Staking Guidelines for CEX's on the Terra Classic Blockchain

Commonwealth: https://commonwealth.im/terra-luna-classic-lunc/discussion/15263-staking-guidelines-for-cexs-on-the-terra-classic-blockchain While this proposal is not about being able to force exchanges to do anything, this proposal is to approve community Guidelines for Centralised Exchanges (CEX's) staking their LUNC on the Terra Classic blockchain. Though we recognise CEX compliance with these Guidelines is strictly voluntary, we encourage that they should be adhered to. Presently the 3 biggest wallets which stake on-chain totalling 265,599,007,646 LUNC (265.6B) worth $30.2M are from CEX's, and they have chosen to stake with only 7 validators out of the 100 validator active set. This has been an issue for some time, but recently we saw the dramatic effects of what problems this can lead to. For proposal #12033, for KYC for L1 developers working on-chain, which recently passed governance, of the entire 265.6B CEX stake on-chain over those 3 wallets: - 0 LUNC went to the YES vote (0%), - 141.9B LUNC went to ABSTAIN (53%), - 55B LUNC went to NO (20.7%), and - 68.1B LUNC went to NO WITH VETO (25.7%). For a vote which passed governance, the CEX's stake should have been more reflective of the community and the voting outcome. Instead, it was demonstrated the CEX's staking choices led to a centralisation of similar decision making over a small number of validators, in what could be seen as an unfair or undue influence by CEX's on Terra Classic's governance. CEX's should not contribute to centralised voting outcomes on our blockchain. By choosing to stake with only 7 validators, the CEX's staking choices could override the will of community governance. If instead the CEX's spread their stake more evenly over the active validator set, we should see a more even contribution to voting outcomes, consistent with decentralised principles. We believe the CEX's will agree with this goal. We propose that CEX's adhere to the following two Guidelines when staking LUNC on the Terra Classic blockchain: Guideline 1: Split your stake over the active validator set in a decentralised manner so as to not centralise voting outcomes. In doing so consider validator voting participation. Guideline 2: Running a validator on-chain without directly participating in governance is discouraged. If you do not want to directly participate in on-chain governance, you can spread the stake over the active validator set as per Guideline 1. We request any CEX's to follow these two Guidelines when staking LUNC on-chain, to preserve our decentralised governance system, and the integrity of our decision making. Guideline 2 is necessary, as CEX validators who do not participate in governance, yet have high % voting power, make it harder to reach quorum on governance decisions. If they do not want to participate in governance directly by voting, it's a simple matter for them to stake among the active validator set in accordance with Guideline 1, to contribute to on-chain governance, while still earning staking rewards. We believe that by CEX's following these Guidelines when staking LUNC, they will not play a role in the centralisation of voting power on-chain, but will contribute to enhancing decentralisation, and fair representation among the community governance system for Terra Classic. Vote YES if you agree CEX's who stake LUNC on-chain should follow Guideline 1 and Guideline 2. Vote NO if you disagree with this proposal. Vote ABSTAIN if you do not wish to vote yes or no but want to contribute to quorum.