Synthetic Minnows and Polycameral Governance

EJ Spode
5 min readSep 7, 2020

A position paper by EJ Spode (comments appreciated). Sept. 7, 2020

email: / twitter: @ej_spode


We would like blockchain governance to be representative of the many, not the few, but how is such a thing possible? I propose that synthetic minnows, if crafted correctly, could work incentivize governance to act in the interest of real minnows, and not merely whales.

The Goal: Diversity in governance

Governance and governance platforms have become important in a number of DeFi platforms of late, and with good reason. If DeFi is to be truly decentralized, then governance should fall to the participants and stakeholders in the platform, and not to a select group.

In theory we should prize a diverse group of governors, in part because we want the DeFi ecosystem to be open to all, and not just those who sat in privileged positions of power in traditional finance. But beyond questions of egalitarianism and fair play, there is the question of whether protocols with diverse governance structures might be more robust and healthy, and better equipped to navigate turbulent times.

The Problem

The problem with the goal of diversity in DeFi governance is that in practice, governance typically gravitates towards the interest of whales — select stakeholders with massive positions in the protocol. This is not really surprising. If control is proportional to shares/coins held, then those with massive positions will ipso facto have massive control over the direction of the protocol.

Perhaps this is the way it should be. We are certainly conditioned to think so. But having whales retain so much power may well be counter to the interests of the ecosystem, of the individual protocols, and perhaps even the interests of the whales themselves. (If lack of diversity of governance leads to myopia and weakness against systemic problems in the ecosystem). It certainly does not seem like a hopeful alternative to the centralizations of power endemic to traditional finance.

The problem with traditional finance and centralized power is not merely that it locks people out of power (indeed keeps them ignorant of its workings) but more seriously that centralized financial power can keep chasing after bad bets. A case in point is the addition that centralized finance has for carbon bubble investments — as its money keeps chasing carbon-based industries instead of alternative sources of energy.

Easily Gamed Solutions

One might think that whale governance is indeed problematic but that there isn’t an option. Imagine, for example, that a particular protocol demands robust representation for minnows, and does so by requiring that each wallet address gets one vote. This is hardly a viable solution, as wallet addresses can be produced at will, and whales can easily manufacture addresses to swing governance votes. Minnows, of course, can do likewise. Wallet addresses are not a solution.

A second option would be to verify real world identities and insist on one person one vote, but this leads to KYC verification of voters, which is counter to the core philosophy of DeFi. It is also the case that for votes of importance whales can pay “civilians” to open small accounts and vote on their behalf.

Is there a solution?

Synthetic Minnows

I propose that the solution to the problem of representing minnows is to enable the creation of synthetic minnows — accounts that may not be held by real life minnows, but which mirror the composition and hence interests of real life minnows. For example, one might require that a voting “minnow” account have no more than 10% of its value in the governance token and that it have a maximum balance of 100,000 USD.

The general idea is that the cost of manufacturing synthetic minnows would be greater than whatever advantage might accrue to gaming votes by creating minnows. Indeed, the idea would be that whoever held a significant number of minnow accounts would automatically take on the interests of minnows and would be incentivized to vote in the interest of minnows.

Synthetic Minnow Composition

The optimal composition of synthetic minnows is an open empirical question, and may well be sensitive to the domain of governance. Different protocols will call for different compositions of minnows. However we can begin to identify certain parameters. These would include the following:

  • Age and history of account
  • Maximum dollar value holdings of account (current or historically)
  • Maximum dollar value of individual coins held
  • Diversity of account holdings (e.g. judged by type of investment)
  • Risk profile of account

The thinking is a follows: A synthetic minnow, like a real minnow, will have a modest total value (let’s say a maximum of 100k USD). The age of the account determine whether the account is only recently minnowed. Other parameters are optional. A protocol might wish to discourage/encourage a high risk profile among voting members of governance. These are choices that are up to the protocol.

Polycameral Governance

One option for governance would be to insist that all voting members of governance be minnows (either real or synthetic). However, another possibility is to introduce separate chambers (cameras) for the governing body (similar to separate chambers in the US Congress and British Parliament).

One way to execute this idea would be to create a House of Whales and a House of Minnows, and require each house to pass a protocol. However, it is no secret that quorum is difficult to achieve in blockchain governance, so other options seem preferable. One idea would be to allow one house to pass a protocol, subject to veto by the other house (the veto would also require quorum). If one house is for a proposal and the other house is indifferent, the proposal would pass.

There is of course, no reason that there should only be two chambers to the governance protocol. There could likewise be a House of Sharks or a House of Dolphins, each reflecting a certain prototypical voting interest that the governance protocol wishes to fairly represent and nurture in its ecosystem.

Secondary Synthetic Minnow Markets

Of course, if synthetic minnows can be created, they can also be traded, and one would expect a synthetic minnow market to emerge. This should be viewed as a welcome development. Protocols that wish to represent the interests of minnows do not need to wait for them to organically arrive. Investors that wish the protocol to succeed can purchase synthetic minnows in secondary markets and direct them to buy in to the protocol. Protocols may insist on vesting periods, or they may not. The point is that whatever the etiology of the minnows, the interests of minnows (whether natural or synthetic) should be well represented.

What About Synthetic Whales?

Synthetic whales already exist, the YFI vaults being cases in point. As matters stand, this has the effect of compounding the weaknesses of current governance mechanisms, as whale interests become even more dominant thanks to the presence of synthetic whales.


Properly parameterized synthetic minnows will take on the interests of natural minnows. Thus, governance protocols that wish to represent the interests of natural minnows may be indifferent to whether the minnows joining governance are synthetic or natural. Apart from the preserving the interests of minnows, such governance strategies can help to broaden the ecosystem and develop governance mechanisms that are more robust and less myopic.



EJ Spode

Writes about Philosophy, Crypto Anarchy, Cryptocurrencies, DeFi, Generative Linguistics. More info: