Governance Paper Working Draft

Hey All,

My apologies for not posting this sooner. I circulated the Governance paper I drafted to some of you and got great feedback. As a reminder this paper was not meant to offer in tokenomics or governance changes. It uses a theoretical framework which with a high level of predictability describes current issues that exist within the ecosystem.

This paper got a lot of students and a few faculty excited to explore a more applied path of research in governance (the intended outcome).

We will be working to clean up the draft, publish it, publish a systematic literature review on governance within the next two months. From there we will diving deeper into governance models and tokenomics, and their consequences.

In the mean time, I am happy to dedicate a few hours a week to helping out as the community sees fit on the governance side more immediately.

Thanks again for supporting us during these difficult times. Looking forward to contributing as much as I can.

 
Thanks @TroyWiipongwii

I appreciate the research. It's important we get more of this as any structural action taken should always be based on careful consideration.

Happy to get your input on the following. Please correct me if I mix anything up.

When looking at contract forms in Factom, we take from positive agency theory that:
  • ANOs have behavior-based contracts, where an ANO (agent) receives a fixed reward regardless if the behavior aligns with other stakeholders (principals).
  • Maintaining a behavior-based model calls for optimal monitoring to assess the performance of the ANO – so its behavior is more likely to align with other stakeholders.
  • ANOs can also have performance-based contracts, where an ANO receives a variable reward (commission, backpay grant), dependent on achieving an outcome desired by both the ANO and the principal.
The paper mentions that behavior-based work relates to maintaining infrastructure and creating code for core development. In other words, these ANOs use a behavior-based contract (fixed reward) for work that can be monitored. We can monitor this, because we can easily observe node status and code commits. The paper then classifies ‘working towards usage’ as performance-based work.

However, because the ANO system uses ‘pledges’, many of these pledges and efficiency-changes include performance-based tasks (working towards usage) but are inherently still subject to a behavior-based contract (fixed reward). The problem this creates is that from looking at positive agency theory, these tasks in the behavior-based contract call for monitoring, but as we know from practice, this information cannot be acquired optimally in the current model.

Put simply, a pledge or efficiency change involving a task that is not easily monitored is still subject to a fixed reward.

Put even more simply, we have ANOs running at very low efficiency based on pledges we cannot track or follow.

Can we then assume two actions?
  • Install systems to try and monitor those tasks.
  • Limit the ability for ANOs to add hard-to-monitor tasks to their behavior-based contracts. There are two things that come to mind:
    • Keep a baseline efficiency that cannot be changed (infra only)
    • Forbid pledges covering tasks that cannot be monitored and expand those tasks beyond the ANO role.
Both options have problems, but are not impossible.

Secondly, I’d like you to check out this performance-based tokenomics proposal. In your opinion, is there room for a hybrid model whereby the pure ANO role stays largely behavior-based and the overall stakeholder model with the proposal above becomes performance-based?
 
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Thanks @TroyWiipongwii

I appreciate the research. It's important we get more of this as any structural action taken should always be based on careful consideration.

Happy to get your input on the following. Please correct me if I mix anything up.

When looking at contract forms in Factom, we take from positive agency theory that:
  • ANOs have behavior-based contracts, where an ANO (agent) receives a fixed reward regardless if the behavior aligns with other stakeholders (principals).
  • Maintaining a behavior-based model calls for optimal monitoring to assess the performance of the ANO – so its behavior is more likely to align with other stakeholders.
  • ANOs can also have performance-based contracts, where an ANO receives a variable reward (commission, backpay grant), dependent on achieving an outcome desired by both the ANO and the principal.
The paper mentions that behavior-based work relates to maintaining infrastructure and creating code for core development. In other words, these ANOs use a behavior-based contract (fixed reward) for work that can be monitored. We can monitor this, because we can easily observe node status and code commits. The paper then classifies ‘working towards usage’ as performance-based work.

However, because the ANO system uses ‘pledges’, many of these pledges and efficiency-changes include performance-based tasks (working towards usage) but are inherently still subject to a behavior-based contract (fixed reward). The problem this creates is that from looking at positive agency theory, these tasks in the behavior-based contract call for monitoring, but as we know from practice, this information cannot be acquired optimally in the current model.

Put simply, a pledge or efficiency change involving a task that is not easily monitored is still subject to a fixed reward.

Put even more simply, we have ANOs running at very low efficiency based on pledges we cannot track or follow.

Can we then assume two actions?
  • Install systems to try and monitor those tasks.
  • Limit the ability for ANOs to add hard-to-monitor tasks to their behavior-based contracts. There are two things that come to mind:
    • Keep a baseline efficiency that cannot be changed (infra only)
    • Forbid pledges covering tasks that cannot be monitored and expand those tasks beyond the ANO role.
Both options have problems, but are not impossible.

Secondly, I’d like you to check out this performance-based tokenomics proposal. In your opinion, is there room for a hybrid model whereby the pure ANO role stays largely behavior-based and the overall stakeholder model with the proposal above becomes performance-based?
Thank you for the detailed questions. You interpreted the assumptions and the consequences that follow correctly. Your ultimate questions on which actions to take are reasonable as well.

1. Installing systems to try and monitor tasks
2. Limit the ability for ANOs to add hard-to-monitor tasks to their behavior-based contracts.

I think improving monitoring, reducing the ability to change efficiency for (infra nodes), and forbid pledges covering tasks that cannot be monitored are good suggestions.

I do have a few opinions about the more equitable voting in the ecosystem that removes some pressure on ANO's to be exclusively responsible for usage increase alone. I will leave those opinions out of this thread for now, but would be happy discuss on discord and share publicly if appropriate. These would be my opinions, absent of the research conducted at W&M.

I will read the proposal put forth and respond. Maybe some of my opinions overlap with the proposal. Will write a detailed response in the coming day!
 
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