draft: referenda confirmation by candle auction

Author: pandres95

text/00xx-referenda-confirmation-by-candle-auction.md

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+# RFC-00xx: Referenda Confirmation by Candle Auction
+
+|                 |                                                                  |
+| --------------- | ---------------------------------------------------------------- |
+| **Start Date**  | 22 March 2024                                                    |
+| **Description** | Proposal to decide polls after confirm period via candle auction |
+| **Authors**     | Pablo Dorado                                                     |
+
+## Summary
+
+In an attempt to mitigate risks derived from unwanted behaviours around long ongoing periods on
+referenda, this proposal describes how to finalize and decide a result of a poll via a
+mechanism similar to candle auctions.
+
+## Motivation
+
+Referenda protocol provide permissionless and efficient mechanisms to enable governance actors to
+decide the future of the blockchains around Polkadot network. However, they pose a series of risks
+derived from the game theory perspective around these mechanisms. One of them being where an actor
+uses the the public nature of the tally of a poll as a way of determining the best point in time to
+alter a poll in a meaningful way.
+
+While this behaviour is expected based on the current design of the referenda logic, given the
+recent extension of ongoing times (up to 1 month), the incentives for a bad actor to cause losses
+on a proposer, reflected as wasted cost of opportunity increase, and thus, this otherwise
+reasonable outcome becomes an attack vector, a potential risk to mitigate, especially when such
+attack can compromise critical guarantees of the protocol (such as its upgradeability).
+
+To mitigate this, the referenda underlying mechanisms should incentive actors to cast their votes
+on a poll as early as possible. This proposal's approach suggests using a Candle Auction that will
+be determined right after the confirm period finishes, thus decreasing the chances of actors to
+alter the results of a poll on confirming state, and instead incentivizing them to cast their votes
+earlier, on deciding state.
+
+## Stakeholders
+
+- **Governance actors**: Tokenholders and Collectives that vote on polls that have this mechanism
+  enabled should be aware this change affects the outcome of failing a poll on its confirm period.
+- **Runtime Developers**: This change requires runtime developers to change configuration
+  parameters for the Referenda Pallet.
+- **Tooling and UI developers**: Applications that interact with referenda must update to reflect
+  the new `Finalizing` state.
+
+## Explanation
+
+Currently, the process of a referendum/poll
+
+```mermaid
+flowchart LR
+  S[Submit] --> P[Preparing]
+  P --> D[Deciding]
+  D --> |Passing| C[Confirmation]
+  C --> |Failing — while on decision period| D
+  D --> |Failing| R[Rejected]
+  C --> |Failing — after decision period| R
+  C --> A[Approved]
+```
+
+This specification proposes including a Finalization state for a poll. This state is described as
+the moment after and extends the decision for a couple of blocks, until is safe to consider the VRF
+used to determine the candle block is not known before the ongoing period (decision/confirmation)
+was over.
+
+```mermaid
+flowchart LR
+  S[Submit] --> P[Preparing]
+  P --> D[Deciding]
+  D --> |Passing| C[Confirmation]
+  C --> |Failing — while on decision period| D
+  D --> |Failing| R[Rejected]
+  C --> FF[Finalization]
+  FF --> |Candle on/after passing| A[Approved]
+  FF --> |Candle on/after failing| R
+
+  style FF fill: #0a0, color: #fff
+```
+
+## Drawbacks
+
+<!-- TODO: Add if any -->
+
+## Prior Art and References
+
+> TODO: Mention Prior Art
+
+- `pallet-auction`
+
+## Testing, Security, and Privacy
+
+> TODO: Mention which testing is done (and will be added on the `polkadot-sdk` PR.
+
+## Unresolved Questions
+
+<!-- TODO: Add if any -->
+
+## Future Directions and Related Material
+
+<!-- TODO: Add if any -->