Accelerated Decentralization Proposal For Optimism

[GFXlabs]

It’s wonderful the Foundation has taken the time to address the priorities laid out above in detail. Some of them do require some additional context for readers, or prompt a request for more clarification.

@system

• In regards to the ability for delegates to submit proposals for a vote, we don’t believe it is safe to put the entire Governance Fund onchain with permissionless proposal rights while the cost of governance attack is currently lower than the value of the Governance Fund. This is a dynamic many DAOs currently face but that we can avoid while we work to increase votable supply (and we’ve hired someone to focus exclusively on doing this.) However, Agora has shipped a new feature that allows any delegate to draft a proposal in the voting UI. Drafts will still need to follow a valid proposal type and receive the required delegate approvals to move to a vote.

We don’t feel this is the case. Optimism’s governance structure, with the Citizens’ House and Security Council, has fairly robust checks and balances compared to most DAOs. Additionally, it wouldn’t be unreasonable to discuss the Foundation retaining some form of veto rights that it could actively exercise over certain sorts of proposals.

@system

• We don’t currently believe there is a strategic need for the DAO to manage ETH while the DAO has access to the +150M OP Governance Fund and the +800M OP Retro Fund. This is also a responsibility that should come online alongside a comprehensive framework for managing the treasury, governing the macroeconomic policies of the Collective, and measuring the efficacy of capital allocation. These are all important governance responsibilities that are under or poorly defined in most other systems. We agree with the sentiment that the near term priority should be on the more technical aspects listed above rather than transition of these responsibilities.

There is a very strong strategic need for governance to have these funds. Firstly, under the Foundation’s custody, this ETH is like a fallow farm field. None of the substantial ETH is staked, either through a service or directly staked. It is clear that there is some hesitancy on the part of the Foundation that makes them skittish about picking such low-hanging fruit. Let governance assume this risk, and offload it from the Foundation.

Secondly, and more importantly, Optimism suffers under a competitive disadvantage versus other grants programs, in that any grantee being directly compensated has their funds locked for 12 months. This is because they are paid in OP tokens, which are also volatile in price. Having access to this ETH would allow these grants – currently forcing grantees to be illiquid and long OP tokens for a year – to be made with ETH or stables, neither of which presumably require a 12-month vesting. Currently, grants that must be locked regularly have to overpay for services or attract lower quality counterparties, and governance control over this ETH would remedy this.

@system

• We agree that all Protocol Upgrades—of which L1 Escrow contracts are among the highest stakes—are decisions for governance to make. However, since this post alludes to “utilizing” the bridge funds, we feel an obligation to express our strongly held viewpoint that such appropriation of user assets would represent an existential threat to Optimism’s social contract, business reputation, and long-term viability. Tactically speaking, it is a clear violation of the key User Protection to State Transition and Message Validity outlined in the Law of Chains . Strategically speaking, the Collective is in the business of providing neutral, scalable blockspace. No matter how alluring it may be to move user assets, deposited with the clear expectation of being fully custodied in a known escrow contract, into a different smart contract—even a relatively low-risk one—the long-term erosion of trust which would accompany such violation of expectations outweighs any short-term sustainability improvements which might come with it.

We think this option should remain open. We and others have lost faith in the current business model of relying upon sequencer revenue, both from Optimism and Superchain members. We fully expect sequencer revenues to trend down over time as L2s must remain competitive with both each other and mainnet. This means the revenue may not allow Optimism to be sustainable, and also that other Superchain members will have an incentive to pioneer new ways to see returns on their investments, since Optimism gets 15% of sequencer revenues. Already we see ultra-low-fee Superchain members where sequencer revenue may never materialize in any meaningful way.

Users have shown little aversion to conservative bridge asset management. Gnosis, Blast, and others serve as examples. Polygon may be the first of the “major” chains to experiment with this, as they are fielding proposals currently. That should serve as a good test of whether users react negatively and can inform any future plans.

But there are no plans at present. We believe it’s the responsible thing to do to keep options open, though.

@system

We would also like to reinforce that the Law of Chains is a critical governing document, which was ratified by the Token House. The Law of Chains also plays a pivotal role in onboarding OP Chains to join the Superchain, which is the sustainable way to drive revenue for the Collective.

The Law of Chains does not irrevocably bind Token House or governance as a whole. It even says so:
But Participant Protections are not, and do not create, legal rights, or corresponding legal obligations. They are not absolutely guaranteed to any ecosystem participant.

The Law of Chains is a set of guidelines. It is not a contract.

Governance approved it, and governance can change it. It is also specifically intended to be a living document, and will require regular updating and re-ratification to remain relevant.

As stated upthread, we do not have faith that sequencer revenue sharing will long-term provide the return that OP tokenholders require to justify holding the asset.

@system

• We think sharing more plans on the timeline suggested is a reasonable goal. It feels worth flagging now that this will be a long burn — decentralized sequencing protocols are still rapidly evolving, but even beyond the tech itself, have deep economic and strategic implications for the Superchain and its partners. As such, we think holding the sequencer accountable to governance is the correct short-term focus.

This is an entirely reasonable response, and we’re happy to see it.

@system

• Although the budget with which the Foundation makes these grants was part of the initial token distribution, and is therefore not subject to detailed disclosure, we are supportive of greater disclosure around the Foundation’s expenditures. However:

This is another area where Optimism lags behind peers. Consider beginning with a level of disclosure similar to The Arbitrum Foundation, and working out from there to meet this goal. See this example:

(The footnote leads to a table of projects that have received grants, though not with amounts.)

Compare to the Optimism Foundation, which does not readily make available lists of grants made at the discretion of the Foundation.

@system

As stated above, this is a very important topic and this post has started a very important conversation. We look forward to continuing to engage in many more constructive and collaborative conversations on this topic as we work to progress on this path as a Collective.

100% agree, and we are excited to move forward on this together. We view the Foundation and Labs as parents to governance. Just as there is sometimes tension when a child has grown up, and the parents need time to adjust to the new dynamic, we understand it can be difficult to let go of the reins. The Foundation has done a wonderful job raising governance, but governance has matured, and it’s time to begin the transition from Foundation overseeing governance to governance being a full partner in developing and growing Optimism.

If you hold OP, please signal your approval of this accelerated decentralization on this Snapshot petition.