Citadel’s Vision for Decentralized & Autonomous Governance

Governance is one of the most critical undertakings for every society and organization. The structure and process of Governance has deep implications for the health of any ecosystem. Accordingly, Citadel DAO strives to establish decentralized, efficient, and sustainable Governance. To accomplish this, Governance will be performed by all parties involved in the DAO — team, community, and partners. With each party’s incentives aligned, Governance will act not as the walls for the DAO, but instead the rails.

History is filled with patterns of failing governance. It may seem this fate is almost inescapable. Most would agree the world today still struggles with inequality, conflict, and overreach. These issues can often be traced back to bad governance design and misaligned incentives of governors. These damning problems underscore the importance of rethinking how we organize ourselves, and should motivate our societies to do better.

Luckily, within the cryptocurrency space, there is a lot of optimism around the subject of governance. There is a notion that we can efficiently organize ourselves with minimal hierarchy. This is radical, but not impossible.

The debate between decentralization and centralization can be distilled into trade offs between ordered systems and chaotic systems. Ordered systems are predictable, safe, and can move quickly. On the other hand, entropic systems can be wild, experimental, and also unleash creative potential that could not be discovered otherwise. Citadel seeks to allow as much creativity, innovation, and potential to flow within the community and team without introducing extraordinary risk.

Citadel’s proposed model strives to bleed between the edges of chaos and order. This balance may be achieved with a few primary principles of governance:

1. Enabling the community to propose, shape, and execute decisions
2. Fostering as much innovation as possible without creating risk faults for the protocol
3. Isolating different governance operations and optimizing each based on the risks and rewards
4. Establishing a Roundtable to safeguard the health of the protocol
5. Align the incentives across the DAO

The best systems find harmony between order and chaos.

CitadelDAO Governance

Governance has all sorts of connotations. For our purposes, governance breaks into two primary functions:

1. Collectively making a decision
2. Executing said decision

Collective Decision Making

Decisions start as ideas which can be discussed in Discord as well as the Forum. As ideas gain traction, their drafts in the Forum have a Request For Feedback Period before formalizing as a Proposal to be brought to vote.

At launch, we are grouping and optimizing for three types of Proposals.

Citadel Strategy Proposals (CSPs)

Citadel Strategy Proposals can have one of four purposes:

1. To whitelist an asset for use in a Strategy
2. To implement a specific Strategy to utilize already whitelisted assets
3. To modify or cease an ongoing Strategy
4. Vote on Funding distribution for an epoch

• Votes on CSPs will be able to be delegated.

Citadel Roundtable Nominations (CRNs)

Citadel Roundtable Nominations occur under two circumstances — most nominations occur together once a year and will have a snapshot vote for the cohort. If the Roundtable is not filled, an additional nomination and vote can occur mid-cycle as well, outlined in the Forum’s RFF.

• The responsibilities of the Roundtable are outlined in the Nomination Proposal.
• Votes on CRNs will be able to be delegated.

The depth of this nomination structure is in the forum, and is currently amidst an ongoing Request or Feedback in the Discord. There we are discussing the inner workings of the responsibilities, guards, and optimizations for this.

Citadel Improvement Proposals (CIPs)

Citadel Improvement Proposals are general proposals to adjust DAO Policy as well as parameters to the protocol.

• Some examples of these general proposals would be to adopt components of this outlined DAO Governance structure.
• Eventually, parameter adjustments will be proposed with associated pull requests and be merged on vote completion. Successful votes move to Approved.
• Votes on CIPs will be able to be delegated.

Any Proposal type can be Proposed by anyone with at least 10,000 xCTDL delegated to their address. We anticipate this minimum being adjusted over time with CIPs as supply increases. As a measure of spam prevention, a given author will only be able to propose two proposals within a fourteen day span.

Voting will be performed via ranked choice voting, allowing each voter’s intent to be signaled most clearly.

Executing Decisions

The second part of governance is following through with the decision the DAO has made. Depending on the type of proposal, this will be done in various ways.

In technical cases like invoking a new Strategy, the process will be handled by core contributors and code will be confirmed, audited, and merged by the Roundtable. In other cases — defined within proposals — community can be empowered to take the lead. This intrinsically builds a path to scale the team and the DAO. The goal is to make this process as fluid and welcoming as possible. The more you wish to be involved, the more you can be involved in the DAO. On the other end of the spectrum, vote delegation enables more passive involvement.

This overall flow avoids friction where unnecessary, allowing the most common case — the ideal case — to move swiftly and efficiently.

The full Citadel Governance process is optimized to minimize friction for the best case. In the case where the Roundtable identifies risk or technical challenges, it is enabled to help guide and ensure the protocol’s safety.

Edge Cases

As seen above, the process is designed to be as minimalist as possible in the common case. The last few weeks we have circled around the finer details of this governance model to make sure we are prepared for edge cases:

1. The Roundtable will be able to support the process as it goes, but there is no formal stamping before a vote occurs. In leiu of this, votes can be prompted after a minimum duration of draft time by a delegate with a minimum amount of xCTDL. The duration of the draft and collaboration — which is set at three days to start — is an opportunity for the Roundtable (as well as everyone) to signal viability, risk concerns, et cetera.
2. As an initial safety net, the Roundtable will be able to vote to send a proposal back to draft if it puts the protocol health in jeopardy or implementation is not viable. The intention is to have a CIP to phase out this functionality once governance is established and running smoothly.
3. Snapshot authors and posters have a limit of two proposals per fourteen days to mitigate spam.
4. Votes will occur with ranked choice to best signal intent and allow degrees of confidence to be shown.

The Roundtable

One nuance to full decentralization is when it comes to Risk. When it comes to protocol-level code, Strategy Risk Frameworks, and emergencies, we intend to have a diverse group of individuals who will ensure the protocol’s safety, sustainability, and health.

We propose the creation of a Roundtable — a group of individuals with the responsibility to protect the protocol and treasury from risk. We want this to be a light layer of governance with the following responsibilities:

1. Code Review & Validation
2. Recommend Strategy Tiers for Citadel Strategy Proposals
   • This Tier will have implications on asset allocation for each strategy
   • These recommendations can range from preventing a Strategy to receive funding to endowing a Strategy with large allocations of assets and Funding.
3. Function as an emergency Pause button during dangerous moments

In the beginning, we anticipate the Roundtable to be comprised of various current contributors from the team, the Early Contributor Program, and Knights (Partners). Nominations for the Roundtable will be voted on at the beginning of each cycle. Mid-cycle nominations will have their own individual vote process. To avoid an overflow of members, we also think a limit is in order — to start, 10 Roundtable Members. As covered in the CRN RFF, pre-cycle nominations will be voted on together.

Roundtable Cycles will be set to last one calendar year — meaning a passing nominee will be part of the Roundtable for twelve months. We are hoping to have the first nominations cycle line up with the start of July and last until mid-year 2023.

As aforementioned, the Roundtable’s primary focus will be preserving the health of the protocol and mitigating the likelihood of emergencies. Interesting ideas have been brought up to decorate the role — such as minting NFTs for internal votes or compensating these roles. These ideas make interesting examples for early Citadel Improvement Proposals (CIPs).

If you’ve been an active DAO member to date with relevant skills, you may be a great candidate for the Roundtable!

Delegation

While some members of the DAO may want to be hands on, we also understand many xCTDL and vlCTDL holders will want to have a more passive participation in Governance.

For more passive xCTDL and vlCTDL holders, we will implement delegation to allow passive holders to pass their votes to other active DAO members for CRNs and CSPs.

This may be particularly wise in stages of Citadel’s future, for example if and when a meta game develops around Funding. In these cases, voters may be rewarded with bribes by protocols which want their Strategies to be well supported in the Citadel Strategy ecosystem. Delegation in this case will enable receiving bribe accumulation in a hands-off fashion.

The Importance of Aligned Incentives

In the cryptocurrency space, the notion of completely decentralized governance is seductive. Complete decentralization is high entropy — it can be wild, experimental, and also unleash maximum creative potential. With this type of system, there is also heightened amount of risk. The other end of the spectrum is complete centralization. These systems are highly predictable, safer, and can move quickly. To accomplish the optimal balance, we must consider and avoid the pitfalls of common governance models. It’s easy to summarize most issues as centralization flaws — but a layer deeper, the first order problem is usually misaligned incentives. Therefore, we want to emphasize the importance of creating a DAO and governing body with all participants aligned.

Consider a system with governing and governed individuals. In this system (pretty much ubiquitous throughout the planet’s history), civilian’s prosperity comes from the labor and value they create within the society. The other group, the governing group, receives and maintains prosperity commensurate to the amount of power they hold. That is to say, when governors are ‘career governors’ their success is reliant not on the wellbeing of the collective, but instead by themselves remaining in power. That’s quite dissonant from the goal of most societies. The goal of most societies is to achieve a sustainable, healthy, and prosperous economy while sacrificing minimal freedoms.

This flavor of totalitarianism — when governors are making policies that apply to other groups but not themselves — is oft the downfall of centralized governance. George Orwell understood this pattern and communicated the theme in Animal Farm beautifully. If you are familiar with this story, think back. If not, we want to highlight something that underscores a key tenant of sustainable governance.

The synopsis of Animal Farm relates to a revolution which occurs upon a farm ran by Jones, the human farmer. Jones used the animals to produce milk, wheat, and so forth. Jones kept the proceeds from the sales of the produce. In this case, Jones is effectively a centralized governor who governs the animals on the farm to perform work for his needs. All the prosperity from the farm is maintained by Jones. This scenario is great for Jones, but bad for the animals. Early in the novel, the animals revolt and overtake the farm in a successful revolution. “Two legs bad, four legs good” the animals proclaimed as they established an anti-hierarchical and decentralized farm. What happens next is human (and animal) nature, and is important to keep in mind to avoid the same mistakes.

While the system worked elegantly in the beginning, with the animals running the farm, in time the pigs — led by Napoleon — became dictators. What happened was a new governing body emerged and became dissonant from the rest of the farm. In other words, incentives became misaligned. While the story is about some farm animals, the message is extremely prescient, and has incredible implications: for a sociopolitical system to succeed, the governance must be ran by everyone. This is why over time we want to have an increasingly diverse and representative Roundtable.

Ideal governance has congruency between governing bodies and governed bodies. When this consistency exists, proposals tend to be most egalitarian.

This community-oriented ethos is instilled into the governing structure we propose for the DAO. For Citadel DAO to be the largest community-owned BTC treasury, and to flourish in it’s ventures to earn yield for CTDL holders while bettering the Bitcoin ecosystem as a whole, the DAO’s governance must be structured in a way that empowers all participants in the ecosystem. We believe this model does just that — optimizes creativity, innovation, safety, and sustainability —all the critical elements for a healthy Governance, DAO, and future.