Hello, I’m Jorge, a co-founder of Aragon and CEO at Aragon One, the company that has developed most of Aragon’s infrastructure to date.
My co-founder Luis and I always dreamed our software would knock down the artificial barriers randomly assigned to those less fortunate than us in the birthplace lottery. You can read some of the ideological background driving our work in the Aragon Manifesto or the story of Maria.
While getting there is the end goal, we are well aware that it is going take many years, and we are fine with that. A medium term goal that we set our efforts towards was to have Aragon be the backend for a second stab at The DAO. A true decentralized and autonomous organization with a decent scale for it to be able to have an impact on whatever it set its attention towards. Reviving this big DAO was one of the reasons why we decided to rebuild Aragon from scratch in 2017 to focus on DAO infrastructure, rather than ‘companies on the blockchain’ as we were doing when the project was started.
I have been following yearn and YFI for some time now, but it wasn’t until fairly recently it clicked for me that yearn and this community have the best shot at actually becoming The DAO v2. As soon as I understood that, I bought myself some YFI (less and more expensive than ideal lol) and the Aragon Association took on a small YFI position and converted a fair amount of USDC into yyCRV.
For all the above and the amazing collaborations that both DAOs could do in the future, we are stoked to make a proposal to the yearn community in order to take its governance process to be fully binding on-chain.
Snapshot is the off-chain voting system built by Balancer Labs currently used by the yearn community for polling. A combination of increasing gas prices (which turned on-chain voting into a stupidly expensive activity) and an outstanding user experience have made Snapshot the de-facto pick for the increasing amount of projects that want to decentralize their governance.
While a fantastic experience, those using Snapshot today rely on a trusted entity (generally a multisig formed by reputable individuals) to actually transform the will of token holders into an on-chain action. This is fine for bootstrapping early projects, but it becomes a risk for big and influential DAOs like yearn, as there’s no guarantee the multisig will follow vote results, and there’s nothing at stake other than social capital. There’s also potential legal liability that the signers take on for nothing in return.
Aragon Agreements allows the introduction of human subjectivity into DAO governance. Originally conceived as a solution to the classic 51% attack in DAOs, it brings the advantages of fiduciary responsibilities to unstoppable organizations while allowing for pseudo-anonymous actors.
More generally, Agreements allow DAOs to be controlled not only by their dry smart contract code but also by wet code in human interpretable documents. By attaching an agreement to a DAO, one can define extra rules in the DAO that would either be hard to implement in code (months of development and potential bugs) or are impossible to compute (e.g., Is this proposal against our Manifesto?)
Agreements work optimistically, the smart contract code assumes all actions comply with the agreement until someone challenges an action. When an action is disputed, Aragon Court is invoked, a decentralized jury is drafted to rule, and cryptoeconomic incentives ensure that those jurors will converge in the most reasonable outcome for the dispute. After the court rules, the party in the wrong loses some collateral to the party in the right.
At the end of the very first announcement of Aragon Agreements back in February, I wrote about how DAOs could take all their voting and governance process off-chain by leveraging Agreements.
The idea is very simple. A DAO can allow any action (e.g., transfer assets, tweak a protocol param) to be executed if and only if there has been off-chain approval for it following a voting process specified in plain English in the agreement of the DAO. The action is queued for a certain amount of time before it is cleared for execution. During this delay, anyone can challenge the action if it doesn’t follow due process and therefore, shouldn’t be executed. Both the submitter and the challenger have some collateral at stake, and Aragon Court makes a ruling on whether the action should go forward or not. Whoever the jurors find to be in the wrong loses a substantial amount of money (this amount is configurable by the DAO), deterring attacks and trolling.
We call this optimistic voting since, in the regular flow that rational actors follow, actions will only be submitted to the DAO if the process has been followed and the action has been approved. Submitting illegitimate actions should be very expensive to deter spam. If the mechanism works correctly, Aragon Court will not be used. It just needs to be there as a deterrent to ensure everyone behaves, and the governance process runs smoothly.
For users, Snapshot has two new features: the ability to attach Ethereum actions to each of the results in a vote and a button to execute the winning action when the vote ends.
In practice, when a DAO uses Snapshot + Agreements for its governance, as soon as a vote is approved, anyone can submit the action to the blockchain, signing a crypto agreement certifying that the community has properly approved the action. They need to put up some collateral that will be returned once the action is executed along with their signature.
The action will be queued up for some time, allowing anyone to see what will be executed and dispute it if needed. If a dispute doesn’t happen in this time window, anyone can click a button to make the DAO execute the action approved in Snapshot.
The majority of token holders will have the same experience using Snapshot as before, with the only difference being that their vote is a binding command to the DAO.
As a bonus, thanks to Aragon Agent and EVMScripts, an off-chain vote can make the DAO perform several actions simultaneously in an atomic manner. For example, a vote could trigger the YFI treasury to withdraw yyCRV from Curve, convert into USDC, exchange it for YFI on Uniswap and burn it. All in one vote that happens off-chain.
Astute readers might be thinking that using this is dangerous since it creates a critical dependency on Aragon Court. In fact, using the mechanism as described above would make yearn’s governance directly depend on Aragon Court’s security and, by extension, Aragon Network DAO’s governance (as the DAO that governs Aragon Court).
Aragon Court’s security is a function of its market cap. While difficult to determine the multiplier over ANJ’s (Aragon Court’s work token) market cap that Aragon Court can safely secure, YFI’s $1.2B market cap is definitely over the threshold (see Aragon Court cryptoeconomic considerations).
Aragon Court needs to be able to secure protocols and DAOs that are more valuable than its own market cap. We are approaching this from two different angles:
- Multisig veto power: by giving the current yearn multisig veto power over any action that gets submitted regardless of Aragon Court’s approval for the action, the yearn community will maintain same amount of security it has right now with multisig enactment, plus the added benefit that the multisig cannot perform arbitrary actions. We strongly recommend using multisig veto until the next stage is ready.
- Governance insurance: akin to smart contract insurance, the Aragon Network DAO could offer insurance to DAOs so that they could be compensated in case a governance failure or an Aragon Court attack causes a malicious action to happen. This way, ANJ’s market cap becomes less relevant with regards to security, since the DAO has the certainty it will be compensated if the Court fails.
Apart from governance and cryptoeconomic security, we take smart contract security very seriously at Aragon. Our current system has been live since October 2018, Aragon AUM fluctuates between $200-400M depending on the day and the total value governed (combined market cap of protocols that use Aragon for its governance) well above $3B. Aragon’s vast codebase has never been hacked or been found to contain critical vulnerabilities in production.
Aragon Agreements introduces a fair amount of new code, currently being audited by Coinspect (auditors of Zcash, WBTC, Grin and the Solidity compiler itself), and will be subject to a $250k bug bounty program upon its imminent release. This audit will be finished before the end of September. We intend to deploy our own DAO using practically the same code around that time.
The core technologies, aragonOS and Aragon Court, also have an ongoing bug bounty program, and have passed the test of time so far.
Apart from being very excited about Aragon potentially being used to power the most exciting DAO yet, this integration will certainly benefit the Aragon community and should lead to ANT value appreciation.
Due to the optimistic approach described above, the better Aragon Court works and people trust it, the less it will be used, except for those who love losing money. If Aragon Court jurors just make money on dispute fees (as other dispute resolution protocols do), the better they do their job, the less money they will earn.
The way we tackled this counterintuitive feedback loop was by introducing transaction fees for every disputable action. If jurors see that a DAO attempts to bypass those fees, the Court will simply not rule on this DAO’s disputes, effectively not protecting it. These transaction fees allow Aragon Court to make decent revenue for protecting DAOs even if disputes are never raised. This revenue is split among active jurors relative to their stake, even if they are never drafted to adjudicate a dispute. Also, the Aragon Network DAO can activate revenue sharing between jurors and the AN DAO itself, directly profiting from transaction fees.
This fee model means that every time someone submits a Snapshot vote on-chain, the submitter will pay a small fee to Aragon Court. This transaction fee hasn’t been set yet (currently at 0 DAI), and ANT holders will control it. I personally think that a reasonable value for this fee is between 10-100 DAI, but I can’t commit to anything since ANT governance is in control (taking over formal control at the end of the month). At the moment, the Aragon Network DAO hasn’t turned on profit sharing, so jurors would be earning all the revenue.
So, what’s in it for Aragon and Aragon One?
For Aragon, long story short, Aragon Court use should lead to ANJ value appreciation since jurors earn a share of transaction fee revenues and dispute fees. ANJ is a token connected to ANT via a bonding curve, so ANJ appreciation results in ANT being bought and locked up to mint more ANJ. This makes Aragon Court usage the main driver for ANT value at the moment.
For Aragon One, the only business model of the company at the moment is holding ANT received from Aragon Association grants. ANT number going up is good for the company.
If approved, Aragon One’s top priority in the coming months will be making sure yearn and other communities using similar DAO setups are really successful using Aragon. For yearn specifically, we can commit to working with yearn’s community and leadership, as we have done prior to writing this proposal, to make sure you have the governance process that works for you. If desired, the Aragon One team can take care of setting up the DAO according to your specification. We are really thrilled to make this happen!
As someone fairly involved in Aragon Network DAO governance, I think it would be reasonable for both DAOs to negotiate a ‘custom deal’ for Aragon Court use in case that paying transaction fees for each submission is not desirable. I don’t think this is a requirement, but it would be amazing to see two DAOs negotiating a pricing deal for use of a protocol.
Regardless of this proposal’s outcome, the Aragon Association will be gifting the yearn community the ENS subdomain
yearn.dao.eth so it can be pointed to the main address of yearn’s DAO.
Incredibly excited about everything that we can build together.