So there is a couple of foreseeable issues that may arise by rewarding voters with liquid JUP, and that this is the same token for voting power.
- Large stakeholders will have an accelerated means to compound their voting power, and whilst this may seem like a good strategy from a participation side of things, it may lead to price manipulation in order to game the system. It is easily prevented, but at current with standard 30d unlocks – this can lead to a major issue. Ill elaborate further;
JUP 4 JUP with a 30d unlock opens up the possibility for whale collusion to first accumulate larger amounts of JUP, to then hold it out of circulation which typically promotes price increase with ordinary demand. This inturn makes it more expensive for new members to acquire much less voting power (and thus rewards). Up until this point, that is not much of an issue – the real issue is when whales wish to all dump their JUP simultaneously in order to buy up even more JUP for much cheaper. In an isolated speculative market, not a big deal… but because it is also the voting token, now we have an issue where vote buying becomes possible (and incentivized unintentionally).
E.g.
A whale group stakes their JUP, earns much more JUP until they have a significant share to impact the market price. They all unlock after several months of accumulating larger rewards, and decide to dump the market so they can rebuy more JUP and restake it. Essentially they accumulate so much that one decides to reach out to the LFG candidates and offers ‘Vote Buying’. This is an inevitability with the design of ASR and JUP 4 JUP, and will lead to concentration of supply as opposed to greater distribution. all of which undermines the integrity of the DAO.
How to mitigate this?
This can be easily fixed with two simple changes;
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Apply a ‘Lorenz Curve’ for Time and Quantity for unlocking. This would mean that the less JUP you have staked, the faster it becomes unlocked. Also, the more JUP you have staked, the longer it takes to unlock.
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In conjunction with the above change, add a realtime display on the voting UI to inform people of how much JUP is pending to be unstaked.
What does this do? – Essentially it alerts everyone to large supply unlocks whilst giving the opportunity to front run the anticipated sell off.
Another alternative is to do a mutual vesting swap with the winners of the LFG votes – meaning that the JUP that would otherwise be granted as rewards to voters, is instead allocated to the project winners on a vesting schedule, and this is in exchange for equal value of the winners project tokens to be a vested reward for the JUP voters instead.
So that is my controversial 2-cents.