voting structure focuses solely on technical governance of the network as it relates to economic factors it does not stop others from creating separate voting structures, DAOs, and pools of tokens that can be created to facilitate different voting and community goals.

Separate community DAOs can be created with their own voting structures that would govern non-technical project decisions including but not limited to:

• Grants
• Marketing decisions
• Business development
• Branding
• Roadmap
• Administration of individual SKALE Chains - i.e Calypso/Europa

The voting structure listed below is a proposal based on aggregated feedback from validator operators, developers, core developers, open source contributors, delegators, community members, and other constituents. In order to ratify the voting structure, the first vote will be held to approve the voting mechanics and approval process. If the minimum thresholds are not met with a passing vote, then a new structure will be proposed and voted on.

Voting Process and Rules

• All proposals will be hosted on the SKALE Forum to collect feedback from the community (https://forum.skale.network)
• Token holders can propose or vote on proposals through their wallets using the approved voting tool, Snapshot.
• The voting will take place on the Ethereum Mainnet.
• As a measure to protect against attacks and for incentive alignment, only staked tokens at the time of the voting period opening are eligible to vote and only until the voting period closes
• Voting periods for each proposal will be active for 7 days.
• In order for a vote to be qualified it must meet a minimum threshold of voting power within the network. The quorum requirements will be set at 33.334% of staked tokens in the network.
• Proposals will be approved if they receive greater than 50% of YES votes tokens.
• These mechanics can be changed via future voting proposals.
• At the time of this writing based on total supply and staked metrics 823,590,936 votes are required for a quorum and 411,795,368 would be required to approve a vote
• Validators will be enabled to vote on behalf of delegates who do not utilize their votes.
  • Voting power is directly proportional to the amount of tokens staked on a 1:1 basis
  • Potential validator voting power is the number of SKL tokens delegated to a validator
  • If a validator votes, the entirety of their voting power will be used
  • Delegators can vote differently than the validator they are delegated to
  • Delegators who do not participate in voting, will have their voting power claimed by the validator if the validator they have delegated to votes
• The weight of a vote will be proportional to the amount of SKL tokens staked.
• Voting rules and mechanics can be modified through governance proposals.
• Voting will be single choice meaning each delegator or validator can choose one of the choices available count towards quorum
• Governance at this time is focused on on-chain parameters and as such are categorized as SKALE Improvement Proposals. New proposals should adhere to the standard of SIP-#: [Title of Proposal]. The # should be incremented for each subsequent proposal

Summarize Goals

Empower the SKALE community to have a say in the network's economic parameters and their impact on the network's security, resilience, and user experience. Encourage token holders to participate in the governance process. Foster a decentralized and transparent decision-making process. Ensure that the network's economic parameters align with the interests of its stakeholders.

Conclusion

The proposed voting system for the SKALE Network's on-chain governance is designed to ensure that all key stakeholders in the SKALE community have a voice in the network's economic parameters and their impact on the network's stability, security, and user experience. By staking their SKL tokens, token holders can cast their votes and play a role in shaping the network's future. We believe this will help to ensure that the SKALE Network remains aligned with the interests of its stakeholders and continues to meet the needs of its users

Additionally, this is an edited version of the initial proposal found on the SKALE Network Forum which has taken and used the feedback provided by the community.

About me and my process

Most of you in the community know me as the Lead Community Developer for the Calypso NFT Hub. I also spend a considerable amount of time helping projects in the SKALE ecosystem, building open source tools for the ecosystem, speaking about SKALE at events, and holding developer workshops as an independent SKALE developer. In addition, I consult and work with a number of entities in the SKALEverse on a contract basis including some key projects within SKALE and the core team. I was asked by a number of stakeholders within the SKALE ecosystem to take the lead on creating a proposal for on-chain voting. I started by researching governance mechanisms for many Proof-of-Stake networks. I collated the “best practices” as well as the common mistakes and errors. I also looked at non-proof of stake network governance protocols in DeFi and L2 products. I then spoke with many different constituents within the SKALE community including validators, delegators, builders, core team members, dApp devs, and community members. The process has taken many turns with the vast amount of feedback and learnings. In the end, the proposal reflects what most have considered a “great starting point” for governance because it focuses on simplicity, flexibility, and growth of governance. It doesn’t pigeon hole the project in any way and allows for proper and urgently needed governance to come into fruition. I hope to see this proposal move to a vote in the very near future. Please leave your feedback in the comments and thank you for your support.

– TheGreatAxios