Thread by @Soorajksaju2

Governance is a crucial component of #Decentralization

This is something that #Bitcoin & #Ethreum conveniently ignore

But, #Cardano is built based on 1st principles & governance is a key focus of development

Here is a thread on Governance, Voltair era & Project Catalyst🧵👇

Like the way, democracy unshackled regular citizens to grab power from the feudal lords

#Bitcoin was the 1st movement

Enabling regular citizens to grab power from the flawed financial institutions

To create a fair, transparent & inclusive financial system

To bank the unbanked

But #Bitcoin has a fundamental flaw, which #Ethereum inherited

"Lack of Governance"

This lack of governance resulted in major community splits

Ethereum & Ethereum Classic as a result of a hack in 2016

Bitcoin & Bitcoin Cash over the debate of the network's scalability in 2017

If we are going to build the future of finance on Blockchain

Governance has to be integrated into the core architecture of the system

•To achieve consensus regarding the evolution of the system

•And to secure sustainable funding for the development of the system itself

So, what does governance mean in the context of blockchain?

It is a set of processes

That a community behind blockchain utilizes

To perform decision-making & converge the community to a widely accepted direction for the system to evolve

In a democratic & self-sustaining way

#Cardano is built based on 1st principles

While building #Cardano, IOG recognized the need for governance very early on

•That resulted in the envisioning of Voltaire development phase

•And the integration of a treasury system to #Cardano

So, what is the "Voltaire" era?

Voltaire era provides the final pieces required for #Cardano

To become a self-sustaining system, by introducing

•a voting & treasury system

Enabling network participants to shape the development of Cardano

Using their stake & voting rights

Voltaire era adds the ability for network participants to present Cardano Improvement Proposals (CIPs)

That can be voted on by stakeholders

By leveraging the already existing staking & delegation process

& a treasury system helps to fund the future development of #Cardano

Voltaire era aims to hand over the management of Cardano's development

From IOHK's management to the community

Enabling #Cardano network to become truly decentralized

& also to become a self-sustaining system that funds its own development

For long-term #Blockchain development & maintenance

Resolving the funding sustainability is of key importance

For that, a decentralized treasury system is necessary

#Cardano is one of the few #Blockchain with such a treasury system

So how does Cardano's treasury system work?

Cardano's Treasury is a decentralized pot/fund

That is replenished a little bit with each transaction

The Cardano treasury system is transparent & is financed from

•Donations

•A percentage of transaction fees

•A percentage of monetary expansion of each epoch

The outflow of funds from the #Cardano treasury is not yet decentralized

Although, it is more like a "MultiSig" wallet

Where keys to the treasury are to be held by 3 parties

•IOG (3 keys)

•Emurgo (2 keys)

•Cardano Foundation(CF) (2 keys)

You need 5 out of 7 keys to execute a transaction from the treasury

Currently, the keys belonging to CF are delegated to IOG

Giving IOG the "de facto" control over the treasury

The long-term goal is to fully decentralize this process

Where funds are under community control

@IOHK_Charles recently posted a video about roadmap & governance

On how to covert the current tripartite governance structure of #Cardano

Comprising of

•IOG

•Emurgo

•Cardano Foundation(CF)

To a decentralized "Members based Organisation"

@IOHK_Charles Currently, #Cardano treasury helps to fund

The biggest decentralized VC in #crypto: #ProjectCatalyst

One could follow the current status of funds in the Cardano treasury

Through "Cardano Blockchain Insights" 👇

bit.ly/3ypYbE2

@IOHK_Charles So what is #ProjectCatalyst?

#ProjectCatalyst is #Cardano's turbo-charged innovation engine

& one of the largest decentralized innovation funds in the world

Enabling #CardanoCommunity to share ideas & priorities for funding

Forming a cycle of sustainable & virtuous growth

@IOHK_Charles Every 12 weeks,

#ProjectCatalyst starts a fresh funding round for projects which are

•Creative

•Technical

•Business and

•Community-focused

Basically, Projects which are focused on enriching the #Cardano ecosystem

@IOHK_Charles From its inception,

#ProjectCatalyst has grown from a fund size of $250K in Fund1

To over $16m in Fund8

From Fund1 to Fund 8, Catalyst has processed

More than 3.5k proposals & cast over 1m votes

The active Catalyst community stands at over 52k members across 91 countries!

@IOHK_Charles So how exactly does #Projectcatalyst work?

What are the moving parts of #ProjectCatalyst?

Every funding round is further divided into different challenges

Basically,

A challenge identifies problems or areas for improvement within the #Cardano ecosystem

@IOHK_Charles A challenge is made up of

•Challenge brief

•Problem statement

•What success looks like & success metrics

•And an allocated amount available for funding

It also provides some guidance that proposers may need when proposing ideas to address that challenge

@IOHK_Charles Challenges go through three phases

•Innovation

•Governance

•and Execution

Within each phase, there are a number of stages for the

•Proposers

•Community advisors & voters

So let's dig a bit more into these stages!!👇

@IOHK_Charles The "Innovation Phase" comprises processes

Where the proposals go through stages such as

•Ideation

•Submition

•Refinement

•and Finalisation

Once finalized, the proposals get assessed by the Community Advisors (CAs)

@IOHK_Charles The proposals that have been assessed by the CAs

Then goes through the second round of filtration

i.e, Review by the Veteran Community Advisors (VCAs)

Once the proposals are reviewed by the VCAs

They are qualified to go to the Governance phase👇

@IOHK_Charles The "Governance Phase" comprises of

•Adding proposals to the voting system

•Registration of Voters

•Registration snapshot to record Cardano addresses that have registered to vote

•Voting

•finally, a voting snapshot to record all votes by the registered voting addresses

@IOHK_Charles Votes for each proposal are tallied to produce a voting result

Community-approved proposals then enter the "Execution Phase"

which includes,

•Rewarding voters & approved proposals

•A voluntary follow-up every 2 weeks by the projects on execution & delivery of the proposal

An astonishing 367 proposals were funded in Fund8 alone

And a total of 1000 ideas have received funding

Since the start of this experiment back in September 2020

All results & data relating to each and every funding round are published here: docs.google.com/spreadsheets/d……

#ProjectCatalyst is an amazing experiment

Trying to crack one of the most difficult problems

In the process of fully decentralizing a #Blockchain

As we are using a community-owned treasury to fund the experiment

Constructive criticism of the current process is necessary

•Lack of prioritization of projects/challenges

•Relatively small size of funding for certain challenges

•Lack of a process for recruiting & rewarding specialized CAs

•Lack of enforceable accountability on delivering the funded proposal

So let's go through it one by one👇

•Lack of prioritization of projects/challenges

VC-chains like #Avalanche and #Solana are laser-focused

In their approach to onboard & funding projects
#ProjectCatalyst lacks this kind of approach when it comes to

Recognizing & prioritizing the projects/challenges

•Relatively small size of funding for challenges

As of now the funds allocated for certain challenges are inadequate

Eg:Fund8 challenge: "Cardano scaling solutions" was allocated 1 million in $ADA

Which was inadequate to fund any meaningful scalability solutions for #Cardano