Governance Lands On Penumbra
On Penumbra, anyone can submit a governance proposal, and both active validators and their delegators can vote on proposals. Keeping to the principle of accountability for validators and privacy for delegators, validator votes are public and attributable, whereas delegator votes are anonymous. Proposals can request a signaling vote, alter chain parameters, call for a chain halt in an emergency, and — perhaps most excitingly — spend funds from the newly-implemented ✨Penumbra DAO✨.
Penumbra manages control over governance proposals using a novel “proposal NFT” mechanism: the submitter of a proposal escrows the deposit upon submission, in exchange for an NFT representing the escrowed deposit. Whoever holds this NFT controls the submitted proposal: they may withdraw it before voting concludes, and afterwards, regardless, they may redeem the NFT for the original escrowed proposal deposit, provided that voters did not vote to slash the deposit.
This model is simpler than the “deposit period” mechanism used by the Cosmos Hub and others: it requires the whole deposit to be supplied up-front by the proposer. We expect the governance forum to act as a “layer 2” for governance proposals, coordinating on the proposal to be submitted in advance of its submission, and we don’t know if non-custodial coordination of deposits will be a problem in practice; if this becomes burdensome, we’d rather build off-chain tooling to help people collaboratively submit proposals.
Unlike in many Cosmos SDK chains, Penumbra does away with the NoWithVeto vote option, keeping only “yes”, “no”, and “abstain”. Spam proposals are instead discouraged by a slashing mechanism: the proposal deposit is burned in its entirety if the percentage of “no” votes exceeds a certain high threshold (on our testnet, currently this is 80% no:total).
Governance is a dynamic process that ultimately involves community members, which means it makes sense not to come up with an ahead-of-time complete solution for every aspect of that workflow. The relatively simple governance model that will ship with Penumbra’s mainnet launch is sufficient to “bootstrap” an upgrade to more complex governance features, should the community desire them, because it enables the vital on-chain coordination necessary to come to consensus on such a future upgrade.
In this model, proposals will fall into one of four categories: signaling, parameter-change, emergency, and DAO-spend:
Signaling proposals signal community consensus about something, without having a mechanized effect on the chain state when passed. Often, they propose software upgrades, or are used as a mechanism to gain consensus prior to future proposals.
Parameter change proposals mechanize changes to the chain parameters. Chain parameters are variables which govern the behavior of the chain. Many of them control economic properties like the base staking reward rate and the slashing penalty. When a parameter change proposal is passed, the chain parameters are updated automatically so that all validators will use the new parameters in future blocks.
Emergency proposals are meant when a rapid coordinated response to a crisis is needed: they have the special property that they are immediately passed when two thirds of the voting power has voted “yes” on them. An emergency proposal may also halt the chain immediately upon its successfully being passed, to allow validators to coordinate an emergency upgrade.
Finally, DAO spend proposals specify a transaction to be executed which has access to the funds in the Penumbra DAO. The DAO is a single publicly viewable account into which anyone can freely deposit funds of any denomination, but from which funds can only be spent by the successful passage of a governance proposal. The Penumbra DAO, managed solely by on-chain governance, strongly supports decentralized control over the future of the Penumbra protocol: all stakeholders will be able to determine the future evolution of the protocol not merely by voting on proposals to alter it, but also by allocating funds to the organizations and individuals they deem best suited to carry out that work.
Decentralized governance has a critical role to play in ensuring a bright future for the Penumbra network. Right now, we at Penumbra Labs are hard at work testing the corner cases of this new work, and we invite you to join us as a participant in our testnet. Join us on Discord and play with democracy on the Penumbra testnet today!