SowellianGovernance
Sowellian Governance v5
“There are no solutions. There are only trade-offs.” — Thomas Sowell
Abstract
Sowellian Governance is a system for decentralized and autonomous organizations that ties every proposal to measurable outcomes, enforces accountability through economic skin-in-the-game, and grows organizational treasuries through modest fees.
Organizations vote on their collective values, proposers risk bonds, voters stake once to express belief, and outcomes are settled against pre-defined Key Performance Indicators.
The system is designed to align incentives, reward foresight, punish mistakes, and strengthen organizations over time.
Guiding Principles
- Organizations need clear KPIs to map proposals to.
- Those who make decisions must pay for mistakes.
- Proposers compete to surface valuable ideas.
- Voters stake once to express belief.
- Change should always leave the organization better off.
- Reputation is a metric best measured through participation over time.
Mechanism Overview
“Vote on values, bet on beliefs.” — Robin Hanson
Organizations vote on their values and their council. Proposals are crafted selecting organization-specific KPIs.
Proposers must stake bonds when they make proposals. Participants take Sowellian Bets on binary YES/NO markets around proposals.
- If more bets support YES and stake quorum is met by the end of the betting window, the proposal passes.
- The losing side forfeits their bets to the winning side.
- The proposer receives 2× ROI relative to voters.
- Treasury grows from a flat 1% fee on betting activity.
KPIs as DNA
“Tell me your KPIs and I’ll know your purpose.” — Dean Pappas
At inception, each organization defines its KPI DNA: the set of essential metrics that capture organizational performance.
This catalog is created and amended by token-vote, and each KPI is tied to oracle sources.
Every proposal must specify which KPI it targets and what improvement it expects by the end of the evaluation period.
Examples:
- Treasury Value
- Market Cap
- Number of Users
- Transactions
- Page Views
Proposal Creation and Quorum
- Proposal bond: Required to ensure skin-in-the-game. Counts as the first YES bet.
- Bond threshold: 0.5–1.5% of quorum stake.
- Bond rationale: Capped at 1.5% to protect voter incentives. If more conviction, proposer may add YES bets but without the multiplier.
- Proposal contents: Action, KPI targeted, expected improvement.
- Example: Swap treasury USDC for BTC, targeting treasury value, expecting +5% USD growth.
- Passing conditions:
- Stake quorum met.
- More YES stake than NO stake.
- Failure: If stake quorum not met by the end of the betting window, bond forfeited to treasury.
“It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.” — Thomas Sowell
Betting (Voting)
- Binary YES/NO staking.
- One-way door: Once a stake is placed, it cannot be withdrawn or switched.
- Participants may add more to their side (YES or NO) during the betting window, but never reduce or move it.
- Stakes lock until end of the evaluation window.
Settlement & Treasury
“The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.” — Thomas Sowell
- No quorum: Bond forfeited → treasury.
- Quorum achieved, NO wins: All bets + bond refunded; treasury earns nothing.
- Proposal passes:
- Losers’ stake transfers to winners after evaluation window.
- Treasury receives 1% of losers’ stake transfer.
- Remaining 99% split between voters and proposer.
Formula
\[T = \tau \cdot L\]- T = Treasury revenue
- τ = Treasury rake (default 1%)
- L = Loser stake (total losing side)
Incentives
We guarantee incentives to ensure clarity for why someone should propose or vote.
Voters
- Always earn a positive ROI if on the winning side.
- ROI increases with contention (closer 51/49 votes → higher returns).
-
ROI floor-guaranteed at +0.5% in near-consensus cases (89–90%).
- This example shows the range of return on a $20000 Stake Quorum Proposal
Voter ROI Formula
\(R_v = \frac{(1-\tau)L}{W + 2B}\)
- Rᵥ = voter ROI (fractional; ×100 for %)
- W = total winner stake
- L = total loser stake
- B = proposer bond (0.5–1.5% of quorum)
Proposers
- Earn exactly 2× voter ROI when their proposal passes.
- Bond capped (0.5–1.5% of quorum) to protect voter upside.
- If quorum missed, bond forfeited to treasury.
Proposer ROI Formula
\(R_p = 2 \cdot R_v\)
- Rₚ = proposer ROI (fractional; ×100 for %)
- Applies only when YES wins
Council
“Democracy is a process by which people are free to choose the wrong man.” — Thomas Sowell
- Referees for maintaining integrity and protecting the org from bad actors or faulty oracles.
- Verifies KPI oracle results.
- Has override power if oracles fail or contradict.
- Council elections: Token-vote, default cycle = 1 year.
- Recall: Members can be removed mid-term.
- Conflict guard: Members cannot propose during their service.
Parameters (with Defaults)
Sowellian parameters let organizations adapt to their needs.
Defaults:
- Stake Quorum = 0.5% of org marketcap (snapshotted at proposal creation).
- Bond Threshold = 0.5–1.5% of quorum.
- Minimum Bet = org-defined, suggested ≥ 0.1% of quorum.
- Betting Window = 7 days.
- Evaluation Window = 90 days (3 months).
- Election Cycle / KPI Setting = 1 year.
- Incentive Guarantees = Voter floor (+0.5%) and Proposer double (2×).
- Treasury Rake = 1%.
Execution
- On-chain instructions execute automatically.
- If execution requires off-chain actions, proposer is responsible.
- Failure: If execution not started by end of evaluation window → proposal fails, all YES bets (including bond) lost to treasury.
Appendix A: Charts
-
Voter vs Proposer ROI across contention
-
Treasury revenue across contention
Appendix B: Terms
Novel concepts in Sowellian Governance
- Sowellian Bet — A bet on which proposal is best. Determines outcome, settles after evaluation.
- Stake Quorum — Quorum by total capital staked.
- Bond Cap — Max proposer bond (1.5% of quorum).
- KPI DNA — Essential org KPIs, amended by token-vote.
- Treasury Rake — 1% fee taken from losers → winners transfer.
- Voter ROI Floor — Guarantee: +0.5% ROI at high consensus.
- Proposer Multiplier — Proposers always earn 2× voter ROI.
- One-Way Door Voting — Stake once, never withdraw/move. Can only add.
Symbols (used in formulas)
- T — Treasury revenue
- τ — Treasury rake (default 1%)
- B — Proposer bond (0.5–1.5% of stake quorum)
- W — Winner stake (total on winning side)
- L — Loser stake (total on losing side)
- Rᵥ — Voter ROI (fractional; ×100 for %)
- Rₚ — Proposer ROI (fractional; ×100 for %)
Essential formulas (collected)
Treasury
\(T = \tau \cdot L\)
- T = Treasury revenue
- τ = Treasury rake (default 1%)
- L = Loser stake (total losing side)
Voter ROI
\(R_v = \frac{(1-\tau)L}{W + 2B}\)
- Rᵥ = voter ROI (fractional; ×100 for %)
- W = total winner stake
- L = total loser stake
- B = proposer bond (0.5–1.5% of quorum)
Proposer ROI
\(R_p = 2 \cdot R_v\)
- Rₚ = proposer ROI (fractional; ×100 for %)
- Applies only when YES wins
Appendix C: Future Extensions
Ideas for exploration:
- Wallet Quorum — Quorum by unique wallets (anti-sybil).
- Wallet Eligibility Filter — Only wallets that staked ≥ 0.1% of quorum count.
- Supermajority Bypass — >90% YES = auto-pass, skip evaluation.
- Reputation — Use past performance on outcomes to weight returns or filter roles.