This is the sixth in a series of casual writings on web3 game design. In a former life, I was an academic in the field of game studies, today I help accelerate web3 companies. For shorter-form content, you can follow me on Twitter @DangerWillRobin 🧵.
Tokenizing Protocols for Governance
For the past few years, blockchain protocols have been issuing “governance tokens.” These are usually transferrable tokens that can be used to cast votes, similar to shares in a corporation. Often these tokens are awarded to the core team of developers, investors, users (through airdrops) and eventually the public. Examples of protocols with governance tokens can be readily found on Snapshot, which is the primary service used to craft proposals, track who has tokens, allow their owners to vote with them and ultimately tally the results.
The vast majority of governance tokens are focused on DeFi protocols. Token holders generally end up becoming a DAO (decentralized autonomous organization), which has alignment with the protocol’s success and thus votes to better it (at least in theory). Examples of non-DeFi projects include: the Ethereum Naming Service, which acts as a censorship resistant alternative to DNS; Friends With Benefits, a web3 Soho House; Axie: Infinity, an NFT-powered video game.
Governed Games
In this series, my focus is on what I will call “Governed Games”. I will define these as games with two components:
- The rules are, at least in part, enforced by smart contracts on an immutable ledger.
- The smart contracts are designed to be upgradeable or alterable based on votes cast.
I have explicitly omitted the need for tokens, because there are other ways to tally votes. I’ve already written about governance in Dark Forest and dfdao’s use of Snapshot to vote on rules changes. In that instance, we used points scored in the previous round and weighted them by taking their log().
I’d like to present a second example today, a project I have been working on with Henry Caron on Axie: Infinity governance.
MMR/ELO for Votes
In standard protocol governance, the people who own the most tokens get the most votes. The idea here is that the people whom governance most affects should have the biggest say. The assumption is that these individuals will be knowledgeable or know knowledgeable people and as such vote intelligently and prudently.
Because $AXS, the governance token for Axie: Infinity, has not be widely distributed to players yet (although that is immanent on the roadmap), the current holders are not those with expertise regarding game balance. So while $AXS holders may be better governors when it comes to making budgeting decisions, they are not ideal candidates for micro-managing the competitiveness of each Axie card.
For this reason, we decided to base votes on match-making ranking (MMR), otherwise known as Elo (after Arpad Elo who invented this zero-sum ranking system). In Axie: Infinity, each player gains or loses MMR based on their performance against their opponents. Over time, players are sorted from incredible with >2000 ratings to terrible <800 (these players are so bad as to likely be bots). In this system, a pro player with 2000 MMR has twice as much say as a bad player with 1000 MMR.
Here the weighting system is arbitrary, it could easily be MMR^2 so that a pro with 2000 MMR is actual 4 times as powerful as someone with 1000 MMR. There could also be a threshold so that someone with <1600 MMR is actually not allowed to vote. All of these parameters themselves could be governed.
The obvious problems with this kind of governance is that players will want to collude to perform insider trading. Imagine that a cartel of pros secretly corner the market on a type of Axie card. And then Imagine that at the voting deadline, the cartel of pros vote to buff their cornered card beyond the realm of reason. All of a sudden the value of their assets skyrocket as players try to shift their holdings to include this newly powerful asset. This is a terrible outcome.
To prevent this kind of collusion, we proposed in our prototype that cards could only shift in power by +-20%. But I would further recommend AXS holders cast votes to ratify the changes or not. This way we have checks and balances from both the pro player side and from the stakeholders.
So anyway, this is what I am thinking about these days and what I will be writing on over the course of the next month.
Next Time
How to vampire attack Chess and create a governing body that can change the rules for the better.