Thursday, July 18, 2024

Introducing Optimistic Dual Governance, an efficient governance design using plugins on Aragon OSx. This governance design enables DAOs to create two different stakeholder groups with different governance permissions, and then execute proposals optimistically. The plugins are currently undergoing audits, but you can check out the progress of the first implementation here.

In a nutshell, Optimistic Dual Governance enables teams to work efficiently while allowing key stakeholders to veto proposals.

While any type of stakeholder group can be defined to meet your organization’s needs, this dual governance design was created for protocol DAOs with these two groups in mind:

  • Teams that are actively building a protocol or doing operational work: such as a core team, guilds, developers, and any other active participants that are making updates, parameter changes, and upgrades to the protocol itself.
  • Members of a Main DAO: any arbitrarily defined stakeholder group, which can be users, liquidity providers, stakers, investors, governance token holders, or another group that has an interest in protecting the protocol, but isn’t proactively involved in operations, development, or parameter changes.

Once you’ve defined your stakeholder groups, the next component of this design to understand is Optimistic Governance. Optimistic Governance is when proposals pass as long as they’re not vetoed. Rather than standard token-based governance where proposals need to be voted on to pass, proposals in an optimistic governance structure pass automatically after a timelock period.

This means teams can move faster and don’t have to put proposals through a traditional governance process, however, this creates an attack surface if proposal creation is open to any wallet. For example, if the main DAO lets a proposal pass that misuses treasury funds, there’s no way to reverse the execution. So, it’s more secure for the DAO to have a defined group—in this case, an allowlist of addresses—that can be held accountable to proposals.

The design was largely inspired by teams that have been exploring Optimistic Dual Governance for their own DAOs, including Lido and StakedFLIP. The design by Jacob from Zora was also a significant inspiration.

Here’s how Optimistic Dual Governance on Aragon OSx works from proposal to execution:

  • Proposal creation: Multisigs or subDAOs on the proposal allowlist can create proposals to the main DAO.
  • Timelock period: During the timelock, the main DAO’s members can veto the proposal.
  • Execution: If the main DAO doesn’t veto the proposal during the timelock, the proposal automatically executes.

Check out the architecture in the diagram below:

The permission management system at the heart of Aragon OSx enables a lean and efficient Optimistic Dual Governance design. It enables a main DAO to have separate permissions from those of the subDAOs, but all DAOs are able to operate within the same governance system.

This is the first iteration of this plugin. There are thousands of versions that could be created to suit the needs of your organization.

For more complex organizations, a variation of this design could be a better fit, because it includes autonomy for subDAOs. Here’s what it could look like: the multisigs would be autonomous subDAOs, which could manage certain permissions by themselves, such as the ability to add and remove new internal members. They could also have their own governance process, such as token voting.

Governance minimization is a key goal of this governance design, and the future iterations will lean into this concept even more. By making the governance process lean and secure, both stakeholders and team members don’t need to spend so much time involved in governance. We’re seeking partners to explore the boundaries of this model and feedback from more industry players. Inquire about using this governance design in your own DAO or protocol by filling out the form above to let us know what you need!

We can’t wait to learn about what you’re building.

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