Decentralized Organization’s (aka DAOs) have been over simplified to date. On the surface they may look simple, but there are many factors that go into a DO, and the infrastructure required to run one securely. The path from no token to a functioning and secure Decentralized Organization is anything but simple, especially when trying to act within the confines of very grey and unknown regulations.
With all the recent press on Solana DOs, we wanted to share more public documentation of decisions made to date, and a roadmap to get to true decentralization. To avoid reader paralysis we have omitted packing the nitty gritty details about governance parameters in this document. Additional information can be found on the docs site.
Full decentralization, as used in this document, means governed assets cannot be acted upon (transferred, changed, etc) without consensus from a distributed and diverse group of individuals/entities. Distributed and diverse encompasses geographical and geo-political diversification to avoid singular domicile risks.
Put simply, no individual person or company can control the DO or its assets.
The PSY token was launched via (extremely successful) IEOs on FTX and Gate. With an additional primary listing on AscendEX. But when we think about on-chain governance, IEOs probably are not the best method to get the tokens out there.
The IEO initial distribution method was chosen to ensure there were proper KYC processes and to limit core team risks. Removing these concerns and acting within the best intentions of current and potential future policies will set the DO up for long term success. These decisions are not easy as they create significant barriers in the short term.
PSY DO is currently running on SPL Governance
v2.X.X. It uses a two token system to allow ease of set up and initial use for a nascent community. Aside from the PSY community token, there is a council token. The council token was included in the DO with the intention of being used for quick updates to a protocol owned by the DO. This is really useful for situations like a critical bug being reported in a DO protocol, which requires a quiet and swift update to avoid adversarial attacks.
The council token acts as a glorified multi-sig. As of now there are 5 members whom are well dispersed geographically & geopolitically. Most governances where the council token use was intended have a 60% vote threshold, meaning 3/5 council members must vote YES on a proposal for it to pass.
This v2 SPL governance protocol has a few quirks that we have noticed. The biggest quirk, which will be fixed in v3, is governance parameters are shared between council mints and community mints. This means that a vote threshold of 20% on some proposal would only require 1 council member to vote YES and other members to abstain for them to pass proposal. This isn’t very decentralized. As there is no timeline for v3’s release we’ll need to mitigate these concerns in the near future.
The Serum DO graciously provided a 2m SRM grant to the PSY DO for our loyalty and continued efforts in the Serum ecosystem. With the deployment of PsyFi vaults V2 and the staking protocol, many community members would like to see SRM rewards incentivizing the use and education around the products. Based on PSY distribution analysis and considering which wallets are locked in centralized exchanges, decentralized exchanges, or locked from circulating supply, there’s slim to no chance the organization could rally more than 20m PSY into the governance protocol for voting.
Active community members have requested the council lower the governance parameters to a vote threshold of 0.2% (2m PSY) for the short term.
Progress: Governance param change has been passed. The council vote can be found here.
2.) Set up new PSY protocol council realm [Completed]
Given the issues with SPL Governance v2 highlighted above, the best short term step is to create a new protocol council Realm. This creates a glorified and transparent multi-sig in Realms that can control the mutable protocols created for the PSY DO. Creating this separate council will allow the PSY DO to remove the existing council token, making it easier to understand and set vote threshold parameters. It will also allow the council to swiftly update protocols without requiring public votes, which could alert adversaries of unpatched vulnerabilities.
We want to emphasize the protocol council would only have control over the protocols and no treasury accounts. Separate Realms means no commingled governance parameters, so there is no individual council member risk.
Note: All PSY DO protocols are open sourced and/or audited (some currently being audited), but the organization should prepare for all worst case scenarios.
New council members can be voted in (new council token minted) by existing council members. All members must have a significant locked stake in PSY. This aligns the council with the long term success of the PSY DO. More robust on-chain practices for a protocol council will be explored further, especially when private round lock ups expire in 4 years.
3.) [Start Aug 15, 2022] Create vesting tokens & distribute vesting tokens to contributors & investor wallets
PSY Token Emissions can be found here.
PSY DO has many incredible partners that seeded the initial Foundation and those investors deserve adequate voting power. Given all team members and private investors have a vesting schedule over 4 years, they make up a group of 30+ entities that have a long term outlook and vested interest in the success of the PSY DO.
To execute, we will use the Voter Stake Registry developed by our amazing friends at Mango DO. For each private investor & core team member individual wallet, deposit entries with the corresponding vesting dates will be created. The unlocks of those deposits will match the token emissions outlined in the original PSY emissions doc.
Note: *The creation and distribution of this token does not give any voting power. That comes in a following step with an update to the realm parameters.
*4.) [Start Aug 15, 2022] Update voting governance parameter to account for new voting power
Enabling 1:1 voting power for the vesting/locked tokens would increase voting supply to 400m votes. The largest individual entity would control 41.3m votes (4.13% of supply) As such, the vote threshold should be increased to 100m votes (10% of total supply).
This should set the DO up for passing votes, while ensuring no individual or entity has full control.
5.) [Start Aug 22, 2022] Propose & remove the council mint from the PSY DO
As mentioned in step 2, with the creation of a new protocol council realm the PSY DO realm can now remove the existing council token. This resolves the current issues and hesitations with using SPL Governance to its full extent and gives complete control of the realm to the PSY token holders.
6.) [Start August 26, 2022] Foundation deposits the remaining 590m PSY into the DO treasury.
After step 6, the risk of an adversarial council member taking over is mitigated and the rest of the PSY can be distributed into the treasury. With increased distribution and appropriate voting parameters the risk of an adversary should be sufficiently mitigated.
At this stage there is quality decentralization and infrastructure that allows the PSY hodlrs to influence and control the direction of the Decentralized Organization. The PSY protocol council solves for the ability to quietly and swiftly deploy security updates.