Chapter IV: Leserve DAO (Part I — Governance)
Dear Leservians,
In this chapter we cover the DAO (decentralized autonomous organization) Governance and Constitution. While exploring, it is of essence to keep in mind that this chapter consists of two parts with this article representing the first. We strived to implement a governance and constitution design that effectively embodies and combines aspects of fairness and efficiency for the Leserve protocol.
Leserve DAO Governance roadmap
It is in our utmost interest to shift and direct Leserve to a truly independent, DAO structure as soon as possible. We believe that it will be feasible and viable for Leserve to achieve full DAO governance, 12 months after launch and stabilisation of the protocol.
We believe that prior to launch, it is of essence for the core team to maintain a firm grip on the governance, as doing so considerably propels the delivery of a coherent product and offering. However, we understand and recognise that excluding the DAO in the protocol’s inception is not viable either, which is why the DAO carries an advisory role until launch.
The manner in which the DAO will be governed and how the core team will execute, is to be reflected and solidified in the constitution, which will be presented to the community in the second part of this chapter, next week. The constitution will thus serve as a social contract that will bind the core team to fully hand over governance, while allowing it to steer the ship in the initial stages of the protocol.
The final go/no go decision on the launch of Leserve, will be one of the very first on-chain governance decisions executed by the Leservian community.
To effectively visualize the transition process of the governance, please see the attached diagram.
Constitution
The constitution is our basic founding document, which contains, embodies and reflects Leserve’s ideals, vision and spirit. The document mirrors and integrates Leserve’s core values of trust, fairness, transparency, accessibility and efficiency.
It covers and specifies the final governance models, describes the responsibilities and power dynamics of each governance body and how they mutually integrate and interact with one another. It is an essential document highlighting the curated and carefully designed structure that should underpin and enhance Leserve’s long-term functionality, prosperity and independence.
Governance Structure
The ultimate end-goal is for Leserve to leverage a governance structure with a reputation based system (non-transferrable governance token), where one’s reputation can be obtained in three different realms: Leservanomics, Tech and Community.
Side note: We are intentionally steering away from a governance structure solely based on LSRV token holdings as that can lead to collusion, bribery and other undesirable effects. (See blog post from Vitalik Buterin on why new governance methods are needed)
We strive to develop and build a meritocratic governance with a strong democratic oversight from sLSRV token holders. We believe that a governance structure that values and emphasizes input from highly knowledgeable and engaged individuals that are deeply immersed in the Leserve community, will lead to optimal results for the whole DAO and for all sLSRV holders.
In order to achieve this, Leserve’s governance will be based upon 3 councils, judiciary and the general assembly.
Leservanomics Council
The council consists of individuals that have a profound understanding of how Leserve functions and operates in terms of its economics. Individuals in the council can adjust Leserve’s tokenomics, investments in other protocols and propose protocol updates with an economic impact. The individuals in this council will ultimately have the greatest impact on the size of protocol’s APY and the potential valuation that LSRV can attain.
Tech Council
The council consists of individuals that fundamentally understand the LSRV system and functionality from a technical perspective. The individuals are expected to possess relevant, technical knowledge and skills such as knowing how to build and develop digital products, write smart contracts, optimise gas usage and much more. Individuals in this council exert the technical power within the DAO and thus would be able to independently execute specific contract updates and would generally control and steer the project from the technical/product side.
Reputation is to be awarded based upon one’s contribution to the technical side of things, from code reviews to full on contract development and architecture. The tech council also grants special privileges to a DevSecOps group of developers that have the right to execute an emergency freeze or upgrades to the contracts, should the security of the protocol be threatened.
Community Council
The council consists of individuals that are highly immersed and interested in Leserve’s community and socially support its growth and wellbeing. The activities can range from translating articles, creating memes to conducting organic outreach. Effectively, any contribution and activity that reflects one’s desire to add value and enhance the wellbeing of Leservians, accumulates reputation in this council. Community councils can vote upon various aspects of the protocol such as grants, events funding, funding for moderators, translators, outreach and other community-related matters that facilitate and nurture Leserve’s growth.
Sidenote: The process of choosing the initial council members is not yet fully fleshed out. Moreover, there is no direct payment associated with reputation, but we expect the DAO to pay and reward developers/copywriters/economists and other regular “contributing staff” from the DAO treasury. People actively contributing to the DAO will most likely also have a reputation within the councils.
Judiciary
Judiciary represents a governing body that focuses on keeping the councils in check. The body consists of 15 judges. The mandate of each and every judge within the judiciary is one year. Every 4 months, 5 new judges are elected. The longest serving judges are hence replaced by the new one’s.
The election process of the judges will consist of continuous voting over 3 months, where sLSRV stakers can submit their jury preferences via a Single Transferable Vote mechanism (please see the attached video to understand the mechanism).
Judiciary has one power which is to veto council proposals. Veto must be given by the majority of the judges to be considered valid and the judiciary must provide a reason to the community, for why it has decided to veto the given proposal.
There are 3 common reasons for a veto to be given:
- Proposed subject is outside of the jurisdiction of the given council
- Does not adhere to the tenets of the Constitution
- Change goes against the current interests of the whole Leserve community
First veto of the proposal provides the council members with a chance to correct the proposal and resubmit it. If the proposal is vetoed again, it is escalated to the general assembly, where the whole community can decide upon its fate.
Judiciary is an active governance role and will be rewarded by the DAO. One of the potentially viable reward mechanisms is to pay the judiciary via long vested bonds and hence ensure that it is in the interest of the judges to judge wisely and not harm LSRV’s coin valuation or damage the protocol’s APY by their decisions. The weekly agenda of the judiciary will be public and anyone can attend any judiciary meeting.
We are still in the process of actively fleshing out some of the details of the judiciary, such as what will be the steps if some judge forfeits their position, but we firmly believe in the usefulness and robustness of this concept. By establishing a judiciary, Leserve is effectively positioned to incentivise long-term engagement from people with enough context, that are dedicated to oversee everyone playing fair and act in the best interest of Leserve community.
General assembly
As previously indicated, if there are highly impactful matters such as changing the constitution, altering the governance model or proposing big changes to how LSRV works, these need to be decided upon by the general assembly, where all reputation holders can vote together.
In the general assembly, councils and sLSRV stakers meet and vote on high-impact proposals such as:
- Constitution change (requires 66% approval instead of the simple majority vote)
- Partnerships with other protocols and entities
- Vetoed proposals by the judiciary
General assembly consists of:
- sLSRV holders (50% weight)
- Community council (16,6% weight)
- Leservanomics council (16,6% weight)
- Tech council (16,6% weight)
Types of proposals
The constitution will further define and specify, among others, the following proposal types:
Community proposals
Proposed and decided by: Community council (100% weight)
An example of proposals included in this category:
- Grants and funding for community projects (such as documentation, moderation, Discord activities, etc.)
- Support and incentivization of organic, social outreach
- Organisation of community-related events
- …
Economic proposals
Proposed and decided by: Leservanomics council (100% weight)
An example of proposals included in this category:
- Reserve asset composition held by treasury, their risk ratios and RFV
- Bonding terms
- Staking payout settings
- …
Contract/Tech proposals
Proposed and decided by: Tech council (100% weight)
An example of proposals included in this category:
- Contract upgrades
- Tech upgrades
- Audits
- Monitoring
- Release management
- …
Protocol proposals
Proposed and decided by:
- Leservanomics council (40% weight)
- Community council (30% weight)
- Tech council (30% weight)
An example of proposals included in this category:
- New yield generating strategies
- New protocols to implement
- New features
General assembly proposals
Proposed and decided by:
- General assembly
An example of proposals included in this category:
- Changes to the constitution
- Governance changes
- Partnerships
- Expansion to other IBC chains
- Vetoed proposals
How will proposals, voting and signalling preference work?
On the topic of proposals
Proposals to the councils and the general assembly can be submitted only by an individual holding a reputation amount, that is above a given minimal threshold. The reputation can be also pooled from multiple reputation holders, if necessary.
Hence, in order to be eligible for establishing a proposition, that will be considered by the DAO and hence use its attention, the individual must become an active community member first. The mechanism does not prevent anyone from suggesting ideas and proposals on Leserve’s discord or forum (should one be established in the future). It will be upon the consideration of council members to listen to the community, pick up the best ideas and form official proposals out of the community input.
On the topic of quorums
Typically, one of the greatest issues that DAOs encounter is to meet quorums for the vote to be valid. Absolute quorums are the safest from consensus perspective, but require massive attention and energy of the DAO. Furthermore, over time, it often appears that there is a substantial number of individuals with voting rights that are not interested in the governance aspect of the protocol.
On the other hand, relative quorums are difficult to set and calibrate. It may be argued that the implementation of holographic governance would solve these problems, however it can be complicated to implement such a solution on the Terra chain, given that at this point in time, we are simply missing the governance toolkit of an EVM-based chain.
We came forward with one possible lightweight solution to this problem: Active/inactive reputation. With the implementation of such a system, reputation only counts towards quorum height, if the holder was actively governing in the “last 2 weeks” (TBD). Otherwise, their reputation is not counted towards the necessary quorum. This solution can dynamically scale the quorum height, in accordance with the activity/inactivity of the individual. This solution, combined with quiet period (or Quiet ending period such as DXDao) could lead to a dynamic quorum that may be deemed as sufficiently safe.We expect a dynamic quorum in the councils to be set at 50%.
Within the general assembly, we cannot use the active/inactive reputation model, as we do not expect sLSRV holders to govern actively at all times. The voter apathy is particularly strong in DAOs and can lead to a voter participation as low as 3.8%. That is why, we believe it is not suitable to implement a quorum-like mechanism in the general assembly at all. Instead, the proposal voting times will be prolonged (1+ week) and the “wait for quiet period” will be lengthened, to effectively account for a circumstance where a proposal that is swinging toward harming the community, by ensuring enough time is provided to drum up support by community influencers to overthrow the vote.
Types of votes
There will be classical proposals to be voted upon for decision-based governance. A conviction voting system (better described here) is being considered for feature prioritization and for setting the Leservanomics parameters.
For example, for economic parameters, individuals would simply stake their reputation on the value that they think is correct for the protocol. The system would then decide on a particular value, based on a relevant mathematical function that effectively considers all of the convictions of the Leservanomics council, as the input.
Leserve roadmap
If a proposal represents a feature, after it is approved by councils, it is placed on the Leserve roadmap. The roadmap of Leserve is a publicly accessible board, where sLSRV stakers can prioritize the features via conviction voting.
The signalled priority of features is not binding to the people working for the DAO but rather shows a clear path forward, for DAO contributors and council members.
How reputation will be given / taken away
We believe that a fair and equitable approach towards allocating reputation to community members is by establishing a vote in each of the respective, governing councils. The DAO is expected to reach a consensus regarding the initial percentage of reputation that a new contributor to Leserve DAO should receive. For example, if a developer finishes their first smart contract update, it will be a custom that they can ask the Tech council for 0.5% of Tech reputation.
It may be questionable to some, why we think that the current reputation holders would be willing to collectively dilute themselves. However, we believe and assume that the outlined governance structure and associated incentives inherently lead to reputation holders striving to preserve and act upon the best interests of Leserve. Hence, it may be assumed that reputation holders are likely to recognize that bringing new talent to the DAO community may impose severely positive implications to themselves, the protocol and its added value.
The council may also decide to slash someone’s reputation if they exhibit bribery, collusion or other adverse actions against Leserve DAO. Slashing of someone’s reputation will require a supermajority of 66%.
We have examined similar mechanisms in successful projects such as DXDao and thus we believe that the imposition of such mechanisms could be highly efficient and functional in the context of Leserve as well.
Reputation of the core team
At stage 3 of the governance roadmap, the core team will not possess any special reputation holding. To ensure the process is equitable and fair, it will be up to the community to determine how much reputation they will leave and allocate for the core team.
Final Note
We hope that the first part of this chapter effectively covers the topic of DAO, governance and the protocol’s direction and that it goes beyond simply outlining its structure but that it also provides an insight and rationale behind why we believe certain decisions and mechanisms are worth enacting more than the others. It is vital for any reader to understand that this is our vision and that the mission is to achieve all of this within 12 months. We are situated in a highly volatile and rapidly changing landscape and thus it is possible that some aspects of the proposed solution may become unfeasible or inefficient over time, leading to some of the outlined mechanisms potentially being altered in favor of a simpler solution.
However, the vision, goal and values of Leserve remain to be set in stone, regardless of the solutions and technologies that will appear to be the most viable at any given time and thus we are confident that Leserve will be able to fulfill and deliver upon its vision and promise.
We would like to emphasize and thank the Leservians that participated in the creation of this document and subsequently ensured that Leserve truly remains community-driven at all times. Special thanks goes to: charlie2212, Crafty Coins, Fart Breath, kulmjord, proddy, Trix and yeezy.
—
Thank you for reading this week’s chapter! Stay tuned for the following chapters in which we will cover:
IV. Leserve DAO (Part II — Constitution)
- We are big supporters and proponents of DAOs and hence we would like to hand over the governance of all aspects of the project to the hands of the community. This chapter will delve into how we plan to do it and how we will mitigate the associated risks.
V. Smart Contracts & Frontend/Design
- Differences between Solidity contracts (compilers, complete rewrite)
- Security & audit
- Frontend technology and hosted on IPFS
- Design language — showcase colour palette & potentially design guideline
VI. Community & Growth
- Marketing strategy
- Leserve’s social identity & overarching philosophy
X. Launch strategy
- Whitelisting, tiers, launch sequence
- How we plan to fight for the community and tackle frontrunners and bots
We look forward to hearing your input and feedback on our Discord and Twitter, where the Leservian community resides and we are excited to reveal the second part of this chapter: The Constitution.
Until then,
(🌖,🌖)
Sources
Sources pertaining to governance structure
https://vitalik.ca/general/2021/08/16/voting3.html — Why sole token voting based governance can lead to bribery and collusion, covered by Vitalik Buterin. Explains why we are in favour of a reputation based system.
https://link.medium.com/WB7sm3IWalb — Expanding on the topic
Sources pertaining to signalling
https://link.medium.com/e2jYDVSXalb — Holographic governance and how it optimizes attention of the DAO, Voter apathy and other interesting topics.
Disclaimers
The above content is published solely for informational purposes. It should not be construed as an investment thesis or be deemed to constitute a prospectus of any sort or a solicitation for investment or investment advice. The information provided in this Medium Post pertaining to the LeserveDAO is for general informational purposes only and is not a formal offer to sell or a solicitation of an offer to buy any investments, securities, options, futures, or other derivatives related to securities in any jurisdiction and its content is not prescribed by securities laws.
The information provided in this Medium Post pertaining to LeserveDAO, its business assets, crypto-assets operations, and strategy, is for general informational purposes only and is not a formal offer to sell or a solicitation of an offer to buy any securities, futures, options, or other derivatives related to securities in any jurisdiction and its content is not prescribed by securities laws. Information contained in this Medium Post should not be relied upon as advice to buy or sell or hold such securities or as an offer to sell such securities. This Medium Post does not take into account nor does it provide any tax, legal or investment advice or opinion regarding the specific investment objectives or financial situation of any person. LeserveDAO and its agents, directors, advisors, employees, officers and shareholders make no representation or warranties, expressed or implied, as to the accuracy of such information and LeserveDAO expressly disclaims any and all liability that may be based on such information or errors or omissions thereof. LeserveDAO reserves the right to amend or replace the information contained herein, in part or entirely, at any time, and undertakes no obligation to provide the recipient with access to the amended information or to notify the recipient thereof. The information contained in this Medium Post supersedes any prior Medium Post or conversation concerning the same, similar or related information. Any information, representations or statements not contained herein shall not be relied upon for any purpose. Neither LeserveDAO nor any of its representatives shall have any liability whatsoever, under contract, tort, trust or otherwise, to you or any person resulting from the use of the information in this Medium Post by you or any of your representatives or for omissions from the information in this Medium Post. Additionally, LeserveDAO undertakes no obligation to comment on the expectations of, or statements made by, third parties in respect of the matters discussed in this Medium Post.
