By Jacob Gadikian of NotionalDAO

Hi in this document I may be switching between speaking as myself and as notional, and also as a cosmos stakeholder and software developer. I am all of these things. Notional is a validator on 27 Cosmos blockchains. Notional has been actively engaged in governance since day one, starting with osmosis but rapidly branching out to a great number of chains in Cosmos.

Delegation

I think that greater emphasis should be placed on the role of delegators. Please allow me to explain: on every single network, notional is elected. The user community or team chooses us to operate on their chain. Oftentimes, it is both the user community and the founding team that chooses us.

As concerns governance, the most important factors that delegators need to keep in mind is that first of all they choose the validators. This means that ultimate control of network security is not in the hands of the validators. Ultimate control of network security is in the hands of the delegators. Additionally, delegators can overrule the votes of validators. This means that while you're validator does represent your stake in decisions, if you disagree with your validator, you can and should vote differentially. One time that I encouraged notional's delegators to vote differentially if their opinion differed from ours was proposal 69 on the cosmos hub. We voted no with veto, ironically of the no with veto taxed on proposal 69. That text did not accurately represent what no with veto actually does.

Community Funds

Inflation is distributed algorithmically in Cosmos. Inflation is like a stream, and that falls into different buckets. One of these buckets is the source of a great many highly contentious governance conversations. The community fund.

For a very long time, since long before I was a validator, on the cosmos hub, there has been an active and vigorous discussion concerning the true value of the atom token on the cosmos hub and of course how to increase its price and make it more attractive.

Also for a long time I have felt that I know the answer to this question: service provision and investment. I believe that the community funds in Cosmos should be actively used to invest in external projects. The trouble is that these proposals tend to cause a great deal of contention. The most recent one is Cosmos Hub 72 which I have currently voted no on. The reason that I voted now is that this proposal wraps many things into one whereas I prefer a one-to-one mapping. This way, we gain the ability to track the actual result of a single governance proposal.

There are three types of Cosmos governance proposals but soon the types will be more or less limitless. Right now, you can send money from the community fund, you can create a signaling proposal, and these are intended to create policy and law for the blockchain, and you can also create software upgrade proposals. Software upgrade proposals are used to upgrade the blockchain and help the validators with the coordination process around upgrading the chain. Additionally, there are IBC related governance proposals that are used when the state proof, called a light client, has expired and cannot be updated.

I believe that as a community we should make a decision to use community funds in a targeted and trackable manner. When we do this we also must keep in mind that we want for the use of these community funds to be attractive. In order for the use of the community funds to be attractive, teams must not be pulled too deeply into the governance process. Additionally, to ensure that the community fund is being used effectively, we should have a set of reporting standards. Currently, none of this really exists. Accountability tends to come in the form of Twitter arguments and code delivery or the lack thereof. I would like to posit additional templating for project tracking is necessary. Right now, we kind of sort of have templates for community pool spend proposals but it's my opinion that proposals are sometimes constructed in a way that makes tracking their result difficult, and it's also my opinion that this isn't really anyone's fault, nobody has stepped up and attempted to create a framework for tracking results.

Finally, it must be noted that results are not always clear financially. The blockchain ecosystem goes through what some call deleveraging cycles that basically amount to generalized boom and bust conditions. Of course, these cycles influence sentiment of the token holders and of the community overall. It is notionals policy to attempt to shelter ourselves from this by diversifying our business and ensuring that we never fully depend on only the earnings from our validator set. Additionally, to reduce conflicts of interest, in general we do not sell what we earn from our validators. There are of course exceptions to this, sometimes we need to fund our operations and other times we may wish to invest in a promising new project on our own. Typically, when we do sell, we try to explain that. Yes, what we earn is our property, yes, we may sell it if we would like to but also, we think that delegating to ourselves is a powerful signal to the community that we wish to remain invested.