53 items found for ""
- DAO Governance and AI
The Evolution of Governance Blockchain technology has not only disrupted finance but also governance, giving birth to DAOs that aim to revolutionize how decisions are made and executed. In parallel, Artificial Intelligence (AI) is altering the scope of what's possible in data analysis, predictive modeling, and automation. When these two cutting-edge technologies converge, they unlock the transformative potential of a new social contract—one that is distributed yet highly coordinated, democratic yet efficient. This convergence holds the power to redefine decentralized governance itself, while simultaneously raising profound questions about agency, ethics, and the balance of power in a world increasingly run by algorithms. In traditional centralized systems, governance decisions are typically concentrated in the hands of a select few or a single entity. This centralized control over resources and decision-making often leads to inefficiencies and can be susceptible to corruption. DAOs attempt to address these concerns by distributing governance across a more diverse group of stakeholders. With the advent of AI in this space, there is a tremendous opportunity to enhance this decentralized model even further, introducing new layers of intelligence, automation, and efficiency. As DAOs govern more specialized domains that rely on expert opinion, they face unique challenges. These include decreased efficiency due to greater community involvement and the challenge of information silos. Given AI's pervasive progress in modern life, it's important to explore how AI-DAO synergy can address these challenges. Yet, we must also remain cautious of the inherent risks that come with these influential technologies. How AI Can Enhance DAOs Artificial Intelligence has the ability to integrate algorithmic decision-making, data analytics, and predictive modeling into the DAO framework. This can encompass a range of applications, from AI bots that auto-execute routine tasks based on community consensus to machine learning models that identify suspicious activities or optimization opportunities within the DAO. This union marks the dawn of ‘super governance’ - a state where decision-making is not only decentralized but also enriched with intelligence, agility, and reduced administrative burden. DAO operators and participants already use existing AI tools like ChatGPT and Otter AI to streamline onboarding and automate routine tasks, but that’s just scratching the surface. Let’s explore key areas where AI could profoundly enhance DAO functionality and invigorate decentralized governance. Productivity and Information Accessibility through NLP techniques: Sifting through extensive forum conversations and governance proposals can be daunting. AI, capable of rapidly parsing massive data sets, can make governance more efficient. Using Natural Language Processing, AI bots equipped with sentiment analysis and topic modeling can distill protracted discussions and complex proposals into succinct summaries, empowering stakeholders to make well-informed decisions without information overload. Dynamic Resource Allocation through Real-Time Analytics: An AI agent operating at the smart contract level can have the ability to dynamically reallocate resources based on real-time data analysis. These agents could use machine learning algorithms to continuously evaluate the impact and performance metrics of various projects. Consequently, they could direct funds towards initiatives showing higher promise of ROI, or dynamically adjust treasury management strategies to capitalize on fluctuations in market conditions. Metagovernance Augmented by Swarm Intelligence: AI has the potential to turbocharge metagovernance endeavors by interlinking AI agents across different DAOs, fostering autonomous inter-DAO communication and action. This could be the most viable pathway for DAOs to attain true autonomy, both in function and in name. Multiple specialized AI agents operating across different DAOs can form a swarm intelligence that can cooperate without much human interference. These agents would autonomously share data, and insights, and even initiate actions across DAOs. Using AGI Robots: As advancements in Artificial General Intelligence (AGI) proceed, we can envisage a future where AGI agents serve as DAO participants' representatives. Unlike narrow AI, AGI boasts adaptive reasoning abilities akin to human cognition. This would eliminate issues like missing votes or proposals failing due to lack of quorum and ensure that every voice is algorithmically represented in the decision-making process Enhanced Security through AI monitoring: AI can bring a transformative layer of security to DAOs through real-time auditing and moderation. Using machine learning models trained to identify patterns indicative of fraudulent activities or harmful proposals, these AI systems could autonomously flag risks and initiate protective actions. For instance, an AI audit tool could scan transaction logs for suspicious activities, while a content moderation AI could filter out spam or reject proposals from known malicious actors and flagged wallets. AI & DAO Governance in Practice As the future of DAO governance unfolds, numerous theories have emerged regarding the role AI will play. There are ongoing experiments and tooling being developed to seamlessly integrate AI-based tools into the governance process. MakerDAO, a leading player in the DeFi space, announced ambitious plans that provide a window into the future of AI-augmented governance. As part of the Endgame plan, Maker plans to launch new tokens that bridge its governance token (MKR) with its stablecoin (DAI) under a unified brand. Following this, six SubDAOs with specialized tasks will be introduced, some of which will leverage AI capabilities. The most exciting part of Maker's outlook is the integration of Governance Artificial Intelligence Tools (GAITs) to assist Maker ecosystem stakeholders in operating, auditing, and improving the Scope Artifacts of MakerDAO and SubDAOs, and the business processes of Ecosystem Actors. These AI utilities are designed to summarize proposals, verify data, and even generate new governance initiatives. By integrating AI in this manner, MakerDAO is creating what founder Rune Christensen calls a "governance equilibrium," a state of optimized, intelligent governance. Similarly, the NEAR Digital Collective (NDC), a newfound effort to unite the NEAR ecosystem, is embracing AI. The NDC has proposed an AI tooling project, a set of tools designed to make participating in NDC governance easier, and more intuitive. This project includes a summarization tool for channels, a document repository with text-to-speech accessibility, and a conversational chatbot. The NEAR Hub Chat Bot is already live, allowing anyone interested in NDC governance to interact with a trained LLM and ask governance-related questions to bring themselves up to speed. In the Web3 ecosystem, the open-source and "build in public" culture has cultivated a hotbed for innovation and experimentation to unlock new use cases. A standout example is the x23 project from an AAVE DAO contributor. This tool uses AI to streamline lengthy forum discussions into short, actionable summaries, making governance more accessible for DAO members. Given the rise of blockchain hackathons, we can expect a surge in similar, high-impact applications that will push both technological and ethical boundaries. AI & DAO Symbiosis: Can DAOs Improve Artificial Intelligence? As the benefits of integrating AI into DAOs gain recognition, it is equally intriguing to examine how DAOs can positively impact the field of AI. DAOs have the potential to democratize AI development, fortify AI systems against potential misuse, and guide the ethical, equitable deployment of intelligent systems. Let's explore some specific areas where the symbiotic relationship between DAOs and AI can have a profound impact. Democratizing Access to AI: DAOs offer a platform where a broad array of stakeholders can participate in the development and adoption of AI systems. Through decentralized governance, DAOs can oversee the allocation of resources, both computational and financial, for the development of AI technologies such as large language models (LLMs). This opens up opportunities for more people to have a say in the direction and development of AI technologies and reduces the concentration of power and influence in the hands of a few tech giants. Decentralized Governance of Computational Resources: Sophisticated AI models demand enormous computational firepower. DAOs present an innovative mechanism to govern these computational resources in a transparent and decentralized manner. Imagine a distributed network of computational nodes, all guided by a DAO. This would allow equitable access to computing power and minimize the risk of monopolistic control over AI infrastructure. Ethical Oversight and Auditing: One of the ongoing concerns in the realm of AI is the ethical deployment of these technologies. DAOs can serve as a dynamic platform for community-driven, real-time auditing of AI systems. Members can vote on ethical guidelines that AI models within the DAO should adhere to, and enforce compliance onchain. In instances where an AI system operates within a legal grey area or ethical ambiguity, the DAO can quickly convene stakeholders to scrutinize the issue, ensuring that ethics aren't an afterthought but are baked into the development process itself Potential Risks and Ethical Implications While the fusion of DAOs and AI poses revolutionary implications, it is important to highlight the inherent risks and ethical consequences of these technologies colliding. Algorithmic Bias: The problem of algorithmic bias is far from a novel issue in AI ethics, but its implications take on a larger significance when such algorithms are incorporated into DAOs. Given that DAOs can operate as self-governing entities, the dangers of perpetuating societal inequalities through biased algorithms are palpable. Imagine, for instance, a DAO that allocates resources for community development but utilizes an AI system trained on biased data. This could inadvertently perpetuate existing social disparities, allocating fewer resources to historically marginalized communities. DAOs employing AI must adopt robust fairness-aware algorithms and engage in ongoing audits to scrutinize and mitigate algorithmic biases to mitigate this risk. Loss of Human Oversight: Another salient concern is the potential erosion of human intuition and ethical nuance, especially as we inch closer to a world where AGI could participate in decision-making processes. Even the most advanced AGI cannot wholly capture the complex tapestry of human emotion, cultural contexts, and ethical subtleties. While AGI can compute millions of data points in a second, can it understand the moral weight of a decision affecting the livelihoods of a community? Human judgment is arguably the cornerstone of any ethical governance framework, and an overreliance on AI-powered, automated systems could risk sidelining this. A New Playground for Malfeasance: As we augment DAOs with complex AI systems, we must also consider that this creates more intricate attack vectors for malicious actors. AI algorithms, if compromised, could be manipulated to make governance decisions that serve the interests of a select few and grossly undermine the very essence of decentralized and democratic governance. Additionally, smart contracts automated by AI agents could become more susceptible to bugs and loopholes as complexity increases. AI & DAOs: A New Social Contract The potential for a synergistic relationship between DAOs and AI offers an exciting yet challenging frontier for governance. We are looking at the possibility of creating not just smarter organizations, but also more egalitarian communities and perhaps, even a new form of society. The journey towards this revolutionary future is fraught with ethical and practical challenges, but if navigated carefully, we could be on the brink of a governance revolution that would reshape our collective social contract for the digital age. It's important that we navigate with both visionary enthusiasm and grounded caution and establish rigorous ethical frameworks that evolve alongside the technology. Only then can we fully harness the collective benefits of DAOs and AI while mitigating these risks that sometimes shadow their immense potential.
- Safeguarding On-chain Governance
The Great On-chain Migration Decentralized governance enables participants to make collective decisions and manage resources without centralized intermediaries. However, this approach is susceptible to governance attacks, where bad actors exploit vulnerabilities in the decision-making process. The most common type of attack occurs when a bad actor acquires enough voting power to propose and pass a measure that grants them control over the DAO, the protocol, or the treasury. Without additional safety measures and mechanisms, these attacks stand to destabilize the future of DAOs. Currently, many DAOs use off-chain voting platforms like Snapshot and rely on trusted individuals, such as a foundation or a core team, to implement the voted changes. However, with the increasing popularity of on-chain governance tools like Tally, more DAOs are moving to on-chain governance, where proposals are automatically executed once a vote passes. While this does increase decentralization, it also creates new opportunities for governance attacks. On-chain proposals automatically execute transactions, which means that if a bad actor gains enough votes, they could pass a proposal with a transaction that proves to be catastrophic. Cost of Governance Attacks Let’s explore past instances of governance attacks and the financial impact they had on DAOs to better understand the severity of these types of attacks. Beanstalk: Beanstalk, a stablecoin protocol, lost $182,000,000 when an attacker used a flash loan to gain sufficient voting power to force through a proposal to transfer $182M of Beanstalk’s reserves to themselves. Tornado Cash: A malicious proposal in Tornado Cash allowed an attacker to withdraw all locked governance votes and drain all the tokens from the governance contract, resulting in a loss of approximately $1,000,000 for the protocol. Build Finance: Build Finance lost $470,000 when an attacker was able to gain enough voting power to pass a proposal that gave them “full control of the governance, contract, minting keys, and treasury”. Governance Safegaurds So how do you prevent malicious proposals from destroying your DAO? Below are common methods used by DAOs and the pros and cons of each. These methods are not mutually exclusive and can be used together to make your DAO even more secure. This overview aims to help guide you in choosing which method might be best for your DAO. Execution Delay If your governance contract executes an on-chain transaction in the proposal immediately then you have no way to stop malicious proposals once the vote is passed. One way to allow a buffer period where the DAO can catch and stop bad proposals is by implementing something called an Execution Delay. An Execution Delay provides an extra day or two after the vote has passed before it executes any transaction it may have on-chain. This gives the DAO time to identify and stop malicious proposals before they are added to the blockchain. There should almost always be an execution delay to add a layer of protection to governance. There are exceptions to this such as emergency proposals where you cannot wait to execute the proposal but emergency votes should follow an established fast-track process as we've previously discussed here. Execution Delay + Foundation Intervention Now that you have this day or two how do you actually stop the malicious proposal? Some protocols give a foundation (or trusted) member the ability to throw out (veto) malicious proposals once they are passed. The Rari Foundation, responsible for stewarding the decentralization of the Rarible Protocol, uses a “cool down period” to delay passed proposals by 2 days to give time for their board to nix proposals that violate DAO rules. Importantly, Rari is currently in the process of adding a security council to fill this role. Pros: Prevents malicious proposals Core Team is incentivized to protect the protocol and treasury Cons: Creates centralization as the DAO must rely on a centralized entity to watch over proposals. Gives the board the ability to reject any proposal they see fit even if they are not necessarily malicious. Execution Delay + Security Council Another method to filter proposals during the execution delay is through the use of a Security Council. A Security Council is a group of trusted contributors to the DAO who are responsible for safeguarding it in emergency situations. Their main role is to review and block any malicious proposal that may arise during the execution delay. Initially, the members of the Security Council can be appointed based on trust, but should eventually transition to an elected system with defined term limits. Security councils offer several advantages over foundations monitoring malicious proposals. Firstly, since the members of the Security Council are paid specifically to identify malicious votes, it ensures that at least one member of the council will detect any such proposal. Secondly, it introduces accountability, as any member who either overlooks a malicious proposal or attempts to approve one can be replaced. Lastly, having a diverse group of individuals provides safety in numbers and different perspectives. It should be significantly more challenging for an entire Security Council to organize, collude, and attack the DAO. Arbitrum currently has a three-day voting delay and a 12-person security council that has the power to act in case of emergency should a malicious proposal be passed. This council initially started as an appointed position for trusted individuals but public election for new members will commence in September 2023. Pros: Prevents malicious proposals Security Council is held accountable since they can be replaced Harder to corrupt an entire council More people watching for malicious proposals Cons: Some level of centralization as the DAO must trust this group to act in good faith Whitelisting Addresses Whitelisting addresses refer to when a DAO preapproves certain wallet addresses to post proposals on-chain. All other DAO members must request permission from these whitelisted addresses to post a proposal on their behalf. This prevents bad actors from posting malicious votes unless they are one of the few trusted ecosystem actors. This however causes major centralization issues and can prevent even beneficial proposals from moving forward. For example, in ApeCoin DAO only moderators can move proposals to a vote. Anyone who authors a proposal must have it reviewed and posted by a moderator. While this can limit attacks it also limits DAO members' ability to contribute and slows down the governance process. Pros: Prevents bad actors from submitting malicious proposals Cons: Very centralized as it means a few people must approve any proposal before it goes to a vote Can prevent good-intentioned DAO members from making a positive change to the protocol Can slow down governance if you have to wait on a small group of people. Even trusted members can turn bad and create malicious proposals Token Staking Models Governance attacks can happen suddenly if an attacker acquires tokens on the open market to manipulate a vote. One way to limit this is to incentivize users to stake or “lock” their tokens in order to receive rewards. This is done by separating tokens held and voting power. Instead of voting using the token itself, DAO votes are counted using a staked version of the token. People who stake their governance tokens are rewarded over time with more and more voting power. This prevents someone from being able to instantly buy the majority of the voting power. Instead, they would need to lock their tokens for multiple years and have their voting power grow over time. For example, Curve Finance uses a vote escrow model for its token veCRV which grants users who lock their CRV voting rights and influence in the Curve Wars. More importantly, it promotes long-term commitment to the protocol while discouraging short-term manipulation. This means, for instance, if an attacker needed 100 votes to ensure any proposal would pass in a normal DAO they could buy these 100 votes. However, in Curve, they would need to buy 400 tokens and then stake these for 1 year in order to acquire the same 100 votes needed to force through a proposal. This means it costs 4 times more and delays their attack by 1 year. This added cost and time delay disincentivizes attackers from trying to force through a malicious proposal, at least in the short term. Pros: Makes it significantly slower to attack. Cons: Bad actors can still accumulate a large number of votes over time. Makes it harder for new passionate DAO members to have a say. Minimal Governance A more extreme method to prevent governance attacks is simply not having DAO governance or very little. If the DAO does not have control over treasury funds or parameter changes then it is likely not worth it for a bad actor to invest resources into an attack, at least not from this attack vector. For example, over at Ajna Finance delegates have limited power as they only have a say in the grants program. While a bad actor could theoretically acquire enough voting power to give themselves a grant, this would likely not be worth the effort for a small reward. In addition, Ajna uses a form of quadratic voting to lower the chances of this happening. Pros: Reduces the attack surface of a protocol. Disincentivizes attacks Cons: Decreases community involvement in shaping the protocol’s future. Usually a non-upgradeable protocol Conclusion While none of these methods are perfect, they do offer some level of valuable protection to a DAO. It’s crucial that every DAO consider all safety measures and strategies to keep themselves safe. At StableLab we have experience in implementing and serving as part of many of these frameworks. If you are confused about how you can implement them into your DAO reach out to us for help. Get in touch, If you would like to support us in our governance efforts If you and your team need guidance on governance-related matters If you are a founder who is building something interesting in web3 Twitter | YouTube | Newsletter | LinkedIn
- Joining the StableLab Team
In the ever-evolving realm of technology, it's rare to find a crossroad where ambition, purpose, and the potential to scale intersect. That crossroad is precisely where I found Stablelab. When I was presented with the opportunity to join Stablelab as the Chief Technology Officer, it wasn’t just the title that intrigued me, but also the immense responsibility and potential that came with it. Here are my core motivations: 1. Building from the Ground Up: There's a unique sense of fulfillment in creating. Crafting an idea, refining it, and seeing it come to life is truly rewarding. At Stablelab, I saw a canvas waiting to be painted on, and I was eager to be a part of that creation. The challenge of taking a product from its early stages to a fully impactful solution is what drives me. It's about making a mark, an imprint of innovation and usability, and doing so in a way that not only serves our immediate users but also sets a precedent in the industry. 2. Crafting a Stellar Team: While technology and products are important, it is the people behind them that truly determine their trajectory. I envisioned not just building a team but curating a culture. A culture that’s defined by passion, commitment, innovation, and mutual respect. By joining StableLab, I've been given the trust and autonomy to handpick individuals who will not just fill roles but will add dimensions to our collective thought process. These are the minds that will navigate challenges, celebrate successes, and continuously push the boundaries of what is possible. 3. Leveraging Existing Partnerships: In the world of business, it's often not just about what you do, but also who you do it with. StableLab's pre-existing partnerships present a tantalizing opportunity. These alliances are not just about business transactions; they are channels of shared knowledge, resources, and growth. They are pathways that can accelerate our product development, enhance our market positioning, and solidify our reputation. In essence, joining Stablelab is not just a professional move; it's a commitment to a vision. A vision of impactful technology, inspired teams, and purposeful partnerships. I am here to contribute, lead, and witness this vision unfold into reality. Connect with me on Twitter and LinkedIn!
- Heroes and Outlaws: The Role of DAO Founders
The crypto space, often referred to as the New Frontier, is a world brimming with opportunity and wealth, but also with increased risk and lawlessness. Within this realm, we witness everything from cutting-edge protocols that handle billions of dollars worth of assets, traders and investors making millions, to Founders and Builders faced with constant scrutiny. It is important to recognize that this environment has given rise to both "Heroes" and "Outlaws" narratives, driven by individuals both inside and outside the industry. The uncertainty surrounding this space motivates many to align themselves with the "Heroes" and attribute any losses to the "Outlaws." It is crucial to understand that such a dramatic view, particularly when applied to Founders, is not sustainable in the long term for DAOs. While the cult of personality surrounding Founders may act as a catalyst to generate interest in the short term, it is essential to acknowledge that Founders are human beings, and expecting them to be invincible and saint-like only serves to destabilize DAOs. From Startup to DAO In traditional startups, it is expected that founders will benefit when the company succeeds. However, in the crypto space, even if DAOs succeed, their founders are often expected to sacrifice everything for the protocol while receiving minimal benefits. There was even a time when it became ethically commendable to receive no funding from Venture Capital and not retain any portion of the token for founders. However, from an economic standpoint, such practices are generally not sustainable in the long term. This issue also extends to founders and governance. For instance, when Rune Christensen, the Founder of MakerDAO, bought more MKR tokens, some criticized him for doing so. However, if he had decided to sell MKR instead, that action would have also been grounds for criticism. This problem is prevalent in many DAOs. In other words, regardless of what founders do, there will always be reasons to challenge them. One of the reasons this challenge arises is due to the inherent transparent nature of most blockchains. Even if founders themselves remain anonymous, their blockchain addresses are often public, allowing for easy tracking of addresses that hold a significant portion of tokens or have been contributing to the associated DAO since its early days. Consequently, unlike in traditional industries where disclosures about companies and their founders are infrequent and hard to find for non-listed private companies, in the DAO space, the actions of founders and teams, especially regarding their tokens and the DAO treasury, are more exposed to the public. From Heroes to Outlaws The crypto space is filled with once-praised visionaries, geniuses, and heroes who have fallen from grace. From Do Kwon, the Founder of Terra, to Alex Mashinsky, the Founder of Celsius Network, we have witnessed numerous cases of Founder "Heroes" later becoming "Outlaws." For example, FTX, one of the largest crypto exchanges, filed for bankruptcy on November 11, 2022, revealing severe fraudulent activities, mismanagement, and risky endeavors. John Ray III, FTX's new CEO, who previously oversaw massive bankruptcies including Enron, strongly criticized FTX in a filing with the U.S. bankruptcy court, stating, "From compromised systems integrity and faulty regulatory oversight abroad to the concentration of control in the hands of a very small group of inexperienced, unsophisticated, and potentially compromised individuals, this situation is unprecedented." The FTX bankruptcy filing exposed many misconducts within the company, shocking those within and outside the blockchain industry who believed Sam Bankman-Fried, the Founder, to be a philanthropist and FTX and Alameda Research to be legitimate and highly profitable entities. In reality, Bankman-Fried was actively involved in fraudulent activities, and the companies had actually lost $3.7 billion before 2022. After the fall of such "heroes," new "heroes" often emerge. However, their time in the spotlight is usually short-lived. Despite the rug pulls executed by these "heroes," many individuals still cling to the belief that these "genius" developers had good intentions and will eventually return. Illusion of Absolute Good and Evil In truth, the line between "good" and "bad" is not always clear. However, on the extreme opposite side, several figures who have contributed to the DAO ecosystem have been unfairly challenged in a negative light. For example, ZachXBT played a crucial role in exposing various frauds and scams, leading to several successful arrests. Unfortunately, ZachXBT now faces lawsuits and various misleading accusations, such as being biased or corrupt in his reports. Such accusations are common in the DAO space, particularly against founders. Andre Cronje, the founder of Yearn, often expressed frustration with this phenomenon. He argued that although he built the protocol by himself with his own resources, most of the community was only interested in the price action, and he was blamed for any faults. This frustration eventually led him to leave the protocol. Recently, Marc Zeller, Founder of the Aave Chan Initiative, posted a tweet that resonated with the crypto community. The tweet was likely in response to the situation surrounding Curve Finance founder Michael Egorov's CRV-backed loans across the DeFi space. As the price declined, especially after the exploit of certain Curve pools, some members of the crypto community called out Michael and his family for purchasing expensive real estate. However, it is important to take a step back and question whether it is fair to equate founders making money with wrongdoing. A Heroe's Hubris Ironically, since DAO Founders are more exposed to the public, some founders exploit this visibility to their advantage. It is common to hear founding teams of new projects announce that they will never "sell" because they believe in the community, only to later reveal that it was merely an illusion (a common example is founders selling tokens and justifying it as "providing liquidity"). Other founders take advantage of the aforementioned transparency, amassing a cult-like community that vehemently defends them against any criticism or hint of misconduct. This can lead to an "Us vs. Them" scenario, where any outsiders or skeptics are aggressively shot down, often with insults and unfounded accusations. This environment discourages objective analysis and critical thinking, as questions or doubts regarding the project's direction or the founder's actions are dismissed as "FUD" (Fear, Uncertainty, and Doubt). Where Do We Go From Here? There is no playbook for how founders should behave in DAOs, and there are no easy solutions to the dilemmas they face. Even in a decentralized system, founders, in one way or another, have an influence on the ecosystem, whether directly or indirectly. However, it is crucial to strike a balance. Projects that rely heavily on a "cult of personality" expose themselves to significant risks when their founders fail to act. On the other hand, if founders are believed to have abandoned the protocol, that can also be harmful. It is important to remember that founders are human beings, and expecting them to be exceptional is unrealistic and detrimental to the builders around us. The key is to make DAOs more resilient so that even if founders or team members are unable to function, DAOs can continue to operate. Additionally, inviting more governance participants ensures that the vision is not solely dependent on a single person but rather on the community as a whole.
- Why I Said 'Yes' to StableLab
Throughout my career, I've always been drawn to the dynamic, challenging, and ultimately rewarding landscape of technology. It's an industry that nurtures continuous growth, fostering innovation at a dizzying pace. I began my journey in the "web2" world, where I dipped my toes in various sectors such as travel and SaaS. However, it wasn't until I encountered the blockchain that I found my true professional calling in web3 Product Management. Like many of my crypto-enthusiast out there, my first encounter with the world of blockchain was through trading. Yet, as I delved deeper into this new industry, I realized that its potential extended far beyond digital transactions. I fell through the rabbit hole. As a Product Manager in web3, I've gained vast exposure to a wide range of blockchain projects. My roles have taken me across the spectrum of stablecoins, DeFi protocols, web3 compliance, and more. Each new project was a new lesson, a fresh insight that deepened my fascination and appreciation for this industry and its people. Now, I'm embarking on the next exciting adventure in my career journey by joining StableLab as Head of Product. I'm particularly excited about aligning my passion with a company renowned for its expertise in DAOs and professional delegation services - a reputation earned by working with some of the most prominent names in web3. At StableLab, my role will further immerse me in web3 and DAOs, which I consider to be the organizational and political systems of the future. I've always been intrigued by the concept of communities organizing themselves within these decentralized networks, and I'm eager to contribute to shaping their evolution. I look forward to leveraging my experience to build products that help DAOs navigate the challenges and opportunities inherent in web3 governance. My goal remains the same: to create products that people love and help expand the web3 ecosystem. Connect with me on Twitter or LinkedIn!
- Delegate Musings: Embracing the Challenges of Governance
DAOs may appear similar on the surface: decentralization as a core value, trust-minimized distributed networks, and token-based governance. Digging deeper, however, each DAO has its own unique culture, operations, and governance processes that significantly impact the protocol, its community, and its trajectory. Despite this diversity, I have noticed common challenges persisting across DAOs. In my first two months as a professional delegate, I've had a front row seat in governance at LidoDAO, Starknet DAO, SafeDAO, and ElementDAO. It's been an interesting journey of discovery, watching democracy in action, observing power dynamics unfold, and experiencing firsthand the teething challenges in our nascent systems. Reflecting on this journey of mine, several lessons stand out – lessons that I believe are crucial for the evolution of DAOs and the broader decentralization movement. It’s All Tradeoffs DAOs must make difficult decisions to reduce reliance on trust while staying agile in a fast-paced world. I have witnessed scenarios where stewards and contributors must balance benefits with drawbacks and the potential for pitfalls. Such issues include decentralization vs. efficiency, short-term vs. long-term gains, growth vs. stability, and an appropriate financial stake for participation that promotes inclusivity and offers protection against undue influence. Decentralization vs. Operational Efficiency Striking a balance between decentralization and operational efficiency is often as delicate as it is crucial. This dance is most evident when a DAO bootstraps with a core protocol team, giving rise to what is termed 'key-person dependency.' While these core teams have the context and influence to drive pivotal decisions at a fast rate, they also bear the responsibility of empowering those beyond the core team to participate in the stewardship of the protocol. This measure is vital to maintaining the spirit of decentralization and making the DAO resilient to the loss of key individuals. For example, at SafeDAO, facilitators from the Ecosystem Foundation (SEF) function as the essential gears in the machinery of governance, guiding proposals through the pipeline. However, the recent exit of a single facilitator threw this process into disarray, with critical proposals stalling indefinitely and the community left feeling unheard. Only until very recently was a new facilitator appointed to pick up where the other left off. Fortunately, there were no urgent or time-sensitive changes related to the Safe protocol requiring swift action from the DAO. This disruption underscored the need for additional facilitators beyond the core team to maintain operational efficiency. The dilemma lies in preserving our core values of decentralization while ensuring that DAOs can function effectively without an excessive burden of lengthy, procedural formalities. Despite the potential inefficiencies, the compromise we must seek is a balance between core principles and operational efficiency. Introducing mechanisms such as a Fast-Track process, which has proven useful in crisis and time-bound situations, alongside broadening powers to include community members, can provide a viable path forward for upholding decentralization principles while ensuring DAOs remain efficient. Short-term Gain vs Long-term Viability DeFi DAO communities are often divided into two camps: those seeking immediate rewards and those advocating for long-term stability. The former see DAO treasuries as a reservoir to be tapped into, leveraging opportunities in yield farming and staking programs to raise protocol metrics like TVL. These aggressive strategies, while promising short-term gains, risk bypassing thorough due diligence and can lead to unsustainable incentive programs that inflate the protocol's perceived value and status amongst competitors. I observed an example of this recently in LidoDAO, with members prematurely proposing $LDO staking alongside a protocol revenue distribution mechanism. DAO operators have to strike a balance between leveraging promising opportunities, maintaining reserves, and making challenging tradeoffs for the longevity of the protocol. There is no right or wrong decision here per se, only one that best serves the community’s collective interest and values. Upgradeability vs Immutability In decentralized and trust-minimized systems, people often advocate for minimal governance. The rationale behind this perspective is that highly decentralized governance can be highly inefficient. This viewpoint is rooted in the historical failure of humans in preserving equitable and consistent governance systems, which effectively turns any governance framework into a potential target for both internal and external corruption. While this viewpoint carries some truth, it's not absolute, and calls for closer examination. Social systems are inherently dynamic and continuously adapt to meet the needs of their constituents. In the context of the blockchain space, this dynamism is significantly amplified. DAOs must face a balance between dissenting opinions, one advocating for the ossification of the protocol’s rules and functions and slowly disintermediating the DAO from the protocol over time, versus continuing to grow the protocol and expanding the DAOs scope to capture new opportunities in the ever-expanding market. This challenge emerges across various DeFi DAOs that are continuously faced with the existential problem of growing and adapting to the environment beyond original use cases in an environment that transcends their original purpose or sticking to a protocol’s initial vision. Essentially, this all boils down to having a codified manifesto that the DAO members can align and rally around. This manifesto would ideally incorporate agents for adaptability, allowing for any necessary shifts due to changes in values, priorities, or circumstances. The Delegate’s Impact: A Force Multiplier Serving as a delegate across these DAOs, I've observed firsthand how crucial the delegate role is in enhancing participation and upholding the democratic principles of a DAO while balancing the aforementioned tradeoffs. Delegates act as a force multiplier and represent the views of many participants who might not have the time, attention span, or inclination to get involved in every governance decision. They facilitate a wider community representation, bridging the chasm between passive token holders and active, diligent governance. In the complex realm of DeFi DAOs, a small group of knowledgeable and resourceful individuals hold the key to understanding protocol functions, smart contracts, and the wider implications of decisions. These experienced DAO members play a vital role in bridging the knowledge gap, researching proposals, and providing insights to the community. However, the challenge lies in incentivizing and valuing these delegates without stifling diverse opinions. Without active delegates, the governance process suffers, making it essential to establish effective delegate frameworks, as exemplified by AAVE DAO's Recognized Delegate program, while acknowledging the need for further improvements in DAO functionality. The recently concluded Tally Delegation Week, Uniswap Foundation's Delegate race, and Optimism Foundation's Delegate discovery initiatives are notable delegate focused events in the ecosystem. These activities underscored the strong involvement and dedication from new and experienced delegates, who bring a wealth of diverse skills, time, and efforts to the governance of their respective protocols. They also signal that there is indeed a promising prospect for the evolution of tools and systems designed to enhance delegation comprehensively. This encompasses boosting awareness of delegation roles and their importance, incentivizing quality delegation, providing retroactive rewards for delegate activities, and enhancing governance tools to better serve the needs of token holders and delegates. Looking Ahead: Wen Robust DAO Governance? With the expansion of the SEF core team and the ongoing SafeDAO Grants Council elections set to precede the official launch of the Safe Grants program, SafeDAO is on the brink of substantial change. We can expect notable amendments to the Safe protocol and significant improvements to the SafeDAO governance architecture. The recent Lido V2 upgrade has also introduced transformative changes to the protocol, most notably the introduction of the staking router, a new modular architectural design primed to welcome a broader more diverse range of node operators resulting in a more distributed validator ecosystem. Given that these new node operators are key stakeholders in the Lido ecosystem, it will be the responsibility of the LidoDAO to effectively manage the appointed stewards, systems, and processes in order to sustainably grow Lido and its community. Emerging DAOs such as ElementDAO and StarknetDAO are poised for increased activity and critical votes that will shape the evolution of their respective protocols. My journey as a delegate across these DAOs has been an eye-opening experience, highlighting the various strengths and areas for improvement in decentralized governance. As the decentralization movement evolves, so should its governance structures, tools, and our approach toward them. Together, we can strive for stronger, more inclusive, and effective governance by continuously refining our processes, leveraging data-driven insights to develop and expand governance tools, and by welcoming more diverse perspectives into the space. In this journey, every delegate, every token holder, and every individual involved in a DAO has a critical role to play. I look forward to delving deeper into the space and upholding my role as an architect of this decentralized future. Get in touch, If you would like to support us in our governance efforts, If you and your team need guidance on governance-related matters, or If you are a founder who is building something interesting in web3 Twitter | YouTube | Newsletter | LinkedIn
- State of Aave Governance: GHO, LST Demand, Safety Module Updates, and Delegate Incentives
Introduction Aave, the leading lending platform, is entering a new chapter in its journey fueled by the introduction of the GHO stablecoin, growing interest in liquid staking derivatives, enhancements of the safety module, and the implementation of delegate incentives. Aave Governance, the community stewarding the protocol, is actively laying the groundwork for these innovations and more within the Aave ecosystem. In this piece, we showcase the latest accomplishments of Aave's thriving community of contributors and service providers. Our goal is to provide a condensed summary of all the exciting things happening within Aave Governance, as well as its promising prospects for the future. GHO Genesis Parameters At Aave DAO, talk of its native stablecoin GHO has been all the raave (heh) recently. In anticipation of its launch, governance has successfully passed a number of key proposals. These proposals aim to set the Genesis Parameters for GHO and encompass key aspects such as the onboarding of GHO Facilitators, the initial liquidity strategy for GHO, and the possible allocation of GHO revenue towards safety incentives. A proposal (status: passed) was put forward by Aave Companies, which introduced the GHO genesis parameters. These parameters included the following initial values: a 1.5% borrow rate for GHO, along with a 30% discount rate for AAVE stakers, a bucket capacity of $100M, and a discount limit of 25% of total GHO bucket size. In order to manage the supply of GHO and ensure price stability, the minting caps for DAO-approved Facilitators can be adjusted based on demand. AAVE stakers can mint GHO at a discounted rate. Additionally, the proposal introduces a dedicated Stability Module designed to provide liquidity support. Aave DAO also introduced a new governance procedure (status: passed) for the onboarding of GHO Facilitators, an entity or protocol who can trustlessly mint and burn GHO. To apply, interested parties can submit their application on the Aave Forum. Subsequently, a discussion period will take place, followed by an off-chain vote on Snapshot. If the vote passes, the address and its initial cap will be added as a facilitator in an on-chain vote that targets the Aave DAO Short Executor. The proposal includes sample applications for facilitators like Aave V3 and Flash Minter, providing a comprehensive overview for the entire procedure. The main objective of this proposal is to establish clear guidelines for onboarding of facilitators, as well as modifying their permissions and handling their offboarding process. Recently, there have been discussions about launching liquidity pools on Balancer for GHO as part of an initial liquidity strategy. TokenLogic authored a proposal (status: passed) outlining an initial liquidity plan for the upcoming launch of GHO. The proposed approach suggests a central liquidity pool that combines GHO/bb-a-USD, LST/GHO (80/20), and GHO/LUSD pairs. The primary objective is to facilitate large trade sizes while minimizing price impact, thereby generating sufficient liquidity to maintain the $1 peg of GHO. Additionally, the plan explores the integration of GHO liquidity tokens into the Aave Safety Module (SM) and highlights the potential contributions from various communities and protocols in supporting secondary liquidity pools. The main liquidity pools are built to leverage Balancer to increase BAL incentives and trading fee income. To maintain liquidity and diversify SM assets, the inclusion of GHO in the Aave SM is considered. Overall, the proposal provides a thorough liquidity plan for GHO, covering primary and secondary pools as well as factors to be considered for ongoing liquidity and future growth. Finally, there are ongoing discussions to allocate GHO revenue as safety incentives. According to the proposal (status: deliberation on the forum) by the Aave Chan Initiative, a portion of GHO Revenue would be dedicated to Safety Incentives to improve sustainability while allowing stakers to earn AAVE and GHO tokens. This tactical change would help lower reliance on the AAVE Ecosystem Reserve. With adjustments made to the distribution % in response to market conditions, the plan focuses on ensuring the protocol's long-term viability and advancement. Further information regarding the technical aspects of the implementation, including the allocation of GHO funds to a splitter contract under oversight, will be provided at a later stage. Next steps include, waiting for the outcome of the GHO deployment vote, gathering community feedback, and potentially moving forward with the Snapshot and ARFC stages for further deliberation and execution. LST Demand The Aave protocol has witnessed a significant surge in demand for Liquid Staking Derivative Tokens (LSTs), particularly from the supply side. The prevailing market sentiment suggests people are looking to earn a yield on their LSTs and potentially leverage them to borrow other assets. In response to this activity, Aave Governance has mobilized to quickly increase LST supply caps. To reduce operational and voting overhead associated with increasing supply caps frequently, BGD posted a proposal (status: passed) to grant Aave Risk stewards the power to increase supply and borrow caps of assets .This step has made it easier to increase the supply and borrow caps of fully utilized assets in a timely manner, this way Aave can meet the demand for these assets safely. Aave Risk Stewards, as their name suggests, are risk service providers entrusted by Aave Governance with administrative permissions to manage supply, borrow caps, and overall risk parameters for assets. Using wstETH as an example, the demand for this asset has surged across multiple markets, including Aave V3 Ethereum, Arbitrum, Optimism, and Polygon. At time of writing, the supply cap for wstETH stands at 66.82% on Ethereum, 100% on Arbitrium, 79.71% on Optimism, and 100% on Polygon. Safety Module Updates Aave service provider Llama proposed a series of proposals aimed at upgrading the Safety Module to be more resilient, thereby strengthening the Aave Protocol. The Aave Protocol is currently at a point where after building a resilient DeFi protocol, the Aave DAO now has the task of maintaining and improving what has been built. As the DeFi ecosystem evolves, so do its risks and attack vectors. The proposed upgrades are a necessary addition to the Aave Protocol’s Safety Module, as one of Aave’s protective mechanisms. It is important for the safety module to be iterated upon at least annually in our opinion, considering that a year is a long time in the DeFi ecosystem. As a reminder, the Aave Safety Module is the primary mechanism for securing the Aave Protocol by incentivizing AAVE token holders to lock their tokens into a smart contract. In the case of a Shortfall Event, part of the locked AAVE is auctioned off and sold against the assets needed to mitigate potential deficits. In general, a shortfall event denotes a circumstance when there is a deficiency in the value of the collateral, and selling locked AAVE tokens through an auction is one option to acquire money to address the shortfall and guarantee the stability of the lending platform. Below we briefly summarize each of the six proposals, saving you the trouble of digging through the forums. Part I - Migrate AAVE/wETH Balancer v1 Pool to Balancer v2 This proposal (status: passed) explores adding the BPT into the Safety Module (SM) and recommends building a new AAVE liquidity pool on Balancer v2. The goal of this proposal is to increase capital efficiency, lower risk, and give depositors a return on their money. The proposal offers four composition alternatives for the pool, including various AAVE to wETH or wstETH ratios. The authors of this proposal maintained a preference for Option 2, which swaps out wETH for wstETH due to its enhanced capital efficiency and possible BAL reward upside. The community ended up supporting Option 2 in the Snapshot vote. Technical requirements and migration process are also described, emphasizing collaboration with Balancer and other communities. Part II - Asset Diversity, SM Categories & Slashing Updates This proposal (status: passed) enhances the SM through asset diversification, risk management, and growth synergies. Three asset categories—Single Asset, Volatile Asset Liquidity Positions, and Stable Asset Liquidity Positions—are proposed to be added to the list of assets that can be accepted by the SM. The proposal analyzes the slashing parameters, underscores the dangers, and outlines the suggested assets for each category. It also outlines the pros and cons for each and offers technical guidelines for putting the enhancements into action, including guidelines for building additional pools in accordance with the outcomes of community voting. Part III - Enable gauges on BPT in Safety Module (smBPT) This proposal (status: passed) suggests allowing deposits in the SM to get yield from other protocols and introduces the idea of "smBPT gauges." Users would be able to use these gauges to stake their LP tokens in the SM and earn incentives from Balancer and Aura Finance. The proposal explains the rationale behind this strategy, including how to maximize rewards by using incentives and voting power. Also included in the proposal are the technical requirements and potential hazards that could arise from implementation. In general, the objective is to increase the capital efficiency of the SM, offer participants sustainable rewards, and reduce risks. Part IV - Incentives Management Upgrade This proposal (status: deliberation on the forum) introduces a novel method of allocating incentives within the Aave DAO in order to cut costs across the board and boost profitability. All incentives are currently being used to mine liquidity from the Ecosystem Reserve, which costs the DAO a lot of money. The proposed method calls for maximizing strategic voting power, lowering costs, and allocating the majority of the AAVE money as vote incentives for smBPT gauges. The strategy calls for strengthening backstop value, lowering AAVE spend, raising depositor yield, as well as boosting profitability and long-term financial viability. The plan also allows for the possibility of enhancing treasury strategies, boosting strategic voting power, and extending safety module coverage. Additionally, the proposal suggests launching a Warden Quest on Paladin Protocol for obtaining votes and talks about the distribution upgrade for single assets, volatile and stable BPTs, and single asset BPTs. The plan places a strong emphasis on the management and optimization of vote incentives to achieve goals and align economic interests. The proposal also lays out the technical implementations involved in setting up weekly prize distribution, designing the voting structure, and putting in place various procedures for managing strategic voting power and vote incentives. Part V - veToken Holding Management Framework In order to manage the Aave DAO's holdings of strategic assets, this proposal (status: deliberation on the forum) suggests creating a voting committee and implementing a framework to help manage the DAOs strategic assets. A collector contract whitelisted multisig would be deployed by the committee, which the community would elect. The duties of the committee include locking and unlocking veToken positions, voting on gauges, claiming protocol fees and rewards, updating veBoost, optimizing strategies, claiming incentives, compounding assets, and transferring yields to the collector contract. Aave hopes to maximize the management of its strategic assets through the use of this framework, increasing governance effectiveness, and boosting profitability. Part VI - Future Considerations This proposal (status: deliberation on the forum) focuses on broader future considerations and strategies Aave DAO might look to adopt in the near future. Specifically, the proposal suggests the gradual migration to a new safety module design, sustainable incentives budgets, protocol-owned liquidity strategy, and a framework for adding additional assets to the safety module. The proposal also highlights a technical implementation plan that calls for the migration of Balancer V1 pools to Balancer V2, the addition of new assets and the reduction of parameters, the introduction of smBPT gauges and the Aura strategy, the distribution of weekly rewards, the election of a committee to oversee incentives and voting power, the creation of quests, and the discussion of progressive incentives migration & other issues. Delegate Incentives In addition to product development and core protocol maintenance, there has been a significant push from the community to implement delegate incentives (finally). These incentives aim to reward governance contributors who consistently bring value to Aave Governance. To justify the proposed financial incentives, the ecosystem has worked to formalize and define the roles and responsibilities of a delegate. Flipside introduced a proposal for the creation of a Delegate Code of Conduct (status: passed) which defines the values and expected conduct for an Aave Recognized Delegate. By ratifying these values through a proposal, the Aave DAO has gained the authority to establish a consensus on the conduct they expect from their delegates. Furthermore, a Framework for Recognized Delegates (status: passed) proposal was introduced and passed by governance as a guideline for prospective Aave Delegates. This official framework defines the duties and responsibilities of Aave delegates and will serve as the foundation for potential future compensation frameworks. Several experimental community campaigns and programs are currently underway to bootstrap delegate incentives. Notably, the Butter and Orbit campaigns are making strides in this regard. The Butter Delegate Campaign took the first step by offering financial incentives to an Aave Delegate. After a fiercely contested election, TokenLogic became the first recipient of $15,000 grant to offer delegate services to the Aave DAO for three months. In the lead-up to the election, several delegate platforms were motivated to develop their own delegate initiative, outlining their plan for contributing to the Aave DAO. Recently, the Aave Chan Initiative launched Orbit, a Delegate Platform Funding Initiative aimed at supporting three active Aave Recognized Delegates for their valuable contributions to Aave Governance. Included in the list of recognized delegates was StableLab (Us), Flipside (Did not wish to participate), and the London Business School Blockchain Society. In response to the rising cost of on-chain governance due to high gas prices, the Aave Chan Initiative proposed a mechanism to reimburse (status: passed) gas fees for Recognized Delegates who vote on Aave on-chain proposals. This initiative was warmly welcomed by delegates who consistently voiced their concerns about the rising costs of participating in on-chain governance. Conclusion The Aave Ecosystem has solidified itself as an important pillar for the wider DeFi ecosystem. As the DAO enters into a new chapter of product launches and product development, it becomes increasingly important to pay close attention to Aave proposals and forum chatter. Aave Governance has consistently shown its dedication to supporting the protocol by leading initiatives that generate value for the Aave ecosystem. Notable initiatives include the launch of the GHO stablecoin, catering to the demand for LSTs, enhancing the Safety Module, and implementing delegate incentives. These developments aim to bolster price stability, meet demand securely, enhance security measures, and reward governance contributors. Aave remains fully committed to evolving and upholding its status as one of DeFi’s most resilient protocols. At StableLab, we're active delegates and ecosystem participant within the Aave ecosystem, and are super excited to see these exciting changes and what's next for the lending platform as it enters a new chapter with the launch of GHO and beyond. Get in touch, If you would like to support us in our governance efforts, If you and your team need guidance on governance-related matters, or If you are a founder who is building something interesting in web3 Twitter | Newsletter | LinkedIn
- Ajna Finance: DeFi Without Oracles
The ancient teachings of the Ajna Chakras hold a belief that activating these energy centers can unlock the true potential of the human mind. Today, this timeless concept finds resonance in Ajna Finance, a cutting-edge protocol aiming to revolutionize DeFi. With a mission to unleash untapped possibilities for on-chain lending and borrowing, Ajna Finance sets itself apart from the rest. Founded by a group of visionaries, including former MakerDAO alum, this lending platform proudly presents a unique approach: a world of boundless opportunities for users, devoid of permissions, price feeds, and even governance. So, how does Ajna Protocol work? How Ajna Protocol Works Ajna Protocol operates on a peer-to-pool concept, which means that lenders supply to and borrowers take from pools of assets. Users of the protocol can permissionlessly create pools for any asset with lending terms managed by the protocol’s rules. The prices of these assets are measured not by price feeds but by lenders. Loans on the platform are perpetual by nature and never expire. Supply and demand affect the variable interest rate for each pool. Importantly, with no protocol governance, Ajna exists as an immutable set of smart contracts that cannot be changed. What's Novel Pools All the Way Down Perhaps most important is the ability for any user to create pools for ANY collateral or quote token asset pairing (including NFTs). With oracles and governance out of the picture, collateral of all types are made accessible. Burn Baby, Burn! Each pool accumulates reserves from Origination Fees, Deposit Penalties, and Net Interest Margin on pool loans. These are then sold in “Reserve Auctions”, where users can buy the pool’s underlying quote token with AJNA tokens. Thereby, burning AJNA and reducing the total token supply in the process. With no minting function, the total supply of AJNA can only decrease with time. Oracle-free since 23’ I’ll dive into this one more below. It's a hot topic. Get in Anon, we’re Funding Grants I’ll let you in on a secret..there is still a little governance, just not in the core protocol. Proudly Oracle-Free Ajna does not rely on external price feeds like other blue-chip lending protocols such as Aave and Compound. By avoiding oracles, Ajna mitigates the risk of external points of failure. Price oracles are often used across DeFi protocols to enable real-time price data for the trading of onchain assets. However, their implementation is a recurring hot topic in the space. Protocols such as Panoptic, Blur, Ethereum Credit Guild (fka Volt Protocol), and Ajna are among a new guard of DeFi protocols claiming to work more effectively without oracles. Using oracles comes with a cost just as much as a benefit. They can introduce potential attack vectors and single points of failure, as witnessed in the past with various notorious exploits in the DeFi space. They also limit the asset universe of lending markets to assets with liquid secondary markets, which many crypto assets do not have. Where oracles do help is in providing accurate and real-time price data, which is essential for certain trading and lending activities. However, Ajna Protocol solves this issue by letting lenders themselves determine the price of assets in their pools. This approach has been called “bring your own oracle”. With a little Future-Proofing Built-In Another unique aspect of Ajna is how it supports its own success through grants. With no protocol-level governance, Ajna’s collective decision-making duties come in the form of a “built-in” grants program. Grants aim to fund initiatives, projects, and builders contributing to the growth and development of the Ajna ecosystem. We at StableLab are encouraging Development, Marketing, Research, and Integration related proposals. The Grants Program Grant Distribution - Every 90 Days Each quarter, a portion (up to 3%) of the treasury (30% of the total token supply) is allocated for distribution. Screening Stage - 73 Days Any interested party can submit a formal proposal for funding. AJNA tokenholders can delegate voting power to themselves or any other party. Uses 1 token = 1 vote Funding Stage - 10 Days The top 10 proposals from the screening stage advance to the funding stage where they receive positive or negative votes Votes count in a quadratic manner; Meaning the number of voting credits they have increases with the number of proposals they vote on. Challenge Stage - 7 Days After the Funding Stage ends there is a one-week challenge period. Alternative sets of winning proposals can be submitted. The optimal batch of proposals is chosen based on the net number of votes and budget constraints. Execution Winning proposals claim funding. 10% of the distribution is awarded across qualifying delegates. Joining the Ajna Community At StableLab, community involvement and development are at the core of our values. That is why we are thrilled to announce our participation as delegates in the Ajna community, where we will play a crucial role in guiding the oracle-free protocol's evolution. The timing couldn't be more perfect, as Ajna undergoes code audits and prepares for its full Ethereum mainnet launch later this year. We invite you to join us in the Ajna community discord and discussion forums, where together we can actively contribute to the decentralization of the protocol and collectively shape its bright and promising future.
- Why I'm Joining StableLab
My journey in the world of crypto has been an exciting voyage of discovery and growth. Each project I've had the privilege to work on, each team I've been a part of, has instilled in me a deep appreciation for this novel digital frontier we're pioneering. Our collective mission is both audacious and just: building a version of the web that is open, democratic, and anti-fragile. A digital space where access, agency, and opportunity are evenly distributed. In my various roles, which have spanned cultivating developer and user communities, developing open-source tools, writing technical documentation, ad-hoc DAO contributions, and offering technical product advisory services, I've gained a multifaceted perspective of the decentralized technology landscape. This hands-on experience has exposed me to the nuances, challenges, and promises inherent in decentralized decision-making. Today, I am glad to share that my crypto journey is taking a new, exciting turn. I have joined StableLab, a leading governance service provider, as a Governance Analyst. StableLab's reputation for expertise in DAO operations, research, and development is widely recognized, with top protocols such as MakerDAO, Aave, Lido, and Balancer frequently seeking the team's input and solutions tailored to the unique demands of each protocol. I am looking forward to diving headfirst into the nitty-gritty of decentralized governance, an area both fascinatingly complex and critically essential for the sustainable evolution of our crypto ecosystems. I am committed to not only navigating these complexities but also contributing to the development and refinement of sustainable governance models. In an era where blockchains have redefined our understanding of control and coordination, we need new, innovative decision-making systems. These distributed, open protocols with no single point of control are orchestrating the flow of billions of dollars worth of value daily. They call for diverse perspectives, nuanced approaches, and agile solutions in their governance. This new role allows me to become a more integral participant in the world of DeFi, a realm I'm particularly passionate about. Not only will I be gaining a more profound understanding of its technical intricacies, but I'll also be actively exploring the complex social dynamics that make these projects tick. I look forward to the professional growth and challenges this opportunity will undoubtedly present. My guiding principle remains unchanged: To contribute meaningfully to projects and protocols that echo my belief in a more open, accessible web. I am steadfast in my commitment to use this opportunity at StableLab to further these goals. Together, we can navigate the complexities of crypto governance and make meaningful strides toward creating a digital landscape where openness, fairness, and collaboration are the norm. I’m super excited for the adventure! Connect with me on Twitter!
- Intents, Missions, & Alliances: Season 4 at Optimism
Optimism is a prominent Ethereum Layer 2 solution that aims to make blockchain technology more scalable. It stands out for its innovative and experimental approach to governance. The Optimism Collective, which stewards the Protocol toward decentralization, collaborates to incentivize public goods and foster a sustainable future for Ethereum. By supporting projects that promote technical decentralization and contribute to the development of a rich ecosystem, the Optimism Collective pushes to eliminate the idea that public goods cannot be profitable and aims to create a more inclusive and resilient future for all. The Optimism Collective has successfully completed three seasons to date, during which they continuously explored innovative ways to incorporate economic incentives into public goods. Season 4 is scheduled to begin on June 8th and will introduce new governance experiments centered around Intents and Missions. These experiments aim to foster collaboration within the community, enabling them to collectively work together to achieve the goals of the Collective. Intents Season 4 consists of four core goals known as “Intents”. These Intents provide a target for the Collective to aim for. How the collective reaches these goals will be determined by the “Missions” that are proposed. More on those later. This season, the Intents were designed by the foundation but in the future, this responsibility will fall on the community so that they can be determined collectively. The four Intents for the upcoming season are the following: Progress Towards Technical Decentralization, Innovate on Novel Applications, Spread Awareness of the Optimistic Vision, and Governance Accessibility. Last week, the budget for each of the four Intents was approved by the Optimism community through onchain votes. These allocated budgets will fund the Missions for each Intent and help Optimism succeed at achieving its stated goals. Intent 1 - Progress Towards Technical Decentralization This Intent is the Collective's highest priority of the four Intents as pushing forward technical decentralization is one of the core values of the Collective. The modular framework of the new Bedrock release will have a big impact on the community’s ability to further decentralize the development of the OP Stack. While OP Labs continues to focus on Permissionless Output Proposals, Bridge Decentralization, and the Cannon Fault Proof Program they still require a rich ecosystem of clients, provers, and citizens to achieve full technical decentralization. The Collective hopes that this intent will help foster this development through the Missions this Intent funds. The approved budget for Intent #1 was 1M OP, which is the lowest budget of the four intents. However, since this intent is seen as the Collective’s highest priority a separate RFP funding process will happen concurrently through Foundation Missions. This will allow for funding technical decentralization initiatives that require more context and expertise such as ongoing core development work by community teams like OP Labs. Intent 2 - Innovate on Novel Applications Intent #2 will be managed by the Grants Council a community-body rewarding projects building on top of Optimism. Interested parties can now self-nominate on the forum to be considered as Grant Council Reviewers for Season 4. Three community members will be chosen to sit on the council's Builders subcommittee and five members will be selected to sit on the Growth subcommittee. We at StableLab have submitted our self-nomination for the Growth Committee. This Intent has a proposed budget of 5.285 million OP to be distributed via grants with any remaining funds returned to the governance fund. The Grants Council will evaluate applications on 5-week cycles. This intent aims to fund missions that help crypto reach its full potentials, such as applications of identity, game theory, social, community, gaming, and bridge dynamics. Optimism continues to improve crypto scalability, this intent will fund initiatives that take advantage of these improvements to build something crypto has never seen. Projects that push forward the frontier of crypto utility to help realize the vision and promise of Ethereum. Intent 3 - Spread Awareness of the Optimistic Vision This intent was initially left unspecified as it was up to the Optimism community to suggest an economically driven Intent. After delegate input and discussion Intent #3 became “Spread Awareness of the Optimistic Vision.” The community realized that many valuable potential contributors might be unaware of the Optimistic Vision and the important role of public goods in our ecosystem. Therefore, this intent was designed to onboard new people, DAOs, and builders to the Optimism Community. The hope is to have Optimism widely recognized as an ecosystem that fosters public goods and works towards the creation of a new economic model. Intent #3 was approved with a 1M OP budget from the governance fund. This budget will fund missions that increase awareness of the Optimistic Vision with initiatives such as educational resources, hackathons, conferences, and marketing efforts aimed at growing a community of Optimists. Intent 4 - Governance Accessibility Optimism has a two-house system that allows protocol upgrades, token treasury, and Collective revenue to be managed by a diverse set of governance participants with checks and balances. Intent #4 is focused on further improving governance accessibility in order to encourage a diverse range of Optimists to participate. A variety of perspectives participating in governance increases knowledge sharing which allows for more informed voters and helps to lower barriers to participation in governance. A budget of 3M OP was approved for Intent #4 and will be distributed to Missions that make Optimism governance understandable, open, flexible, and legible to all. These initiatives hope to increase the amount of $OP used to vote as well as decentralize the voting power amongst new voters. Specific examples of possible missions for this intent include initiatives that increase the resiliency of core governance infrastructure, create user-friendly interfaces to interact with governance programs, or promote a welcoming governance community. Missions Season 4 introduces Missions for the first time. Missions are proposals that are specifically aimed at helping achieve an Intent. They are designed with a narrow focus capable of being finished by the end of Season 4. This serves as an alternative to working groups as they allow initiatives to be more focused on a specific task instead of a vague scope of work. There will be two separate types of missions: Proposed Missions and Foundation Missions. Proposed Missions Missions will be submitted to one of the four Intents and will receive funding from that Intent’s budget. The Token House will be responsible for ranking proposed Missions and prioritizing them in order of most aligned with the Intent they were submitted to. The Intent’s budget will then be distributed based on these rankings. Foundation Missions (RFPs) Foundation Missions will also fall under the four Intents, however, these are pre-specified by the Foundation similar to Requests for Proposals (RFPs). Funding for Foundation Missions will come from the Partner Fund instead of the Governance Fund and the Foundation will select the proposals to complete each Mission. To ensure transparency and accountability of this process the Token House will have visibility into all Foundation Mission applications. Alliances and Trust Tiers Missions will be completed by groups of contributors known as “Alliances” that work together to finish the Mission. Alliances can be made up of external organizations or groups of internal contributors. Season 4 also introduces Collective Trust Tiers. These tiers help establish standards and determine what level of funding an alliance can receive. Alliances may only propose Missions or apply to accept Foundation Missions at their corresponding Collective Trust Tier. There are four tiers and the requirements to qualify for each tier can be found below. 1. Ember Tier Eligible to receive up to 100k OP Never worked for or with the Optimism Collective or has never received retroPGF 2. Fledgling Tier Eligible to receive up to 350k OP Has done work for or with the Optimism Collective at least once before or previously received retroPGF 3. Eagle Tier Eligible to receive between 350k OP and 1M OP Has repeatedly done work for the Optimism Collective or has received over 50k OP via retroPGF 4. Phoenix Tier Eligible to receive over 1M OP Has repeatedly done work for the Optimism Collective, at the Eagle Tier level, or has received over 100k OP via retroPGF Alliances may submit multiple Mission proposals at a time with a maximum of three Mission proposals per period. If an Alliance is made up of multiple contributors its Trust Tier is determined by the Alliance’s lead. Proposing Missions Alliances may propose a Mission to a specific Intent. To do so, Alliances must post a Mission proposal to the forum that contains the following aspects: Specification of a baseline reward amount required to execute the Mission. Measures of success and KPIs so Token House delegates can measure progress and Citizens’ House badge holders can accurately measure the grant’s impact. Critical milestones. (Failure to reach these may result in removal) Alliances must then get 4 delegate approvals to ensure the proposal is valid and works towards the specified Intent. Valid Mission proposals will be added to a Voting Roundup under the appropriate Intent by the end of the relevant Voting Cycle’s review period. In Season 4, this will be June 21st at 19:00 GMT and must receive 4 delegate approvals by June 28th at 19:00 GMT. After the season all successful Missions will be evaluated for retroactive rewards if they exceeded what was expected of them. Apply to Accept a Foundation Mission Alliances interested in accepting a Foundation Mission must submit their Foundation Mission application on GitHub. The deadline to submit Foundation Mission applications is June 28th at 19:00 GMT. Foundation Missions will be created at the start of every voting cycle by the Foundation. Alliances are eligible to apply for up to 3 Missions per period but can only apply to Missions at their corresponding Trust Tier. Closing Thoughts Season Four at Optimism is shaping up to be another exciting experiment for governance and public funding. With the Collective setting the goals for this Season through the four Intents, it is now up to us in the community to get involved. We at StableLab are looking forward to actively participating in Season 4 and have already applied to be on the Grants Council for Intent #2. Additionally, we will be proposing Missions under Intent #4 and will be sure to keep an eye out for any Foundation Missions we feel we can accomplish. We’re thrilled to continue being active members of the Optimism Collective. Stay Optimistic! (✨🔴_🔴✨) Get in touch, If you would like to support us in our governance efforts, If you and your team need guidance on governance-related matters, or If you are a founder who is building something interesting in web3 Twitter | Newsletter | LinkedIn
- Understanding Governance Contracts
Decentralized Autonomous Organizations (DAOs) and the protocols they govern have revolutionized how blockchain-based businesses approach decision-making, most notably in the Decentralized Finance (DeFi) sector. These DAOs are disrupting the traditional financial system by enabling transparent and decentralized products that operate without intermediaries to ensure that financial services can be accessed in a decentralized manner. To achieve this, DeFi protocols often use ‘Governance Contracts’, which are a type of smart contract that embeds rules and decisions onchain. These contracts enable a trustless and decentralized decision-making system, allowing DAO token holders and community members to have a say in the direction of the organization. Overall, this technology has revolutionized countless DAOs and propelled them toward full decentralization. While DeFi protocols can operate without governance contracts, a DAO cannot exist without one. Protocols choose to use these contracts to enable collective decision-making by DAO token holders, contributors, and community members in a trustless and verifiable manner. Governance contracts have proven to be an essential part of the democratic principles that DAOs uphold. In this article, we’ll explore governance contracts, how they work, the different types, their current limitations, and the innovations that have been made to these primitives. How Governance Contracts Work At the core of every Governance Contract lies the Core Voting Contract, where essential parameters are established by the contract’s creator. These initial parameters typically encompass voting power, proposal monitoring, and voting power calculations. Over time, fueled by various industry innovations, governance contracts have evolved to include features beyond the Core Voting Contract. This evolution has enabled greater adaptability and modularity in contract parameters, broadening the ways in which a governance contract can be tailored to meet the specific governance needs of a particular DAO. A prime example of a Governance Contract that boasts adaptable and upgradable features to cater to a DAO's unique requirements is the Council Governance Contract. To better understand how governance contracts operate, it is crucial to examine their historical development. Compound Finance, a decentralized lending and borrowing platform, is renowned for its pioneering efforts in creating and implementing Compound Governor Alpha and Bravo. These two contracts are considered among the most significant in the realm of decentralized governance. As a result of its simplicity and forkability, Governor Bravo became the preferred governance contract for protocols such as Uniswap, Compound Finance, and Indexed Finance. Notable Bravo contract functions include: propose() — allows anyone with enough votes to propose changes to the protocol. castVote() — any token holder can cast a token-weighted vote on a proposal delegate() on the ERC20 contract — This gives token holders the right to give their governance power to another token holder; the token holder can go on to vote on their behalf. cancel() — any token holder can cancel a proposal if the against votes outweigh the votes in its favor. queue() — anyone can begin the queueing process of a proposal after it passes. execute() — allows anyone to execute a queued proposal after the timelock delay has passed. How Bravo Improved Alpha On March 30th, 2021, Governor Bravo was released as an upgrade to Alpha and brought with it new optionality and upgradability compared to its predecessor. Built-in Upgradeability: Regardless of any adjustments or upgrades to the governance contract or its execution, Governor Bravo has a set contract address and proposal numbering system which will not change when an upgrade occurs. Parameter Changes: Governor Bravo introduced the ability to easily adjust certain parameters such as quorum, submission threshold, voting period, and time lock period. This adjustability helps improve governance risk management, something Alpha lacked. Other Governance Contract Types As previously mentioned, governance contracts come in many shapes and sizes. Building on the foundations established by Governor Bravo, novel governance contracts have emerged, offering innovative solutions to governance challenges. In this section, we explore two prominent governance contracts in the space. Open Zeppelin Similar to Governor Bravo, the Open Zeppelin (OZ) governance contract enables DAOs to perform on-chain governance with customizable parameters to meet the unique needs of each DAO. Notably, the OZ contract is fully open-sourced, unlike Governor Bravo which has to be forked in order to implement. The OZ contract offers a wide range of options for governance customization. For example, it supports ERC721's voting power, allowing NFT owners to participate in governance. Additionally, it can distribute voting power to multiple ERC20 tokens, among other possibilities that create more inclusive governance. Overall, the Open Zeppelin Governance Contract offers a higher level of optionality than other governance contracts, and its open-source nature allows for greater collaboration and innovation from day one. Council by DELV The Council Governance Framework, developed by DELV (formerly known as Element Finance), is a cutting-edge innovation in the field of governance contracts. Unlike traditional governance contracts, DELV's Council Governance Framework offers a modular approach that allows for greater flexibility in meeting the diverse needs of today's and future governance requirements. Although the Governor Bravo and OpenZeppelin contracts are upgradeable, they fail to give DAOs the optionality of switching voting strategies to cater to the different kinds of votes that a DAO may have, this has led DAOs to operate a hybrid governance system where proposals that do not require on-chain implementation are done on Snapshot and proposals with onchain implementations are executed with native onchain governance. This is where Council comes in with various governance strategies for different circumstances. For example, the variety of techniques that can be accepted as voting power is a major constraint for most onchain governance contracts. Token-weighted governance is the standard in most DAOs, but it has drawbacks that have been well-documented in one of our previous posts. By enabling protocols to switch between voting strategies easily, voting vaults provide a more tailored solution for DAOs. As the vaults are upgradeable and detachable via the core voting contract, protocols can then combine various voting vaults across multiple use cases. Voting vaults enable governance to scale alongside a DAO and its protocol; as new token primitives and voting strategies are developed, new vaults can emerge to accommodate those use cases. This flexibility opens the door to whole new on-chain governance processes, approaches, and power structures. Limitations of Governance Contracts Similar to other smart contracts, there are certain limitations to governance contracts. Sacrificing Yield for Voting Power: When a governance token is deposited into a liquidity pool or staked to earn yield, the token holder in most cases has to sacrifice the governance power in that token for yield. This forces token holders to choose between yield or governance power. As a result of this tradeoff, a number of tokens are not represented in governance and instead are used to generate yield. Lack of Partial Delegation: When it comes to delegating governance power, most contracts today allow a token holder to delegate their governance power to one delegate, an optimal system would be a situation where a token holder can delegate to more than one person. A tokenholder should be able to fractionalize their support between multiple delegates. Exploitation: A common fault within smart contracts is they’re exploitable, meaning because they run with code they can be manipulated and changed by bad actors. Below are a couple of examples of these. Low Price Attack: If the price of a governance token is low enough and there is a large incentive to attack the governance of a DAO, an attacker might seek to amass enough tokens to execute a malicious proposal. To accomplish this, an attacker would be able to execute this attack if the price of the governance token is low and there is a lack of governance communication within the DAO. An example of this occurred against True Seniorage Dollar, where the attacker voted to mint billions of dollars worth of stablecoins to then be transferred to their personal wallet, after which the attacker sold the stablecoins on a decentralized exchange. Flash Loan Attack: According to ChainLink, a Flash Loan is “a type of uncollateralized loan that lets users borrow assets with no upfront collateral as long as the borrowed assets are paid back within the same blockchain transaction”. This kind of attack is designed to get around the time delay in case a last-minute request needed to be approved. An attacker would take advantage of this by obtaining a flash loan to have enough voting power to go around the timelocks and issue a command that would deplete the protocol's treasury. Innovations in Governance Contracts The world of governance contracts has been largely built on the foundation of Compound Governor Alpha and Bravo and Open Zeppelin. These contracts have played a crucial role in the development of crypto governance. However, as the ecosystem continues to evolve, we can expect to see new innovations and upgrades to these and new contract primitives. Below are some interesting and notable developments. Council: This governance framework from the DELV team is the latest in governance contract innovation. Council aims to serve as the foundation for future governance developments that address tomorrow’s needs. Butter: The Butter Protocol aims to solve a unique governance problem via an onchain delegation mechanism that makes governance tokens reusable, thereby creating an additional layer of utility for governance tokens. Gas Rebates: With the ever-increasing cost of participation in on-chain governance due to gas prices, Gas Rebates would cover the costs of on-chain voting for involved stakeholders by refunding them the “gas” cost to participate. This lowers the barrier to entry for participation and helps eliminate any potential financial burden. Cross-Chain Governance: As DAOs continue to expand across different chains, it’s important for these organizations to run and execute governance votes on different networks. For example, Aave V3 Polygon parameter changes are voted on Ethereum mainnet instead of where the protocol version is deployed. Aave Service Provider BGD Labs has begun dedicating its efforts to enabling cross-chain governance. Shielded On-Chain Voting: DAOs should offer the choice to enable shielded voting for on-chain proposals. This enhancement would be crucial in addressing the bias that can arise from voters viewing the outcomes of a proposal in progress. It is often underestimated how psychological factors can impact tokenholders when they have access to real-time governance vote results. By adopting shielded voting, the voting behavior of individuals can be monitored without any external influence, thereby promoting independent thinking rather than groupthink. Overall, implementing shielded voting would help to ensure fair and transparent decision-making within DAOs. Conclusion The world of on-chain governance is constantly evolving, with new innovations and upgrades constantly being introduced to governance contracts. However, there are still limitations, such as the tradeoff between sacrificing yield for voting power and the lack of partial delegation. Exploitation is also a common fault within smart contracts, and there have been instances of attacks, such as the low price attack and flash loan attack. Despite these limitations, new developments, such as Council and Butter, along with gas rebates, cross-chain governance, and shielded on-chain voting, offer exciting solutions for future governance needs. Get in touch, If you would like to support us in our governance efforts, If you and your team need guidance on governance-related matters, or If you are a founder who is building something interesting in web3 Twitter | Newsletter | LinkedIn
- Governance Theater: Lessons from AIP-1
In theater, actors often have a say in determining their character's actions, but the overall vision of the play is ultimately determined by the director. For better or worse, in the world of DAO governance, some critics claim it’s all theater. This view stems from instances when tokenholders were promised decision-making power in an important process, but the reality was more like a staged performance, where the script was predetermined by the centralized core team. Something similar transpired during the recent launch of Arbitrum’s DAO. The Layer 2 project ran into trouble when tokenholders discovered they didn’t actually have influence in the inaugural proposal of the DAO. Controversy ensued, as it touched on a sensitive issue plaguing some DAOs today: Governance is all a theater, and we are the actors. In this post, we’ll explore Arbitrum’s recent go-to-DAO stumble and the lessons we can draw from it. How We Got Here First, a quick timeline of the events that transpired. On March 15th, the Arbitrum Foundation posted a draft of AIP-1 to the forums alongside The Constitution of the Arbitrum DAO. On March 16th, the Arbitrum Foundation published a blog post detailing plans to decentralize the Arbitrum One and Nova networks through a DAO governed by the ARB token. On March 23rd, the ARB token airdrop went live for eligible users. On March 27th, voting began on AIP-1 through Snapshot. On April 3rd, AIP-1 failed to pass with a 76.67% ‘Against’ vote. On April 5th, the Foundation addressed community concerns with the three new documents. What AIP-1 Proposed Arbitrum Improvement Proposal 1 contained the foundational process by which the newly created ArbitrumDAO would operate. Broadly, the document details: A breakdown of the governance powers ARB Tokenholders, Arbitrum Foundation, Directors of the Cayman Foundation, Security Council, Data Availability Committee A breakdown of the AIP process The voting procedure required to implement changes including the ratification of the ArbitrumDAO Constitution A breakdown of the total cost 3.5B ARB earmarked to the DAO Treasury fully controlled by on-chain governance. 750M ARB earmarked to an “administrative wallet” controlled by the Arbitrum Foundation for “purposes of making Special Grants, reimbursing applicable service providers for the Total Setup Costs and covering ongoing administrative and operational costs…” This last detail is where the controversy begins. The Mistake As often occurs in governance forums, feedback and comments from the community trickled in and then poured in all at once. Among the issues highlighted was the nature of the proposed “Administrative Wallet” and the total amount of ARB tokens proposed it receive. Late Thursday into Friday, community members began questioning who and why this unknown group would control such a large piece of the token supply (7.5%). Among those asking clarifying questions were Westie and MattOnChain from Blockworks Research. The team persisted in uncovering the details of the admin wallet and its proposed funds. They were also the first team to come out publicly as an “Against” vote. Then, Dan Smith (also from Blockworks) stepped in. He argued, “The Administrative Budget Wallet (0xc2) was funded 15 days ago during the initial distribution phase – before the user airdrop occurred. Why does AIP-1 speak in the future tense, implying 0xc2 has not been created yet?” This was the missing piece and root of the issue. The community revealed the admin wallet had already been funded and had even sold off some of the ARB prior to any governance proposal or vote happening. The Arbitrum Foundation was forced to mobilize over the weekend in which they clarified that the proposal was in fact more of a procedural ratification than an actual request from the community. A ceremonial proposition. AIP-1 failed to pass the vote. Shortly after its failure, the Foundation announced AIP-1 would be divided into smaller proposals in the hopes that a much more focused and detailed proposition would succeed. On April 5th, the Foundation published three more documents: Transparency Report about the Foundation, AIP-1.1: Lockup, Budget, & Transparency, and AIP-1.2: Founding Documents Amendments. The drama surrounding AIP-1 offers us valuable lessons to draw from. Let’s highlight a few of them. Lesson 1: Public Trust Matters When launching a protocol with the intention of decentralizing it by including various public stakeholders, start building the foundations for trust either through on-chain mechanics, off-chain accountability measures, or clear communication. When you effectively communicate what you are building and why, third parties can fully understand the motivation and vision as they develop trust. Progressive decentralization, when you progressively hand off parts of the protocol structure to your community, introduces unique coordination dynamics that can quickly devolve into scrutiny and mistrust if ignored. When executed effectively, this is what makes these organizations so revolutionary and when you fail to do so, the narrative can quickly get away from you. In addition, protocol core teams deal with the added challenge of knowing what aspects of this process can and/or should be disclosed. In the case of Arbitrum, they admitted in their mea culpa that they overlooked details and failed to adequately prepare the Foundation with enough resources to provide effective communications. Arbitrum found itself in a tricky situation because the language and communication confused and misled the involved stakeholders. Arguably, there was no ill will, only oversight on their end. So, set up great communications and be fully transparent as much as possible where possible because everyone will and should have an opinion on what is being built. Lesson 2: Be Honest About Your Structure One of the running jokes about the incident was that it showcased yet another example of “Governance Theater” occurring within DAOs. In other words, a DAO pretends or acts as if they have a governance process by which the community is able to meaningfully influence the internal decision-making process. In reality, when you progressively decentralize and hand over the keys to the kingdom, there will be moments when it appears as if the community has more power than they actually do. This is totally normal. Coming out and making it blatantly clear what parts of the organization are still centralized will keep everyone participating in governance accountable and on the same page. What is not okay is when your community feels duped or tricked. Mitigate this as much as possible and be brutally honest with yourself and the community when many of the important decisions will be made internally by the centralized team. Arbitrum did a great job by communicating early on that parts of the initial process will be centralized. However, where the Foundation stumbled was in its communication of what AIP-1 actually changed. Although their intentions were arguably pure in that they wanted to signal and almost ceremoniously give the DAO the illusion of this decision, community members were not happy. This produced tension in an already early-stage and immature community. Lesson 3: Launches Matter, But Think Long-Term The launch of a new protocol is a crucial moment for setting the tone and expectations for the project. However, it is just the beginning of a long-term journey that requires careful planning and consideration of both short- and long-term implications. While token airdrops and launches may attract individuals with a short-term mindset, it is important to focus on building a strong community of contributors and builders who are committed to the project's long-term success. Arbitrum has recovered for now regardless of price action and noise generated from short-term thinking individuals. The success of a protocol falls on the execution of its strategy and the ability to navigate unexpected challenges that may arise. Conclusion Overall, the controversy surrounding AIP-1 has provided us with valuable lessons to reflect on. As more protocols move towards launching DAOs, it is essential for them to establish trust with stakeholders from the outset. To achieve this, effective communication is vital, as is maintaining honesty regarding the degree of centralization. Furthermore, it is crucial to keep the long-term vision of the project intact, even in the face of new obstacles. The shortcomings of AIP-1 serve as a great reminder that even the best intentions can be derailed by miscommunications, oversight, and unclear expectations. Ultimately, successful decentralized organizations depend on a strong foundation of trust and transparency built and established early on by the centralized team. At StableLab we created DAOmeter, a DAO maturity rating system, as a nudge for protocols to increase this very foundation. As we move forward, it is important to remember that progress is not always linear, and mistakes are inevitable. However, by being proactive and communicative, we can mitigate risks and ensure a more successful and sustainable path towards decentralization. Let us all take these lessons to heart as we continue to build and improve the DAO ecosystem. By doing so, we can create a more transparent, accountable, and equitable world for all. Get in touch, If you would like to support us in our governance efforts, If you and your team need guidance on governance-related matters, or If you are a founder who is building something interesting in web3 Twitter | Newsletter | LinkedIn