The Cardashift voting system: Rules, rewards, and game theory
Our goal is clear: to move towards decentralized governance. At the outset, we have set up a voting system to include our community in the project selection process.
Why is it essential for us to allow the community to vote?
The voting phase is about getting the community to help us identify projects for the pre-funding stage. As alluded to in our article — Crypto holders: try impact investing! — a crypto community is composed of investor-citizens. Therefore, as in any democratic system, we want to include community members in finding the projects that will make Cardashift. This system has three objectives:
● To gain insights into community preferences that can inform our decision-making during the rest of the selection process;
● To enable project leaders to discuss their ideas, receive feedback, and seek advice from the Cardano community;
● To boost community members’ confidence while helping them to develop their project assessment skills (by sharing our assessment methods with them)
We hope to create a community of analysts who can increasingly contribute to and further develop the decentralized governance system in the long term.
Come as an investor; stay as an active member of an impact-driven community!
General rules of the voting system
Here are the instructions for voting; they will help any investor participate.
Every two months, community members will receive an invitation to help identify the most promising projects by participating in a “voting by staking” system, which will run for one month.
Requirements for participation:
● Just one CLAP!
We made a bold choice to bring more equality and democracy to the selection process. It means that everyone can participate! We want to get back to one of blockchain’s original goals — injecting greater equality into the financial system by enabling any community member to choose and invest in the projects of tomorrow.
Basic rules:
● We will allocate voting tickets according to the amount of CLAP held:
● Each member can put their voting tickets on the projects they like the most
● Members will receive a 7–8% annualized return on holding, i.e., 0.6% for a complete month [UPDATED: 20% APR, i.e 1.5% for 4 weeks]
Rewards for the voter:
● Each member will get back the amount they kept held plus interest
● If the project they selected proceeds to the funding round, the ones who voted for it in less than 48h will be whitelisted for the private sale
Two metrics for project selection:
1. The volume (total number) of CLAP tokens staked per project call
→ It gives us insights into projects’ funding potential
2. The number of voters (unique addresses) participating in each project call
→ It avoids a plutocratic system where the wealthiest wallets are the only ones to drive the decision
At the end of the staking period, projects that meet the percentage threshold for both metrics proceed to the next step.
Difficult to digest?
Here’s an example:
It’s the last day of the voting period — at the closing time, here are the figures:
● 20 projects in the cohort
● 100 members have voted
● 10,000 voting tickets at stake
● Percentage threshold of 10%, i.e., 10 voters and 1,000 voting tickets
Four projects are in the lead:
Results: Projects A & B get selected for the next step. Project C & D are not.
Does our system convince you?
Want to be a part of it?
An exploratory approach assigns the community a vital role in the selection process. We want to expound on the rationale underpinning the system and include all the members in our discussions about it for transparency issues. So, for those keen on game theory, here’s how the system incentivizes participants to make informed decisions.
A resilient system to slick characters!
Disincentivizing ‘slick characters.’
The main potential pain point is opportunistic members who do not stake during the 1 month, then, just before the end of the process, put 1 CLAP on a project which has already cleared the threshold.
If such opportunistic members make up a significant share of voters, that may distort the outcome of the vote.
Let us illustrate this point using an example. Imagine the following situation:
● Number of projects in the batch: 20
● CLAPs volume staked: 10,000 CLAPs
● Current number of voters: 100
● Threshold: 10%
Now, let’s assume that 10 members, who haven’t yet staked, choose to put 1 CLAP each on project A, so as to be sure that they get whitelisted for a potential upcoming private sale.
It’s fair to say that these 10 new investors just went with the flow and didn’t actually cast an informed vote.
However, due to the last-minute intervention of the aforementioned 10 investors, the state of play at closing looks like this:
It poses two ethical conundrums:
- While the launchpad claims to foster sustainable development, speculative investments have precluded potentially impactful projects from being selected
- Investors who made an informed decision to vote for projects B & C feel cheated by this system
So, the voting system doesn’t work?!
Well, actually…
A little bit of game theory shows us the resilience of the staking system
The risk of last-minute opportunist voters is accurate, but we believe that the staking system acts as a corrective mechanism, ensuring that voting decisions are as informed as possible. The staking system incentivizes investors to choose their favorite projects at the beginning of the 1-month voting period. This is because the more time they stake, the more they stand to gain.
Investors, being rational actors, will choose their favorite projects from the very beginning. In so doing, from a game theory perspective, this ensures that the system works.
Let’s be more precise:
According to Rasmusen’s theory, knowledge is deemed complete if every player is aware of the following from the very beginning:
- the possible actions he can take
- the possible steps the other players can take
- the imaginable rewards for his actions
- the other players’ objectives
However, a game can have complete but imperfect information, meaning the investor doesn’t know the other members’ moves. That is indeed the case here.
It means the investor has three options:
- Wait for the others to make the first move to be sure to stake on the right project → The reduced staking reward makes this less attractive.
- Pick projects rationally, assuming that most investors will do the same and reach the same conclusion as himself.
- Making uninformed and risky assumptions about which projects could meet the threshold → is unattractive. One can quickly reduce risk by analyzing the different projects, which takes us back to the previous bullet point.
Are you convinced?
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You can also follow us on Twitter and learn more about us on our Website.⚡️
Written by Yannis Baala & Anaïs Bouchet — Impact Project Managers
