As a RAD token holder I want to provide liquidity to the market. I believe it will economically strengthen the token ecosystem. I also want to use Snapshot or Sybil to participate in governance and vote on important proposals.
Today the Uniswap (or Balancer) LP tokens don’t grant me any rights. They only represent my share in the liquidity pool. As they reduce the number of RAD token in my wallet, my vote weight diminishes. I would like LP tokens to grant me governance rights so I’m incentivised to do both: Provide liquidity and vote. I’ve seen other networks that allow to “Stake” the LP tokens. Staking LP tokens as a proof for providing liquidity would enable different mechanisms to allow governance participation. I’d like to get feedback on two ideas:
Liquid Treasury Delegations
There could be a system of smart contracts that delegates treasury funds to the “Staker” proportional to the amount of locked RAD in the LP.
Liquidity Pool Governance Derivatives
Alternatively there could be synthetic RAD token (sRAD) that allows participation in governance. These could be minted upon Staking.
As the amount of RAD in the liquidity pools rebalances, it isn’t straight forward and there might be other unforeseen challenges. The problem with moving funds in and out from LPs are simply the high gas fees. On-chain gas fees might be another problem for dynamically adjusting these governance rights.
In my opinion, it would be worthwhile for people providing liquidity to still be able to vote as well. Just as long as it isn’t a tradeoff for security.
On a side note, does anybody know how COMP prevents from flash voting? I’m sure there must be some mechanism in place to prevent somebody from taking out a flash loan of some governance tokens and voting with them, correct? MakerDAO was having problems this last October:
I was wondering if it would be possible to remove your liquidity, vote, and return it to the pool in one transaction. But I’m sure I’m missing something. If anybody knows how Compound governance prevents this, please point me in the direction to learn more!
Very valid concern. With one of the ideas above (synth RAD) there would be even more attack vectors. Uniswap allows flash swaps to incentivize arbitrage. This would allow the attacker to leverage the full reserve in the pool. Todays thats around 150k RAD worth $1,47m.
I don’t know how that would affect a multi-day vote on Snapshot and more importantly Sybil and if the forked Governor contract has mechanisms to mitigate those.
For votes to count, they must be delegated before the proposal is submitted. This means you can’t simply take a loan out and vote. You have to have the tokens delegated to you prior to the proposal existing, then wait until voting starts.
I came across DAOhaus and wanted to share some of their measures with regards to the problem described above:
[…] Shogun staking HAUS holders can provide liquidity for ETH/HAUS on HoneySwap and receive ‘soft’ signalling power through snapshot, as well as HAUS rewards.
[…] Ronin staking allows HAUS holders to ‘stake’ only their tokens to receive ‘soft’ signalling power and HAUS rewards.