Wealth based

Wealth based approach for determining voting power


Wealth based voting power is calculated using the amount of wealth a voter has. This type of voting power could be described as a plutocracy or a wealth based timocracy. Wealth based voting power can make sense in the earliest stages of a Web3 ecosystem where there are fewer use cases and transactions and a genesis allocation of community funds to use for growing the ecosystem. The users who invest in the ecosystem could have a proportional say in how those funds are used based on how much they have invested into the network. The problem with wealth based voting power is it becomes increasingly less fair over time as more people contribute to the network in terms of tax based contributions and other forms of contribution that help to maintain and improve the network. Those who already have wealth in the ecosystem would have no obligation to actively contribute to the ecosystem as they already have a large financial position and influence over how treasury funds are spent. Wealth based voting power is an important consideration for network based parameter decisions that can impact everyone in the ecosystem. For treasury funding decisions it is less important how much wealth someone has and more important to consider the contributors who have actually funded that treasury through transaction fees.

Low execution & scaling complexity (Score - 4)

A Web3 ecosystem can easily determine the amount of wealth that each wallet has and take this information into account in any voting system that is adopted. All of the required data is available on-chain meaning this approach is fairly easy to execute and scale. The main scaling and execution complexity for wealth based voting power is that the amount of wealth someone has can suddenly change. Voters could purchase more of the network's coin or use loans to suddenly increase their position and increase their influence on important decisions. After the vote they could completely sell their coins. This creates a risk for the network that someone will attack the network by voting maliciously and then suddenly sell their position and exit the ecosystem.

Low fairness for network decisions (Score - 2.5)

Wealth based voting power for network decisions is not very fair in situations where the people who are voting on these network changes can easily buy in and sell out of the ecosystem at a moment's notice. There is fairness in taking into account the wealth of each individual in the ecosystem when it comes to network parameters as all of these users have an amount of capital invested into the ecosystem and deserve the right for their capital to be respected and represented in a voting process. If their capital is not respected and there are many other ecosystems the wealthier individuals have no obligation to stay and could migrate towards where they are treated best. Another concern with a predominantly wealth based voting power approach is that it could give perpetual control to individuals who hold large positions in the network. These holders may provide no further value to the network beyond their initial investment but could be able to repeatedly extract value out of the network if they are able to vote on parameters that are self-serving to the wealthiest individuals. Wealth based voting power becomes less fair over time as transaction fees become the more important reason why the network survives and succeeds rather than the initial capital that people invested.

Low fairness for treasury decisions (Score - 2)

Wealth based voting power is at its fairest at the beginning of a Web3 ecosystem where the ecosystem benefits from investment that helps to increase the value of the ecosystem and any treasury funding that has been allocated at the genesis of the network. Investment can also be directed towards initiatives within the ecosystem that help to grow and improve the network. This voting power approach can make sense in the beginning as the initial treasury capital became valuable due to the investment of these original investors. Over time this approach becomes increasingly less fair for the users of the ecosystem as the treasury assets would be eventually replaced by tax based contributions. Wealthier individuals could end up having perpetual influence over how other people's tax contributions are being spent even though they might not be contributing much themselves. A wealth based voting power approach ignores the tax contributions that people make that actually keep the network alive and operational and that fund the treasury. Wealthy individuals that don’t contribute towards the ecosystem's treasury would still be benefiting from the contributions of others that lead to funded initiatives that maintain and improve the network.

Total score = 8.5 / 15

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