Creating Good Blockchain Citizens - #NotJustDigitalMoney

The wheel - The steam engine - The internet - Blockchain. Disruptive technologies turn the page in our collective history book. Together, we decide what goes on each fresh page.

With blockchain technology, we now have an opportunity to be citizens of the world in a new way. Blockchain has the power to change our paradigms for secure personal identities, trustworthy voting, and equitable financial tools. It presents the opportunity to update how we think about sharing work and responsibility. It holds the promise of transparency and accountability, and a total change in our notion of the halls of power.


However, it can only do these things when we participate, and use it. Together we are creating the future. What do you want it to look like?

Lido Nation believes the future is for everyone. Our mission is to create good blockchain citizens. The website provides accessible and newcomer-friendly education and tools, in multiple languages, with the hope that everyone can participate in creating tomorrow’s world. Lido Nation also runs a staking pool on the Cardano network, which provides a great platform to act on our mission of creating good blockchain citizens.

Our latest initiative in support of this mission is called Phuffy Coin. With Phuffy Coin, we are using the Cardano blockchain as a tool to create something new. With it, we hope to help people participate, have fun, and learn about what it means to be a good blockchain citizen. Before I explain how Phuffy Coin works, I want to review a couple other concepts:

Purpose-Driven Pools

Many staking pools like ours give a portion of earnings to charity. So-called “purpose-driven pools” may attract delegators who are interested in a given cause, or who simply like knowing that their stake can help a good cause while earning passive rewards.


On the other hand, some people are skeptical of the Purpose-Driven Pool premise. It can seem like a marketing strategy that is little more than window dressing - especially when donation amounts are minimal, or when transparency is lacking.

Network Tokens

Another well-known concept in the blockchain space is the ability to mint and distribute network “Tokens” for various projects and purposes. Tokens might support governance within an organization, or be useful within a gaming world, or they may simply have monetary value. Others are created and never become useful at all.

Phuffy Coin

With Phuffy Coin project, we want to harness the power and potential of both of these concepts, to create good blockchain citizens who are empowered to use blockchain technology, and inspired to do good.

The premise is simple. When our pools receives network rewards, half of our pool’s margin is earmarked for giving. But the power to decide where and how that money is spent is in the hands of our delegators. They use Phuffy Coin to nominate and vote for causes they choose. Winning causes receive donations commensurate with the Phuffy Coin pegged to them by the voters. Participating and deciding how Lido Nation spends its charitable dollars is at no cost to our delegators.


Here’s a little more detail about how it works. When our pool receives rewards, half is held for charity giving. To drive the charity selection and voting process, we mint an equivalent amount of Phuffy Coin and distribute it to our registered delegators. The amount of Phuffy Coin that each delegator receives is based on a scoring algorithm that rewards delegators who have more stake, as well as those who are loyal to our pool. Delegators can then use Phuffy Coin to nominate a cause they care about, or to vote for a cause that has already been nominated. When a winning cause is decided, we will cash out the amount of ADA that is equivalent to the Phuffy Coin that was voted to that cause. In this way, delegators can have the experience that their Phuffy Coin is more than simply a vote - it is linked to an amount of real ADA currency, whose charitable destiny they control.


Solving interesting problems

Now a word about scoring and distribution of Phuffy Coin. As we imagined this system of nominating and voting for charitable causes, we needed to decide how the Phuffy Coin would be distributed. It would be possible to simply distribute an equal amount to each stake’s wallet - something like one person one vote. But unless and until we could establish true digital identities, this plan would not be fair; someone who wanted to game the system could move their ADA into multiple wallets, and claim an unfair number of votes. But beyond that, we actually do want to give more voting power to delegators who stake more ADA with us. People have choices about where they invest their money. Just because someone has a million dollars does not mean they will invest all or any of it in Cardano, or in our pool. People who choose to invest more in Cardano, and in our pool, have some right to have more of a say.

At the same time, creating good blockchain citizens can’t just mean handing out all the prizes to the wealthy. So we looked for another lever. We also care deeply about retaining our delegators. We want them to invest not just monetarily, but to become a part of our community long-term. We want them join us and contribute their skills, time, and ideas to building a better future together. So in addition to stake amount, we want to reward loyalty. We considered the idea that by sticking with our pool for a number of years, someone with a smaller stake could eventually earn a voting score equivalent to someone with 10x greater stake who just joined yesterday – and we liked that idea!


So we first played with some simple scoring formulas that gave different weightings to stake amount and loyalty. And we found that yes, with a fairly simple weighted score, a person with 5k ADA and 3 years loyalty could have the same score as someone who just entered the pool yesterday with 50k ADA. We liked this idea, that by sticking with our pool and participating long-term, a person with less monetary resources can still be equitably influential if they just stick around.


But even with this formula, the potential for great inequity remained. While the difference between 5K and 50K might seem like a lot, it’s nothing compared to 500K or 5M. Consider for a moment that 1 Million is 1 THOUSAND TIMES larger than 1 Thousand. With much larger stakes involved, there was just no way that a simple formula could diminish inequities to the extent that we wanted. Even with loyalty heavily weighted, a person with a smaller stake would have to be invested for lifetimes to approach the score of a Million-ADA delegator who entered the pool yesterday. To put it another way - a few whales would still control all the voting power.

Having reached the limit of our own math skills, we reached out to clever friends, who showed us how “log functions” could help us achieve what we wanted. Using a more sophisticated formula with a couple of log functions, we created a scoring formula that compresses the spread of scores to within about a 100 point range. Instead of a person with 1M ADA having ONE THOUSAND times the the voting power of a person with 1k ADA, with our formula they can only really have 10-15x the voting power. And with loyalty scores added in, what we see is that anyone who sticks with the pool for 5 years will have roughly the same voting power! A higher stake at that point might have a few points more influence, but no longer is the difference measured in multiples.

log-curve For you math whizzes and curious types, here is the formula: ((LOG(DelegatedAmount)+1)/(LOG(HighestDelegatedAmount)+1) * 100) + #EpochsLoyal * .1

We don’t know for sure how this formula will play out over time, and how different people might feel about it, but we are excited to give it a try. And we are open to the next iterations of it when those needs become clear. Hopefully by then we will have a few more math whizzes in our community to help with the fancy problems we are trying to solve!

Blockchain technology is a tool, like the internet. How it shapes the world is up to us, to participate and create the future we want to see.

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What do you think it means now - or in the future - to be a "Good Blockchain Citizen"?

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Commenter avatar

Hi, I really love the idea of implementing tokenized voting. It will give your delegators an awesome possibility to feel like their staked ADA really matters. I just have a couple of questions:

  • How will delegators be able to propose a chartiy, Discord Server, on-chain, google forms?
  • Does it have to be a charity?
  • Who decides if a chartiy is elgilble for funding?
  • How does the timeline for voting look like, I guess voting will take place every epoch for the previous one?
  • How will the voting work, on-chain, Discord Server, other poll tool?
  • Will there be new phuffy coins for every voting cycle or can they be re-used?

Sorry for all the questions I’m just really passionate when it comes to decentralized governance :D

Thanks in advance for your reply.

Cheers, L

Darlington Kofa avatar

Great Questions! Please don’t be sorry and bring on the questions. We will respond here as well as parse some FAQs pairs for the phuffycoin dashboard/landing page.

How will delegators be able to propose a charity, Discord Server, on-chain, google forms?

This will happen directly on the dashboard. We will nominate a few causes for the first round, but in future rounds, if you have a certain amount of phuffy in your wallet you will be able to propose a new cause. This will happen on-chain and count as the first vote for that cause.

Does it have to be a charity?

Great questions. We are still working out how this will work, so the first round of causes was nominated by us. For the next round we will open up nominations to the community; we are excited to figure out exactly what that will look like and we welcome your ideas and feedback!
For now, we can describe the values that are guiding us:

  1. Freedom: in general, we put a high value on the users being able to have a true and meaningful say on what causes get nominated and voted for!
  2. An international lens: There may be some necessary limits on what causes can qualify, but whatever those limits may be, it’s important to us that we be able to consider good causes around the world. Every community is someone’s “local”!
  3. Accountability: This can mean a lot of things, and come from a lot of directions, and we are thinking about all of them. We are accountable to our community to show our work, so causes that can accept fund transfers in a transparent way will serve that need better than others! As a nonprofit legal entity in the US, there may be certain parameters that we have to consider for that.

We are taking a step-by-step approach to find the right way to define this - and one of those steps is definitely getting community feedback and participation in the defining! What are your thoughts?

Who decides if a chartiy is elgilble for funding?

The votes! We have picked the charity for the first round to fully test the code. A vote of a certain amount nominates. Every 3 months, whichever cause is at the top, get the ada equivalent of votes cast to them.

How does the timeline for voting look like, I guess voting will take place every epoch for the previous one?

Voting will always be open. Our delegators who register and opt-in will get new PHUFFIES in their wallets over time as we receive rewards. They can then use those PHUFFIES to vote immediately, or let them accumulate to nominate a cause or vote later. You will be able to vote any time with no cut out window. “Picking” the top cause is a transaction on the blockchain so until that transaction happens you can keep voting. If votes are sent to a cause after they are chosen, those funds will either be returned to sender, or put in escrow for redistribution (haven’t decided yet).

How will the voting work, on-chain, Discord Server, other poll tool?

Voting will work like the nomination - as an on-chain transaction. We’re hoping to develop the landing pageto be a dashboard with rich interaction. When you are logged into the site, it will be able to read your wallet and give you corresponding access and abilities directly on that page based on how much PHUFFYCOIN you’re holding and what nft exists in your wallet. So please bookmark PHUFFYCOIN. We want the barrier to participation to be as low as possible.

Will there be new PHUFFY coins for every voting cycle or can they be re-used?

You vote by sending your PHUFFYCOIN to a cause’s unique address. When causes are awarded ADA, all PHUFFYCOIN in their wallet will be burned. The burn record will hold “proof” of disbursement. Remember that PHUFFYCOIN are actually wrapped lovelaces. Every PHUFFYCOIN ties back to an actual lovelace held in escrow so once it is spent, (by donating to that cause) that PHUFFYCOIN is gone! One cool feature this will enable, is that the site will be able to aggregate all of your outgoing PHUFFY transactions and show you exact ADA value “you’ve sent” to this or that charity or cause over time.

Thanks again for all the questions. if you have any feedback we’re happy to hear them!

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Commenter avatar

What type of voting methods will you be using with Lido Nation and Phuffy Coin. Are you familiar with Star Voting, Approval voting and other forms of weighted voting?

Stephanie King avatar

Great questions - we have built a tool where users actually vote WITH their Phuffycoin, on the blockchain. Phuffycoin is wrapped ADA - so it is tied to real value. When they “Vote” with Phuffycoin, they are really just pegging real money to the charity they want to support. And since it’s Lido Nation’s money – not their money or rewards – it’s like they get to support a cause they like, at no cost to themselves. We are kind of doing a weigted/scored thing, but that happens BEFORE they get their Phuffycoin - basically their score determines how much Phuffycoin they get. It’s a work in progress and we are open to feedback! I’m not familiar with Star voting and the other methods you mentioned - what do you want to tell me about it?

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