Budget

Hi, this is Charles Hoskinson broadcasting live from warm, sunny Colorado. I'm making a quick video to talk about budgets—everybody's favorite topic. Let me share my screen. There we go. So, right now, we have this constitution process currently underway.

Roughly speaking, about 50% of the people have voted yes. I have the numbers right here: 4.3% have voted no, and 44% have not voted yet of the six billion. This is active stake, and it's split up with abstains. The abstains mostly come from exchanges and custodians, although there are some no-confidence votes in there and some legitimate abstentions.

So, really, you have three things: the constitution, the roadmap, and the budget. What you're looking for there is integrity. Here is strategy, and here's execution. A two-year process exists here to get your integrity where it needs to be. People are really chasing this idea of minimum viable governance.

A lot of the people who voted yes as DPs didn’t vote yes because they love the constitution or think it's perfect. They voted yes with the hope that there would be a process where we aggregate as a community all the inputs and work hard on the next version, Constitution V2. That will be a combination of working groups and workshops, and it will get more inclusive over time while preserving the integrity of the original document. There are some things that need to be cleaned up. I believe at our current rate of progress, this will probably get done in February.

There's no indication that there will be a large voting block to vote no, but you never take anything for granted. There's obviously a campaign, and we're trying to just get it over the line. This kind of starts the Cardano governance. As for Cardano's roadmap, IO published a roadmap, and Intersect has a roadmap as well, but there are alternatives. We can ratify this through an info action.

The idea there is a basket of goodies, and there's an IOG blog post that summarizes the roadmap. We just had a meeting today with the SBOS about the roadmap as well. I’d say probably around mid-February, as the constitution stuff starts dying down, a lot of people will begin talking about the roadmap and asking if it makes sense. Do we really want to do these types of things? That's where you'll find things like Leos, for example, and the multi-client efforts.

We're working really hard to coordinate people, and people get excited about this. The budget is where all the controversial stuff comes in. That's because money goes to Bob, but sometimes money doesn’t go to Alice. In every budget process, there are winners and losers, and there's nothing you can do about that. There will always be more people wanting money than those who can receive it.

If this is the raw budget, what will end up happening is maybe this slice is the slice that gets funded, and this slice is the slice that doesn’t. Anytime that happens, anyone on the loser side tends to attack the legitimacy of the process as a whole. It's what all budgets do, and we have to accept that. The process that I recommended we follow is that we have two things to solve at the same time, which is unfortunate, but we have to solve them both. IOG and Intersect got together, and there's a budget working group.

A ton of intermediate documents have been worked on inside that group, discussing different ADA ranges, trade-offs of winners and losers, and different philosophies behind having to approach that. We came up with a concept called CEDC, which we'll talk about in a little bit. Intersect has committees made up of members working with OG and others. The idea is that we get to a date—my hope is the end of February. That's what I've asked the people for—and propose a budget.

Now, it's the Article A budget, not the budget. The budget is decided by the on-chain government; there's no one else who can decide that. You guys know what that is, and we're okay so far with the rest of that. What’s going to happen is competing budgets will be proposed, whether we want it or not. There will be Budget One, Budget Two, Budget Three, and it just keeps going.

Then, the DS and the Constitutional Committee need to get together and form a working group to discuss the reconciliation of all these budgets. The pieces of all the proposed budgets will come together, and then there will be a candidate budget that gets voted on. If it’s made up of the DS and the ICC, they are the ones who decide the budget. They have the power for that; that's their responsibility. When I said we have to solve two things at the same time, one is how we do the audit and oversight mechanism.

There are some ideas about smart contracts and audit agencies—there are all kinds of mechanisms we can use to resolve that. Part of this proposal includes an audit and oversight package. Then, there’s also this concept of funding coalitions, where you get your Dev, which is the Cardano Development Ecosystem Coalition, and you get your ecosystem. These are basically apps and projects in the ecosystem that have been around for a while and received Catalyst funding. People seem to like them and use them, so we need to make sure the budget takes care of them and their needs.

Is it perfect? No, but it’s a starting point. The heavy lifting is done here in the reconciliation and working group side of things. You need to bring a group of people together. This is where you’re also going to have your biggest fights because nothing is really decided here.

Some people will go to Twitter and grandstand, making dramatic statements. They might say, "This intermediate thing is the absolute final budget, and you've cut me out; you're a bad person." But we already fixed it here. It doesn’t matter; they’ll still say it’s terrible and that everyone is evil. That’s not where it gets decided; it’s decided during the reconciliation phase.

If you’re a DP, you’re part of that because, at the end of the day, you’re the one who has to put the whole budget together. We have to figure out frameworks for audit and oversight, frameworks for coalition building, and a way to aggregate alternative budgets. We also need to determine how long a working group process needs to operate for us to get through. What’s nice about having a constitution and a strategy ratified is that you’re looking at this from the lens of that strategy and that constitution. You’re asking if we’re violating any of our principles and if we think this is the most effective and efficient way of executing the strategy we’ve laid out.

Implicit within the budget is an endorsement of a particular strategy and a lens on how to do that. Then, obviously, there’s communication. You have to communicate what has been done to the community as a whole. We’ve helped facilitate this process, as has Intersect. IO is available to help host these working groups.

Many of you came to the office for the constitutional working groups and for SIP 1694. If it’s not at our place, we’re happy to help pay to bring people to a place to get these things done. Once we’ve established this process, it is reusable. The constitutional convention process, the roadmap consolidation process, the budget reconciliation process, and the audit and oversight process—all of these things are modules. We can run them, improve them, and version them.

This means the next time we do this, the entire thing will be significantly easier, a lot more fun, and less controversial. But the first time we do it, there’s no precedent, so nobody knows what’s legitimate and what’s not. We owe it to all the people, the winners and losers, to do it as ethically and honestly as we can. So don’t freak out; there’s a budget. There will be other budgets.

I’ve heard that the C is working on their own, and other people are working on budgets as well. That’s actually a good thing; it’s not a bad thing. The goal is reconciliation. You have to bring it all together. The DS listening are already thinking about this.

They have communication channels with each other and are working together very closely. At some point, after they see a collection of budgets and have had time to read and understand them, they’ll need to come together. I recommend doing this in person because in-person meetings build trust. You can do these things digitally, but the big difference is that by being together, you understand each other better, and you build trust as a result. You feel heard, listened to, and respected, even if you’re a small DP.

Bringing a representative sample of the larger DS together and getting them to build those relationships allows them to get the job done one way or another. Once that job is done, we get where we need to go. We have a budget, a roadmap, a constitution, and, more importantly, a process for how to do these things. It’s not easy; it really isn’t. Some people love the constitution, some people hate it, some love the process, and some hate the process.

But how do you build consent when you don’t have a consent engine? How do you get a document ratified or a governance system turned on-chain if there’s no pre-existing voting system that represents the people? It’s the bootstrap problem. By bootstrapping the government, we now have a mechanism that we can use for future changes that become more legitimate over time as they preserve the integrity of the system and make good or bad decisions. The hardest part is actually over; the constitution was the single hardest part, and SIP 1694 was the single hardest part.

We should expect fights; we should expect drama. Human nature is such that people are very passionate about things, and in some cases, incredibly unfair. They rob people of the benefit of the doubt. Because there’s politics, you will see grandstanding. You’ll see people know in their hearts that what they’re saying isn’t true, but they’ll say it for political purposes to gain points.

It is what it is, and that’s okay. That’s what politics is all about. Some people love that; some people hate it. I personally hate it; it’s really hard for me. I also know that I can’t do that forever, which is one of the reasons I didn’t want to be a member of the constitutional committee.

I tend to say what I think and do what I say, and politicians have a hard time with that. They’re always asking where the wind is blowing. It’s a popularity contest; you have to always stay popular. Knowing when to be in the room and when not to be is important. I’m taking an increasingly larger role in facilitation rather than execution of governance—creating spaces for governance to happen and environments for governance to grow, as opposed to being in charge of or running something inside of it.

We take less and less of a role month by month. This working group is a great example. Somebody’s going to convene it, and if people have financial trouble, I’ll help them get there. But at the end of the day, it’s a meeting for the DS, and we have no say in that. Their job is to help put all these pieces together, and the people who wrote these budgets will represent their cases for why they think certain things should be included.

At the end of the day, the DS and the Constitutional Committee are the ones that will vote and decide whether this is real or not. Intersect is a servant organization to the on-chain government. The on-chain government decides whether to fund Intersect, and Intersect does not make enough to survive without treasury funding. If you are a DP and feel that Intersect is not useful to you, then defund it. It’s not sitting on 600 million ADA and completely unaccountable to anybody.

The board is unelected, and it cannot survive indefinitely without community consent. It is a creature of community participation or lack thereof, and it has to make the case for its relevance year by year. When there’s a vote on protocol parameter changes, there should be someone at Intersect whose job it is to explain things objectively. They should be able to answer questions about the budget process and oversight. If they can’t answer those questions convincingly, you have to question whether they should be funded or not.

I say this as someone who helped found that organization. I believe they’re great people, and I think they’re doing a lot of work. But every one of them understands who they work for at the end of the day: the Cardano community. They are made up of the Cardano community, and their job is to serve it. Another part of the process is figuring out the communication relationship between the Constitutional Committee, the DPs, and Intersect, as well as how to work with those institutions and what they can do for governance support.

It’s part of the mandate of that organization; they think about it every day. Just a few things I wanted to talk about before I leave for the weekend. It’s important to understand that this is participatory governance built in a very bottom-up way. What you see is what you make. It’s not the U.

S. government, where you have no say and no power, and all you can do is be a spectator and complain. Cardano is built for its holders, and if you want something done, you often have to have some sort of role in that to push it along. I would like to see a budget pass. I would like to see a constitution pass.

I would like to see a product roadmap pass because I know that if those things can occur on an annual basis, I could disappear for 20 years, come back, and Cardano will be ten times the size. What I invested in the last ten years of my life will be sustainably here. I know that in my heart because I know that the system will get better every year, and it’s led by wise, great people. If these things can’t converge, then unfortunately, the system will stagnate, it will lose its people, and it won’t be here in 20 years. This is why I care and why I push so hard to get these things done.

It’s a legacy for me. I’d like to justify the last ten years of my life and say that I invested them wisely, and that we all worked together to create something great. I’d also like that system to have integrity. I do not want to wake up and see that system co-opted and controlled by a few entities or forking to remove people’s money or reverse transactions or all the maladies I’ve seen in the last 15 years in the cryptocurrency space. I don’t want Cardano to descend into that, which is why the constitution is so important to me.

If that process is properly followed, it gets a better constitution every year or every few years, and the integrity of the system is preserved. This is very important to me, and it’s worth all the money in the world to see this go through because it’s going to be how I’m judged for the rest of my life—whether I built good things or not, and the legacy I leave in terms of what those things do for society. If we achieve this, we have proven all the skeptics wrong. More importantly, we’ve taught humanity new ways to collaborate, build trust, and get things done in a totally decentralized way. It may be lost on some, but those who study governance, especially how to build governments, may realize that Cardano actually doesn’t have an executive branch.

Traditionally, in governments, you have an executive branch, a legislative branch, and some form of judicial branch. The balance of power between them varies from country to country, but typically you have those three functions. You’ll notice we only have two of the three. We kind of have a judicial function with the Constitutional Committee, but for the most part, we just have a legislative branch. The executive function is an emergent property of the people, which means there are no official organizations, no founding entities, and no one with statutory authority above others.

Every single part of it is completely bottom-up. Most people say you cannot run a government without an executive function. If Cardano is successful, we have not just proven that for a cryptocurrency; we’ve proven that for any governing structure—a corporation, a nation-state, you name it. We’ve done it. Imagine the kind of world we could live in without CEOs, presidents, and kings.

Imagine how much fairer the world would be if that were the case. Part of my legacy is proving things, and this is one of the things I really want to prove. I want to get this done. I figured I’d make a quick video for you guys before I head out to show you where my thoughts are at and say we’re actually all on schedule as an ecosystem. For the most part, things are looking pretty good.

I’m happy about where we’re going, and there’s a lot to do, but everybody’s kind of picking up a shovel and getting it done. I’m really proud of the DPs, and I’m really proud of the Constitutional Committee members. I think they’re asking the right questions, having the right conversations, and managing their newfound responsibilities quite well. All things considered, Cardano is a shining beacon for these things. Thank you guys so much for listening, and I’ll see you on the other side.

Cheers!