Simple Summary
This proposal seeks to establish, maintain, and grow a meaningful DAO stake in the ongoing governance of The Index Cooperative Protocol.
Abstract
Upon implementation this proposal would establish an Operational Sustainability Account that would serve to ensure that the DAO, as composed of the actively contributing Owls, will have an ongoing meaningful voice in protocol governance. To that end, the account would initially be seeded with 5% of total INDEX token supply from the Community Treasury, equating to an amount ensuring the long-term sustainability of a DAO contributor voice in the governance of the protocol. Governance voting would be cast as a block, decided by active-contributor poll as outlined in the specification section of this proposal.
Motivation
The risk facing any protocol challenged with distributing governance is that contributors will have diminishing ability to gain meaningful governance in the protocol to which they are contributing, despite gaining better context over the challenges being faced in real-time. Stakeholders and contributors alike have a common interest in ensuring that the active-contributor base, namely those executing the strategies set through stakeholder governance, have a meaningful stake in that governance in perpetuity. While there will likely ever be debate regarding the proper amount of contributor-community protocol ownership, there is arguably a bare-minimum at the level of quorum. If a contributor-community cannot meaningfully put forth its own proposals there is a risk that stakeholder and contributor alignment will diverge over time.
Specification
Overview
The Operational Sustainability Account would consist of one or more wallets holding a block of INDEX not less than 5% of the total INDEX supply at inception. The assets that may be placed in the account are not limited by this proposal. Governance over the account would be initially implemented as follows:
Simple majority of weighted-votes, each vote weighted to the number of months of continuous contribution, subject to a cap.
The months of continuous contribution (MCC) is simply the number of months of continuously rewarded contribution for a given contributor. The cap (MCC Cap) should be a carefully considered amount, as it essentially signals that incremental context is no longer valued as much as that of a newly contributing Owl.
The initial account would be a multi-sig utilizing current best-practices and placed in the operational charge of elected contributors. The proposal would additionally grant approval for the OSA to hold assets other than the initial seeding of INDEX, and to manage them toward the goal of DAO sustainability.
Rationale
When considering the greatest risks to the long-term success of a protocol-centric DAO (as opposed to say a social DAO) the one that seemed perhaps the most tragic would be a gradual decoupling of the alignment of the DAO with the stakeholder interest at large. The best way to guard against this is arguably communication, but absent a mechanism for each party to meaningfully effect change within the organization, the risk of disenfranchisement by an otherwise capable contributor base is unnecessarily high.
Unlike a traditional company, in which stakeholders elect a representative dictatorship, there is a complete removal of the traditional layering that is found between stakeholders and ‘workers’ in the token-governed DAO system. Stakeholders communicate directly and with greater frequency regarding broad organizational decisions, and while DAO contributors execute those decisions, they do so with little friction in the DAO contributor marketplace; a sense of ownership and buy-in is essential to retaining contributors with specialized context. Put simply, there are significant advantages to stakeholders in having an executive body (DAO) that is sustainably able to maintain a voice in it’s own operation and ongoing priorities, as incentive alignment is the current and planned mechanism funding contribution.
Why an account and not direct distribution? If the goal here is IC 2041 and beyond, there needs to be enough INDEX in the bank to take action independently if necessary. This essentially ensures that at a minimum the DAO can function on it’s own. This proposal does not contemplate the overall challenge of token distribution broadly, just establishes the effective minimum at a DAO level, along with an avenue to increasing that stake over time.
Doesn’t this take 5% out of circulation indefinitely? Maybe. An IIP would establish this thing and an IIP could modify it or dissolve it. Maybe quorum goes to 1% and there’s a vote to reduce the holding. Maybe contributors feel that increasing governance power is a worthy endeavor and accumulate more INDEX in the account. To be clear however, although out of circulation it would certainly be counted for quorum requirements, as it would be a voting block.
Why MCC as a weighting? Context in the sense of a DAO is super important. The Owls that were here at IIP-1 (talk about a legendary 1st post @dylan) should absolutely have more say in the DAOs use of block governance power than an Owl that just earned their first INDEX (congrats if that’s you, btw). In terms of how to weight that context, I’d argue that anything more complicated than what is being proposed would invite controversy. I like this method because of its simplicity and easy verifiability. Should there be concern that the system is being gamed, a minimum threshold for INDEX earnings could be established (to weed out say a bunch of bots doing some minimum impression mining to snag a bunch of MCCs), but I would expect this method of governance to take shape over time and trust this community to solve its own problems as they present.
Why not pass through the vote in proportion of FOR:AGAINST as cast? This would defeat the purpose of being able to hit quorum and more symbolically it seems important that the DAO communicate externally with a unified voice in this regard.
Technical Specification
OSA = Operational Sustainability Account: The subject of this proposal.
Voting: Could currently be implemented via public governance forum poll, voters extracted from simple vote, tallied with weighting, and results posted. Long-term, a more robust solution should be implemented.
Parameters:
MCC = Months of Continuous Contribution: The number of continuous months for which a contributor has received a contributor reward from Index Coop.
MCC Cap = Maximum number of MCC units to be cast in a single contributor vote regardless of total contribution time.
MNC = Months of Non-Contribution: Number of months of no reward to the subject contributor resulting in a contributor’s removal from the OSA voting pool.
Open Discussion
This topic affects every Owl. I sincerely invite everyone in this DAO to thoughtfully consider the challenge of giving the contributor community here a voice, now and into the future. There’s a lot to be done, but this is how I’d begin to solve this particular problem; how would you?
I sincerely invite stakeholders to partake in this discussion, as this is new to all of us, and the future of governance is going to look a lot more like a conversation than a ballot box. What you likely know is that we’re working hard at building the best possible indexing products; what we’d like to invite you to help us do is build the best possible DAO over the coming months and years. So I ask, do you see a risk to your investment by having a contributor community with enough governance to complete the protocol-level voting process independently? Let’s make sure we’re vibing.