TLDR: Optimism’s valuable experiments in governance continue as the Foundation proposes to restructure the Governance Fund process by eliminating Governance Committees and creating a Grants Council.
Optimism is a leading Ethereum Layer 2 protocol, known as much for the success of its rollup design as for its public-goods-oriented ethos. Also notable is that governance in Optimism explicitly posits itself as an experiment. The Optimism Foundation regularly underscores the provisionality of its documents, rules, and procedures; the structure and approach of governance is emergent, and the assumption is that given appropriate participation by the community, governance will iterate and improve over time.
The Optimism Collective, formed in April of 2022, is an experiment in governance consisting of two co-equal “houses”: The Token House, which is comprised of OP token holders, and the Citizens’ House, which will be comprised of those who have been granted “citizenship”. Together the houses are “tasked with balancing short-term incentives with a long-term vision in the pursuit of the Optimistic Vision.” The first airdrop of the OP token (Airdrop #1, described here) initiated the Token House; the Citizens’ House will take shape at a later point.
The Token House began its governance work in June of 2022 with the Governance Fund. Season 1, which included three “Voting Cycles,” concluded on August 3rd. As is typical of the Collective’s thoughtful approach, this set of cycles was followed by a reflection period during which the community provided substantive feedback to help make the governance process better.
One thing that had become apparent to all involved was that the amount of time and attention needed to adequately review proposals during each Cycle was very high (some ~60 proposals of all kinds had been submitted since Phase 0), making informed participation in governance for delegates and token holders alike a major challenge. The solution proposed by the Optimism Foundation was to create a set of Governance Committees for Season 2. The idea was that the committees would make governance participation easier for delegates and token holders as they could rely on committee recommendations to guide their voting. This in turn would increase informed participation in governance — always the primary aim. The stated assumption was that delegates would vote according to committee recommendations — and if not, that delegates would publicly articulate reasons for their dissent.
It was a worthy experiment — but it ran into difficulties almost from the very start of Season 2. Various delegates argued about who belonged on which committee and why; some of these arguments devolved into personal attacks across Discourse and Discord, and factions began to take shape. (A Shadow Governance Committee was even formed in protest.) Conflicts between factions were often presented as philosophical or ethical but soon became entangled with financial questions as those involved applied to the Governance Fund or were accused of misusing or otherwise inappropriately profiting from previously awarded grants (by selling granted OP or self-delegating OP to maximize governance power).
Season 2 concluded on November 10, and the Optimism Collective is now in another period of reflection. The Foundation, having closely observed each of the voting cycles, had already posted concrete ideas to “course correct” Token House governance ahead of Season 3: a delegate code of conduct has been introduced; a Governance Fund Charter has been created to clarify purpose; a protocol delegation program has been designed to address self-delegation; and a Grants Council has been proposed to restructure the entire Governance Fund process (which would involve eliminating Governance Committees). We’ll focus on the Grants Council proposal here, as it could have a major impact if adopted.
On November 8th, the Optimism Foundation — stewards of Optimism’s Governance — introduced a proposal outlining the creation of a Grants Council. In the proposal, the Foundation illustrates the structure, responsibilities, membership criteria, budget, and implementation for the Grants Council. In essence, the council plans to take over the role of overseeing the current Governance Fund grant process.
The Council is to be structured as one entity with two smaller sub-committees. These sub-committees will be focused on two specific grant types, Builders and Growth Experiments. Their responsibilities include considering and passing any proposal that looks to “maximize the number of developers building on Optimism”. The Builders Sub-committee will work to bring more developers building on Optimism while the Growth Sub-committee will work to bring more users.
There will be one Council Lead, three elected community members in the Builders Sub-committee, and five elected community members in the Growth Experiments Sub-committee. (One delegate that previously served on a committee must serve in both committees.) The Council Lead role will be sourced from the community through an open application process with the Foundation ultimately having a final say. This leadership role will be compensated 35K OP per season. All other roles will be compensated 14K OP per season.
The council will have an initial budget of 5M OP for grant distribution. Any amount that is unspent during Season 3 will remain in the Governance Fund to be used in the future. This initial budget may fluctuate in future versions of the Council based on community feedback and approval.
This proposal will be voted on during the Special Voting Cycle 9a, a pre-season period that is focused on ratifying changes to the upcoming season. Off-chain governance votes require a 30% quorum. The Snapshot vote will take place from December 8th through the 21st.
The Grant Council will continue working closely with the Foundation for any of its administrative needs. This includes reviewing and approving operating expenses, conducting the KYC process for grant recipients, and administering the multi-sig for fund disbursement.
Goals for Season 3 have been outlined and include creating a more streamlined and consistent process for proposers, setting a pace for grant distributions, defining a clear scope, creating accountability via smaller grant sizes & milestone-based distributions, and reducing the workload on delegates so that they have more time to weigh in on high impact votes.
Season 3 at Optimim is tentatively scheduled to commence on January 19th, 2023.
If the Grants Council proposal succeeds, Season 3 will surely test its viability — as the previous Season did with Governance Committees. Key questions will be: How involved will delegates really be in Optimism governance if the Grants Council takes over the lion’s share of the Governance Fund process? (Something on the order of 14,000 wallets have voted in each proposal in recent cycles.) Will OP holders at large remain interested enough to participate in other Optimism governance processes? (The Foundation identifies several soon-to-come.) Will the Grants Council provide the needed clarity and structure for grant applicants as well as the wider community? Will the Council be able to create publicly assessable systems of accountability for grantees? And finally, will Council members be able to work through any internal conflicts productively?
The great virtue of the governance experiments happening among DAOs (and DAO-like organizations) is that fresh thinking can be brought to bear iteratively, with visible mechanisms in place to adapt, adjust, and improve rather quickly — and in public. Conflict is inevitable because humans are involved; the key is to make conflict productive by keeping the process open and engaging. This doesn’t happen of its own accord. Guidance and direction are needed as governance processes are bootstrapped to become increasingly self-sustaining. The Optimism Foundation is a model in this regard: Even in the face of bitter disputes and thorny problems, they hew closely to their vision, keeping the Collective deeply involved as better systems and processes are sought. Perhaps the Grants Council — and the other attendant changes mentioned above — will provide the solution the community needs; perhaps it won’t. Either way, the Collective has the ability to move forward with new concepts and structures — as long as community participation remains strong.