Drama and FUD with Governance

Hi, this is Charles Hoskinson, broadcasting live from warm, sunny Colorado. Today is March 15th, the day after Pi Day, and I figured I’d make a quick video to talk a little bit about SIP 1694. We knew going into this process that a lot of people would immediately go to Twitter and say things that are materially untrue. The problem is that because people take things at face value, it tends to create a lot of drama where there really isn’t a need for that. I’m going to give you guys a quick example.

We had a workshop with a lot of great people in attendance. In fact, I’ll show the acknowledgments of how many people came. The output of that workshop has resulted in an update of SIP 1694, which just got posted a few days ago. I think it’s a huge improvement over the initial SIP that was proposed in November. The process moving forward, as stated before, is that members who attended that workshop have expressed interest in hosting their own workshops.

Other people in the community have also expressed interest in hosting SIP 1694 workshops. Over the next few months, that’s what will happen. People will spread out through the world, into Africa, Latin America, and Asia. I hope Australia steps up; come on, you Aussies! I want somebody to host a workshop there.

Everyone will follow the same format, and a lot of great information will come up. All that will be aggregated together for one final workshop in July to finalize the design of the SIP. If you go to the official source of truth for the SIP process, which is the Cardano Foundation SIP repository, you can see the SIPs and discussions about them. You’ll see proposals under review, listed for ease of navigation, and tentatively allocated numbers to avoid later clashes. Right at the bottom, there’s a proposal for entering the Voltaire phase.

If you click on it, it takes a little while to load, but you can see the rendered version right there. I have a PDF version of it that I converted from Markdown. It’s a bit long, but it goes through a lot of different ideas, and there’s an open process. For example, the workshop was responsible for adding governance action number seven, which was an oversight in the original design. You can take a look and see the people who attended the workshop.

This is publicly available; these are people exist, like Pi from Sunday Swap, Rick, Andrew Westberg, and others. They have diverse opinions, and the whole point of the workshop was to get their opinions, positive or negative. Then you see tweets like this about Voltaire: "Vote or lose your rewards." I feel it’s important to understand whose idea this is and why, and the conversations that led to it. We have been shut out.

A sanitized PR package from a closed-door meeting does not count. Okay, I guess that’s closed door, and more are happening. The outputs are public; I think we should have them by Friday, but we’ll see. Does that help anybody? Is that real conversation?

No. I see a lot of this floating around on Twitter; there’s a lot of drama. This is a representative sample; it’s not just one little tweet; there are hundreds of them. So where did this come from? Here’s the problem: What if you disagree with the entire government of Cardano?

How do you host a vote of no confidence? How do you have it kind of a temperature scale, where as more people disagree, more of the government starts shutting down? It starts losing power until eventually, it can’t do anything until people start agreeing with it. Imagine the United States: we have a House of Representatives, a legislative branch, an executive branch, and a judicial branch. With a nine percent approval rating for the legislative branch, a lot of people aren’t happy with the president or the Supreme Court.

So what if you had the power to say, “I have no confidence in the entirety of this government”? If ten of you got together, then stuff would start happening to the government, like discretionary spending stopping, or people not getting their paychecks on time. Eventually, a total recall occurs, and everybody is kicked out of the House of Representatives. New people have to be voted in, and the prior people are barred. This thought experiment led us to consider a system where something gets too hot and shuts down, requiring it to cool off for a bit.

Wouldn’t it be cool if you had a signal in the system to indicate there’s no confidence at all? Second, what if you want to stake your ADA but don’t want to participate in the D-Rep system? The system needs to know you’ve abstained. For example, let’s say you’re Binance, and you’re staking with your customers’ funds. This happens right now, but they have a policy not to participate; they’ll abstain but still stake.

Let’s say you want to participate, so you stake and delegate. What incentivizes people to pull one of those three levers? The easiest way to do that is to say if you either delegate, abstain (which means you’re not participating), or vote no confidence, you have to pull one of those three to claim stake rewards. You’ll notice something: this is a superset of the existing system. Option two is currently what we have: a 100 percent stake abstention because none of you are voting.

Options one and three are additional capabilities and features. It’s not forcing you to vote no; it’s just an additional flag built in to give you direct democracy. So, a vote of no confidence in the system as a whole also encourages people to delegate D-Reps. Why? Because the point of delegation is that you’re not entitled to money; you’re doing work.

The stake pool is doing work; blocks are being made. If no blocks were made, no rewards would be paid. The governance layer of the system is the maintenance of the system. The people who serve as D-Reps, that whole representative democracy thing, is basically the voting class that makes decisions on one of the seven governance events. That’s the whole concept of 1694 that’s being discussed and debated in an increasingly open way.

So then you go to Twitter and read it, and it’s just not there. You hear these things, and people have a knee-jerk reaction. It’s incredibly important for you to rise above the fray. How you do that is by going to the source of truth. Read SIP 1694 yourself.

Don’t just take a tweet or a YouTube video at face value. Instead, take a step back, take ten minutes, and read the SIP. You’ll be surprised; there’s a lot of nuance and balance there. Is it perfect? No, but it’s the minimum viable governance.

The only way we can get through this and get Voltaire out is by designing a system together that reflects the needs of everybody. Some people say it should be more than just one ADA for one vote; there should be other mechanisms in place. People who serve on terms on a constitutional committee may have no ADA; it’s a different decision mechanism, a different group of people that counterbalances the plutocratic arguments we have with the system. Some people say stake pool operators, because they have the most knowledge of infrastructure, should be involved whenever a major upgrade occurs. So, the idea we had last year of a 70 percent threshold for hard forks with stake pool operators was incorporated into the SIP by saying that if there’s a hard fork, the stake pool operators have to signal support for it.

You see, it’s a tripartite model, a compromise of some old and familiar things and completely new things. Here’s the reality of democracy: the vast majority of people just don’t care. It’s a fact. They have strong opinions at the bar, but how many of them actually run for office, get educated on the issues, attend town hall meetings, or contact their local representatives? They’re too busy paying bills, paying rent, dealing with family drama, raising kids, or trying to get ahead in life.

It’s no coincidence that the highest participation rate in politics tends to be among the elderly, because they’re retired and have the luxury of time, and the wealthy, because they also have the luxury of time. Everyday people find it hard to participate, which is why they vote so often, but the representatives do that work. The point of the system we’re crafting is to give a balance. If you want to be an activist, you can. If you want to have nothing to do with it, you can.

If you hate the whole thing and want it to burn to the ground, you have an option for that. If you just want to occasionally delegate to particular people of particular competencies or a political party, the stake pool operators party, you can do that. It leaves the option for a ton of community tooling to be constructed. Direct democracy and delegated representatives can have a lot more interplay with the people who’ve delegated them than a normal congressman does. For example, they can have a pub-sub channel that the community can construct, and we’ll probably have an RFP for this as community tooling is being constructed.

If they’re going to vote on something, you’ll get a vote dashboard and see how your D-Rep voted. They can push a poll to you and say, “Hey, I’m thinking about voting on this; what do you guys think?” You can vote yes or no and add an opinion. It’s kind of a digital town hall. If you don’t feel your D-Rep is responsive, you can fire them.

Why? Because you just go to another one; you just click a button and go somewhere else. Delegation portfolios allow you to delegate to a group of stake pools. You can have political parties and delegate to a group of D-Reps. We have all these ways for people to layer governance and all these dynamics that people will have.

The point of minimum viable governance is to give us something considerably better than where we’re at. It’s a little scary; it does require a bit of courage, and there are a lot of moving pieces to all of this. By the way, SIP 1694 discusses implementing various governance processes, but in my opinion, it assumes a fact that maybe shouldn’t be. The system needs to know that you abstained. Why?

Not voting already abstains. No, because when we talk about majority, you have to register to vote. What if we set a condition where 50 percent of the relative majority have to vote for it to pass? How do we know? What if two-thirds of the ADA is sitting in cold storage?

Hypothetically, technically speaking, unless it signals that it’s registered to vote, if we don’t have a mechanism for that, then you’ll never get to that 50 percent threshold. It’s physically impossible to do that. One more time, because this point is so important: there’s a difference between an absolute majority and a relative majority. If you don’t have a signaling mechanism to indicate what is the active voting stake, then you run into an issue where if anything requires a majority or supermajority of all stake, it may be physically impossible for anything to pass. Why?

Because more stake may be out of circulation than in circulation, and as a result, you can never get to the 50 percent threshold. In other words, the system can never converge by having an abstention mechanism that’s connected to the delegation mechanism. Then that the 74 percent of stake that’s currently active will have to be in one category or another: not participating, participating, or not liking the whole system. Because you have that mechanism, you can assume the other 26 percent is abstaining because they’re not connected to that. It’s an opt-in system for participation in governance.

We can get much better ratios about who registers. By the way, every democracy in the world has a registration step. You don’t just show up on Election Day and say, “I’m ready to vote.” There’s a registration step before you go, and they have you on the voter rolls. It’s that simple.

There’s no KYC; there’s none of that. I know the FUDsters talk about when you delegate, there’s an additional field that was proposed. From a user experience perspective, it’s pretty simple. Option two is right now what you do; it’s the default. If somebody was implementing this in a wallet, what you do is delegate to somebody.

Under the hood, it would abstain from the vote unless you go out of your way to delegate to somebody. You wouldn’t even see that abstention in practice; it’s just an additional flag inside the system. You’d only leave that “not participating” category when you make the decision to delegate to a D-Rep. Can you go back? Yep, at any time you want.

So, it just tells you which category you’re in. By having this, it gives a mechanism to actually have a vote of no confidence in the system, which means you have direct democracy. If you’re not happy with any of the government, the constitutional committee, the stake pool operators, or any of these things, you can click that button too. Why connect it to the withdrawing of rewards? It’ll ensure that the highest percentage of that 74 percent of delegated stake will do it, and they’ll show you the categories.

We want high participation as a system. It’s not truthful when people feign outrage. I hear a lot about how I should ignore the critics and be more patient. You have to understand there’s steel manning a fair argumentation, and then there’s just outright lies. It is a lie when you take something and knowingly misrepresent it.

If someone’s political position is pro-Second Amendment, and then somebody comes out and says that person wants to ban all handguns and rifles, that’s a polar opposite of their position. Would that not be a misrepresentation, a lie? Isn’t that what we hate about politics? Isn’t that why people don’t want to run for office? How are we as an ecosystem any better if we devolve into that?

Let’s be fair to each other. Now, you may disagree with this feature, but we have this issue of relative and absolute, how to set thresholds, and how to know if people are participating or not. You’re future-proofing the system by having a signaling system. You gain nothing from going without it; there’s no upside to that because it can be hidden from a user experience perspective in the wallet. You also remove the direct democracy component.

Now, as a user of Cardano, you no longer have a means of a vote of no confidence for the entire ecosystem. You lose that capability. Furthermore, what happens if you have very low participation, like 10 or 20 percent? Are you comfortable with only a small group of people, eight to ten percent, having total dominion over what happens in Cardano? What the reward function should be, the K parameter, who should be on the constitutional committee, when and how we hard fork withdrawals from the treasury?

Would you feel comfortable with that? Would you feel comfortable with five percent? Would you feel comfortable with one percent? Isn’t it in all of our best interests that it’s a large group of people? If you connect this to those trough staking rewards, then what’s going to happen is you’ll get around 70 percent participation.

People will actively engage inside the system. Why? Because they want to get their ADA. It’s very simple. It’ll either be abstain, participating, or no confidence; it’s your decision.

That was the proposal. Now, if you have a better idea, of course, that’s the point of the discussion and deliberation. But what you’ll find is that the enemy of good is better. The goal here is not to construct a perfect governance system. We will never be done; we will never finish.

We will never get anywhere as an ecosystem if all we do is bicker about small details. The point here is about a minimum viable governance system that is orders of magnitude better than what we currently have and is capable of upgrading itself. I just read an article the other day about GPT-4 from OpenAI. The research paper discussed the next version, GPT-5. Apparently, they’re using GPT-4 to help train GPT-5.

The prior version makes the new version, and the new version makes the next version. You have this exponential growth inside the system because everything gets more reliable. Similarly, when you talk about governance, that’s effectively what we’re doing here. Let’s think about the future together—three years, five years, ten years. Imagine a world where you have a governance class in the system that represents you: thousands of people who are diverse, all across the world, with different opinions, agendas, and beliefs, and that you have a say in that.

Imagine that collective group of people coming together and starting to open up Cardano, funding hundreds, if not thousands, of unique and interesting ideas, and embracing a much more nuanced roadmap than any one actor, no matter how brilliant, could do. We would have a superpower that no cryptocurrency in the entire industry has. Our rate of growth will be faster, our resilience will be greater, and because this government is made up of people from dozens, if not hundreds, of countries, Cardano will be nearly unstoppable. Even if one country bans it or if there are regulatory problems somewhere, the rest of the world is still there. Just like when China banned Bitcoin—did it really do anything to us here?

No, because it’s truly decentralized. This is how you achieve resilience, decentralization, growth, and representation. Now, it’s not a perfect model; it’s going to have to be improved. New features will have to be added, and new types of voting will be introduced. We have to think carefully about the seven different governance events and how they’re going to grow.

Political parties will inevitably form, and that’s the point. Every year, the government upgrades and updates itself. We can’t complain anymore. How many parties, how many bars, how many social events, how many family gatherings have you been to where you sit next to a person who complains about the government and the way things are, but they don’t do anything? This is our chance to actually do something productive, positive, and constructive.

The government we design here will one day be much better than any representative democracy on Earth—much more inclusive, agile, transparent, and ultimately effective. It will stand as a model for how to bring so many different kinds of people together and get them to do amazing things together. That’s the goal, but you have to start somewhere, and you have to start on a foundation of integrity and honesty. You can’t just go to Twitter and run your mouth; you have to participate. You have to talk about it, share your opinion, host a workshop, bring people together, and really think about what the authors, collaborators, and other people of these types of proposals are trying to accomplish.

Not a single person fully agrees on everything; not a single person wants everything.