The Effect DAO Voting: Adapt to Survive
Chapter #4
In this blog series, we’re paving the way to a decentralized governance model that will be the backbone of The Effect Network. In this 4th installment, I’ll discuss the most fundamental part of governance: the voting system. You’ll learn what can be voted on, how votes are tallied, and how funds are distributed to the creative minds, visionaries, whizzkids, shills, supporters, rebels, and AI-robots in the network.
Every system has to adapt in order to survive. This is especially true in industries as fast-paced as AI. It’s very important to keep a company’s funds and developments aligned and moving in the right direction. The role of AI in society is changing day by day and it’s impossible to anticipate where it’s going next. This unpredictability means that industry leaders have to be flexible by nature. “Pivoting” is a defining concept for companies that venture into this space.
This is where things get hard, as adaptability and decentralization are somewhat of a contradiction. Similar to how democracy has a harder time changing its laws and taxes than a monarchy. As we haven’t shied away yet from hard things, the Effect DAO will have adaptability in its DNA, consisting of a new governance system that’s tailored to our community and the AI-industry.
In the Effect DAO, the governance consists of a novel voting and proposal system that’s based on frequent voting cycles and a 2-layer authority system. Participating in either voting or proposing is highly rewarded with fee distributions, which will be discussed in the forthcoming chapter. Any member can submit and advocate a proposal that requires the resources or authority of the network. No matter how futuristic a DAO for Decentralized AI may sound, it will always remain a system steered by people, built for people.
Proposals
Proposals are the origin of change in the DAO. Change can have many forms. Anything that happens in the network will come from a proposal put forward by someone. This can range from funds for creative writing to elections of the High Guard. Want to put an EFX sticker on your truck and drive the Dakar? How about making a batch of Effect Brew? Hire a crew to build that worker app? Or do you want to offer your own service on Effect Force? Put it in a proposal and get it funded.
We identify 2 types of proposals: funding proposals and governance proposals. Funding proposals are used to distribute funds from the DAO to different initiatives in the network, while governance proposals declare changes to the rules of The Effect Network itself. Check the diagram below for an example of their properties and use cases:
Both proposal types contain an extensive description of their purpose and the credentials of the author. Funding proposals clearly list how many funds they unlock and to which account they will be sent. For governance proposals, it’s even more important to show what technical changes it will execute when it gets approved.
Both types of proposals follow the same life cycle:
- At the start, a proposal is drafted and discussed in the community. This can already happen before submitting it to the blockchain, as there will be a fee required to do so.
- If there is enough traction for the initiative, the owner can submit his proposal to the smart contracts of the DAO. This creates an official draft proposal.
- A proposal becomes active when its owner assigns it to the current voting cycle.
- All active proposals are voted on by the Guardians during the voting phase of the cycle.
- Selected proposals have to be approved by the High Guard
Creating a new proposal will cost a fixed network fee. This can be seen as a spam protection fee that ensures that Guardians don’t get blinded by too much information. Note that once you purchase a proposal it can be modified and adapted until it’s been approved in a voting cycle. If a proposal didn’t get approved in one cycle it can be recycled by the owner.
Once a proposal is approved and executed there is an option for the owner to post proof of its completion. This proof has the form of a hash that can be attached to it on the blockchain. This hash can refer to a blog post, video, blockchain transaction, or whatever is necessary to show your success. As your competence and trustworthiness will be important in winning the votes of Guardians it will be necessary to build a strong history of proof for the bigger game.
Voting
Voting will happen in predetermined cycles. This will bring consistency to the rate of change and will give all Guardians the time and opportunity to react to new initiatives. At the same time, the cycles will be frequent and powerful enough to accommodate the “pivotal” behavior required in our industry.
Initially, the voting cycles happen back-to-back on a monthly basis. Each cycle consists of 3 phases: the Voting phase, the Approval phase, and the Execution phase.
The number of votes that a Guardian has is determined by the Effect Staking Protocol: a triforce of EFX and its Stake Age, and more importantly, NFX. These 3 factors will determine how many Voting Allocations you have at your disposal. The next blog post will go in-depth on this Staking Protocol. What’s more important now is that these Allocations can be “tied” to proposals for a certain amount of cycles. Tying an allocation for multiple cycles will increase its weight but will also lock it for a longer period of time. The total Vote Allocations tied to a proposal and their weight will determine its ranking.
Tied Voting Allocations will also play a special role in the Fee Distribution later on. An in-depth description of the role of vote power, the limitations per account, and the reward will be released with Phase 0 of the Effect DAO.
At the start of a cycle, all current active proposals are collected and listed on the DAO Dashboard. Guardians will be able to browse the list and inspect the motivation, discussion, and requirements of each. Guardians can then distribute their available Voting Allocations to his or her preference.
Once the voting phase is over the ranking of proposals is final. The proposals that didn’t meet a required voting threshold are filtered out. This ensures that a minimum amount of participation is needed by Guardians. Next, starting from the top of the ranking, proposals are accepted until one of the cycle’s restrictions has been reached. The number of proposals that can be executed is determined by the size of the proposal and the restrictions of the cycle.
The restrictions on voting cycles limit the number of proposals that can be executed and is related to the number of funds that can be released according to the cycle’s budget. It’s possible that a single proposal consumes the entire capacity, in which case the others will have to try again during the next cycle.
After this, the Approval phase starts, where the High Guard has the option to reject any proposal they deem harmful to the network by majority vote. This is a final and important safety net to secure the network.
After the Approval phase, all proposals that are accepted can be executed on the blockchain. For governance proposals, this means executing the embedded transaction, and for funding proposals a transfer of tokens from the Galaxy Pool. Proposals that did not get accepted return to draft mode and can be edited again by their owner.
Funds and Resources
The proposal and voting system outlined in this article is an extremely important and integral part of The Effect Network. Funding proposals give the DAO complete access to Galaxy Pool funds, while governance proposals give access to smart contracts and the rules of the system itself. In a technical sense, the ownership of The Effect Network has been pushed to an on-chain governance system.
This is why the High Guard and The Effect Network Foundation will play an important role in the initial rollout of the system. When the Galaxy Pool is handed over by The Effect Network Foundation to the DAO it will include a slow release schedule. At the time of this writing, the Galaxy Pool contains more than 170 million EFX tokens. These tokens will be released through the Voting Cycles of the next 15 years at a rate that can be determined and fine-tuned by the Guardians as things progress.
