Vertex DAO
Overview of the Vertex DAO structure.
The Vertex DAO provides the decentralized governance architecture for the Vertex Protocol – introducing the route that maximizes the decentralization of the protocol over time. The governance system aims to share the alignment between various participants within the Vertex ecosystem, protocol functionality, and the VRTX token as a core element to securing the protocol.
The Governance system of decentralized protocols derives from the reciprocity of community participation, incentives, regulation, and management.
DAOs have been increasingly popularized across various blockchains and communities, notably in the Ethereum ecosystem. The foundations of this enable the creation of automated, smart contracts for the ratification of various governance processes – allowing DAOs to operate. As described by Vitalik Buterin, 2014, a DAO “is an entity that lives on the internet and exists autonomously, but also heavily relies on hiring individuals to perform certain tasks that the automaton itself cannot do.”[1]
Governance of blockchains and protocols commonly refers to the specific and relevant details of how the code of a blockchain or protocol is changed. The ideology around blockchain governance has been influenced by developer culture, deriving from Bitcoin’s ideals of immutability, and trustlessness, resulting in the renowned phrase “code is law.”[2] This ideology has resulted in various implementations of “on-chain” and “off-chain” governance across various DAOs, with “off-chain” governance allowing the intervention of human participation in a less formal manner.
The imperative goal of the DAO is the deliverance of sustainable protocol growth and security, taking priority over any individual stakeholder. This goal is reflected in the principle design of Vertex’s decentralized governed protocol, attaining the Lockean understanding of the separation of arms of government, highlighted in Version 2 of Vertex DAO.[3]
Governance participants render decisions about new features and the direction of the Vertex Protocol, such as the integration of new functionality, protocol upgrades, and adjustment of risk parameters.
Decentralized administration of governance ensures the protocol can adjust to meet the demands and requirements of the market dynamically.
Governance will be introduced to VRTX token holders over a phased approach, firstly Version 1 and later transitioning to Version 2. Further details on the Vertex DAO governance launch will be released after Vertex’s V1 mainnet launch in Q1 2023.
Vertex Governance V1 is the protocol's first iteration of on-chain protocol governance. The governance format enables anyone to participate in governance discussions relative to the evolution of the protocol – providing VRTX token holders an avenue to govern the protocol based on the community’s voting.
Governance discussions are hosted on the Vertex Governance Forum. Anyone can discuss governance and proposals relevant to the protocol. A diagram illustrating the Vertex DAO governance flow is pictured below.
High-Level Display of the Governance Structure of the Vertex DAO
Graphical depiction of the governance forum flow from discussion to implementation.
Proposals: Governance proposals are hosted on the Vertex Governance Forum on Commonwealth. Anyone can write, publish, review, and feedback on proposals relevant to the protocol.
Proposals are simplified into two initial formats:
- Vertex Parameter Change (VPC)
- Proposals advocating to adjust protocol parameters, including risk, collateral, and liquidation.
- Vertex Improvement Proposal (VIP)
- Proposals advocating for the addition of new features and adjustments to existing features.
Governance Editors: Elected by Core Contributors, Editors maintain the ability to post polls and votes on the official Vertex Governance platforms.
- Once a proposal is ready (according to assigned document standardization requirements), proposal creators must signal Editors to post as a poll or vote accordingly.
Informal Polling [off-chain]: Vertex Protocol utilizes Snapshot for proposal polling. Snapshot is an off-chain, gasless governance solution.
- Informal Polls provide a structured form of feedback on proposals. Polls do not directly affect the protocol (e.g., parameter changes) but are instead used to measure sentiment around proposals.
- Governance Editors can post polls displayed on the official Vertex Snapshot on behalf of the DAO. This is to ensure a level of standardization and quality of presentation.
Voting [on-chain]: Voting controls various aspects of the Vertex Protocol.
- A wallet must hold and stake VRTX tokens to participate in on-chain voting. Holders can vote on changes to the system through voting.
- Voting power is calculated via a weighted voting system, where voting power is proportional to the amount of VRTX tokens staked.
- Governance Editors can publish votes displayed on the official Vertex Governance Forum on behalf of the DAO. This is to ensure a level of standardization and quality of presentation.
The Vertex DAO V2 update introduces a new governance model comprising several Sub Councils, formed via the selection of proficient DAO members working in tangent with Core Contributors of the protocol.
Core Contributors: Core contributors deliver valuable general and technical protocol work, implementing features and making changes to the protocol.
Sub-Councils: Sub-Councils are community-elected workforce divisions that oversee, manage and prioritize Vertex Governance. Each Sub Council is assigned specific aspects of Vertex Governance that cover a broad set of responsibilities and focus.
- More details on the organizational structure of Sub Councils as it pertains to subsets of DAO responsibilities will be published closer to the Vertex DAO launch.
Elections [nominee]: Sub-Council elections are open and occur on a rolling 3-month basis. Councils will have the ability to vote out non-committed council members during the council seating period.
- VRTX stakers (> 0.01 VRTX) can nominate themselves for a (singular) council position, submitting in tandem a governance pitch with their relevant experience and information.
Elections [voter]: VRTX stakers participate in electing Sub Council members. A wallet must hold and stake VRTX tokens to obtain voting power (Voting Power).
- Votes are counted quadratically, and at the end of an election period, the top-weighted nominees by votes will be elected for their respective sub-council position.
For more details on quadratic voting, please refer to Snapshot’s documentation on the subject of voting systems here.
The governance forum is where open conversations about Vertex protocol and potential changes to the DEX are discussed amongst community stakeholders.
Discussions: Dialogues are hosted on the Vertex Governance Forum. Anyone can discuss governance topics and proposals relevant to the protocol.
Proposals: Proposals are hosted on the Vertex Governance Forum, located on Commonwealth.
- Anyone can write, publish, review, and offer feedback on proposals relevant to the protocol. You do not need to stake VRTX tokens to participate in proposal feedback and other discussions on Commonwealth.
Governance Editors: Elected by Core Contributors. Editors can put up polls and votes on the official Vertex Governance platforms.
- Proposal creators must signal Editors once a proposal is ready (according to document standardization requirements) to post as a poll or vote.
Voting Power [V2]: Each xVRTX pledged will earn 0.02277 voVRTX per hour – up to a maximum score of 100 voVRTX per xVRTX. In effect, this means it will take 6 months to reach a maximum score.
- Boost ranges from 1X to 2.5X and will be calculated as follows:
Vote Boosting Formula
Voting [on-chain}: Voting controls various aspects of the Vertex Protocol. On-chain voting reflects the supreme verdict on prevailing topics under various circumstances, including but not limited to:
- Sub Council cannot meet quorum.
- Sub Council defers voting to DAO-wide vote.
- A wallet must hold and stake VRTX tokens to participate in on-chain voting. Holders can vote on changes to the protocol through voting.
- Voting power is calculated via a weighted voting system (refer to V2 voting power above).
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- 1.Vitalik Buterin, 2014. DAOs, DACs, DAs and More: An Incomplete Terminology Guide. ↑
- 2.Lawrence Lessig, Code and Other Laws of Cyberspace Version 2. (Basic Books, 2006). ↑
- 3.John Locke, *Two Treatises of Government* (London: Black Swan, 1690). ↑