On Sunday, 28 July 2024, members of the Cardano community came together near the historic Alexanderplatz in Berlin for the inaugural Cardano Constitutional Workshop hosted by the Cardano Foundation. This event, attended by more than 30 participants and facilitated by two coordinators, kicked off a global series of over 50 workshops to refine and provide input for the Cardano Constitution. The workshop’s structure encouraged solo reflection, paired discussions, and group debates, ensuring every attendee’s voice was heard.
Setting the Stage
The workshop started with a brief introduction explaining the purpose of the gathering, which was followed by additional context about the Cardano constitution, highlighting its significance and philosophical underpinnings. This was followed by audience queries and a set of ground rules and best practices laid out by the facilitators to ensure a productive session. The workshop aimed to work through five key topics and associated questions, which the host selected before the workshop. This design decision was necessary as more than a workshop of 6 hours is needed to discuss each intricacy of the Constitution.
Topic One: Financial Sustainability
Question: Select all that apply:
- A) Identify how the budget will be administered
- B) Identify who will administer the budget
- C) A Cap on the budget
- D) A spending rate for the budget
- E) Other
Discussions across solo reflections, pairs, and groups highlighted several key points. Participants emphasized the importance of defining the budget process to ensure effective and impactful spending while focusing on sustainability. There was strong support that the Constitution should outline how the budget is administered, focusing on best practices without specifying the administrators. Institutions might change while the process lasts.
The need for a straightforward, transparent budget process was a significant focus. Participants suggested incorporating independent verification and audits to resolve disputes.
The Constitution should establish the principles for budget administration, leaving detailed processes flexible to adapt over time. This flexibility would prevent the need for frequent amendments while ensuring that the body responsible for setting these processes is clearly defined. Participants highlighted the importance of decentralizing budget distribution to avoid the centralization of power and ensure fair administration.
Various groups considered performance metrics and a return on investment (ROI) mentality underpinning the budget process as a necessity. However, specific metrics should not be enshrined in the Constitution to avoid potential manipulation. Instead, the focus should be on fostering a philosophy of performance and sustainability, ensuring that the budget benefits the entire ecosystem and not just a few entrenched interests.
Transparency and audibility were repeatedly defined as the cornerstone of financial sustainability, emphasizing third-party audits for any project receiving treasury funds. The budget process should be predictable, enabling participants to understand and engage on all levels while also ensuring the long-term sustainability of the Treasury.
The discussions of the first question ended with attendees’ points on removing the need to avoid overly rigid budget caps, advocating instead for dynamic spending limits based on surplus and sustainability goals. This approach would allow for adaptable and responsible financial management, aligning with maintaining the ecosystem’s health and growth.
It was clear that participants placed significant importance on how the budget would be administered. The emphasis was on creating a transparent, adaptable, and sustainable budget process that ensures accountability and benefits the broader ecosystem.
Key Insights from the Group Discussion:
- An independent 3rd party should audit anybody that received funding through the Treasury.
- The consensus among participants is that transparency and audibility are key.
- Capturing in the constitution “HOW” the budget will be administered is more critical than the “WHO” is administering it.
- The budget should not benefit the few but rather the entire Cardano ecosystem.
- Performance metrics and a performance mindset should be established. Return on Treasury should always be considered.
- The necessity of an independent auditor of the budget process should be defined in the Constitution.
- Centralizing accountability can be a risk; plurality in the system is essential.
- Define a threshold after which withdrawing from the Treasury becomes unconstitutional. This would, among other things, ensure the Treasury’s long-term viability.
- Treasury value is measured in ada and is thereby volatile. If the ada price in USD is high, less ada is required, but if the opposite is true, more ada is needed to cover the costs.
Topic Two: Additional Tenet on Financial Sustainability
Question: Should there be an additional tenet addressing financial sustainability of the Cardano blockchain ecosystem?
- A) Yes
- B) No
- C) Unsure
Most participants supported including a tenet focused on financial sustainability, linking it to economic security. Essential suggestions included maintaining a sustainable treasury, implementing an absolute cap on the circulating supply, and ensuring responsible spending.
Participants emphasized the importance of clear guidelines on treasury spending, regular financial reporting, and audits to maintain transparency and accountability. Strategies for managing financial risks such as market volatility and unexpected expenses were considered necessary, including establishing reserve funds for emergencies and future investments. Adhering to financial regulations and standards was highlighted to avoid legal and operational challenges, promoting practices that align with the long-term goals of the Cardano ecosystem.
The idea of a hard cap on the total supply of ada at 45 billion (45×10^15 Lovelace), formalized within the Constitution, was widely supported. This cap represents a social contract, currently defined as a network constant, with any changes requiring a hard fork and an amendment if added to the Constitution.
Additionally, there was a consensus on the need for a cap on treasury spending or guardrails to protect the Treasury. Participants suggested limiting annual treasury outflows to a certain percentage to ensure long-term economic security and stability. This would help prevent excessive spending, which could negatively impact the ada price by increasing sell pressure.
Another critical point discussed was the management of treasury funds due to ada’s price volatility. Participants proposed converting some treasury funds to stablecoins to hedge against market fluctuations, ensuring consistent funding for core operations. There was also discussion on the potential impacts of inflating the ada supply, with a general agreement that such measures should only be considered under extreme circumstances where network security is at stake.
In conclusion, the discussions highlighted the need for a robust and flexible approach to financial sustainability within the Cardano ecosystem. By incorporating these principles into the Constitution, the community aims to foster long-term economic stability, predictability, and security, ultimately supporting the growth and health of the Cardano ecosystem.
Key Insights from the Group Discussion:
- The network security is also reinforced through the social contract we have established around the total ada supply.
- Predictability when it comes to Cardano’s monetary policy and budget process is crucial.
- Is the liveness of the protocol more critical than a fixed total supply?
- The total ada supply is defined as a global constant (maxLovelaceSupply). Reinforcing that constant in the Constitution would be an additional safeguard.
- Amending the total supply should only be considered if protocol security is at stake.
Afternoon Session
Post lunch break, we pivoted from Miro to Mentimeter as the tool to capture input from the attendees. The format of solo, paired, and group debates remained the same. The remaining topics are noticeably shorter since I’m only leveraging my notes from the workshop; access to the mentimeter data still needs to be provided.
Topic Three: Mandated Budget Inclusions
Question: What should the Cardano budget be mandated to include?
- A contingency fund,
- an indemnity fund,
- compensation for DReps,
- compensation for the CC
- None
Discussions highlighted several potential items that could be mandated via the budget: funding core protocol development, R&D, and ecosystem development, which includes marketing and business development. Regarding the contingency or indemnity fund, some participants believed there shouldn’t be a specific separate fund or institution holding ada, but rather provisions within the budget that would not deem a necessary treasury withdrawal unconstitutional, only on the merits of not being part of the budget.
There was a debate on the necessity and structure of a contingency fund, emphasizing accountability and scrutiny to prevent misuse. A contingency fund should not be used to cover all kinds of costs not included in the budget. Participants stressed the importance of a slim and efficient administrative body and the mandatory influence that ada holders must have in creating a budget, ensuring the budget reflects the community’s needs and not just the interests of an administrative class. Many participants agreed with incentives for DReps.
Key Insights from the Group Discussion:
- Introducing another institution for the custody of an indemnity fund could introduce additional risk and inefficient administrative strains.
- The Cardano Community should have direct input into what the budget should be mandated to include.
- A slim and efficient administrative body overseeing is a prerequisite for a successful budgetary process.
- A provision in the approved budget should allow for withdrawals in an emergency. Requires exact specifications of what an emergency is.
- The budget should benefit the entire Cardano community.
- The incentive for DReps is something many workshop participants agreed with.
Topic Four: Voting Rights
Question: Should the constitution specify that owners of ada and their appointed designees have the right to vote in on-chain governance actions?
Participants agreed that ada holders or those designees who obtained explicit consent should decide on its use in governance. They highlighted the importance of explicit consent for voting rights to prevent unethical practices and the need to educate ada holders about the implications of governance changes and that ada will obtain additional utility features.
Participants strongly opposed practices that trick people into giving away their voting rights, emphasizing that ada holders should always retain control over their voting rights and be fully informed about the changes in ada’s utility with the imminent implementation of CIP-1694’s governance model.
Key Insights from the Group Discussion:
- When it comes to voting rights, legal ownership of the asset is sometimes not enough; what matters most is who controls the private keys necessary to vote.
- Explicit consent is vital when giving away your voting rights as an ada holder.
- Ada holders need to understand thata ada as a utility token will gain additional utility through the Chang upgrades.
Topic Five: Principles and Tenets
Question: Do you see any inconsistencies between the principles and tenets [mentioned in the Constitution]?
The groups discussed the principles of transparency, openness, and responsible governance, emphasizing reward sharing and cryptographic fundamentals. They highlighted the importance of recognizing the Cardano community’s contributions and ensuring that governance promotes a culture of trust and collaboration.
Participants proposed that principles should have their section in Article 1 of the Constitution, providing a straightforward and foundational guide for all governance actions. The discussions also touched on the need for global accessibility, resilience, and the longevity of Cardano as guiding principles.
Finishing Thoughts
Throughout the day, the knowledge and perspectives of the participants contributed to the resounding success of the Berlin workshop. The conversations during the day highlighted the importance of inclusive, transparent, and auditable processes for the future governance model, all underpinned by community involvement. The lessons learned in Berlin will help improve the entire feedback process and ensure the voice of the global community is heard and reflected in the future Cardano Constitution.
Thank you to all who made it to the event. We are forever grateful for your contributions!
