A Community Guide to Synthetix Governance
Synthetix Grants Council Initiative
1. INTRODUCTION
Synthetix Governance is the decentralized process by which strategic decisions are made on protocol changes and the future direction taken by the Synthetix DAO. Through combining open-source proposal submission with endorsement provided by community-elected governance role holders, the development and deployment of code on the blockchain is managed, bringing about the ongoing improvement of the user-facing Synthetix protocol.
The purpose of this guide is to explain the submission process for governance proposals in a way easy-to-understand for those who are new to Synthetix. The hope is that newcomers may then feel confident contributing to governance and helping steer the protocol forward. Whether the reader is a community member interested in becoming more involved with the protocol or a representative of an external DAO that wishes to partner or integrate with Synthetix, this guide should help explain the governance process of proposal submission necessary to successfully participate in Synthetix Governance.
* If the reader is simply trying to answer the question “How does Synthetix work?” then this guide would not be the best starting point. Acquiring familiarity with the Synthetix protocol should instead begin with a review of documentation available on the Synthetix website.
** This guide makes reference to the Synthetix Discord Server, where governance discussions and presentations are hosted. Discord users, especially new Discord users, are reminded that to avoid phishing and scams, particularly those focused on crypto approvals or capturing seed words, they should ignore all direct messages (DMs). Synthetix DAO support will never DM you first!
Do not trust links, do not enter your seed phrase and never trust DMs in Discord!
2. SIPs / SCCPs / STPs
We will begin with the formal definitions found in the existing Synthetix governance documentation, before then describing them in a way that clearly contextualizes their uses.
What is an SIP?
SIP stands for Synthetix Improvement Proposal, it has been adapted from the Ethereum Improvement Proposal (EIP). The purpose of this process is to ensure changes to Synthetix are transparent and well governed. An SIP is a design document providing information to the Synthetix community about a proposed change to the system. Source
What is an SCCP?
SCCP stands for Synthetix Configuration Change Proposal. SCCPs are documents for making a case for modifying one of the existing system configuration variables. The intent is to provide a clear and detailed history behind each configuration change and the rationale behind it at the time it was implemented. Source
What is an SIP?
STP stands for Synthetix Treasury Proposal. An STP is a document that outlines a proposed ongoing management process or one time use of Synthetix treasury funds. The STP structure has been adapted from the SIP (Synthetix Improvement Proposal) model. Source
Where it relates to protocol smart contracts, in practical terms, an SIP generally means the creation of a new contract, while an SCCP edits a configurable value in an existing contract and an STP prompts the transfer of assets held within the treasury’s contracts. As an example, when a new synthetic asset is added to those the protocol supports, this requires a novel smart contract be deployed that contains its variables and controls how users and implementers can interact with it. If a new crypto asset called sEXAMPLE were to be made available on the protocol, then a SIP would be required. If it were later felt that the fee charged by the protocol for trading sEXAMPLE is too high and an adjustment needed, then an SCCP would be used to make this change.
The addition of an asset is, however, a relatively clear cut example of when to use an SIP over an SCCP or STP. Even experienced protocol users do not necessarily know intuitively if an SIP is required versus an SCCP when the changes to the protocol become more nuanced. Furthermore, and this point falls outside the scope of this guide, there also exists a sub-type of each proposal known as meta-governance proposals. These are used when adjustments are made to how the governance system itself functions. For a user wishing to participate in governance, then, the process will often most productively begin with engaging with the community on the project Discord server in order to discover how a suggested idea would be most appropriately brought before Synthetix Governance.
Initial Proposal Idea
For basic changes, informally consulting with less technical community members who are otherwise experienced in DAO governance is often all it takes to confirm what form a governance proposal should take. This can be combined with browsing the extensive collection of past SIPs, SCCPs & STPs on the SIPs website, where comparable proposals may be found. Those listed as Implemented will be especially useful when it comes to deciding if a new proposal is necessary and the form it should take. For more advanced changes, discussion with the project’s developers, known as Core Contributors (CCs), and those with development experience may be necessary.
For an example of an SIP used to add a new derivative to the protocol, see SIP-2000: Add ATOM, AXS, FLOW, FTM, NEAR, AUD/USD and GBP/USD to Perps V2.
For an example of an SCCP that was used to alter an existing variable, see SCCP-285: Increase minimum C-ratio to 500%.
As the writing of the code used to meet the requirements of a passed proposal is handled by CCs, their opinions on whether a proposal idea is viable can be sought out. The Spartan Council, an eight-member team of elected individuals judged to have the knowledge and experience necessary to endorse or reject SIPs and SCCPs, is also well-placed to assist and will provide a ‘temperature check’ indicating whether an idea is likely to be considered. Similarly, STPs can be approached in much the same way, though the governance body responsible for deciding if they should be implemented is the Treasury Council. Members of the Spartan and Treasury Councils, as well as Core Contributors and other formal DAO participants, are consistently available in the Synthetix Discord server and regularly respond to governance and technical questions, allowing the feasibility of proposal ideas to be assessed and moved on to the drafting stage.
Proposal Drafting and Submission
If a proposal idea seems to be viable and has the tentative support of those responsible for passing it at a vote, the next task is writing the proposal in draft form. A SIP template can be found on the project’s Discord servers using the following link. This can be adapted to meet the unique requirements of SIPs, SCCPs and STPs, with unnecessary sections removed or tweaked, where appropriate. Again, reviewing prior SIPs, SCCPs and STPs that have passed a vote is a suggested method for learning the generally accepted style and detail required when proposing protocol changes. While there is some flexibility when an author chooses the length of particular sections of a proposal, the sections of a proposal should provide a good framework to follow.
- Preamble — This section includes the metadata about the proposal, including its number, a short descriptive title (limited to a maximum of 44 characters), author details and progress. In order for a proposal to be added to the SIP repository, the metadata should follow the accepted formatting rules to avoid an error.
- Simple Summary — “If you can’t explain it simply, you don’t understand it well enough.” This section provides a simplified and layman-accessible explanation of the SIP.
- Abstract — a short description of the technical issue being addressed.
- Motivation — The motivation is critical for proposals that want to change Synthetix. It should clearly explain why the existing specification is inadequate to address the problem that the proposal solves. Proposal submissions without sufficient motivation may be rejected outright.
- Specification — The technical specification should describe the syntax and semantics of any new feature or, in the case of STPs, the tokens, amounts, and destinations, and schedule of funds to be moved.
- Rationale — The rationale fleshes out the specification by describing what motivated the design and why particular design decisions were made. The rationale may also provide alternatives, evidence of consensus within the community, and should discuss important objections or concerns raised during discussion.
- Test Cases — Test cases may be added during the implementation phase but are required before implementation.
- Copyright Waiver — All proposals must be in the public domain and include a copyright waiver to evidence this.
- SIPs require: All of the above
- SCCPs require: Preamble, Simple Summary, Abstract, Motivation, Copyright Waver
- STPs require: All of the above, except Test Case
Once a proposal has been drafted using the correct template, it will be ready for formally adding to the appropriate proposal directory on the project GitHub. This can be done either directly by submitting a pull request to the project’s SIP repository, adding a new file to a folder within a forked version of the repo and then requesting its inclusion, or by collaborating with a SIP Editor. SIP Editors are members of the community with the experience necessary to prepare and format proposals so that they can be correctly added to the SIP repository and website. For newcomers, SIP Editors can provide invaluable assistance in ensuring that a proposal is made available to the community.
If desired by its author, a proposal can also be shared on the project Discord server within the SIPs Forum. This special channel exists so that links to new proposals can be shared directly with the community, with relevant parties tagged in order to encourage their contribution to discussion.*
* In Discord, tags should be used only where necessary, with groups being tagged rather than individuals.
Proposal Presentation, Voting & Implementation
Presentation: Once a proposal has been added to the SIP repository, what happens next depends on whether it is an SIP, which will require a formal presentation, or an SCCP or STP, which can proceed directly to vote when discussion has concluded. Given that SIPs introduce new assets or features, or make fundamental changes to the running of the protocol, a formal SIP presentation is required so that the community has the opportunity to observe and contribute to the decision on whether it should be accepted. This requirement for a presentation also applies to meta-governance SCCPs (SCCPs that alter how governance is performed), though these are comparatively rare.
A SIP presentation involves the proposal author or their representative outlining the proposal’s contents over the Discord voice talk interface, which should itself provide the justification for it being considered. At least half of the Spartan Council must be present for this public presentation, during which they (as well as members of the community) can ask questions or seek clarifications that may influence the decision on whether or not the proposal is accepted or rejected during the vote. CCs able to provide technical analysis are expected to be in attendance during SIP presentations and will frequently contribute to the discussion. Usually, a SIP presentation will conclude with the Spartan Council members who are present indicating whether they will vote favorably and, if any exist, suggesting changes that would be necessary to win their support. If these necessary changes are substantial, they may also ask that the proposal be presented again at a later date.
Voting: If, following a SIP presentation or general discussion, a proposal is considered ready to be voted on, the proposal author or somebody assisting them can then move to creating a vote using the Snapshot application. Using the following direct link, a vote can be created using the following settings:
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Title: SIP/SCCP/STP number and title as it appears within the SIP repository
Description: The proposal’s abstract and a link to the full proposal
Discussion: A link, if available, to the discussion in the SIP Forum Discord channel
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Type: Single choice voting
Choice 1: sYes*
Choice 2: iNo
Voting period: A minimum of three days
* The use of sYes and iNo is a reference to the historical existence of inverse synths (synthetic assets) that inversely tracked the prices of cryptocurrency assets on the protocol.
Once the vote has been published, the Spartan Council (or the Treasury Council, in the case of STPs) should be immediately alerted to the fact on the project Discord. They will then have the time covered by the voting period in which to vote on the proposal, with the achievement of a simple majority in favor resulting in its passage for regular SIPs, SCCPs and STPs. As an exception, meta-governance SIPs and SCCPs will, in accordance with SIP-263, require unanimous approval by all active members of the Spartan Council. The vote will be considered final once the voting period has concluded, after which those whose proposals have been approved can petition, where necessary, the Core Contributors to begin making the necessary upgrades to the protocol required to bring the changes about.
Implementation: If a proposal is approved, the responsibility falls on the CCs to see to it that it is eventually implemented and the applicable smart contracts or other code base changes are made.
3. GOVERNANCE
Knowing the following information related to Synthetix DAO governance is not necessary for submitting a successful governance proposal, though it may provide useful context when navigating the governance system and the groups within it.
Governance and Protocol Groups
- The Spartan Council (SC) is the central governing body of the Synthetix protocol. The Spartan Council votes on overall improvement proposals and parameter changes.
- The Grants Council (GC) is a value-based Synthetix elected body whose ultimate goal is to fund beneficial and high-quality public goods projects through grants, initiatives, retroactive grants and prizes. Original SIP that created the GC: SIP-39
- The Ambassador Council (AC) actively promotes and advocates for the interests of Synthetix in the overall Ethereum (and DeFi) ecosystem. Original SIP that created the AC: SIP-157
- The Treasury Council (TC) manages the Synthetix Treasury and provides funding to the other governance bodies, CC stipend payments, and other discretionary incentives. Original SIP that created the TC: SIP-155
- The Core Contributors (CC) are the development and management arm of the Synthetix Protocol, ensuring the project has the resources for protocol development according to the objectives laid out within SIPs.
- The Core Contributor Committee (CCC) is made up of three CCs, and is tasked with liaising between the SC to ensure the CCs are working in accordance with priorities defined by SIP passage, as well as the TC to ensure resources are optimally used to achieve the protocol’s objectives. Original SIP that created the AC: SIP-161
- SIP Editors are community members who have the ability and experience necessary to approve changes to the project’s SIP repository on GitHub, assisting in the management of the governance proposal process.
Council Mandates
Spartan Council Mandate: The Spartan Council is responsible for assessing the merit of changes in protocol design and architecture proposed through SIPs and SCCPs. This is carried out through internal discussion, public discourse and debate held during governance calls open to the Synthetix community and beyond. In assessing proposed changes, Spartan Council members are expected to advocate for the position that they see as being most beneficial to the Synthetix project in the short, medium and long term, especially in regards to protocol safety and the protection of the interests of liquidity providers. As the Spartan Council members are granted the authority to alter the protocol even to the extent of changing fundamental governance structures, it is anticipated that they interact with all branches of the project in order to bring about continued progress and optimize for sustainable growth.
Given the centrality of the tasks of assessing and voting on proposed protocol changes to the Spartan Council role, active members are required to commit to ongoing engagement with voting procedures. Failure to do so can result in expulsion from the council and a prearranged adjustment to governance processes to compensate until the conclusion of the next council election.
Grants Council Mandate: The Grants Council is tasked with managing the issuance of token grants, bounties and rewards to groups and individuals that have proposed initiatives with the potential to forward the Synthetix ecosystem and expand its community. Council members are responsible for overseeing successful applicants throughout a grant’s unique life-cycle, from guiding applicants wishing to acquire funds through the established application processes, through to evaluating the ongoing progress of grant and retroactive-grant recipients. Additionally, where public goods projects are found that are deemed to be of benefit to the larger decentralized finance community, of which Synthetix is an integral part, the Grants Council has a responsibility to consider provisioning funding.
The five Grants Council members assess grant proposals and then vote on whether they should be funded. A successful application commits the council’s members to then monitor each project to ensure, wherever possible, objectives are met as stated and in a timely fashion. For audit purposes, it is required that detailed records are kept of all awarded grants and funds transacted as a part of Grants Council activities.
Note: The Grants Council adheres to an internal rule where we do not actively fund Grants Council members to participate in Innitiatives or Grants. This excludes funds transacted for the purpose of recovering costs or expenses incurred by council members while undertaking their responsibilities or producing public goods services or products.
Ambassadors Council Mandate: The role of the Ambassador Council is the promotion of Synthetix’s interests within the wider decentralized finance ecosystem. This is conducted through two primary activities: 1) participation in the governance of related DAOs and 2) establishing collaborative relationships with like minded projects. By way of governance powers delegated to it, the Ambassador Council is expected to seek to influence protocols in a manner that is beneficial to the Synthetix project, voting on proposals that align with the project’s interests. When engaging in collaborations, the Ambassador Council is tasked with working with existing and prospective collaborators, such as protocol integrators, addressing their needs and guiding them through the Synthetix ecosystem and external grant programs.
Outside of these two principal activities, the Ambassador Council is also expected to maintain the accessibility of the Synthetix community to new members and actively introduce DeFi projects to it through collaborative media initiatives that bolster engagement.
Treasury Council Mandate: The Treasury Council is responsible for funding the operational costs of the Synthetix project and making strategic decisions on the use of protocol-held funds. The Treasury Council’s task of providing the financing necessary for development work conducted on the protocol is carried out in collaboration with the Core Contributor Committee, which is itself responsible for direct oversight of Core Contributors. Council stipends used to compensate the active participants in governance bodies, on the other hand, are distributed directly by the Treasury Council to all qualifying council members on a monthly basis, with any adjustment expected to be carried out openly through protocol governance. Conversely, the Treasury Council is granted discretion in the strategic use of protocol funds, such as OTC sales or deal making, due to the frequent necessity of non-disclosure prior to an arrangement’s conclusion. Nevertheless, while no formal process need be adhered to by the Treasury Council in the use of protocol funds, in order to facilitate community input, Synthetix Treasury Proposals (STPs) serve as documentation of treasury processes and assist with the handover of membership duties at the conclusion of each epoch.
Councils Confirmation & Epoch Structure
The following SIPs provide confirmation on the structure of the different Councils as well as how the Epochs are run.
Council members are voted in by $SNX token stakers to serve on the councils for a period of 4 months at a time.
Nomination: 14 days prior to ‘epochEndDate’ the ‘nominationPeriodStartDate’ starts and any community member can nominate themselves to one (1) Council. This stays available until the ‘epochEndDate’. No one can be nominated by another party.
Voting: 10 days prior to ‘epochEndDate’ the ‘votingPeriodStartDate’ start. This stays available until the ‘epochEndDate’. Only $SNX token stakers can participate in voting for Council members.
