MakerDAO passes new ‘constitution’ to formalize governance process

March 27, 2023 admin Cryptocurrency News 0

MakerDAO, the decentralized autonomous organization that governs the Dai (DAI) stablecoin, has passed a new proposed “constitution” intended to formalize governance processes and help prevent hostile actors from taking over the protocol, according to the official forum page for the proposal.

According to the proposal’s text, a constitution is needed because the Maker Protocol “relies on governance decisions by humans and institutions holding MKR tokens,” which can “expose weaknesses and vulnerabilities that can result in the failure of the Maker Protocol or the loss of user funds.”

To avoid this failure, the Maker Constitution engages in “alignment engineering” to “lock in the core commitments” of Maker’s community, the document said.

The governing document creates several categories of participants with different powers and responsibilities. For example, constitutional conservers (CCs) have the job of “facilitating and protecting the Maker Governance process” by ensuring that the constitution is followed by other participants. CCs can become constitutional voter committee members (CVCMs) or constitutional delegates (CDs).

CVCMs craft position documents for voters to consider, and CDs operate smart contracts that allow MKR holders to delegate their MKR without losing custody of their tokens.

Related: MakerDAO votes to keep USDC as primary collateral

Each office has powers to remove listings of officers from the app’s front end if they are believed to be violating the constitution. For example, a CD can ban a CVC from the front end if the CVC is believed to be deceiving the voters who are delegating to it.

The Maker constitution proposal passed with 76.04% of the MKR vote. Less than a quarter (23.95%) of MKR votes went against the proposal, and 0.01% abstained.

Despite the vote in its favor, some Maker users have openly criticized the constitution as being authoritarian. For example, the pseudonymous Twitter user PaperImperium has claimed that it forces users to be “muzzled and forbidden from communicating with anyone at or around Maker about Maker” due to restrictions it imposes on communications from constitutional delegates.

Maker’s constitution is one step in the process of creating what Maker founder Rune Christensen called the “Endgame Plan” for the protocol, which he believes will convert MakerDAO into a decentralized organization that keeps DAI stable as it potentially becomes the reserve currency for the world. End Game has been criticized by Andreessen Horowitz for doing too much too fast: the venture capital firm supports changing the protocol in a more piecemeal fashion.

DAI is an algorithmic stablecoin pegged to the U.S. Dollar. It temporarily lost its peg on March 11 due to fallout from a banking panic in the U.S., but then recovered it after MakerDAO passed emergency measures to limit the ability of users to mint DAI with USD Coin (USDC).