On-chain government is an inevitable part of a decentralized blockchain project. Catalyst is a project that will try to introduce it on Cardano. Stakeholders should pay attention to the project and understand the importance in the context of the future success of Cardano.
The Voltaire era is about governance
Decentralization is a relatively old concept but it is something new in the world of the internet. While we are able to create decentralized protocols via network consensus we still do not know how we should decentralize their maintenance and development. It is hard to achieve decentralization on the level of source code. Maintenance and development of the source code are about making critical decisions and certainty that implementation of changes will have a desired high quality. There is always a team or at least a group of developers behind every decentralized protocol. If not, a network will probably fail sooner or later since nobody will be fixing issues.
The goal of decentralization is to create a self-sustaining system from the network perspective but also from the perspective of maintenance and development. The critical decisions must be made collectively. In the ideal case, decisions should be made by people that are competent to do so and have their skin in the game. In the Cardano ecosystem, stakeholders will be responsible for making decisions. People holding ADA coins will have voting rights and will be able to decide about proposals that will be funded. Thus, they will be responsible for the Cardano protocol and the whole ecosystem. Cardano has a project treasury and in every epoch, new ADA coins are inserted into it. The destiny of Cardano will be fully in the hands of the community.
The Catalyst project is not about making decisions related directly to the development of the Cardano protocol. It is a kind of preparation and experimental stage where the IOHK team learns how to establish a decentralized government. The infrastructure is getting ready and people learn how to use it. Catalyst is a series of experiments with real funding of projects. The projects are focused on community-driven innovations that will be built on Cardano or help to create infrastructure. The IOHK team is still responsible for the development of the Cardano protocol. At the moment, Cardano can be used as a platform on which new projects can be built. Many features will be released in the foreseeable future and the abilities of the Cardano platform will increase. The Catalyst project has been started before releasing the key features intentionally to allow people to start building interesting things in advance.
What is Catalyst?
Catalyst is a project that supports innovations and growth of the Cardano ecosystem. Catalyst allows the community to decide about the ideas that will be funded from the project treasury. It is the community that should benefit the most from the existence of Cardano. Thus, it makes sense to let the community propose ideas, moderate the discussion, decide what is best for the future, and set priorities.
ADA coins that are collected from fees and taken from the monetary expansion are given to the project treasury. Coins are used not only for rewarding stakeholders but also for funding the maintenance and development of the protocol and ecosystem. The more usable Cardano is, the more coins will be collected. As a result, more coins can be distributed for further expansion of the ecosystem.
The selection of the ideas that will be funded and the distribution of coins should be done in a decentralized way. It would make no sense to let a few individuals decide about the future of the protocol since decentralization is the most important feature of Cardano. In other words, ADA coins in the treasury are owned by the community. The community must be responsible for the future and Catalyst is the entrance gate. It is the beginning of on-chain governance and it begins by taking over the responsibility for the ecosystem. One day, the community will be well-prepared to propose changes related to the Cardano protocol via Cardano Improvement Proposals (CIP) and make decisions about that.
Catalyst is an important part of decentralization. Innovations are inevitable for every project that is expected to exist for decades. The ideas of the community members will be funded and the community will decide which ideas will win. Innovations will bring new values to the ecosystem and will have an impact on adoption. Thus, the Cardano growth will be ensured. Cardano should be formed by the decisions of stakeholders and as is expected in the decentralized environment, the majority should decide, not the strong minority. It is a challenge and it is expected that ADA coins will not be the only means on how to participate in voting.
Catalyst is an experiment and as such it can and it will evolve over time. Nothing is set in stone. When the team comes to a conclusion that something is worth changing to improve the process it will probably happen. Take it into consideration when reading the article.
What does a funding round look like?
Every 6 weeks, a new funding round begins. A certain amount of ADA coins is used for every round. At the moment of writing, the process is driven by the IOHK team but it is expected that it will be fully decentralized in 2021. Every funding round is a relatively long process that consists of 3 phases:
- Innovation phase: This phase begins with a challenge. It can be understood as a theme of the funding round. Participants submit new ideas that should be related to the challenge. Other participants can discuss ideas, comment on them, refine them, and review them. The goal is to prepare them for the governance phase. New ideas are submitted via the IdeaScale platform. Submitters proposing a project that is to bring the idea to fruition and defining the price that is needed for the realization.
- Governance phase: In this phase, a voting committee published top proposals. People that are interested in voting have to register by the creation of a voting certificate. Participants must find out what is the current required minimum of ADA coins to participate in voting. A voting period is announced in which voters can vote to support their selected projects. Every ADA coin is one vote. When the voting period ends the voting committee counts votes and publishes the results.
- Execution phase: The participants of the voting are also rewarded for their effort. The voting committee distributes the rewards to voters and also distributes funds to the winners. In this phase, winners are going to realize their projects and they are obliged to report on the progress.
Notice that when one innovation phase ends and moves to the governance phase then the next innovation phase begins. As we said it happens every 6 weeks. For example, it means that at the moment when the innovation phase of funding round 6 begins, funding round 5 is still in progress and it is in the governance phase.
The innovation phase is mainly about the IdeaScale platform. You need to create an account to be able to participate. You will find a few campaigns including a timeline. You can easily differentiate among funding rounds. For example, founding round 5 can be easily found by the acronym F5.
The innovation phase lasts 6 weeks and is divided into 6 sub-phases where each takes one week. You can check the campaign timeline to see what is the current innovation sub-phase. You can find these self-explanatory categories of the sub-phases: INSIGHT SHARING, SUBMIT PROPOSALS, REFINE, FINALIZE, ASSESS, ASSESS QA. For every sub-phase, there is the expiration date which basically is the end of the sub-phase.
The proposers can submit their ideas in the SUBMIT PROPOSALS sub-phase. The community can begin by providing feedback. In the REFINE sub-phase, the community continues with giving feedback and the idea can evolve. In the FINALIZE phase, proposers are called on to provide additional details about ideas. They answer the questions and clarify the idea. In ASSESS sub-phase, the proposals are assessed by experts from the community. Assessors rate the ideas to find the best ones that deserve funding. In the ASSESS QA sub-phase, the assessments are reviewed by experienced community advisors. There are another few steps that are described in IdeaScale.
The governance phase is related to voting and it begins at the moment where there are chosen a few potential proposals. To participate in voting, it is necessary to have ADA coins in a wallet. Try to find out what is the current required minimum of ADA coins. The number of coins determines the voting power. The governance phase is a decentralized process. Thus, participants need to create a voting certificate via a Cardano wallet. Both official wallets Daedalus and Yoroi are able to create the certificate. You need to do so in a given period. It can be a few weeks.
During the process of the voting certificate creation, a PIN code and QR code are created. The certificate is stored in the blockchain. QR code and PIN are used for linking the certificate with an application that allows you to vote. It was a mobile application in funding round 3 but the goal is to allow people to vote directly from the wallets.
Remember, that there will be an announced date of a snapshot. The snapshot scans all registered wallets (the wallets that were used for the creation of the voting certificate) and participants must ensure that they have ADA coins in their wallets. The snapshot actually determines the voting power based on the number of ADA coins in the wallet. The voting period is also a given period of time that will be announced in advance and it usually comes soon after the snapshot is taken.
When a voting period ends, voters will be rewarded with ADA coins. The amount of ADA coins dedicated to rewarding voters and rules can change in every funding round.
The committee distributes funds to proposers that have won in the voting. The teams or individuals can begin with the implementation of their ideas. They are obliged to report about the progress. If progress reports are not provided then funding can be removed from the projects. It makes no sense to support projects that are not going to bear fruits.
Catalyst is open for everybody
Everybody in the Cardano community can take the opportunity and get engaged in Catalyst.
Everybody can propose an idea and ask the community for funding. No ADA coins are required to have the opportunity to propose an idea. The ideas should be in line with a challenge. Proposers should be able to explain how the idea is connected to the challenge and what will be the expected impact if the proposal wins.
The innovation phase does not require to own ADA coins. Everybody can see the proposals and comment on them. The insight of experts is very valuable and it helps to better understand the problem and the proposed solution. It is fine to share your honest view or propose how to implement the idea in a better way. Constructive feedback is a very valuable thing. Every sensible comment can help voters to make a smart decision and select the best projects.
The reviewers of ideas can provide Kudos on the IdeaScale platform. Kudos is a noun that means “praise, honor, or acclaim.” It is a kind of reputation score that expresses the perception of the work of individuals and praises their contribution. It is a method of signaling a beneficial contribution. For example, when you see a great comment that brings a new view on an idea you can praise the author by giving him or her Kudos. Kudos helps build the reputation of people who are being helpful.
Community advisors are reputable members who initially evaluate proposals before providing them to voters. The community advisors evaluate and rank proposals and focus on the impact of proposals, their feasibility, and the ability to audit them. Being a community advisor is a responsible role and they should act in the best interest of the Cardano ecosystem. Advisors should be unbiased and the brightest people in the community. Their decisions can be perceived as subjective but the community should objectively see the benefits of their effort. In the long term, the results of advisors can be measured and evaluated. Decentralization on this level is hard but we can imagine some kind of voting that will help to choose the best advisors in the community. Advisors are also rewarded for their effort.
To become a voter in the governance phase, ADA coins are required. Governance is not for everybody and only people that have their skin in the game can decide about proposals. Voters are all stakeholders that have registered via the creation of the voting certificate and had ADA coins in the wallet when the snapshot was taken.
Proposers who won in the voting receive funds and they are responsible for delivery. It is on the proposers to decide who will realize the idea. A proposer can be an individual or a member of a team. Proposers can also find a team that will implement the idea. Everybody can offer to help with the implementation of the idea to proposers and discuss the reward.
Project Catalyst is in the experimental phase and it will change. It can be a bit difficult to get oriented and participate in it. It is definitely worth getting engaged and influence the future of Cardano. We propose you begin by registration to IdeaSlace and review proposals. When you are familiar with proposals you can consider participating in the governance phase and vote for your favorite project.
Decentralization is about making a collective decision. To avoid the existence of centralized entities the responsibility must be given to the bunch of individuals. We have achieved a solid quality of decentralization on the network level. However, it is just a beginning. It is necessary to establish decentralization on the level of maintenance and development. The PoS consensus has the advantage that every holder of ADA coins can become responsible for making decisions. Everybody should consider the opportunity.
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