Based on community feedback, this post has been updated and can be viewed here.

As the Maker project is about to reach a significant milestone with the launch of Multi-Collateral Dai, it’s time to turn to our next, and perhaps most important goal: Can the Maker community succeed in making decentralized governance work?

The Maker Foundation Team is increasing its focus on the challenge of achieving decentralized governance. We firmly believe that a careful and gradual approach is the safest path towards a long-term equilibrium of decentralized governance. The first step is to hold the first-ever public MKR vote.

This first-ever MKR vote may be one of the most significant, as we will use the opportunity to bootstrap the spirit of community governance by aligning all of us behind five core principles that will guide Maker on the path to long-term success and genuine decentralized governance.

All Maker community members should read these five core principles of the Maker Governance philosophy carefully. As you reflect on whether these principles are in alignment with your own ideas about how Maker can maximize its positive impact on the world, please remember to provide feedback and join the debate on the /r/MakerDAO subreddit. The Maker Foundation Team will iterate on the Foundation Proposal based on your feedback and ultimately hold a vote to accept the Proposal as the first collection of core documents of the Maker Governance Philosophy.

Scientific Governance

The Maker Governance Framework will be built on rigorously vetted, reproducible, scientific models created by experts with proven track records in the traditional finance space.

The Framework itself can be broken down into two major components:

Governance Proposals: Symbolic votes used to poll community sentiment towards specific models or data sources.

Executive Proposals: Used to ratify the Risk Parameters determined by the models and data accepted by Governance Proposals. Executive votes result in state changes inside the Dai Credit System and occur every quarter.

This distinction encourages the governance debate to become a consensus-seeking exercise to reach a compromise, where communication channels force participants to focus on the underlying reasoning, theories, and data of risk assessments, rather than a polarising popularity contest about specific risk parameters for particular tokens.

In this model, neither the MKR holders nor the Maker Foundation will have any special powers to arbitrarily dictate the risk parameters of the system, they can only affect changes through fact-based, provable, scientific arguments.

The Maker Foundation Risk Team will be publishing a series of foundational papers about the Maker Governance Framework that will provide a full overview of the different elements required to launch a functional governance process. These will be released to the community in stages before the Foundation Proposal vote takes place, as its models and principles are a crucial part of what MKR voters need to approve. The models outlined in the foundational papers will determine the risk parameters of Multi-Collateral Dai at launch, and the process to modify them over time.

The 20% Principle

MakerDAO needs to provide more than just a technical upgrade to the financial system; it should also revolutionize the role of finance in the economy. Dai already levels the playing field for the unbanked and small businesses against the incumbents, but to truly make an impact we need to go further by ensuring Dai becomes a global engine for equality.

The Maker Foundation will allocate an amount of MKR from the dev fund that corresponds to 20% of the total MKR supply to continuously finance charitable initiatives or direct giving schemes that use Dai as the financial infrastructure. MKR voters will directly govern the charitable transactions, adding another crucial dimension of altruism to the governance philosophy. The 20% principle will be funded in a sustainable manner that ensures the charitable transactions always remain at exactly 20% of the system’s fees minus expenses.

Distribution of charitable funds will be managed through a process similar to the Governance Framework. The Maker Foundation will initially lead the community by presenting the best choices available, but over time the process will become decentralized, and completely controlled by the community through a framework that is based on data-driven impact analysis.

Before the date of the Foundation Proposal vote, a full post will describe the competitive business advantages of adopting the 20% principle, and provide a more in-depth look at how charity governance will play out in practice.

Sustainable Finance

The makeup of the Dai collateral portfolio can have a significant impact on global capital allocation. It is therefore crucial that governance of the collateral portfolio take long-term societal, environmental, and sustainability impact into account. The Maker project as a whole must keep the principles of sustainable finance as a core value, and always include negative externalities as a key factor in risk assessments of collateral. This means that Maker will be biased towards, for example, renewable energy that provides a long-term global benefit, while being biased against funding fossil fuels and other assets that create long-term risk.

Gradual Decentralization

The Maker Foundation is committed to true decentralization, but the road to decentralization needs to be a steady path taken step-by-step. This will ensure that the Foundation will have the support it needs to be successful, and protect against threats to the long-term goal of decentralization, such as a power vacuum. It is also crucial to provide maximal stability for partner companies that are integrating with Maker in various ways, as they need to feel safe there won’t be sudden changes due to rapid decentralization of governance.

The Foundation will drive Maker towards increased decentralization, with every step opening up more aspects of governance to community control, and eliminating single points of failure. At the same time, the Foundation will also take responsibility for teaching and providing guidance on how community members can most constructively contribute to governance.

Strong Market Focus

In the short term, the Maker Foundation needs high levels of flexibility and more control over the growth and adoption of Dai. The Foundation will facilitate exponential user growth, business adoption, and dapp integrations to maintain the dominance of Dai across all markets for decentralized stablecoins.

This includes doing various low-level tasks in the ecosystem, such as managing the initial set of Oracle nodes and the first Emergency Shutdown (formerly called Global Settlement) infrastructure.

Before the new voting governance dashboard is released, the Maker Foundation will coordinate voting among highly technical MKR holders via command line tools, to avoid any disruption of Single Collateral Dai.

Mechanics of the vote

If you agree that these five principles, as written above, should be included in the core documents of the Maker Governance Philosophy, get ready to vote Yes when we conduct the first official MKR vote on August 22nd. If there is something you would like to change, please provide feedback on our subreddit.

Be on the lookout for the additional documents expanding on the Scientific Governance principle and the 20% principle, that will be available in advance of the vote on August 22.

The vote will use the new voting governance dashboard that is under development, and showcase the upgraded user experience that will be used to control Multi-Collateral Dai governance. Both Yes and No options will be available for people to vote on, and there will be detailed instructions on how to vote with your MKR. The Foundation Proposal will be considered passed if there is a simple majority (>50%) for Yes, with no quorum.

The goal is to achieve a landslide success, showcasing the unity and enthusiasm of the Maker community in taking on the challenge of decentralized governance. The Maker Foundation will seek a dialogue with any No voters to better understand their concerns. We strongly encourage everyone to share feedback and provide any input they have that will make the Foundation Proposal the ideal governance philosophy.

Community Call

An extraordinary community call will take place this Friday (June 22) at 16:00 UTC, where Maker Foundation team members will be available to answer questions, receive feedback on the Proposal, and explain points in deeper detail. Please be sure to add any questions, comment or concerns you may have to the ‘Foundation Proposal’ thread in our subreddit.