One Council to Rule Them All

Transcript

all right well first of all i just want to say how excited i am to be here i haven't been at an in-person event for over a year um so excuse me if there's a little rust but i'm really excited to be here and to talk about governance so the title of this talk is called one council to rule them all and what i'll be talking about is bringing back experimentation and incentives to decentralized governance and before i get started i just want to say well my name is charles st louis i'm the ceo at element finance previously i was the decentralized governance architect at maker dow and the maker foundation where i worked on the self-sustaining dow initiative as well as created the mips framework and governance research and experiments and

so on and before i get into the details of the governance model i just want to say a bit about element finance element finance is a open source protocol for fixed and variable yields and our team has been very focused on research on bringing new primitives to d5 from traditional finance to new concepts and new products but we're also very focused on governance and that's what we're going to be talking about today is our new governance model which is going to hopefully bring back a lot of that excitement in experimentation so collectively we've spent a lot of time over the past few years building

governance researching observing and planning out new systems and experiments we have people from xerox maker dao and quite a few other projects who have extensive experience in governance so to be blunt we've seen what works what doesn't what we can improve on what we can experiment with and so on so and one major aspect of that is the vision of certain protocols after a project has decentralized fully needs to be very clear or there needs to be a way to manage it and maintain it otherwise you see silos happen individual parties working on governance systems they don't all work together so you need to have some sort of vision

alignment or else the protocol can fall apart of course the other issues that we see and are very common are things like low participation people don't want to vote every week or every couple days on a certain proposal and because of that they suffer voter fatigue and from voter fatigue we get that voter apathy effect where people just stop caring they don't vote at all or they just click on one answer and it results in malicious proposals getting through the next area is certain things that are very common with one-to-one token voting so that's things like capital loss plutarchy governance attacks when a token is used it can be accumulated by large parties aka whales and they can

sway governance with the click of a mouse the other area that i think is not talked about a lot is the capital loss and the opportunity cost when you're actually participating in governance so when you're locked up in a governance contract all you can do is really vote you can't do anything with it and because of that i think a lot of people stop voting or they just sell their tokens or do away with it because they're tired of it and lastly i think one important thing which i'm hoping to revitalize during this talk is experimentation and innovation in governance a lot of projects have used iterative governance as an excuse to not innovate such as the classic

snapshot vote to multisig because they have no exact timeline on when they actually have to go fully decentralized now that the safe harbor proposal that says you have three years to decentralize has passed who knows how long you can actually like string it out for so i think that's kind of delayed a lot of governance innovation so what we really want to do with this governance model was to bring back that excitement and experiments with governance not just in d5 not just in finance but also bring back incentives to governance so a lot of protocols in the space really emphasize liquidity mining as a way to incentivize their users but no products actually really

incentivize governance behavior and i'm not just talking about incentivizing votes because a lot of people argue that incentivizing votes is paying people to vote for you but or paying for their attention but in reality you can incentivize way more in governance you can incentivize people to make good proposals and if they do a good job they get rewarded you can incentivize delegation you can incentivize so much that just goes beyond voting so what we really want to do is focus on the right incentivization and if it works we'll keep it if it doesn't we can turn it off the other one is just testing these new experiments and pushing the ethos of ethereum forward of the honor and the ability ethereum has given us to just test new economic models test new

governance models test software and just continue on with that ethos and push it forward so with that i'm really excited to introduce council this is our governance protocol it's a decentralized system that enables flexibility improvements experimentation while successfully maintaining the robustness and security of the protocol that is governed whether that's element or another project that wants to use this system for themselves there's three important features of council that i want to talk about today there's a lot more to this but these are the big ones that everyone loves and the first one is the governance steering council which will govern the protocol the second is

voting vaults which essentially allows you to assign voting power to a specific position i'll get into that a little more and lastly is just flexible spending and optimistic grants to allocate funds to certain people and projects within the treasury so i think in general grants are really seen as a pessimistic view on people they assume people won't follow through on their grant and get the work done but this model inspired by paul who's sitting in the front row assumes the best in people he assumes that the grantees will achieve their work and if they do they get their funds over time and it can be pulled back so the governance here in council was inspired by traditional corporate

governance which has been battle tested for generations and it works and because of that i think it is done because they're incentivized to be data driven they're community vetted to run the company and there's a lot of great things about that and it shouldn't be pushed away it shouldn't be ignored so the gst really combines and emulates the good from traditional corporate governance but also from decentralized governance so there's permissionalist joining and what that means is anyone can join the gsc as long as you're delegated a certain threshold of votes you can actually be on it so there's a defined threshold if you need it you're on it and what that comes with in certain decentralized projects if you're voted in to do a certain task there should be

some authority that allows you to do your job because you're an expert for there and that you've been vetted so the gst will be allowed to provo propose votes directly on chain spend the treasury budget up to a certain limit and oversee the off-chain processes as well so that includes the bug bounty programs small spending allowances and essentially advocating for the protocol and the vision which solves that main issue i brought up earlier where a lot of decentralized projects lack vision so the council will be able to push this vision forward do the checks and balances if it's not going well and readjust the next is voting vault so this is a really exciting area that a lot of

people have been talking about recently and that is a structure to assign voting power custom voting power to our to a particular use case so what this is is capital efficient voting like i said before governance tokens are locked in contracts they can't be used in a capital efficient manner so some examples of this would be if you would create a voting vault for a compound a maker or an ave position that allows you to borrow against your collateral but also remain voting in the system so it doesn't result in that capital loss opportunity cost and reduces kind of cell pressure on certain markets one of the other cool ones is that

voting votes are not just for tokens or positions they can be applied to digital identities as well and lastly the third key element is that flexible spending and optimistic grants model so spending in general with treasuries has seen a lot of problems in the past and what we really want to see is a more flexible model so if it's a low spend there's very low quorum it's easy to push proposals through there's going to be tiers of certain spending so if it's a high spend it will take a lot more governance pressure if it's a low spend it can be done just by an approval from the gsc and lastly the optimistic grants so these will be pre-funded grants with a friendly claim process so what that

works is as the grantees are working towards their goal the funds will accumulate and if they aren't essentially doing their product well the gsc or governance as a whole can reclaim that or claw it back and once the expiry time on that grant is there the grantee can claim their rewards so overall what does this model mean for governance users well i kind of see two different types of users for this governance model there's obviously the governance participants and users of the everyday governance system and what that comes with is capital efficiency so they can participate in governance while doing whatever they want to do in d5 earn yields and whatnot so

it's also a very simple delegation flow so much like bitcoin's rollout you can automatically delegate and essentially be hands off if you want or you can be a voter and try to accumulate votes to be a part of the gst or just be a delegate in general and the cool thing about this is that governance rewards are thought of in this way that if i delegate to let's say sebastian in the front row here i'll get 90 of the rewards he could get 10 and it encourages him to go and get as many delegates as possible incentivizing his visionary aspect of the protocol so adding rewards in that aspect is going to be a really great experiment that we try um and lastly i mean if you're a governance user who hates governance you can just delegate to the gsc and let them vote

for you and watch possibly participate in the forums and whatnot the second user we really see is for protocols and dials so we want people to fork this project it's open source we want people to work with it contribute to the code directly or they can take it build their own experiment anything is possible the other area is that they can actually propose voting vaults for their protocol so like i mentioned before if you have a governance token in compound um and you want to vote with that you can have the protocol propose that for them so of a compound even lp positions if you want to vote while being in an lp position you can do that and lastly protocols can apply for grants to work with us or do one-off projects much like individuals as well

so what are our next steps well our audits are on the way they have been very thorough and a big shout out to runtime verification and chainsafe for their exceptional work we absolutely loved working with them and would recommend it any day we want people to build with us so our security roadmap is coming out with our audits our bug bounty program our open source code and our documentation as well so we want people to try and break things read our code fork it everything and for now we're back to work so from here we're going to continue to build work on our front ends establish our governance processes and also think about experiments we wanted to propose to the community to

consider in the future so as a final note this governance system has a lot of great features that we want people to use in the ecosystem and with that i truly want everyone to reconsider what they think about governance and how they want to participate and push the system forward because we've been stagnant for quite some time so i truly think with council we're on the verge of something new and we want to reinvigorate the experimentation and innovation and governance today and i think that's how defy should be so thank you guys [Applause] i i did want to take some questions if i

do have some time let me check yeah does anyone have any questions wendra you know what inspired you to have like those different like structure of governance is it like some real case or just embedded something completely new i mean yeah like i said before i think that traditional corporate governance and a board of directors is partly inspired part of the inspiration for the gse so i mean it's been battle tested for generations it works today very well so i think you can take some great parts

from that and then the good parts from decentralized governance such as delegation treasury spending and simpler things there but yeah it what really inspired the open source nature of it was compound government alpha governor bravo with their upgrade ability our system in general is very modular so you can build things on top of it remove them much like voting vaults you could create a voting vault it doesn't work you can you can cancel it by governance so the nature of the protocol modular flexible is really what inspired everything any other questions all right well that concludes it thank

you