[RFC] Signals Protocol

General
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Hi all,

@jkm.eth an I just wrapped up a new essay on Signals and we are looking for feedback from the DAO.

In addition to building native governance clients we are also protocol builders! We will open another thread shortly for our native mobile app that supports Arbitrum governance.

We have already had some positive feedback on the mechanism design by virtue of prizes from:

  • Arbitrum Collabtech Hackathon (1st) Q424
  • Arbitrum Stylus Prize (1st) - Uniswap Hookathon Q125
  • Uniswap Foundation Prize (unranked) - Uniswap Hookathon Q125

Our protocol has been development for over 6 months and quickly maturing in the various use cases it can handle while also introducing some novel game mechanics. To the best of our knowledge, it is unique in its mechanism design and composition.

This is the first of many posts we will be dripping to the DAO for feedback.

The goal will be to eventually explore a pilot with Arbitrum but there much work to do to get there! At this point we need to seed the idea and gather as much feedback from the broader DAO so we appreciate all comments!

3 Likes
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I’ll start by saying that, as a concept, this is interesting. I’m sharing a stream-of-consciousness as I read through your document—please take any comments or questions as constructive and offered in good faith:

1. Impact of Locking on Price: Locking governance assets to signal support would reduce the instantaneous circulating supply. I would imagine this has positive impact on price. I’m curious how much locking as defined in your product impacts price relative to changes in actual circulating supply. Do you have any test cases on this?

2. Unlock at Actioning Gamed For Liquidity:

“Boards are configured with a target level of support, called the “acceptance threshold”. Any Initiative that currently has enough support to exceed this threshold can be “actioned,” in which case the Initiative is closed and all tokens locked up in support of that Initiative are immediately unlocked. This early unlock incentivizes users to only support Initiatives they think will be popular. It is up to DAOs to decide how to treat initiatives that have been actioned.”

This design is interesting, but I’m wondering if it introduces a risk of forced passing during periods of urgent liquidity need. For example, if markets are falling, would large holders rush to lock tokens (or coordinate with others to do so) not necessarily out of conviction, but to quickly push an initiative past the threshold and trigger an early unlock? In that case, the mechanism would be used more as a liquidity release valve than as a signal of genuine support. Curious if you’ve considered this scenario or seen it stress-tested.

3. Integration into the Current Structure: How would this integrate into the current proposal-based governance structure? My concern is that locking tokens as signals would further exacerbate the existing Quorum issues on proposal votes.

Would love to chat: Calendly

2 Likes
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Thanks for the great questions! Really appreciate your time reading through the work.

  1. Impact of Locking on Price

While lockups are a feature, we hope that the majority of support goes in the direction of ideas that are wanted, thus tokens would be released back into circulation quickly. Therefore the people who are mostly having to serve the entirety of the lockup are people who have placed support behind ideas that have little traction.

We haven’t done any pricing simulations yet. Right now, we think an important relationship to understand is the impact of locked tokens on votable supply.

Examining this relationship will give us a better understanding of what a reasonable “acceptance threshold” could look like.

  1. Unlock at Actioning Gamed For Liquidity:

This is a great observation. We think some of the existing mechanics go a long way to deter this type of behaviour but we also have some more ideas in the pipeline to further act as a deterrent.

Ideas top of mind include:

  • Moving away from a straight linear boost and squaring time, duration or both to dampen effects.
  • A cooldown upon acceptance
  • Having a committee or veto power to block as we align on algorithmic params

With the above compositions in place, I would think this would be a stepwise improvement to what’s currently available.

  1. Integration into the Current Structure:

We have always seen Signals as a stage of the governance process separate from the voting stage. Internally we call this stage Ideation, but it would be interchangeable with sensmaking, aggregating sentiment, discovery etc.

With that in mind, we could see Signals boards being created with narrow focus. Take for example the recent discussions on AI etc.

A board could be opened to all DAO members to collect their preferences over a 90 period. Very quickly we could develop an understanding of what is concretely top of mind from the broader community.

Over that 90 period strongly supported initiatives would rise quickly and ideally be accepted and those supporters rewarded. At the end of the 90 day period the board is closed/archived and locked tokens returned to participants.

With regard to accepted proposals they can then be formally ratified though other governance avenues (if necessary) but interestingly we are filtering out a lot of the noise as Signals acts as a great filter.

I’m glossing over a lot of detail but hopefully that should illustrate how it could work.

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Last week we published a set of essays that explain aspects of the protocol in more detail. We recommend reading them in sequence as they build on each other.

  1. Signals Protocol - Overview
  2. Incentive Design in Signals
  3. Why we use NFT Bonds to encode lockups

H/T to @DonOfDAOs who raised some very questions in our discussion.

  • “Rage quit” is important
    • If an Initiative can only state transition though acceptance. How can we better understand that tension such that collusion is not incentivised?
    • Should canceling a proposal be possible? Does that undermine the initial intent of locking?
      • One possible design scale the ability to cancel based on the {n} of lockers
  • A user physically locking tokens is an extremely strong sign of intent/conviction. Could we reward this behaviour through a passive voting power boost?
    • Similarly, Delegates who actively demonstrate good choices by means of endorsing Initiatives that eventually get accepted should enjoy an active boost in their voting power.