As Theo (@mintcloud) announced on the February developer and governance call, in the interest of responsible iteration, we are introducing a staged transition to full protocol decentralization, starting with a community-owned treasury seed-funded by 0x Labs.
We are seeking input and feedback, as well as expressions of interest from community and ecosystem members who may want to self-nominate for a role as a bootstrap delegate.
Call to action: Please review and comment on the plan as outlined below and reach out to Nikita, Theo, or Brent on Discord if you are interested in volunteering to be a bootstrap delegate.
0x DAO MVP - Bootstrap Delegates
As we continue our mission to create a tokenized world where all value can flow freely, 0x Labs intends to experiment with seed-funding a community treasury managed by a DAO.
To establish the DAO, 0x Labs will identify a set of bootstrap delegates that will shepherd the initial steps of governance decentralization. These individuals and/or entities will receive enough delegated voting power to autonomously create treasury proposals, and to coordinate and execute them with neither the authority, nor the intervention of 0x Labs. This will constitute the 0x DAO MVP.
What’s in scope/out of scope in 0x DAO MVP
The 0x DAO MVP will include an on-chain, binding governance function that initially will control only the community treasury, but will not control updates of the core protocol. However, the goal is to progressively increase the governance reach of the 0x DAO so that it will assume responsibility for and control of protocol upgrades. For example, an intermediary step could be to give full control of staking parameters to the 0x DAO.
As outlined in the governance roadmap posted in 2020, the path to the decentralization of 0x is composed of several technical milestones, both accompanying and requiring a parallel evolution of the 0x community. The introduction of a 0x DAO is one of the most important steps on that path.
The purpose of the treasury is not enforced, and ZRX holders will be in control of what to do with treasury funds. The suggested usage, however, is the funding of projects (in the form of grants or other forms of work compensation) that benefit the 0x ecosystem and provide positive effects to ZRX holders. For example, we have seen these types of efforts with Uniswap and Compound, where the treasury is used to pay developers and finance initiatives aimed at increasing the adoption of the underlying protocol.
It is important to note, though, that the management of the treasury doesn’t have to be limited to spending funds. The DAO will be a veritable investment manager of these funds and can decide to use them in the way it finds it most useful; for example, lending to other protocols, LP AMMs, farming, or other activities designed to extend the fund’s impact and wherewithal.
Initial seed funding for the treasury will consist of $1m worth of ZRX, which will be allocated directly from the Ecosystem Development Pool administered by 0x Labs. So that the treasury becomes self-sustaining, it is further intended that a portion of 0x protocol fees collected from protocol usage will be directed to the treasury in the future. 0x Labs, at its discretion, may also decide to allocate additional funds.
High-level overview of the voting process
The system is similar to the one used for the governance of Compound Protocol and Uniswap Treasury:
- Someone proposes a vote. We check they have enough stake by querying the Staking contract, and if it’s above some threshold we record the proposal / current epoch.
- Vote goes live throughout epoch+2. When someone casts a vote we simply query their balance in the staking contract. This will be constant throughout the epoch.
- When epoch+2+vote length completes the proposer calls some finalize function that distributes the funds if they met some quorum.
The role of bootstrap delegates
0x Labs intends to identify 5-7 individuals or entities to actively participate in helping to shape the governance of the treasury as stewards of the 0x DAO MVP. They are expected to:
- align with the 0x protocol mission of building a world where tokenized value can flow freely.
- be comfortable with being accountable for the good functioning of the protocol governance.
- make responsible decisions based on the interests of the community, including creating and championing proposals that gather consensus in temperature checks.
This is an important step in progressive decentralization of 0x protocol. These delegates will have enough voting power to create proposals independently based on discussions with other ZRX holders. They will not have the power to unilaterally make decisions, but will have the power to influence decision-making through their reputation and advocacy.
Current voting power snapshot
Currently, the voting power of ZRX holders is spread across large categories of actors as shown below. Approximately 47% is considered inactive for voting purposes, approximately 3% is staked and can be considered active, and the remainder is unknown.
|14%||Ecosystem Dev Pool||Inactive||Source of treasury seed funding|
|12%||Exchanges||Inactive||ZRX withdrawn from exchanges would become active|
|11%||0x Labs Team Vesting||Inactive||Vested ZRX already distributed to employees are active|
|3%||ZRX Vault||Active||ZRX staked in pools|
|50%||Unknown Addresses||Active||ZRX held on exchanges are inactive|
It is important to note as a frame of reference that staking pool operators control 50% of the vote for the ZRX staked in their pools, while the other 50% is controlled by the individual stakers in those pools. So in practice, pool operators have “overweight” voting power, which reflects how the system was designed, i.e., to amplify marketmaker interests as they are the main organic generator of protocol fees.
Proposed allocation to bootstrap delegators
It is desirable that a set of bootstrap delegates will be able to create proposals autonomously, without having to put capital upfront. This voting power will be delegated to them by 0x Labs.
Because no single entity should be in the position to unilaterally control the outcome of a vote, the voting power held by the largest stakeholder informs the decision on what this allocation should be. The staking pool with the highest voting power is currently Volleyfire, with approximately 7m ZRX worth of voting power (50% of their staked value).
Therefore, to counterweight the largest staking pool’s voting power, we propose that bootstrap delegates in aggregate be assigned an equal amount of voting power. For example, if there are 7 delegates, each delegate will control 1m in ZRX voting weight. Specific numbers will be determined based on the number of bootstrap delegates.
Furthermore, to encourage and facilitate diversity of representation, we propose that a minimum quorum threshold be established for proposal passage, which will initially be set at 10m ZRX.
Typical activities of a bootstrap delegate
As representatives of the larger community, bootstrap delegates are expected to actively participate in various activities that reflect and contribute to healthy discourse and governance.
Suggested activities include:
1 / Hang out in the 0x Discord
Currently, Discord is the community hub where most conversations, especially those not directly related to governance, take place. It is important to maintain an awareness of the themes, concerns, and emerging ideas that are being shared there to identify and inform opportunities for more formalized governance.
2 / Watch the 0x forum
To host conversations around how to use treasury funds, the 0x forum (https://forum.0xprotocol.org/) seems a better venue than Discord. Discord is a great venue for a continuous flow, but not good for making decisions.
Delegates should monitor the activity on the forum, respond to treasury-related questions, and periodically initiate conversations, especially when ideas are being surfaced on Discord that can be translated into a treasury proposal.
3 / Create new proposals
The most meaningful activity that bootstrap delegates can engage in is to craft proposals that enable stakeholders to evaluate and vote on important issues that will shape the future of the protocol. This is not to say that all proposals will be profound, but they all will contribute to improving something in the short or long term. Delegates have been chosen with the expectation that they value this privilege and responsibility and will act in the best interests of the community and the protocol by researching and laying out courses of action to enable informed consideration, even for ideas that they may not personally agree with or support.
4 / Be opinionated on open proposals
Delegates should publicly express their opinions on open proposals, even if not created by them. This could be as simple as leaving a short ‘in support / not in support’ comment on the forum where the discussion on the proposal is underway.
5 / Vote on proposals
Vote with their delegated voting power. This is a fundamental part of their role. Repeated abstention would be a ‘waste’ of voting power delegated by 0x Labs.
6 / Participate in other communities
Participating in other projects and social media creates added value through learning what is or isn’t working; gathering feedback; creating opportunities for synergy, advocacy, and integration; and accelerating ideation.
Q: How were delegates chosen?
A combination of reaching out to active ecosystem leaders and self-identification/nomination.
Q: How much time should I expect to commit?
A fair estimate would be 5-10 hours per week for delegates participating in all the activities listed above, but this will likely ebb and flow. However, delegates selected from the 0x ecosystem may choose to participate mainly by voting, which would decrease the time commitment significantly.
Q: What is the term of service (how long is this phase expected to last)?
We currently estimate a minimum of 6 months.
Q: Is there any compensation for my time and effort?
Delegates can expect to benefit indirectly from the outcomes that the treasury funding enables. Additionally, more direct financial compensation may be provided at some point in the future if approved by a governance vote. (See Synthetix and Uniswap for examples of compensated representatives.)
Q: Am I required to personally hold/stake a minimum number of ZRX to be a delegate?
Q: Under what conditions might my status as a delegate be revoked?
Delegate status may be revoked if there is an extended period of non-participation and/or malicious, disruptive behavior. A process will be put in place for periodic review.
Q: Will there be a standard proposal template to follow?
Yes; an industry-standard template will be adopted.
Q: Are any resources available to help with technical or operational feasibility evaluations and cost estimates?
We expect to be able to provide assistance, within reason and resource constraints. Additionally, we expect that a body of knowledge will accrue to facilitate these types of activities.
Q: I am one of the bootstrap delegates and I (or my team) runs an application using 0x. Can I propose grants towards my team?
The usage of the funds is not strictly enforced, and it is up to the community of holders and the other bootstrap delegators to assess the benefit and ROI of any proposal and express it through their votes.