From 88ded85a9d3b3a30929f75c5da5a5d34c33dd984 Mon Sep 17 00:00:00 2001 From: Thomas Date: Sat, 29 Nov 2025 19:45:01 +0100 Subject: [PATCH 01/16] Create README.md --- CIP-????/README.md | 245 +++++++++++++++++++++++++++++++++++++++++++++ 1 file changed, 245 insertions(+) create mode 100644 CIP-????/README.md diff --git a/CIP-????/README.md b/CIP-????/README.md new file mode 100644 index 0000000000..5f9a8c4085 --- /dev/null +++ b/CIP-????/README.md @@ -0,0 +1,245 @@ +--- +CIP: XXXX +Title: Compensatory Ledger Mechanism (CLM) +Category: Metadata +Status: Proposed +Authors: + - Thomas Lindseth +Implementors: [] +Discussions: + - +Created: 2025-11-29 +License: CC-BY-4.0 +--- + +## Abstract + +This CIP introduces the **Compensatory Ledger Mechanism (CLM)**—a deterministic, protocol-level compensation system for governance actors participating in Cardano governance actions. A portion of each governance action’s deposit is automatically distributed to Constitutional Committee (CC) members, Delegated Representatives (DReps), and Stake Pool Operators (SPOs) who cast a valid vote. + +This mechanism requires **no smart contracts**, **no Treasury withdrawals**, and **no manual triggers**, operating fully within Cardano’s ledger rules in a manner analogous to staking rewards. It creates an incentive-aligned, sustainable, and decentralized compensation model that reflects the real cost of governance participation. + +--- + +## Motivation: why is this CIP necessary? + +Cardano’s decentralized governance framework requires persistent engagement from CC members, DReps, and SPOs. These actors must analyze governance actions, evaluate technical and economic implications, and cast informed votes. This work incurs ongoing time, expertise, and operational costs. Without a reliable compensation model, several risks emerge: + +### **1. Governance Fatigue** +Uncompensated governance labor leads to declining participation over time. + +### **2. Centralization Risks** +Only large, well-funded entities can consistently afford to participate, reducing diversity and representation. + +### **3. Low Governance Participation / Quorum Instability** +Without compensation, new and smaller actors lack incentives to engage, harming governance quality. + +### **4. Misaligned Incentives** +Proposers incur no cost commensurate with the burden placed on reviewers and voters. + +### **5. Need for a Deterministic, Automated Mechanism** +Any off-chain or trust-based compensation scheme introduces friction and reduces security. + +The CLM addresses these issues by: +- Making governance participation economically feasible +- Ensuring compensation flows only to active participants +- Funding compensation from proposer deposits, aligning costs with governance load +- Executing payments entirely through the ledger for maximum reliability + +--- + +## Specification + +### 1. New Protocol Parameters + +The following fields are added to `PParams`: + +| Parameter | Type | Description | +|----------|------|-------------| +| `ccCompensationRate` | UnitInterval | Portion of `govDeposit` allocated to CC. | +| `drepCompensationRate` | UnitInterval | Portion allocated to DReps. | +| `spoCompensationRate` | UnitInterval | Portion allocated to SPOs. | +| `drepWeightFactor` | UnitInterval | Fraction of DRep pool distributed stake-weighted. | +| `spoWeightFactor` | UnitInterval | Fraction of SPO pool distributed active-stake-weighted. | + +**Constraint:** +`ccCompensationRate + drepCompensationRate + spoCompensationRate ≤ MAX_COMP_RATE` +where `MAX_COMP_RATE` is hard-coded (e.g., 0.25). + +--- + +### 2. Compensation Trigger + +Upon finalization of any governance action requiring a deposit—whether it **passes**, **fails**, or **expires**—the ledger automatically: + +1. Finalizes deposit accounting +2. Creates the compensation pools +3. Distributes funds to voting governance actors + +This occurs atomically during governance-action completion. + +--- + +### 3. Compensation Pot Creation + +Let `govDeposit` be the required deposit for the governance action. + +``` +TotalCompensation = + govDeposit × (ccCompensationRate + drepCompensationRate + spoCompensationRate) +``` + +Split into: + +``` +CC_Pool = govDeposit × ccCompensationRate +DRep_Pool = govDeposit × drepCompensationRate +SPO_Pool = govDeposit × spoCompensationRate +``` + +The remainder is refund-eligible for the proposer if the action passes. + +--- + +### 4. Distribution Rules + +#### **4.1 Compensation to Constitutional Committee (Equal Share)** + +Only voting CC members are compensated. + +``` +Payout_CC = CC_Pool / numberOfVotingCCMembers +``` + +Non-voting CC members receive 0. + +--- + +#### **4.2 DRep Compensation (Hybrid Model)** + +##### Equal-Share Portion +``` +EqualShareAmount = DRep_Pool × (1 − drepWeightFactor) +Payout_Equal_DRep = EqualShareAmount / numberOfVotingDReps +``` + +##### Stake-Weighted Portion +Based on governance stake represented by voting DReps: + +``` +WeightedAmount = DRep_Pool × drepWeightFactor +Payout_Weighted_DRep = + WeightedAmount × (stakeRepresentedByDRep / totalStakeOfVotingDReps) +``` + +##### Total DRep Payout +``` +Payout_DRep = Payout_Equal_DRep + Payout_Weighted_DRep +``` + +--- + +#### **4.3 SPO Compensation (Hybrid Model)** + +##### Equal-Share Portion +``` +EqualShareAmount = SPO_Pool × (1 − spoWeightFactor) +Payout_Equal_SPO = EqualShareAmount / numberOfVotingSPOs +``` + +##### Stake-Weighted Portion +Weighted by **block-producing active stake**. + +``` +WeightedAmount = SPO_Pool × spoWeightFactor +Payout_Weighted_SPO = + WeightedAmount × (activeStakeOfSPO / totalActiveStakeOfVotingSPOs) +``` + +##### Total SPO Payout +``` +Payout_SPO = Payout_Equal_SPO + Payout_Weighted_SPO +``` + +--- + +### 5. Deposit Finality + +The compensation portion of the deposit: + +- **is always consumed**, regardless of proposal outcome +- **is never refundable to the proposer** + +This internalizes governance processing costs. + +--- + +## Rationale: how does this CIP achieve its goals? + +### **1. Ledger-Native Implementation Ensures Maximum Reliability** +All compensation logic is implemented inside ledger rules. +This guarantees: + +- Deterministic execution +- No dependency on smart contracts +- No treasury governance or manual intervention +- A trust model equivalent to ADA staking rewards + +--- + +### **2. Incentive Alignment Through Hybrid Distribution** +The hybrid model balances: + +- **Equal-share rewards** → compensate time, labor, and research +- **Stake-weighted rewards** → reflect responsibility and influence + +This prevents domination by large actors while recognizing the security contribution of higher-stake entities. + +--- + +### **3. Fair Cost Attribution via Proposer Deposits** +Because proposer deposits fund compensation: + +- Governance costs are paid by those creating that cost +- Spam proposals are discouraged +- The Treasury is untouched +- The system remains self-sustaining + +--- + +### **4. Promotes Broad Participation and Decentralization** +By providing guaranteed compensation: + +- Smaller actors can sustainably participate +- Governance remains diverse and representative +- Participation rates and quorum stability increase + +--- + +## Path to Active + +### Acceptance Criteria + +This CIP becomes **Active** when: + +1. All new protocol parameters are implemented in the ledger. +2. Distribution logic executes correctly on testnet. +3. A governance action on mainnet distributes compensation correctly. +4. Ledger events expose compensation in a standardized, wallet-readable format. +5. Sufficient community and technical review confirms correctness and consensus. + +--- + +### Implementation Plan + +1. **Community Discussion & Review** +2. **Ledger Engineering Review** +3. **Implementation** +4. **Testnet Deployment** +5. **Hard Fork Activation** +6. **Post-Deployment Monitoring** + +--- + +## Copyright + +This CIP is licensed under **CC-BY-4.0**. From eb77038276b757903e56d71ba8857d6a2f71ae0f Mon Sep 17 00:00:00 2001 From: Thomas Date: Sat, 29 Nov 2025 20:05:18 +0100 Subject: [PATCH 02/16] Update README.md --- CIP-????/README.md | 21 ++++++++++----------- 1 file changed, 10 insertions(+), 11 deletions(-) diff --git a/CIP-????/README.md b/CIP-????/README.md index 5f9a8c4085..fd8592151f 100644 --- a/CIP-????/README.md +++ b/CIP-????/README.md @@ -221,22 +221,21 @@ By providing guaranteed compensation: This CIP becomes **Active** when: -1. All new protocol parameters are implemented in the ledger. -2. Distribution logic executes correctly on testnet. -3. A governance action on mainnet distributes compensation correctly. -4. Ledger events expose compensation in a standardized, wallet-readable format. -5. Sufficient community and technical review confirms correctness and consensus. +* All new protocol parameters are implemented in the ledger. +* Distribution logic executes correctly on testnet. +* A governance action on mainnet distributes compensation correctly. +* Sufficient community and technical review confirms correctness and consensus. --- ### Implementation Plan -1. **Community Discussion & Review** -2. **Ledger Engineering Review** -3. **Implementation** -4. **Testnet Deployment** -5. **Hard Fork Activation** -6. **Post-Deployment Monitoring** +* **Community Discussion & Review** +* **Ledger Engineering Review** +* **Implementation** +* **Testnet Deployment** +* **Hard Fork Activation** +* **Post-Deployment Monitoring** --- From 3f507dbfbeb31be958a95d53d59d8b8a31620288 Mon Sep 17 00:00:00 2001 From: Thomas Date: Sat, 29 Nov 2025 20:12:02 +0100 Subject: [PATCH 03/16] Added discussion --- CIP-????/README.md | 4 ++-- 1 file changed, 2 insertions(+), 2 deletions(-) diff --git a/CIP-????/README.md b/CIP-????/README.md index fd8592151f..66d67ee14a 100644 --- a/CIP-????/README.md +++ b/CIP-????/README.md @@ -6,8 +6,8 @@ Status: Proposed Authors: - Thomas Lindseth Implementors: [] -Discussions: - - +Discussions: + - https://github.com/cardano-foundation/CIPs/pull/1117 Created: 2025-11-29 License: CC-BY-4.0 --- From d8561ce0e58cf791c65a1faa113170e2ea26091f Mon Sep 17 00:00:00 2001 From: Thomas Date: Sun, 30 Nov 2025 22:33:33 +0100 Subject: [PATCH 04/16] Update CIP-????/README.md Co-authored-by: Robert Phair --- CIP-????/README.md | 2 +- 1 file changed, 1 insertion(+), 1 deletion(-) diff --git a/CIP-????/README.md b/CIP-????/README.md index 66d67ee14a..bee5117fa1 100644 --- a/CIP-????/README.md +++ b/CIP-????/README.md @@ -1,7 +1,7 @@ --- CIP: XXXX Title: Compensatory Ledger Mechanism (CLM) -Category: Metadata +Category: Ledger Status: Proposed Authors: - Thomas Lindseth From 429ac7916c095312235a467a7b7d975eccb113e1 Mon Sep 17 00:00:00 2001 From: Thomas Date: Sun, 30 Nov 2025 22:34:34 +0100 Subject: [PATCH 05/16] Update CIP-????/README.md Co-authored-by: Robert Phair --- CIP-????/README.md | 8 ++++---- 1 file changed, 4 insertions(+), 4 deletions(-) diff --git a/CIP-????/README.md b/CIP-????/README.md index bee5117fa1..7c6017584d 100644 --- a/CIP-????/README.md +++ b/CIP-????/README.md @@ -221,10 +221,10 @@ By providing guaranteed compensation: This CIP becomes **Active** when: -* All new protocol parameters are implemented in the ledger. -* Distribution logic executes correctly on testnet. -* A governance action on mainnet distributes compensation correctly. -* Sufficient community and technical review confirms correctness and consensus. +* [ ] All new protocol parameters are implemented in the ledger. +* [ ] Distribution logic executes correctly on testnet. +* [ ] A governance action on mainnet distributes compensation correctly. +* [ ] Sufficient community and technical review confirms correctness and consensus. --- From 581ac38f79416886af6457265a7b44382da08166 Mon Sep 17 00:00:00 2001 From: Thomas Date: Sun, 30 Nov 2025 22:35:07 +0100 Subject: [PATCH 06/16] Update CIP-????/README.md Co-authored-by: Robert Phair --- CIP-????/README.md | 2 +- 1 file changed, 1 insertion(+), 1 deletion(-) diff --git a/CIP-????/README.md b/CIP-????/README.md index 7c6017584d..17cd583daa 100644 --- a/CIP-????/README.md +++ b/CIP-????/README.md @@ -241,4 +241,4 @@ This CIP becomes **Active** when: ## Copyright -This CIP is licensed under **CC-BY-4.0**. +This CIP is licensed under [CC-BY-4.0](https://creativecommons.org/licenses/by/4.0/legalcode). From 602c74d75c36459ec7f6a55d22bba4755ca0c8c5 Mon Sep 17 00:00:00 2001 From: Thomas Date: Sun, 30 Nov 2025 22:35:20 +0100 Subject: [PATCH 07/16] Update CIP-????/README.md Co-authored-by: Robert Phair --- CIP-????/README.md | 2 +- 1 file changed, 1 insertion(+), 1 deletion(-) diff --git a/CIP-????/README.md b/CIP-????/README.md index 17cd583daa..def07b20fa 100644 --- a/CIP-????/README.md +++ b/CIP-????/README.md @@ -1,6 +1,6 @@ --- CIP: XXXX -Title: Compensatory Ledger Mechanism (CLM) +Title: Compensatory Ledger Mechanism Category: Ledger Status: Proposed Authors: From d47cb499ba2e70ebf73a1fbf463fb355d85f79ec Mon Sep 17 00:00:00 2001 From: Thomas Date: Sun, 30 Nov 2025 22:39:23 +0100 Subject: [PATCH 08/16] Update README.md --- CIP-????/README.md | 10 +++++----- 1 file changed, 5 insertions(+), 5 deletions(-) diff --git a/CIP-????/README.md b/CIP-????/README.md index def07b20fa..06c3900c31 100644 --- a/CIP-????/README.md +++ b/CIP-????/README.md @@ -24,19 +24,19 @@ This mechanism requires **no smart contracts**, **no Treasury withdrawals**, and Cardano’s decentralized governance framework requires persistent engagement from CC members, DReps, and SPOs. These actors must analyze governance actions, evaluate technical and economic implications, and cast informed votes. This work incurs ongoing time, expertise, and operational costs. Without a reliable compensation model, several risks emerge: -### **1. Governance Fatigue** +### Governance Fatigue Uncompensated governance labor leads to declining participation over time. -### **2. Centralization Risks** +### Centralization Risks Only large, well-funded entities can consistently afford to participate, reducing diversity and representation. -### **3. Low Governance Participation / Quorum Instability** +### Low Governance Participation / Quorum Instability Without compensation, new and smaller actors lack incentives to engage, harming governance quality. -### **4. Misaligned Incentives** +### Misaligned Incentives Proposers incur no cost commensurate with the burden placed on reviewers and voters. -### **5. Need for a Deterministic, Automated Mechanism** +### Need for a Deterministic, Automated Mechanism Any off-chain or trust-based compensation scheme introduces friction and reduces security. The CLM addresses these issues by: From afc77ab9904eb583d023afe9777156338dc7e4c1 Mon Sep 17 00:00:00 2001 From: Thomas Date: Mon, 1 Dec 2025 00:45:02 +0100 Subject: [PATCH 09/16] Update README.md --- CIP-????/README.md | 22 +++++++++++----------- 1 file changed, 11 insertions(+), 11 deletions(-) diff --git a/CIP-????/README.md b/CIP-????/README.md index 06c3900c31..5abb1e30e8 100644 --- a/CIP-????/README.md +++ b/CIP-????/README.md @@ -49,7 +49,7 @@ The CLM addresses these issues by: ## Specification -### 1. New Protocol Parameters +### New Protocol Parameters The following fields are added to `PParams`: @@ -67,7 +67,7 @@ where `MAX_COMP_RATE` is hard-coded (e.g., 0.25). --- -### 2. Compensation Trigger +### Compensation Trigger Upon finalization of any governance action requiring a deposit—whether it **passes**, **fails**, or **expires**—the ledger automatically: @@ -79,7 +79,7 @@ This occurs atomically during governance-action completion. --- -### 3. Compensation Pot Creation +### Compensation Pot Creation Let `govDeposit` be the required deposit for the governance action. @@ -100,9 +100,9 @@ The remainder is refund-eligible for the proposer if the action passes. --- -### 4. Distribution Rules +### Distribution Rules -#### **4.1 Compensation to Constitutional Committee (Equal Share)** +#### Compensation to Constitutional Committee (Equal Share)** Only voting CC members are compensated. @@ -114,7 +114,7 @@ Non-voting CC members receive 0. --- -#### **4.2 DRep Compensation (Hybrid Model)** +#### DRep Compensation (Hybrid Model)** ##### Equal-Share Portion ``` @@ -162,7 +162,7 @@ Payout_SPO = Payout_Equal_SPO + Payout_Weighted_SPO --- -### 5. Deposit Finality +### Deposit Finality The compensation portion of the deposit: @@ -175,7 +175,7 @@ This internalizes governance processing costs. ## Rationale: how does this CIP achieve its goals? -### **1. Ledger-Native Implementation Ensures Maximum Reliability** +### Ledger-Native Implementation Ensures Maximum Reliability** All compensation logic is implemented inside ledger rules. This guarantees: @@ -186,7 +186,7 @@ This guarantees: --- -### **2. Incentive Alignment Through Hybrid Distribution** +### Incentive Alignment Through Hybrid Distribution** The hybrid model balances: - **Equal-share rewards** → compensate time, labor, and research @@ -196,7 +196,7 @@ This prevents domination by large actors while recognizing the security contribu --- -### **3. Fair Cost Attribution via Proposer Deposits** +### Fair Cost Attribution via Proposer Deposits** Because proposer deposits fund compensation: - Governance costs are paid by those creating that cost @@ -206,7 +206,7 @@ Because proposer deposits fund compensation: --- -### **4. Promotes Broad Participation and Decentralization** +### Promotes Broad Participation and Decentralization** By providing guaranteed compensation: - Smaller actors can sustainably participate From 27e705cd85bbf90335dd65f6469d7e3ba4f2f3dc Mon Sep 17 00:00:00 2001 From: Thomas Date: Mon, 1 Dec 2025 02:30:05 +0100 Subject: [PATCH 10/16] Update README.md --- CIP-????/README.md | 16 ++++++++-------- 1 file changed, 8 insertions(+), 8 deletions(-) diff --git a/CIP-????/README.md b/CIP-????/README.md index 5abb1e30e8..362f73ecae 100644 --- a/CIP-????/README.md +++ b/CIP-????/README.md @@ -102,7 +102,7 @@ The remainder is refund-eligible for the proposer if the action passes. ### Distribution Rules -#### Compensation to Constitutional Committee (Equal Share)** +#### Compensation to Constitutional Committee (Equal Share) Only voting CC members are compensated. @@ -114,7 +114,7 @@ Non-voting CC members receive 0. --- -#### DRep Compensation (Hybrid Model)** +#### DRep Compensation (Hybrid Model) ##### Equal-Share Portion ``` @@ -138,7 +138,7 @@ Payout_DRep = Payout_Equal_DRep + Payout_Weighted_DRep --- -#### **4.3 SPO Compensation (Hybrid Model)** +#### SPO Compensation (Hybrid Model) ##### Equal-Share Portion ``` @@ -147,7 +147,7 @@ Payout_Equal_SPO = EqualShareAmount / numberOfVotingSPOs ``` ##### Stake-Weighted Portion -Weighted by **block-producing active stake**. +Weighted by **block-producing active stake. ``` WeightedAmount = SPO_Pool × spoWeightFactor @@ -175,7 +175,7 @@ This internalizes governance processing costs. ## Rationale: how does this CIP achieve its goals? -### Ledger-Native Implementation Ensures Maximum Reliability** +### Ledger-Native Implementation Ensures Maximum Reliability All compensation logic is implemented inside ledger rules. This guarantees: @@ -186,7 +186,7 @@ This guarantees: --- -### Incentive Alignment Through Hybrid Distribution** +### Incentive Alignment Through Hybrid Distribution The hybrid model balances: - **Equal-share rewards** → compensate time, labor, and research @@ -196,7 +196,7 @@ This prevents domination by large actors while recognizing the security contribu --- -### Fair Cost Attribution via Proposer Deposits** +### Fair Cost Attribution via Proposer Deposits Because proposer deposits fund compensation: - Governance costs are paid by those creating that cost @@ -206,7 +206,7 @@ Because proposer deposits fund compensation: --- -### Promotes Broad Participation and Decentralization** +### Promotes Broad Participation and Decentralization By providing guaranteed compensation: - Smaller actors can sustainably participate From a87a970654d1d03e5da2fe33990e95e14486b607 Mon Sep 17 00:00:00 2001 From: Thomas Date: Tue, 2 Dec 2025 19:04:11 +0100 Subject: [PATCH 11/16] Create example.md --- CIP-????/example.md | 187 ++++++++++++++++++++++++++++++++++++++++++++ 1 file changed, 187 insertions(+) create mode 100644 CIP-????/example.md diff --git a/CIP-????/example.md b/CIP-????/example.md new file mode 100644 index 0000000000..7b9a5e40b9 --- /dev/null +++ b/CIP-????/example.md @@ -0,0 +1,187 @@ +# **🧮 Example Scenario** + +A **Protocol Parameter Update** governance action is submitted. + This action requires **CC \+ DRep \+ SPO participation**. + +**Participation:** + +* **CC:** 7 members voted + +* **DReps:** 357 voted + +* **SPOs:** 254 voted + +**Deposit:** + `govDeposit = 100,000 ada` + +**Assumed Compensation Parameters:** + +* `ccCompensationRate = 0.03` (3%) + +* `drepCompensationRate = 0.11` (11%) + +* `spoCompensationRate = 0.11` (11%) + +* **TOTAL \= 25%** (the max allowed by your guardrail) + +Hybrid distribution: + +* `dRepWeightFactor = 0.50` + +* `spoWeightFactor = 0.50` + + +# **📌 STEP 1 — Ledger splits the deposit** + +**Deposit:** 100,000 ada + **Total compensation \= 25%** + +→ **25,000 ada becomes the Compensation Pot** + The remaining **75,000 ada** is refundable regardless if the proposal succeeds, fails or expires. + +**Compensation pot breakdown:** + +| Group | Rate | Amount | +| ----- | ----- | ----- | +| CC | 3% | **3,000 ada** | +| DReps | 11% | **11,000 ada** | +| SPOs | 11% | **11,000 ada** | +| **Total** | **25%** | **25,000 ada** | + +✔ The ledger has now created three internal compensation pools. + + +# **📌 STEP 2 — CC compensation distribution** + +**CC Compensation Pool:** 3,000 ada + **7 CC members voted.** + +CC uses **equal-share only** (per Article VII, § 8): + +→ **3,000 / 7 \= 428.571428 ada per CC member** + +Ledger sends: + +* CC member 1: 428.571428 ada + +* CC member 2: 428.571428 ada + +* CC member 3: 428.571428 ada + +* CC member 4: 428.571428 ada + +* CC member 5: 428.571428 ada + +* CC member 6: 428.571428 ada + +* CC member 7: 428.571428 ada + +(Any CC member who did not vote receives **0**.) + + +# **📌 STEP 3 — DRep compensation distribution** + +**DRep Compensation Pool:** 11,000 ada + +DRep distribution uses your **hybrid model**: + +* **50% equal-share \= 5,500 ada** + +* **50% stake-weighted \= 5,500 ada** + +### **A. Equal-share portion** + +357 participating DReps: + +→ **5,500 / 357 \= 15.4109 ada per DRep** + +Every voting DRep receives **15.4109 ada**. + +### **B. Stake-weighted portion** + +Ledger uses: + +* the DRep governance stake snapshot + +* only stake represented by **voting DReps** + +* proportional distribution + +**Example (hypothetical):** + If DRep A represents **1.5%** of the total DRep voting stake: + +→ 1.5% of 5,500 \= **82.5 ada** + +So DRep A receives: + +* **15.4109 ada** (equal-share) + +* **82.5 ada** (weighted) + +* **97.9109 ada total** + +Non-voting DReps receive **0**. + +# **📌 STEP 4 — SPO compensation distribution** + +**SPO Compensation Pool:** 11,000 ada + Hybrid model identical to DReps: + +* **50% equal-share \= 5,500 ada** + +* **50% stake-weighted \= 5,500 ada** + +### **A. Equal-share portion** + +254 voting SPOs: + +→ **5,500 / 254 \= 21.6535 ada per SPO** + +### **B. Stake-weighted portion** + +Uses **block-producing active stake** (not delegated stake). + +**Example:** + If SPO X has **2%** of total block-producing stake among participating pools: + +→ 2% of 5,500 \= **110 ada** + +So SPO X receives: + +* **21.6535 ada** (equal-share) + +* **110 ada** (weighted) + +* **131.6535 ada total** + +Non-voting SPOs receive **0**. + + +# **📌 STEP 5 — What happens to the rest of the deposit?** + +* The proposer receives back **75,000 ada** + +* Ledger distributes **25,000 ada** as compensation (already paid) +The compensation portion (**25,000 ada**) is **never refunded**, by design. + + +# **📌 SUMMARY TABLE** + +| Group | Voters | Pool | Distribution Model | Payout Per Entity | +| ----- | ----- | ----- | ----- | ----- | +| **CC** | 7 | 3,000 ada | 100% equal-share | **428.5714 each** | +| **DReps** | 357 | 11,000 ada | 50/50 hybrid | **15.4109 \+ stake-share** | +| **SPOs** | 254 | 11,000 ada | 50/50 hybrid | **21.6535 \+ stake-share** | + + +* No smart contracts + +* No manual triggers + +* No multi-sig + +* No treasury action + +* No external scripts + +This compensation system is fully determined at **protocol level**, just like staking rewards. From 4d88a202cf33e52e71c28b8ec28018b1ea166cef Mon Sep 17 00:00:00 2001 From: Thomas Date: Wed, 3 Dec 2025 00:56:16 +0100 Subject: [PATCH 12/16] Add reward-account extensions and eligibility rules Updated to add optional reward-account support for DReps and CC hot keys, plus the eligibility rules for who can actually receive CLM payouts. This includes: - new ledger maps for storing optional reward accounts - updated DRep registration cert - updated CC hot key cert - eligibility section (must vote + must have reward account) --- CIP-????/README.md | 45 ++++++++++++++++++++++++++++++++++++++++++--- 1 file changed, 42 insertions(+), 3 deletions(-) diff --git a/CIP-????/README.md b/CIP-????/README.md index 362f73ecae..d7e9cf5975 100644 --- a/CIP-????/README.md +++ b/CIP-????/README.md @@ -14,7 +14,7 @@ License: CC-BY-4.0 ## Abstract -This CIP introduces the **Compensatory Ledger Mechanism (CLM)**—a deterministic, protocol-level compensation system for governance actors participating in Cardano governance actions. A portion of each governance action’s deposit is automatically distributed to Constitutional Committee (CC) members, Delegated Representatives (DReps), and Stake Pool Operators (SPOs) who cast a valid vote. +This CIP introduces the **Compensatory Ledger Mechanism (CLM)**—a deterministic, protocol-level compensation system for governance actors participating in Cardano governance actions. A portion of each governance action’s deposit is automatically distributed to Constitutional Committee (CC) members, Delegated Representatives (DReps), and Stake Pool Operators (SPOs) who cast a valid vote. This mechanism requires **no smart contracts**, **no Treasury withdrawals**, and **no manual triggers**, operating fully within Cardano’s ledger rules in a manner analogous to staking rewards. It creates an incentive-aligned, sustainable, and decentralized compensation model that reflects the real cost of governance participation. @@ -67,8 +67,37 @@ where `MAX_COMP_RATE` is hard-coded (e.g., 0.25). --- +### Ledger Additions +The ledger maintains two new optional mappings: + +- `drepRewardAccounts : Map DRepID (Maybe RewardAddress)` +- `ccRewardAccounts : Map CCHotCredential (Maybe RewardAddress)` + +### DRep Registration Extension +DRep registration certificates now include: +- a DRep ID +- a deposit +- an optional anchor +- **an optional reward address** + +Processing rule: +- If present → `drepRewardAccounts[drepID] = Just rewardAddress` +- If absent → `drepRewardAccounts[drepID] = Nothing` + +### CC Hot Key Registration Extension +A CC hot key registration certificate now includes: +- the cold credential +- the hot credential +- **an optional reward address** + +Processing rule: +- If present → `ccRewardAccounts[hotCred] = Just rewardAddress` +- If absent → `ccRewardAccounts[hotCred] = Nothing` + ### Compensation Trigger + + Upon finalization of any governance action requiring a deposit—whether it **passes**, **fails**, or **expires**—the ledger automatically: 1. Finalizes deposit accounting @@ -156,14 +185,24 @@ Payout_Weighted_SPO = ``` ##### Total SPO Payout -``` + Payout_SPO = Payout_Equal_SPO + Payout_Weighted_SPO -``` + +### Eligibility +To receive CLM compensation, a governance actor must: +- cast a valid vote on the governance action, and +- have a registered reward address: + - DReps: `drepRewardAccounts[drepID] = Just addr` + - CC members: `ccRewardAccounts[hotCred] = Just addr` + - SPOs: existing staking reward account + +Actors without a reward address remain part of vote weighting but receive no payout. --- ### Deposit Finality + The compensation portion of the deposit: - **is always consumed**, regardless of proposal outcome From f081e318bec25e3eab402f98d2549304b9501095 Mon Sep 17 00:00:00 2001 From: Thomas Date: Wed, 3 Dec 2025 01:01:55 +0100 Subject: [PATCH 13/16] Minor wording fix --- CIP-????/README.md | 6 +++--- 1 file changed, 3 insertions(+), 3 deletions(-) diff --git a/CIP-????/README.md b/CIP-????/README.md index d7e9cf5975..385905ff4e 100644 --- a/CIP-????/README.md +++ b/CIP-????/README.md @@ -68,13 +68,13 @@ where `MAX_COMP_RATE` is hard-coded (e.g., 0.25). --- ### Ledger Additions -The ledger maintains two new optional mappings: +The ledger should maintain two new optional mappings: - `drepRewardAccounts : Map DRepID (Maybe RewardAddress)` - `ccRewardAccounts : Map CCHotCredential (Maybe RewardAddress)` ### DRep Registration Extension -DRep registration certificates now include: +DRep registration certificates should include: - a DRep ID - a deposit - an optional anchor @@ -85,7 +85,7 @@ Processing rule: - If absent → `drepRewardAccounts[drepID] = Nothing` ### CC Hot Key Registration Extension -A CC hot key registration certificate now includes: +A CC hot key registration certificate should include: - the cold credential - the hot credential - **an optional reward address** From ad9aa2d43fab321629339d0212d4bddb1bffe4e3 Mon Sep 17 00:00:00 2001 From: Thomas Date: Wed, 3 Dec 2025 09:40:24 +0100 Subject: [PATCH 14/16] =?UTF-8?q?Updated=20the=20CIP=20so=20that=20only=20?= =?UTF-8?q?governance=20groups=20**relevant**=20to=20a=20given=20action=20?= =?UTF-8?q?type=20generate=20compensation.=20Added=20the=20`EffectiveRate`?= =?UTF-8?q?=20logic,=20updated=20the=20compensation=20pot=20formulas,=20an?= =?UTF-8?q?d=20fixed=20the=20deposit/refund=20rules=20so=20that=20any=20po?= =?UTF-8?q?rtion=20tied=20to=20non-relevant=20groups=20isn=E2=80=99t=20con?= =?UTF-8?q?sumed=20and=20is=20returned=20to=20the=20proposer.?= MIME-Version: 1.0 Content-Type: text/plain; charset=UTF-8 Content-Transfer-Encoding: 8bit This makes the CLM behave correctly when, for example, SPOs can vote but their votes aren’t counted towards ratification. Only DReps/CC get compensated, and the SPO portion of the deposit stays refundable. --- CIP-????/README.md | 52 +++++++++++++++++++++++++++++++++++----------- 1 file changed, 40 insertions(+), 12 deletions(-) diff --git a/CIP-????/README.md b/CIP-????/README.md index 385905ff4e..3c8ee19d00 100644 --- a/CIP-????/README.md +++ b/CIP-????/README.md @@ -108,24 +108,58 @@ This occurs atomically during governance-action completion. --- +## Compensation Eligibility Based on Relevant Governance Actor Groups + +For each governance action type, the protocol specifies which governance actor groups are **relevant** to the ratification of that action. Only these *relevant* groups contribute to the tally for that action, and only these groups may generate compensation under the CLM. + +Governance actor groups that are **non-relevant** for a given governance action type may cast votes, but their votes do **not** affect the tally and they do **not** receive compensation. Their associated portion of the compensation rate is **not consumed**. + +Let `RelevantActors` be the set of governance actor groups relevant for the governance action type. Define: + +``` +EffectiveRate(group) = + compensationRate(group), if group ∈ RelevantActors + 0, otherwise +``` + +Only these `EffectiveRate` values are used for compensation pot creation. + +### Refund Behavior + +Any portion of the governance deposit corresponding to compensation rates for **non-relevant** governance actor groups: + +* is **not added** to any compensation pool, +* is **not consumed**, and +* remains part of the **refundable deposit** that may be returned to the proposer when the governance action finalizes. + +Thus: + +``` +TotalCompensation = govDeposit × Σ(EffectiveRate(group)) + +RefundableDeposit = govDeposit − TotalCompensation +``` + +--- + ### Compensation Pot Creation Let `govDeposit` be the required deposit for the governance action. ``` TotalCompensation = - govDeposit × (ccCompensationRate + drepCompensationRate + spoCompensationRate) + govDeposit × Σ(EffectiveRate(group)) ``` Split into: ``` -CC_Pool = govDeposit × ccCompensationRate -DRep_Pool = govDeposit × drepCompensationRate -SPO_Pool = govDeposit × spoCompensationRate +CC_Pool = govDeposit × EffectiveRate(CC) +DRep_Pool = govDeposit × EffectiveRate(DRep) +SPO_Pool = govDeposit × EffectiveRate(SPO) ``` -The remainder is refund-eligible for the proposer if the action passes. +The remainder is refund-eligible for the proposer when the action expires. --- @@ -202,13 +236,7 @@ Actors without a reward address remain part of vote weighting but receive no pay ### Deposit Finality - -The compensation portion of the deposit: - -- **is always consumed**, regardless of proposal outcome -- **is never refundable to the proposer** - -This internalizes governance processing costs. +The compensation portion of the deposit corresponding to EffectiveRate(group) values greater than zero is consumed. Any portion corresponding to groups with EffectiveRate(group) = 0 (i.e., non-relevant governance actor groups) is not consumed and remains refundable. --- From c5b83ba134336b784ddec8408182c0fc78e7f954 Mon Sep 17 00:00:00 2001 From: Thomas Date: Wed, 10 Dec 2025 00:11:29 +0100 Subject: [PATCH 15/16] Update CIP-????/README.md Co-authored-by: Ryan --- CIP-????/README.md | 2 +- 1 file changed, 1 insertion(+), 1 deletion(-) diff --git a/CIP-????/README.md b/CIP-????/README.md index 3c8ee19d00..9c2487abe3 100644 --- a/CIP-????/README.md +++ b/CIP-????/README.md @@ -1,6 +1,6 @@ --- CIP: XXXX -Title: Compensatory Ledger Mechanism +Title: Governance Participant Compensation Category: Ledger Status: Proposed Authors: From 0677f4cf6e61d29d1152f0f39e48df42b8cd9398 Mon Sep 17 00:00:00 2001 From: Thomas Date: Wed, 10 Dec 2025 00:16:53 +0100 Subject: [PATCH 16/16] Update CIP-????/README.md Co-authored-by: Ryan --- CIP-????/README.md | 2 +- 1 file changed, 1 insertion(+), 1 deletion(-) diff --git a/CIP-????/README.md b/CIP-????/README.md index 9c2487abe3..eeaa64b26d 100644 --- a/CIP-????/README.md +++ b/CIP-????/README.md @@ -108,7 +108,7 @@ This occurs atomically during governance-action completion. --- -## Compensation Eligibility Based on Relevant Governance Actor Groups +### Compensation Eligibility Based on Relevant Governance Actor Groups For each governance action type, the protocol specifies which governance actor groups are **relevant** to the ratification of that action. Only these *relevant* groups contribute to the tally for that action, and only these groups may generate compensation under the CLM.