The governance of cryptocurrency protocols continues to be an important design space in our fledgling industry.
As DAOs continue to experiment, we explore the pros and cons of governance design mechanisms, each providing data on how to best coordinate. Many of these mechanisms revolve around democratic principles - token holder voting, delegation, conviction voting, holographic consensus, etc.
Similarly, Tribe DAO pushes boundaries of its own, having successfully implemented an on-chain optimistic governance mechanism using Orca Pods.
Optimistic governance is one of many possible governance mechanisms. The premise flips traditional DAO governance on its head - instead of assuming dissent and asking for governance, it assumes consensus and asks for denial. You can think of it as an “express lane” for execution, with an empowered group of representatives enacting proposals under the watchful eye of token-holders who can veto any act.
DAOs may choose to employ optimistic governance for a number of reasons:
- Empowers a smaller group of high-context individuals to quickly ship proposals, while allowing the DAO to retain ultimate authority through veto
- Side-steps voter apathy by only engaging voters on vetoes and not approvals
- Removes the cognitive burden of gathering consensus from disparate token holders
- Fast tracks governance by reducing the time from proposition to execution
What is Tribe DAO?
- Fei Protocol: A decentralized stablecoin pegged to $1 USD
- Rari Capital Fuse: The open lending and interest rate protocol
- Turbo: A FEI liquidity accelerator and yield-sharing protocol
- Volt: An inflation-protected stablecoin pegged to $1 USD
- Midas Capital: A multichain-focused lending and interest rate protocol based on Fuse.
Together, all these products position Tribe DAO to create a vertically integrated DeFi stack.
How does Tribe DAO use Optimistic Governance
Tribe DAO has three governing layers: (1) Token Governance, (2) Optimistic Governance, (3) Security Guardian.
Token holders have the highest level of control over managing the protocol, as with many DeFi protocols that operate through token-weighted governance. Token governance operates through positive consent, requiring certain quorum and voting parameters in order to pass a proposal. Tribe DAO token governance activity can be seen on Tally.
For the reasons described above, Joey Santoro of Tribe DAO proposed a new governing structure within Tribe DAO: Optimistic pods. These pods are envisioned as working groups of high-context community members and experts sitting on a Gnosis Safe that are able to optimistically govern certain parts of the protocol by queuing transactions into a timelock - a smart contract that delays the execution of an on-chain transaction after a predetermined amount of time has passed..
The counterpart to optimistic pods is the Nope DAO. The Nope DAO is a sub-DAO within Tribe DAO that can veto any proposal that an optimistic pod has queued into the timelock. The Nope DAO works just like Token Governance except it has a lower quorum. If the Nope DAO successfully vetoes a proposal, that proposal must go through the standard DAO governance channels and receive a full DAO vote.
At inception, the only optimistic pod is the Tribal Council, a representative body of nine multi-sig signers. Any time five of these nine council members sign a transaction, the optimistic governance process kicks off, in which the Nope DAO can veto any proposal. You can see the Nope DAO’s governance activity on Tally and which transactions have been executed by the Council compared to the DAO.
The final part of Tribe DAO’s governance structure is the security guardian, an emergency multi-sig that can take limited security actions in case of a protocol emergency.
How Tribe DAO uses Pods for Optimistic Governance
What are Pods?
A common design pattern seen amongst DAOs are teams of people - governed by token holders and delegated responsibility - imbuing these teams with the authority to enact a certain mandate, be that managing a grants program, building a product, managing security, handling communications, etc. We’ve seen this pattern play out time and time again – Yearn, BanklessDAO, Tribe DAO, ENS, MakerDAO all employ this model for creating teams, empowered by token holders.
That’s why we built Orca Protocol, a way for DAOs to easily spin up working units while managing them through on-chain governance. We call these working units, Pods.
Technically, pods are a lightweight permissions layer around a Gnosis Safe multi-sig wallet, used to create more flexible and composable working units. Access to a pod is authorized through membership NFTs. These NFTs act like office keycards. When you swipe into your office, your keycard is validated against a set of permissions to see whether or not you have access. Changing key cards (adding new members or revoking access) is as simple as updating office access permissions.
Pods create on-chain structures, ensuring DAOs can benefit from the security, permissions, and autonomy of being on-chain while maintaining the flexibility of small working units. You can learn more about pods here.
How Tribe DAO uses Pods
Working closely with Tom Waite, who built the optimistic governance upgrade for Tribe DAO, we deployed each optimistic pod as an Orca pod that wraps around a Gnosis Safe, each with its own timelock to give time for any veto. Each pod member is granted an ERC-1155 NFT that grants them membership in the pod. Currently, the only pod is the Tribal Council with nine multi-sig signers, each elected through a DAO vote.
As pods are empowered to have optimistic governance control over protocol variables, Tribe DAO has implemented a sophisticated role permissions system, built using Open Zeppelin’s role-based access control contracts. This system gives the Tribal Council the on-chain authority to call certain functions, but can also be revoked through token-holder governance.
The final element of optimistic governance is the Timelock and Nope DAO. Whenever the Tribal Council chooses to execute a proposal, the transaction is placed in a 96-hour timelock during which the Nope DAO can create a proposal to veto. Should sufficient quorum and consensus be reached, the Nope DAO can execute an on-chain transaction that will veto the council proposal held in timelock. This workflow is very similar to the common Governor contract model.
Benefits of Pods
DAOs should always retain power over pods they create, such as Tribe DAO having the power to decide who sits on the Tribal Council or even revoking all permissions. In order to enforce these decisions on-chain, the Tribe DAO holds an admin key to the council pod.
These admin keys give Tribe DAO executive powers to manage pods, such as adding or removing members and managing fund access. Currently, the admin key has been given to a custom gateway contract.
By holding the admin key in this contract, $TRIBE token holders can hold on-chain votes and execute an administrative decision for pods, such as adding/removing council members.
Access to pods is authorized through membership NFTs (ERC 1155s). These NFTs are like keycards - replaceable keys with certain privileges that can be minted or burned based on pod needs. For Tribe DAO, each council member has been minted a pod membership NFT, giving them the ability to sign and execute transactions for pod-specific activities.
Permissions to add and revoke NFT membership are managed by the pod’s admin key. Because the Tribal Council key is given to a custom smart contract, council members are directly beholden to $TRIBE token holders and their votes. In other words, if Tribe DAO decides to elect or recall a council member, they can hold a vote whose decision is automatically enforced by the pod contracts.
A few weeks back, we wrote about Trustware vs Socialware in our blog post, but the premise is that there are two models for the assurances provided by governance:
- Socialware: Mechanisms that create assurances through human relationships, incurring a high social coordination cost
- Trustware: Mechanisms that create assurances through technology, incurring a low social coordination cost
Socialware consists of things like charters, constitutions, documented processes, and other systems that require careful human attention to coordinate around. Trustware uses technology to create assurances that are not subject to human fallibility.
Take, for example, a lemonade stand vs vending machine. The lemonade stand is socialware, as you wait by the table for people to come and purchase your drink. You create assurances that people will pay through human coordination - no one will steal lemonade if you are standing there and monitoring each transaction. Vending machines are trustware. It serves the same purpose as a lemonade stand, but the machine itself produces the assurances through technology. It’s much harder to steal when the rules are codified into a resilient physical machine.
Tribe DAO’s governance is sophisticated, employing a combination of token governance, optimistic governance, and veto powers. However, all of this governance is managed on-chain with minimal human management. Imagine the room for human error if Tribe DAO managed governance through Snapshot and relied on a multi-sig to execute Snapshot outcomes. This is a problem for DAOs that only use token-holder voting, let alone optimistic governance. The Pod + Timelock + Nope DAO contracts allow for Tribe DAO to manage their governance through a series of programmatic rules with little social coordination cost.
About Orca Protocol
Orca Protocol makes governance accessible by creating tools around a DAO’s most basic primitive: people.