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The Basics of CIP 1694: A Proposal for Decentralized Governance

Updated: May 7

Enabling decentralized decision-making, this new structure ensures a balanced, transparent, and accountable governance model where everybody plays a crucial role.


 The Voltaire era of Cardano is named in honor of François-Marie Arouet, one of the main representatives of the Enlightenment period, a period that emphasized the power of human reason and science.


 

Introduction


Since the beginning of the Voltaire era, the community has been actively working on creating Cardano's new decentralized governance system. The level of participation and feedback reflects everyone's strength and commitment to simplify and clarify the decision-making process in Cardano, promoting active community involvement and laying the groundwork for solid and transparent governance in the future.


What is CIP-1694?


CIP-1694 is named after Voltaire's birth year and serves as the focal point for the onset of Cardano's Voltaire era. It proposes a revision of Cardano's on-chain governance system to support Voltaire's new requirements, highlighting the introduction of two new fields in normal transactions: Governance Actions and Votes. Three distinct groups will be responsible for ratifying these governance actions with their votes: a constitutional committee, delegation representatives (DReps), and validator operators (SPOs); and ratified actions will be enacted on-chain, following well-defined rules.


This governance mechanism will be introduced gradually and will then gradually become more complex, going through debates and discussions by the various stakeholders of the Cardano community, including developers, stakeholders, academics, interest group operators, and others. Below are the latest developments in its development.


Motivation for Change


We are heading into the Voltaire era, laying the groundwork for decentralized decision-making in Cardano. This CIP describes a mechanism for on-chain governance that will support the Voltaire phase, providing a valuable and technically feasible first step. Additionally, it aims to serve as a starting point to continue community contributions and adapt the proposal to emerging governance needs.


Differences from Current Governance Design


As we know, Cardano's current on-chain governance mechanism - introduced in the Shelley era - allows for protocol parameter modifications and Ada transfers. Governance actions are initiated through special transactions that require governance key authorizations. However, this design has deficiencies, such as the lack of active participation from Ada holders and opacity in treasury movements.


The current design lacks active on-chain participation from Ada holders and does not differentiate between hard forks and other protocol changes. Treasury movements are difficult to track, and there is no document recording Cardano's guiding principles immutably.


Specifications of the new Governance Design


Cardano Constitution

The Cardano Constitution not only defines the platform's fundamental values and principles but also establishes a solid foundation for decision-making and decentralized governance. While this document is currently kept off-chain, it could evolve into a set of rules based on smart contracts in the future. For now, its primary function is to provide clear and unambiguous guidance on the values underpinning the Cardano ecosystem.


Constitutional Committee

This committee plays a crucial role in Cardano's governance process. It consists of selected members who oversee governance actions and ensure compliance with the Constitution. It is important to note that the Committee can be in a state of trust or lack of trust, affecting its ability to participate in governance decisions. The existence of a mechanism for its replacement ensures the continuity and integrity of the decision-making process.


Governance Actions

Governance actions are a central part of the system, allowing Ada holders to propose changes, express concerns, and make key decisions for the network's evolution. From no-confidence motions to Constitution updates, these actions encompass a wide range of possibilities and are governed by specific ratification and enactment rules.


Votes

Votes cast by the Constitutional Committee, Delegation Representatives (DReps), and Validator Operators (SPOs) are crucial in determining the fate of governance actions. Each vote is recorded and taken into account in the ratification process, ensuring active and diverse participation in decision-making.


Delegation Representatives (DReps)

DReps play a crucial role as community representatives in the voting process. Their ability to receive participation delegations and cast votes on behalf of Ada holders makes them key players in Cardano's decentralized governance. Furthermore, the implementation of incentive mechanisms ensures that DReps are fairly compensated for their contribution to the ecosystem.


 Art that represents Cardano's governance model and its incentive for the community to participate in decision making.

Cardano Improvement Proposal: Simplification and Clarity


Cardano's decentralized governance is strengthened by a new decision-making framework involving the Constitutional Committee and Delegation Representatives (DReps). While it may initially appear that the Committee has additional powers, its function is essential for ensuring a smooth transition to fully decentralized governance. The Constitutional Committee addresses the initial challenge of activating this new governance framework, ensuring that the system can evolve towards complete decentralization over time. Additionally, it serves as a mentor and advisor in long-term governance decisions, always maintaining coherence with the principles established in the Constitution.


Identity validation is deliberately not mentioned in this proposal to encourage participation without imposing unnecessary barriers. It is expected that the community will exercise its judgment when voting and delegating to those who provide some form of identification. To maximize participation in the governance process, it is proposed to reuse existing credentials for stake distribution, avoiding additional complexity for end users. Hard fork initiation is considered an independent action from protocol parameter updates, ensuring adequate planning and effective coordination among various network actors. Three levels of treasury withdrawal are established to effectively manage available funds and limit the number of projects funded in each round, avoiding system saturation.


A Step Towards the Future


This careful approach will ensure that the Cardano community, developers, projects, and other stakeholders have sufficient time to adapt. Once Cardano's decentralized governance trought CIP 1694 is confirmed and in operation, the blockchain will be in the hands of the community. This means that the Constitution Committee, Dreps, SPO, and other community members will be able to make proposals and submit them to a vote, turning the Cardano network into the first decentralized blockchain protocol controlled and managed by its community.


In conclusion, this proposal aims to lay the groundwork for solid and transparent governance in the future, promoting active community participation in the decision-making process within Cardano.


Stay tuned for updates!


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