Tax contributions

Tax contribution based approach for determining voting power

Overview

Tax contribution based voting power is determined based on the amount of tax a person has contributed to the network. Tax contributions could be described as a form of tax timocracy. Tax contributions towards a network's treasury become an increasingly relevant form of voting power over the long term as the network will eventually rely on the transaction fees to maintain itself and optionally these contributions could fund an ecosystem treasury.

Very low execution & scaling complexity (Score - 5)

The funds that a user has paid to the network in the form of transaction fees are available as on-chain data. This makes it easy to work out which users have contributed what amount to the network. The main execution consideration is ensuring that the voting power would expire once the users contributions have been spent or a voting power time limit is applied.

High fairness for network decisions (Score - 4)

Tax contributions are going to be less meaningful and less important in the earlier stages of a network when there are fewer use cases and transactions being made by users. Over the long term the importance of transaction fees becomes increasingly relevant for the survival and success of the network. Due to the growing importance of network fees for paying validators it is fair to increasingly weight the network decisions based on the people who are actually using the network and paying for it to be maintained. However tax contributions on their own is not a fair voting power system due to the fact there are also people who have invested their capital into the network. A fairer outcome would be to try and balance the need to respect the capital that people have invested as well as respecting the contributions that people make through transaction fees that help to maintain the network.

Very high fairness for treasury decisions (Score - 5)

In the short term the usage of a tax based voting power would not be immediately fair for situations where there is a genesis allocation to the treasury. The people who invested in the network to make that allocation valuable would have likely made more contributions towards making the coin valuable than any initial transaction fees would have. This is a short term factor as over the long term this initial allocation will be depleted. Over the long term tax contributions would likely be the main driver for funding any ecosystem treasury. Due to this the people that contribute to this are highly valuable for the network as they both pay for the validators and also for the treasury that gets funded. It is fair for these individuals to have voting power to decide on how their own contributions will be spent. This approach would mean the people that contribute the most in terms of transaction fees would just have a direct say in how their funds get spent. This is a fair outcome as they are the ones who contributed these funds and their voting power would just be used to decide how those funds should be best used to maintain and improve the network. A benefit with this approach is that wealthy individuals would not have any perpetual control over the treasury decisions, they would have to contribute financially to the treasury through taxation to have any voting power. Wealthy individuals that don’t use the network regularly would have far less voting power than those that actively use the network and contribute to the treasury. The users that don’t contribute much or anything to the treasury would still get the benefits of a maintained and improved network from the funds that do get spent from the users that have contributed.

Total score = 14 / 15