The Proposal Lifecycle and Five Steps to Get The “Yes”
#18 Governance Series
It’s official. He/She proposed. What did you say? Yes or no?
DAOs aren’t like a marriage, but it sure feels like one with the ups and downs we have in DAOs. For better or worse, we live and breathe DAOs. Through sickness and bear markets, we care for our DAOs. Simply put, we protecc.
But how do I protect my DAO? How do I improve my DAO? It’s decentralized, so how does a community member introduce change to a DAO?
Let me introduce my feeble friend “Proposals.”
Yes, for a low price of one governance token, you can propose without getting down on one knee.
Where do we eat?
It’s a standard British day; rain and more rain. As you sit at the bus stop with your friends, you discuss where to eat; Indian, Chinese, Moroccan, or a chip butty. You propose the British national dish, chicken tikka masala, explaining the richness, sweetness, and creaminess of your favorite dish.
Steve doesn’t want that; he talks about how a pad thai is better for the group. How do they decide? With our good old friend, Mr. Democracy.
As the discussion continues, they put it to a vote, and it rules in favor of chicken tikka masala with an 80% majority. Steve ain’t happy, but this is the way. It is the only way. Like our lovely British friends, DAOs make decisions in a similar way where the majority wins.
Poor Steve… Luckily a garlic naan can turn his frown upside down.
One key difference between this example and most DAOs is that the majority can be based on token holdings rather than each person having a single vote. In our example, each person had one vote. Instead, DAOs commonly employ a token-based voting system which was explored in an earlier article.
Simply put, each one-token-equals-one-vote, so the majority is those who have the most voting power, not necessarily the most people. Plutocracy strikes again.
MakerDAO uses a token voting system; as individuals and organizations have varying amounts of MKR, some token holders will have a larger influence than others. In this case, the top 3 delegates outweigh the votes of the remaining delegates, showing flaws in this current system. In these types of systems, convincing the relevant whales within a protocol is a key part of the process of successfully passing a proposal.
One governance system similar to our initial example is the one-person-one-vote system. Proof-of-Humanity currently uses this system since they employ Sybil resistance methods, disabling people from making multiple accounts to increase their influence. Regardless of the different governance systems, this won’t significantly influence your proposal writing process.
What type of ring should I get?
Proposals are the official way to enact change within a DAO. I say enact with a subtle laugh because most votes are actually enforced through social consensus rather than automatic changes.
There are two types of votes, off-chain and on-chain voting. For a change in one word, these can’t be more different than another. Sometimes both are used in a governance process, but it is more common to see off-chain voting integrated within a protocol’s governance processes than on-chain voting.
One of the main positives of off-chain voting is that there is no cost to the voter. On-chain voting requires a transaction cost, an obstacle for many governance participants since not everyone can afford to vote weekly or monthly. That’s why it is common to see protocols employ off-chain voting mainly.
On-chain votes are conducted on Tally or a native platform. These votes occur on-chain and can be enforced automatically once the vote concludes. It doesn’t necessarily mean it will be enforced, but the functionality is there to enable such a transaction.
Another way to distinguish between off-chain and on-chain proposals can be to term them as social and technical proposals.
Social proposals are any proposals that include no smart executable contract, but a technical proposal is any proposal that includes a smart executable contract.
Most DAOs do not distinguish between types of proposals. However, this can help token holders understand whether a smart contract will be involved during the execution of a successful proposal. For example, any technical proposal should undergo multiple rounds of reviews before being accepted since it can lead to a technical upgrade within the DAO or spending money from the treasury.
Social Proposals aren’t as dangerous to a DAO, so they can undergo a less intensive process to successfully enact changes, such as formalizing a partnership or approving a service provider.
These types of proposal distinctions should be a standard that protocols should uphold. Voter apathy is a common problem, and categorizing proposals is a great way to identify which proposals require more of the community’s attention than other proposals.
How should I propose?
To enact change in a DAO, you need to communicate with community members, gauge sentiment on a potential change, and eventually, have the majority of token holders/voices in favor of a change to successfully create change within a DAO.
Contributors discuss changes in Discord since it’s a place for informal conversations, meaning that potential proposals might not even progress further from here and might just lay waste as potential ideas in the abyss of #general channel.
Those ideas that gauge enough community support will be formalized into a proposal template and posted on discourse. Each DAO should have its proposal template to reduce variability across proposals within a DAO. These templates provide structure and make it easier for people to both write and read proposals.
Balancer keeps a lightweight template to enable gauges but includes enough information for readers to understand the gauge proposal and make an informed decision. Gauge proposals are one of the most common proposals, so standardizing a template ensures that all protocols follow the same standards, enabling gauges to be evaluated against one another.
Element Finance has two types of templates; social and technical, depending on the type of proposal.
Both templates include similar information and encourage users to document as much as possible, so contributors can make an informed decision if the proposal moves further.
But how do I find the perfect ring?
Tailor your proposal to a DAO. Use their template.
The cardinal rule in proposal writing is simply to use their template instead of copying and pasting the proposal without adapting it to DAOs requirements. As you can see, each DAO has different templates, with some requesting more information than others, but use their template and previous proposals to gauge how to write your proposal.
Research previous successful proposals to understand how they were written to provide inspiration.
KISS. Keep It Simple Sam.
No one has the time to read an essay. Keep it short and sweet. Proposals should be informative, not a story.
Governance participation is already a myth, so proposals should be informative yet concise so that people can understand and make informed decisions without spending too much time reading them.
This isn’t possible in all cases, and sometimes, you’ll be spending a lot of time understanding the background of a proposal, but make sure there are references within a proposal that simplify this for a reader.
Data is key.
Data can speak more than a thousand words. There is a range of powerful tools, Dune Analytics and Flipside, that allow you to easily pull data from the blockchain to create visualizations to aid you in writing a compelling proposal.
Data should only be used when relevant, as it helps write persuasive proposals.
Gather feedback from community members.
Community members of a protocol are one of the most informed members of a protocol. Utilizing their feedback is an essential part of the proposal process before posting it on discourse.
An important of proposal writing is that there will be ups and downs. People won’t always agree with your initial draft, and that’s an important part of the process. Those individuals who criticize your proposals will help you fill in gaps or communicate your proposal in a more digestible way.
Sharing proposals before posting provides an extra opportunity to get a few more eyes on your proposal. In my experience, community members will give you further information on certain topics you would have otherwise overlooked.
Get the ring ready. It’s proposal time.
Post it on Discourse. Let your proposal be free. Release it to the masses.
Prepare to be shredded or receive loads of love. Ideally, it’s the former so you can find ways to improve your proposal. Feel free to contact community members to gauge their feedback on your proposal.
Governance participation is a pressing issue, and sometimes you will have to reach out to individuals on Discord, Twitter, or Telegram to get their attention since not everyone has Discourse notifications or even checks Discourse daily.
Sadly…I have 6 Discourses that I have to check daily, but that’s not the point. (Can someone please make my life easier)
Proposals are effort
Si senor, (My Devcon trip had a lasting impact on me) proposals are effort.
However, this is a world of decentralization. We want to provide an opportunity for every community member to voice their opinions and participant whilst making changes to a protocol. So, yes, it’s a slower process, but it is part of decentralization.
Sometimes we forget that DAOs aren’t meant to be replacements for businesses necessarily but an alternative to them. They are a healthier alternative that provides transparency and the ability for token holders to voice their opinion, but it comes at the cost of efficiency.
But there is a middle ground…
One common practice is to empower working groups to make decisions without pushing every change through governance. We will dive into these service providers in another post, but this form of minimizing governance will become more common as time goes on.
Not only with service providers, but we are starting to see new governance models such as Element Finance’s Governance Steering Council (GSC) model, where they will be empowering the GSC to handle certain decisions instead of relying on token holders to vote on them. The GSC might be expected to handle approving working groups and approving treasury expenditure, amongst other responsibilities, instead of relying upon token holders to approve every decision.
I expect this form of minimizing governance to become mainstream, but only time will tell.
To make DAO participation much easier, we need to simplify some of the processes to participate in governance, such as creating proposal templates or providing examples for individuals to follow. Jet Protocol wrote the initial onboarding asset proposals so the community could use them as an example to write future proposals.
Decentralized governance is still messy and requires much more standardization to enable easier participation for token holders. Through our work at StableLab, we work with DAOs to prioritize these standards because there is far too much variance across DAOs and within DAOs.
As StableLab works across various DAOs, we have identified key factors that can help protocols create proposal templates and how to author successful proposals. We have written proposals that have successfully passed and enabled changes within DAOs, by going through the processes I have outlined above.
If you have questions about authoring a proposal or creating a template within your DAO, feel free to contact us at StableLab.
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