Kusama’s “100x Split Proposal” Review: Was it doomed to fail from the beginning?

Within one day after the proposal was made, until the evening of October 26, the attention it received was still very low. For example, only 3677 KSM were in favor of the proposal, 0 KSM were against it, and the proposal was shown as "will be passed."

On October 25, a proposal to split Kusama 100 times was released, which received heated discussions in the Polkadot community at home and abroad.

Today, although this proposal has been rejected, Kusama, as Polkadot’s test network, is one of the most important development methods of the Polkadot ecosystem. The concepts, methods, and impacts involved in the voting process are still worthy of our attention.

So, what else should we pay attention to in this Kusama 100 split vote? What are the impacts? Why is this proposal doomed to fail from the beginning?

1. Review of the Kusama 91 vote

On October 25, a proposal to split Kusama 100 times attracted attention. This proposal is Kusama Proposal No. 91.

The proposal consists of four aspects.

1) The total issuance of KSMs will increase 100 times, from about 10 million to about 1 billion; 2) The KSM distribution balance will increase 100 times, so that 1 KSM (old) will become 100 new KSMs; 3) The distribution of KSMs has not changed, and the holders of KSMs still have the same network share as before the change; 4) The precision of KSM will change from 12 decimal places to 10 decimal places. The main benefit of this change is to avoid using decimals when dealing with KSM and implement a simpler calculation system, which is the same as the Polkadot renaming of DOT.

Among them, the most important and the one that can trigger the most community discussion is that the number of KSM tokens has increased from about 10 million to 1 billion.

Within one day after the proposal was made, until the evening of October 26, the attention it received was still very low. For example, only 3677 KSM were in favor of the proposal, 0 KSM were against it, and the proposal was shown as "will be passed."

Subsequently, around 19:45 on October 26, the number of votes began to surge, with the number of votes in favor rising from a few thousand to 120,000, and the number of votes against rising from 0 to 6,100. At this point, the voting status showed that it would be rejected.

Since the voting mechanism adopted by the Kusama network is Super majority approval, that is, the proposal can only be passed if the absolute majority of KSM participating in the vote agree. Therefore, we can see that the proposal is passed when 3677 KSM agrees, but 120,000 KSM agrees but is in a veto state, because the number of votes against has increased from 0 to 6100.

As the number of voting participants surged, the price of KSM tokens also began to surge. From 19:00 to 22:00 on the 26th, the price of the coin rose from 27USDT to 38USDT, with the highest increase exceeding 40%.

Since then, the proposal has been in a state of being rejected. As of 04:03:54 (+UTC) on November 2, the proposal was finally rejected with approximately 390,000 votes in favor and 350,000 votes against.

The above is the voting process for the Kusama 100-fold split proposal.

Although this proposal has been rejected, the impact of voting governance is worthy of our attention.

2. The “possibility” behind Resolution No. 91

What possibilities will the 100-fold split of Proposal 91 bring? There are at least three aspects.

First, the impact of whether the vote is passed or not.

If it passes, it means that 1 KSM will become 100 KSM, which will have a huge impact on the price of KSM tokens. Taking the 100-fold split of DOT as an example, during the split process, the price of DOT tokens rose by leaps and bounds, and the final increase was as high as 200%.

Secondly, it affects the price trend of DOT tokens because the prices of DOT and KSM tokens are mutually beneficial.

Let’s take the 100-fold split of DOT on August 21, 2020 as an example. Even after the split, the price of the coin did as expected, rising by 60% in one day. During the same period, the price of KSM nearly quadrupled.

In fact, the KSM token price surged on the night of October 26, which also led to a surge in the price of DOT, with the price rising from 4.3USDT to a maximum of 4.8USDT, breaking through the pressure in one fell swoop. So the prices of KSM and DOT are mutually beneficial.

Finally, build momentum for the upcoming parachain auction.

At present, Polkadot parachain 1.0 is about to be launched, the development of parachain 2.0 is nearing completion, and the auction module is also on the way. When parachain 2.0 and the auction module are officially launched, the Polkadot ecosystem will usher in the most important parachain auction.

Since the parachain auction also involves voting, the current KSM split voting is actually beneficial to the subsequent parachain auction process.

In summary, there are many benefits to splitting the vote 100 times, including affecting the price trends of DOT and KSM, benefiting the parallel chain auction, etc.

In fact, long before the auction began, the opinions of overseas community bigwigs had already determined the outcome of the split vote.

3. Bruno Škvorc’s “debate” with the ksmholder

During the discussion on October 12, the voices of the overseas community actually indicated the result.

Take the conversation between Polkadot ecosystem expert Bruno Škvorc and ksmholders on the kusama.polkassembly.io website between October 12 and October 25 regarding the 100-fold split of KSM as an example.

Bruno Škvorc: Not super against it if that’s what the majority of KSM holders want, but out of curiosity, why would you want to do this? Considering the two networks (Kuasma vs Polkadot) are separate entities at this point, what benefit would it have for them to have the same total supply?

ksmholder: Hi Bruno, actually I (and I think many others like me who don't have close access to the Polkadot/Kusama ecosystem) would prefer to make Polkadot more comparable to Kusama. Kusama's original selling point was Polkadot's canary network (testnet), if a project bids for a slot in both networks, then why is it that 10 KSM is used when voting for a parachain slot, instead of 1000 DOT?

ksmholder: Also, it’s easier for investors to compare. Let’s say I participated in Moonbeam’s parachain initial offering on Kusama and invested 10 KSM, but I have to invest 1,000 DOTs in Polkadot’s IPO for the same Moonbeam to get an equivalent stake, which is a bit weird.

ksmholder: So I think it makes sense to do an equivalent redenomination of the Kusama token, just like we did with Polkadot (split).

Bruno Škvorc: I understand your point, but to be honest I cannot support this for the sole reason that it "feels weird". In my opinion, the confusion caused by changing the value of the currency is much greater.

ksmholder: Hi Bruno, feeling weird is probably not the right way to comment. I definitely feel that since Kusama is being marketed as a canary network for Polkadot, there should at least be the same economic base of the currency units to make them more comparable. Of course, the governance wise setup is divergent, which is perfect, but in terms of comparable views of the units and some other key features, the conceptual connection between the two networks is given. What do you need to support this idea?

Bruno Škvorc: If the majority agrees, so would I. But I think it would cause too much confusion and unless there is public opposition, I don't think I would change my mind.

ksmholder: I read through the governance process but on the technical side, how should I propose in a formally correct way? As someone who is not so tech savvy, please guide me, thanks. I read the documents but I am not smart enough to connect these to the blockchain. But when I just followed https://kusama.polkassembly.io/referendum/52, I exchanged DOT for KSM.

ksmholder: Please start! https://polkascan.io/kusama/democracy/proposal/37

Bruno Škvorc: Remember, even if we discuss it here, it's non-binding, because we're just discussing it here. You should probably discuss it in the chat as well, but it's nice to have it out there nonetheless.

In short. KSM holder insisted that since DOT has been split 100 times, why not KSM? Not splitting is even more strange. Under KSM holder's repeated insistence, Bruno had to say that if most people agree, I will too. Bruno also said that even if I express my approval here, it is not binding.

We saw a KSM holder ksmholder who was eager to get the split proposal passed, but the big shot has been refusing to express support.

In fact, it was not just Polkadot ecosystem expert Bruno Polkadot who vetoed the proposal. In the discussion forum, most overseas KSM investors who expressed their opinions opposed the 100-fold split of KSM.

In summary, the proposal to split KSM 100 times was rejected, even though many KSM investors were eagerly looking forward to the adoption of this split proposal. However, we still see the positive role played by KSM token holders in participating in the process of Proposal No. 91.