Legislative governance

Legislative governance is the process of steering future behavior by planning and implementing changes to executive governance protocols in a DAO. Legislative goverance is one of three branches of governance under DGF. Legislative governance determines changes to the future behavior of smart contract parameters, smart contract logic, UI appearance and function, backend logic, the protocols for governance itself, and soft protocols.

The process of legislative governance follows a sequence of Validation Pools which allow members to register their opinion by voting with REP tokens. The sequence proceeds from loosely-coupled votes to tightly-coupled votes. Loosely-coupled votes encourages authentic deliberation and truth discovery, while tightly-coupled votes enforce timely resolution of any changes the DAO requires in response to changing markets.

Overview

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Legislative governance proposals

Legislative proposals follow the same mechanism set up for judicial governance proposals, they merely have different intent. A legislative governance proposal is future-oriented, whereas a judicial governance proposals past-oriented. An example legislative concern is to propose developement changes to the DAO, such as offering bounties for UI development, or suggesting an adjustment to the Work smart contract. An example judicial governance proposal would be to redress a grievance concerning how a member's action was overly rewarded or rewarded insufficiently.

System design

Example for dev bounty

Suppose a DAO wishes to offer a bounty for improving the UI, say to make the skin more attractive. The basic process would be to make a proposal to the DAO that they should pay a certain amount $\$b$, which could be claimed by anyone who satisfies the stipulations of the proposal. If the proposal is eventually accepted by the DAO according to the following legislative process, then the proposal would become an active smart contract which selects a developer for the job following DGF work flow. The funding of the proposal is also detailed below.

DGF work flow for claiming the bounty

DGF work flow.

Funding the bounty

First we assume the DAO enforces a ${\textstyle 10\%}$ global tax on all new REP value minted in the DAO. This number is not necessary for any particular DAO and the percentage is arbitrarily chosen for the purposes of illustration. By a ${\textstyle 10\%}$ tax, we mean that whenever new fees enter the system the amount of new REP minted is ${\textstyle 1.10*fee}$. In this case, ${\textstyle 1.10}$ is the minting ratio and the extra ${\textstyle 10\%}$ is the governance tax. We call it a tax, because if the newly minted tokens are not burned (see below) then they dilute the power of previous REP tokens, so that all members are affected, since their REP salary is diluted.

By fiat, the DAO requires that every new work smart contract (WSC) post which earns fees and REP must donate ${\textstyle 10\%}$ of the new REP to give power to posts dictated by the governance process. Governance posts are called proposals. New posts automatically reference approved proposals because the UI automates the process of fulfilling proposals.

The governance process is as follows. A proposal is submitted. If accepted the proposal becomes a promise. Future work posts donate their ${\textstyle 10\%}$ REP to fill all promises. When a promise is filled it becomes a fulfilled promise.

In greater detail: A proposal is a post submitted to the Validation Pool for gREP owners to consider. A proposal typically has 0 value at initiation and will onlyA proposal references other posts, donating and/or leaching, which entail a suggestion for redistribution of REP. In other words, a proposal has a set of references and number called its full potential. The full potential is the value it proposes to eventually receive by future work posts. The full potential and the references determine the actual value of REP redistribution of a proposal.

If the proposal is accepted by the DAO through a Validation Pool, then it becomes a promise. That is, a promise is a validated post in the Forum which has a set of references and a specified full potential. Typically a promise starts with 0 value, then subsequent work posts donate REP value to it until it reaches value equal to its full potential. Then the promise becomes a fulfilled promise. Before a promise is fulfilled, it is an unfulfilled promise.

The current WSC is continually updated to hold the set of unfulfilled promises. The worker UI parses the difference between the sets of fulfilled and unfulfilled promises. If there are no outstanding unfilled promises, then the UI automatically donates the ${\textstyle 10\%}$ governance tax from the work post to the incinerator.

Governance tax

The parameter $p=10\%$ in the above example is the governance tax. From the DGF model, the parameter $p$ is included in the minting ratio $m$. It can be chosen by the DAO to be any number $0\leq p<\infty$.

The governance tax is particularly equitable, since every worker pays precisely the same amount, relatively. Since every WSC donates the same ${\textstyle 10\%}$ to governance references, then the remaining REP every worker receives from a WSC has the same value by the quantity theory of money in economics. To illustrate this point, notice that if every members' REP holdings were arbitrarily doubled, then the salary each member receives would be unaffected.

The REP salary is unaffected by the ${\textstyle 10\%}$ of REP tax whenever it is incinerated, because there is no actual loss in REP salary, because everyone has the same governance tax for every WSC.

Similarly if governance equally redistributes REP within the Forum--meaning the amount leached from posts is equal to the amount donated to posts--then any member whose posts are not affected will not have any change in their REP salary.

The only time general REP salary is affected by the governance tax is when the reference donation and leaching is not equal. When donation is larger than leaching, then the REP salary of other members is decreased, since the total REP is increased, diluting the power of REP. When leaching is larger than donation, then the REP salary of other members is increased, since the total REP is decreased, which concentrates the power of REP. Therefore the effect on the salary is bound by the size of ${\textstyle p}$ and is typically much smaller. It is worth reiterating: governance tax REP sent to the incinerator is good for every member of the DAO.

So a tax of ${\textstyle p=10\%}$ does not affect the value of REP unless it is used to donate to new posts in excess of leaching, which should only be done to redress past mistakes.

Fairness

Regardless of the change in REP total, the tax affects every REP token equally, since the tax dilutes REP universally. Since every WSC post is required to donate at least ${\textstyle p=10\%}$ of its REP to governance, then that REP is available for revaluing the WDAG in response to governance proposals that the DAO approves, as long as the DAO is actually earning revenue.

Governance agility vs stability

Finally, the ${\textstyle p=10\%}$ parameter is arbitrary. Governance can decide to make ${\textstyle p=1\%}$ if the DAO wishes governance to move slower, or ${\textstyle p=200\%}$ if it desires faster governmental responses. A smaller number gives greater stability and less responsive regulation. A larger choice destabilizes the DAO and is a threat to security, but also makes the DAO more nimble and responsive to changes in the market and makes policing more effecting.

Example legislative proposals

• Proposal to change a smart contract's parameters
• Proposal to change a smart contract's logic
• Proposal to change the governance of a DAO
• Proposal to change soft protocols