Delegations act as Political Parties that compete for token holders’ support to win the grant money set aside for them by the attached Organizations. The amount of funds they receive is based on how many of the Organization's governance tokens are staked in them.
Delegations help the growth of an Organization and its ecosystem. They can have different purposes, such as marketing, organizing tech hackathons, creating popular content, R&D, and much more. Anything that aims to help adoption of the Organization's product or service could be a legitimate Delegation.
Each delegation has a host, which can be a wallet or a contract (such as a multi-sig) managed by the Delegation representatives. The host has specific governance power over the Delegation as described below.
Everyone can easily open a Delegation and choose one or more Organizations to support at the same time. The creation and management of delegations can be completely done via the interface; no coding skills are required!
Delegation design enables token holders to elect delegate organizations where they jointly decide how to invest the Organization funds. In fact, once token holders stake tokens, they maintain an active role in the Organization ecosystem as they receive Delegation Tokens which can be used to vote on the Delegation's own internal Proposals:
- Transfer funds from the Delegation Treasury. Users can vote to move the received grants; the spent funds must bring benefits to the Organization token holders and by extension to the Organization ecosystem.
- Vote Organization Proposals. Users can vote to make the Delegation voting on a proposal of the attached Organization (both at the Root and Governance Layer) using the governance tokens staked by users.
A Delegation can also create Polls, that are multi-choice proposals with no trigger action. So, if they are approved, they don’t execute code.
Delegation tokens holders can withdraw their staked tokens at any time if tokens are not used as votes in Organization Proposal at that moment.
The Delegation Host, or Delegation Representative, can be a wallet or a contract such as a multi-sig.
It has the following capabilities:
- Change Delegation Metadata containing links, information, etc.
- Attach the Delegation to an Organization to take part in receiving grants
- Change Governance Rules. The host can change the Delegation Governance rules related to the previous two Proposals (Transfer funds from the Delegation Treasury and Vote Organization Proposals)
For anything else, the Delegation has to make a proposal to the token holders and the host does not have any kind of control over tokens staked by users in the Delegation.
The Delegation Host, or Delegation Representative, sets and can change the Delegation's governance rules. The governance rules are:
- Quorum -> A percentage of votes required for a proposal to pass.
- Max Cap -> An optional percentage of a minimum number of votes required to end a proposal, regardless of how long it is still set to remain open.
- Survey Duration -> The duration (in blocks) that Proposals will be open for.
- Validation Bomb -> This is an optional amount of blocks after which a passed Proposal can never be executed. If set as zero, there is no time limit by which a Proposal must be executed.
Quorum and Max Cap are percentage values and are applied to the total amount of tokens staked in the Delegation when the Proposal is being voted on. Consequently, the number of tokens staked in the Delegation at the time of splitting and receiving grants does not count.
If there are 10,000 tokens staked in the delegation and the governance rules chosen by the Delegation representative are:
- Quorum 10%
- Max Cap 20%,
then 1,000 votes are needed in the delegation to reach Quorum, and 2,000 votes are required to reach Max Cap.
If during the Proposal, the total amount of tokens staked in the Delegation becomes 30,000, the Quorum will be 3,000 and the Max Cap will be 6,000.
These governance rules are applied to the two types of proposals that users can vote on, i.e. "Transfer Funds" and "Vote Organization Proposal".
Delegations compete to receive funding from the Organization at each defined block-based interval on a pro-rata basis.
The amount of funds they receive is based on how many of the Organization’s governance tokens are staked in them by users. In exchange, while their tokens are staked in the Delegation, those holders receive an equivalent amount of the Delegation's tokens. A Delegation aims to represent the interests of token holders, who stake their tokens to in a sense 'elect' them.
Let’s make an example:
Governance token supported by the Organization: $VTB
Delegations linked to an Organization: 3
ETH amount to be split among Delegations: 10 ETH
Tot. amount of $VTB staked by the three Delegations: 1000
Amounts staked by the three Delegations:
- Delegation 1: 250
- Delegation 2: 450
- Delegation 3: 300
ETH amount received by the three Delegations:
- Delegation 1: 2.5 ETH
- Delegation 2: 4.5 ETH
- Delegation 3: 3 ETH
A Delegation must stake a number of tokens defined by the organization to be able to receive funds from it. These tokens may be staked by either a Delegation representative or any other person in favor of the Delegation's creation.
The staked tokens represent a disincentive to malicious behavior aimed at using the funds received by the organization in a way that does not conform to what was initially proposed to the token holders. In fact, an Organization can detach from a Delegation in two ways:
- The Delegation is detached and the staked tokens return to the original holder. In this case, the Delegation can be reattached to the organization in the future and regain control of the funds.
- The Delegation is banned and the staked tokens are burned. In this case, the Delegation cannot be reattached to the organization in the future.