Compound Governance Process V0

Author: @Bobbay_StableNode

The “Compound Governance Process” is an all-in-one document for contributing to Compound DAO. This document will be continuously updated by Compound DAO contributors.

This document aims to provide an overview of the different roles, flows, and pathways for various stakeholders to participate in Compound DAO. It is a summary of resources compiled into one document.

Contents

  1. Governance Roles (Delegates, Delegators and Contributors)

  2. Governance Processes

  • Proposals
    • Compound Governor Proposals
    • Compound Improvement Proposals (CIPs)
  1. Working Groups
  2. Funding
  3. Voting
  • Proposal discussion
  • Quorum
  1. Changes to Governance
  2. Resources

Governance Roles

There are three key roles in Compound:

  • Delegates,
  • Delegators,
  • Contributors.

Delegates

Delegates have received voting power from other community members or through self-delegation. You can see the addresses ranked by voting weight (Only the top 100 delegates are shown). Anyone with more than 1% of COMP can propose a governance action.

Anyone can become a delegate; there is no application to fill out. Delegates can see their voting history by clicking on a profile.

Delegators

Delegators are community members who hold COMP but have entrusted their voting power to another person. The person they delegated their voting power to is considered a delegate.

Contributors

Contributors are community members who participate in and dedicate their time to Compound DAO. They participate by building on top of the Compound Protocol or for the DAO via grants or partnerships while working towards completing shared goals.

Governance Processes

The processes described in this section are an overview of the official ways to participate in Compound DAO, documenting the various paths for the lifecycle of a COMP holder, contributor or curious individual.

Most governance discussions occur on the official Compound Forum and Compound Discord.

Proposals

There are 4 types of proposals.

  • Compound Governor Proposals
  • Compound Improvement Proposals (CIPs)
    • Meta Process
    • Protocol Enhancement
    • Tooling & Support

Compound Governor Proposals

Compound Governor Proposals are used to authorize any smart contract executions such as Risk parameters, Comp distribution Parameters, primary modular contracts, and administrative functions (Reduce reserves, ERC-20 transfer)

Here is the life cycle of a Compound Governor Proposal.

Stage one (Idea): Post your proposal to Compound Forum under the “Proposal” Category.
Include enough information about how your potential proposal would impact Compound.

Stage two (Community Feedback): Using community feedback and an open mind, make any necessary changes to your proposal

Stage three (Compound Governor): Once your proposal has been approved by the community and you believe it has a high chance of success, it is recommended to move it to an on-chain vote.

Anyone with more than 1% of COMP can propose a proposal to Compound Governance. If you do not have enough COMP, you can request someone to post on your behalf. The Compound multisig can also white-list proposers for a set amount of time.

Compound Improvement Proposals

Compound Improvement Proposals describe the standards, processes, and enhancements to improve the governance protocol. Their main purpose is to improve the off-chain and on-chain governance of the Compound.

There are three types of CIPs, each with different pathways, which will be described below.

  1. Meta Process: Any process to be implemented or modified that better coordinates Compounds governance, development, or community efforts.
  2. Protocol Enhancement: This involves any changes to smart contracts that are involved in Compound Protocol and Governor
  3. Tooling & Support: This involves any additions or modifications to off-chain infrastructure, tooling, documentation, or other components that support the usage of Compound Protocol.
CIP Lifecycle

CIP Authors will start with an idea, draft that idea into a CIP document, request a peer review, and then move through an approval process with the Compound Working Group.

To request a review, link the CIP document in #governance channel in Compound Discord.

Ideas can be filed as issues on a commonly shared GitHub, similar to Ethereum PM. CIPs can be drafted as PRs and then request for a review to be added to the agenda for the biweekly Working Group meetings.

CIP Editors will provide feedback to CIPs. If any objections are raised to a CIP in its first meeting, it must address that feedback and request another review in a future meeting. In a CIP’s second meeting, if there are no objections OR a majority of Editors are in favor, the CIP is approved and then remains in the Last Call for 14 days before the implementation process begins.

Once past the Working Group, a CIP’s implementation path will diverge depending on its type:

  1. Meta Process CIPs will be approved by a majority Signal vote by COMP holders with no quorum. After this, they will become officially adopted as part of the Compound governance process that all COMP holders are expected to uphold.
  2. Protocol Enhancements will also need to pass through a Compound Governance vote just as any other smart contract change would.
  3. Other CIPs are left to the community to implement, which can include funding to be approved by a Grant Committee or any other entity willing to support them.
What belongs in a successful CIP?

Each CIP should have the following parts:

  • Preamble - RFC 822 style headers containing metadata about the CIP, including the CIP number, a short descriptive title (limited to a maximum of 44 characters), a description (limited to a maximum of 140 characters), and the author details.
  • Abstract - Abstract is a multi-sentence (short paragraph) technical summary. This should be a very terse and human-readable version of the specification section. Someone should be able to read only the abstract to get the gist of what this specification does.
  • Motivation - A motivation section should clearly explain why the existing protocol state is inadequate to address the problem that the CIP solves.
  • Proposal Details - One or more sections that thoroughly explain the technical solution and/or processes of the proposal. The specification should be detailed enough to allow for either a technical implementation or adoption of a governance process should the CIP be approved.
  • Rationale - The rationale describes what motivated the CIP and why a particular design or process decisions were made. It should include alternate designs/processes that were considered and related work, e.g. how the feature/process is implemented in other protocols. The rationale should discuss important objections or concerns raised during a discussion around the CIP, including technical and legal concerns.
  • Expected Impact - The CIP’s expected impact should list measurable results for how Compound will be improved by its implementation. It might also take note of the negative trade-offs mentioned in the Rationale section and demonstrate that they are outweighed by the positive effects.
  • Security Considerations (optional) - While not always required for “Meta Process” or “Tooling & Support” CIPs, every “Protocol Enhancement” must contain a section that discusses the security implications/considerations relevant to the proposed change.
  • Copyright Waiver - All CIPs must be in the public domain. The copyright waiver MUST link to the license file and use the following wording: Copyright and related rights waived via CC0.
CIP Formats and Templates

CIPs should be written in markdown format. There is a template to follow that will be established in a GitHub repository for tracking and approving all CIPs.

Working Group

There are no official working groups in Compound DAO, nor is there a working group template to enable this. There are service provider agreements between Compound DAO and Open Zeppelin, and between Compound DAO and Gauntlet.

A “Service Provider” template should be created to standardize the process. This would simplify the process for individuals or teams to get involved in the DAO.

Funding

Compound DAO has two pathways of funding:

  • Direct funding through governance
  • Compound Grants Program 2.0

Direct funding through governance

Service Providers can establish an agreement with Compound DAO in exchange for payment. Although this is not common practice within Compound DAO, this will be expanded upon once service providers are considered a common practice within Compound DAO.

Open Zeppelin is an example of a service provider to Compound DAO.

Compound Grants Program 2.0

The Compound Grants Program aims to tackle four domains; Multichain strategy, Developer Tooling, Security Tooling, and New Protocol Ideas & Dapps. Applicants will be able to apply to the program to receive funding directly.

If your idea does not fall within the stated domains, or if you have any questions about the grants program, please contact the team in the #grants channel in the Compound Discord.

Voting

Compound DAO enacts all protocol changes through Compound Governor. Proposals are executable code, not suggestions for the team or foundation to implement.

Once a proposal has been created, it is subject to a 3-day voting period. A proposal is only approved if it reaches the minimum quorum of 400,000 votes and has a majority. Once a proposal has been passed, it is automatically queued in the timelock and will be implemented after 2 days.

Changes to Governance

Any changes to the Compound Governance Process must be ratified by the community through a CIP (Meta Proposal).

Resources

Introduction to Compound Governance
Good Governance
Delegate Leaderboard
How-to-Delegate Guide
CIP-1
CIP-1 Template

6 Likes

@Bobbay_StableNode Should this be 400,000?

Amended it, thanks for catching that

1 Like

This is awesome @Bobbay_StableNode :slight_smile: Just one suggestion is to consider alternative terms for the funding mechanism labeled here as “Compound Treasury”. Its use in this document is consistent with how the word is used in other DAOs, but Compound Labs also offers an institution-facing product that they also call “Compound Treasury”. So this descriptor could potentially be confusing.

My impression is that Compound Labs shies away from referring to protocol reserves and yet-to-be-distributed COMP as a “treasury” since its primary purposes are insurance against bad debt (for non-COMP assets) and distribution of governance rights (for COMP).

Perhaps this funding category could be labeled “Direct funding through governance”

2 Likes

Ah yes, it slipped my mind, I amended it now to make it more clear!

This is really great work, Bobby!

2 Likes

Thanks for making this @Bobbay_StableNode! Would you be able to point me to where I could find out more about Compound’s “Working Group” and how they manage proposals internally or is this not disclosed?