Decentralization is one of the core principles that drives the work we do at NuCypher. It is more than a type of mere network architecture – it’s also a tool to shift power to individuals, and a way to understand and reason about how communities can work and thrive.
In line with these values, we are excited to announce that governance in the NuCypher Network will be decentralized from genesis. To this end, we introduce the NuCypher DAO, a Decentralized Autonomous Organization to rule over the NuCypher Network, powered by the Aragon project.
The NuCypher DAO comprises the core stakeholders: the stakers that put up resources to run nodes for the network and serve users. NuCypher stakers will be able to validate issues, proposals, and changes that affect the daily operation of the network, with validation power directly proportional to the amount of tokens staked. These issues include proposed smart contract upgrades, changes to the global fee rates, and adjustments to other parameters of the NuCypher protocol and the NuCypher DAO itself. Additionally, all NuCypher stakers will be able to make such proposals to the DAO, regardless of the size of their stake.
Why a DAO?
The concept of “governance” in the context of a distributed network based upon Ethereum hinges on who has control over the smart contracts that define and enforce the rules of the network. In a project with a centralized approach to governance, ownership of smart contracts remains with the development team, a foundation, or some similar entity. Some projects may introduce some steps towards decentralization, like using a MultiSig involving third-parties. None of these approaches, however, is sufficient if we aspire to act in the true spirit of decentralization.
A truly decentralized approach to governance would try, instead, to shift power and oversight to participants, creating a community united towards a common goal, without relying on a central “authority” to make and enforce decisions. In this context, DAOs have played a fundamental role and there are several projects that have fully embraced this approach in the last few years. Some notable examples are Maker DAO, Decentraland and Giveth.
In the case of our network, the NuCypher DAO will be the actual owner of the network’s smart contracts, and all decision-making in the DAO will belong to the community of stakers.
How does NuCypher DAO work?
Internally, the NuCypher DAO is powered by Aragon OS, which provides a secure and well-engineered implementation for DAOs based on Ethereum, and an intuitive user interface to interact with them. A central part of this DAO architecture is the Agent, a smart contract capable of executing proposals validated by the community of stakers. The NuCypher Network's smart contracts are owned by the Agent, which, in turn, is configured in such a way that it only executes actions that are validated by a majority of the staking community.
For NuCypher stakers, the process of validating proposals is very straightforward. Each time a staker makes a proposal to the community, all stakers have the chance to validate that proposal:
Clicking on "Yes" or "No" triggers an Ethereum transaction signaling each staker's opinion on the proposal. Depending on whether a quorum is reached, proposals may be validated rejected. If they validated, they can take immediate effect on the NuCypher Network via the Agent.
Note that not all proposals necessarily aim to produce on-chain effects on the network's smart contracts; some proposals may seek to consolidate a current of thought among stakers. For example, deciding on new directions for the network, or collecting the community's sentiment about some past event or decision.
Let us know what you think
We believe that introducing a DAO is the way forward for the NuCypher Network. It facilitates the ability for the entire staking community to propose and make decisions on the future of the network. Such a system distributes decision-making across its community and ensures that no single entity has the power to make unilateral decisions.
As we get closer to our Mainnet Launch🚀, we will give you more information on how to participate in the NuCypher DAO. In the meantime, we're preparing a test DAO in our IBEX testnet. Since you need to be a staker to be part of the DAO, we launched a test WorkLock that will be open for participation until Friday 19th, 23:59 UTC. You can find a guide for the WorkLock CLI here . Make sure you use ibex as the network, an Ethereum provider connected to Rinkeby, and our latest release of nucypher (version 2.1.0b12).
There are still some open questions like "For how long should proposals be open?", or "What percentage of stakers should be required to validate a proposal?". We’d love to hear what you think about these questions or about NuCypher DAO in general. Reach us on Discord in the #nucypher-dao channel or Twitter.
Finally, many thanks to Aaron Foster, Brett Sun, and the rest of Aragon’s team that helped us throughout this process.