A new constitution proposal will — if accepted — allow projects to easily opt-in to Q’s governance-as-a-service features. This is a major milestone towards Q’s mission to bring Shared Governance Security to Web3.
There is a Fundamental Constitution Proposal live on-chain: https://hq.q.org/governance/proposal/constitutionVoting/6
I believe this to be the most important proposal that the Q Protocol has seen to date: if accepted, it will enable projects to easily opt-in to Q’s governance-as-a-service features.
The proposal already introduces three concrete features which we know are major pain points of dApps and DAOs: protection of code upgrades, treasury oversight, and expert decision making oversight. It also lays the groundwork for more governance-as-a-service features being introduced by the Q community.
Voting on this proposal is possible until January 19th, 2024, so please check it out and cast your vote!
Q Constitution Update №6
Q Constitution Proposal №6 includes a set of substantive changes, stylistic changes, and technical changes. You can read about the details here. However, I would like to focus on one change in particular: the introduction of governance services to integrated applications.
The concept of integrated applications that share governance security was introduced in the Q White Paper. With the current constitution update, it fully comes to life. This presents an exciting new opportunity for projects to upgrade their security. It also provides a strong foundation for legitimate decentralization in the face of growing scrutiny from regulators around the globe towards Web3.
Background: Web3’s Governance Problems
The past two years saw a ridiculous number of exploits and value lost in the Web3 space. Many can be traced back to governance failures, which succeeded either through the manipulation of a project’s governance framework, or through the lack of such a framework. Terra Luna and Mango DAO are two well-known examples which come to mind.
Despite all the aspirational Whitepapers which espouse the benefits of decentralization and moving away from traditional control actors, true decentralization has not been achieved by many projects.
You may accuse me of being a jurisprude, but I believe that fundamentally, there are traditional concepts from law and institutional design which are crucial to the stability and security of a system which are often overlooked by overzealous crypto enthusiasts. While these concepts are not fool proof, they have stood the test of time, so ignore them at your own peril. These concepts are human discretion and anchoring checks and balances outside of the native organisation.
Human discretionary decision-making
On the human discretion front, this means that the current binary deterministic nature of decision-making processes in Web3 are not sufficient to cater to the range of use cases. Incomplete contract theory argues that the drafting of rules and laws must be general and principle-based to anticipate a variety of situations which cannot not be expressly provided for. This very much applies in Web3. Take a novelty glassmaking service DAO for example. It is not sufficient to code a smart contract which executes payment upon delivery as it cannot anticipate the myriads of situations which may arise and lead to dispute. What if the customer requests a glass vase that embodies the colour of the ocean, and the delivered vase is not in the appropriate shade? There is no code in the world which may anticipate for perfectly plausible human misunderstandings such as this. Yet these use cases and transactions already exist in Web3 and disputes from black-and-white smart contract design abound.
For Web3 to flourish and develop to accommodate the same level of diverse and rich use cases as we see in the off-chain world, it must find a way to move beyond “code is law” and integrate human discretionary decision-making.
This discretionary decision-making is already taking place at Q. The Q Root Node panel is integrated as the oversight body for key processes of decentralized blockchain governance such as validator slashings and decentralized code upgrades.
The new Constitution Proposal is now offering the Q Root Nodes’ human discretionary oversight to Web3 projects who find code insufficient in protecting their value proposition.
Anchoring checks and balances outside of the native organisation
In true jurisprude fashion, I must highlight that in every traditional Western institution, we do not trust the institution to govern itself. We rightly demand checks and balances. Examples include national bodies overseeing banks or the US Supreme Court having jurisdiction over the executive and legislative branch. The same should be applied in crypto: it is incredibly important for any Web3 project to anchor its governance security outside of the project itself to an impartial and incorruptible body which is tasked with preventing corruption and collusion.
While some may point to the governance token and argue that it is enough to have the governance token within the hands of the community, I would argue that there are several weaknesses to this.
The first weakness is the tyranny of the majority. Lido’s staking controversy is a known example of this. Of course, Lido community members themselves have argued that it would be nonsensical to abuse their position as such abuse would essentially tank their business by destroying the value of ETH. Nonetheless, from a governance and structural standpoint, this argument does not hold. Token holders can have their own agenda which may or may not be aligned with the original intention of the protocol. For a system to be structured in a stable, sustainable, and incorruptible manner, it must be designed in such a way that there cannot be a single point of failure where abuse of power through concentration of power is possible. Thus, Lido’s situation is prima facie unacceptable. While I would stand just shy of drawing analogies to historical tyrants that have led countries to ruin, I would argue that self-awareness and good intentions are not strong arguments against an inherently unstable governance structure.
The second weakness in anchoring governance security within governance tokens distributed to community members is more economic. The proposition is this: for a project to be secure, the disutility of expending capital to acquire the necessary amount of governance tokens must be greater than the utility which arises from any potential spoils that may be obtained from the project’s value. For this to be the case, the value of all governance tokens must be greater than the value which the project controls (this may include TVL, the project treasury or other elements). More often than not, this is not the case. And it is impossible to guarantee.
This is why Web3 projects should actively seek impartial bodies outside of themselves to secure their governance.
The Q Protocol has achieved this through its governance architecture, which includes the Q Root Nodes. As you may have read in #5 Basic Constitution Proposal, the intention behind the formation of the Q Root Node panel is to create an incorruptible group of individuals independent from any industry or jurisdiction who have a unique interest in fulfilling their duties of ensuring due process in the Q ecosystem.
Q Constitution Update: Introducing three standardized opt-in features to secure the governance of Web3 projects
This current Constitution proposal introduces three standardized opt-in features utilizing Q’s governance framework. Web3 projects can easily propose to be voted in by QGOV token holders as integrated applications on Q. In exchange for the service they receive, projects pay a governance fee.
These three opt-in features are protected code, expert decision-making, and treasury oversight.
This opt-in feature allows projects to conduct decentralised code upgrades while protecting key parts of their code vital to their mission from being inadvertently altered by malicious actors.
By integrating with Q’s governance framework, projects can create their own Constitution in which it may enshrine sections of protected code and identify the location of this code in its Constitution. An example of sections of code which certain projects may seek to protect is a liquid staking platform’s liquidity allocation algorithm.
The integrated application’s Constitution also provides for processes by which the project may employ internal voting processes to amend sections of the protected code if it wishes to improve on that key piece of technology. Thus, the project’s community retains its autonomy and flexibility and is not locked into a piece of code once it is integrated in the Constitution.
In the meantime, if members of the project agree to update other sections of the project code, they can pass this on to the Q Root Nodes for decentralized execution. The Root Nodes are obliged to exercise their discretion and examine the proposed code with reference to the code listed in the Constitution to ensure that no changes to the protected code can be made without due process and can veto any malicious attempts to sneak in fundamental changes to a project’s key functions through seemingly minor code changes.
Q Name Service has integrated this opt-in feature and receives Root Nodes’ protection of its pricing algorithm in return for paying governance fees to the Q Protocol.
This opt-in feature seeks to protect projects against points of centralization within projects. These can be internal expert panels, sub-DAOs, delegates with a specific task or similar. Since they are subset of the project’s community with a specific set of competencies and privileges, they are uniquely positioned for discretionary decision-making. However, they may be corrupted by internal or external actors who seek decisions in their favour.
An example of a Web3 project which wishes to taken advantage of this opt-in feature on Q is DeSci World. They are a DAO dedicated to the development and promotion of decentralized science away from the restrictions of traditional academia. They seek to support DeSci projects that hold the same values as them through the issuance of NFTs which signify the project’s success in meeting specific DeSci values and standards. However, the point of centralization in their project lies in their internal group of experts responsible for the issuance of these NFTs. Given that from a technical standpoint, NFT issuance is “arbitrary”, this is not something that can be solved by clever smart contract design. Therefore, they have turned to the Q governance framework for verification. The key here is that some things that cannot easily be detected technically are plainly visible to the human eye: for example, an official expert opinion which leads to the lyrics of Rick Astley’s iconic Never Gonna Give You Up, or a link to a site that has a paywall.
This opt-in feature allows for projects to introduce an element of external oversight against improper spending of its treasury, whether it is through misappropriation of funds for illegitimate purposes or overspending of the treasury beyond what is sustainable and accepted by the community.
Through this process, projects are able to subject spending decisions of internal actors, whether it be a designated expert panel or the community through a vote, and describe in its Constitution what documentation is needed as justification for this spending as well as what the limit is for each spend. Then, once a decision on treasury spending has been reached, Q Root Nodes may act as a final oversight for successful spending proposals that actually ran counter to the project’s Constitution — either because it does not provide the required justification for the spending or the spend actually exceeds a certain acceptable percentage of the treasury or value threshold. This Root Node oversight is especially helpful in protecting against issues of low voter engagement, voter fatigue, and 51% attacks.
DynaDAO has requested to take advantage of this feature in its treasury spending proposals aimed at supporting projects chosen by its community.