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Cardano governance – CIP 1694 update

Eystein Hansen
March 27, 2023
4 minutes

Cardano Improvement Proposal (CIP) 1694 is named after the birth year of Voltaire and aims to create a first version of a governance system on the Cardano blockchain. The proposal suggests a division of power between a constitutional committee, direct representatives, and staking pool operators. There will also be member organizations that will contribute, for example, by providing information to representatives.

Anyone can become a representative, but it requires a deposit (during bootstrap pahse) and the delegation of votes from others to have any significant influence in the system. Any person can also propose a suggestion, whether or not they are a representative, but again, it requires a deposit. (Both during and after the governance boostrap phase). In the future, wallets may have a feature where multiple people can collaborate to submit a proposal.

An important part of the system will be the metadata for proposals and the metadata associated with the voting of representatives. The structure of the metadata is still being discussed among the ecosystem and those who create tools and pages to present the metadata. The ability to effectively present voting and create a history for this will be important for having a well-functioning system. This will be an upgrade of the traditional voting process used by most countries by having even more transparency in the voting process through blockchain technology. 

Protocol upgrades that are hard forks, which have been initiated by 5 out of 7 keys from the three organizations IOHK, Emurgo, and Cardano Foundation so far -  will be part of the constitutional committee in the future and will include community members as well as the three organizations. The committee will have veto power in certain cases, including hard forks and protocol parameter changes. They will follow a constitution that Cardano will have and therefore have a role as a body that ensures stability. Everyone in Cardano has the opportunity to vote that they do not trust the committee, so their power is balanced by this. SPOs will naturally have something to say in voting on hard forks, and it is also discussed whether they should sign their voting with the new versions of software that support any hard forks.

Another important function is payments from Cardano's treasury. It is unclear whether this will replace Catalyst or whether, for example, a portion of the treasury will be allocated to Catalyst and another portion to member-based organizations. However, it is certain that they want to provide rewards from the treasury to representatives for the work they will do with voting and reading proposals. But the amount of the reward is still under discussion.

An exciting innovation discussed during the workshop in Colorado was to divide protocol parameter changes into groups (network, economic, technical, and governance) and have different voting requirements so that more positive votes can be required for what may have a greater impact on the security of the protocol. Another innovation is in the creation of voting keys based on the same delegation and stake system that Cardano uses for staking now. A third innovation is that the constitutional committee has a limited time before it must be established and voted on again, and the system will transition to "no trust" until this new committee is in place. While having a blocked constitution is not new, implementing it with a constitutional committee like Cardano is trying to do is quite revolutionary. One thing seems obvious: blockchains that want to invite projects in as sidechain/layer 2 solutions will have an advantage if they can also demonstrate stable rules and governance so that those who want to get involved know what they are getting into and what values the blockchain stands for.

NBX is following the development of governance on Cardano, and the author was present at a governance workshop.

#staking
Eystein Hansen
March 27, 2023
4 minutes
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