CIP-1694: Enhancing Cardano Governance with Chang

Over the weekend there was a big social media push to get stake pool operators to upgrade their servers as a signal of acceptance of the coming era and readiness for the switch over. As of this article, 65% of all Cardano pools have upgraded. 3 exchanges have signal readiness and many more have already started the upgrade process. For the network to switch to the new era 70% of the blocks will need to be produced by nodes running the new software (Version 9.1.0). Exchanges, top 10 DApps by value locked will also need to signal readiness. What exactly is the ecosystem agreeing to by performing the upgrade? Cardano version 9.1.0 is mostly the implementation of the Cardano Improvement Proposal (CIP) 1694. What is CIP 1694 and how does it change the way Cardano is managed and developed going forward? Let’s dive in!

CIP-1694: Enhancing Governance

CIP-1694 introduces a comprehensive governance framework to support Cardano’s Voltaire phase with the big idea of decentralized decision-making. Key elements include:

1. Governance Actions and Votes: Two new fields will be added to transaction bodies. These fields are for governance actions and votes. This will allow any Cardano user to submit a governance action.
2. Tricameral Governance Body: Introduction of a constitutional committee, Delegated Representatives (DReps), and Stake Pool Operators (SPOs). Each governance action requires ratification by at least two of these bodies.
3. DReps: short for “Delegated Representatives”, DReps hold the voting power of ADA holders who choose to let a DRep vote on their behalf. The process of delegating to a DRep to vote with your ada is conceptually similar to choosing a stake pool. Your ADA doesn’t leave your wallet or your control. Similar to how your stake pool uses the power of your ada to help validate block, your DRep will use the power of your ada to cast votes. While the thought is that many ada holders will delegate their voting power to DReps in order to let these dedicated individuals do the work of staying highly informed for each vote, it will still be possible for an individual holder to vote, if they prefer. Essentially, a solo ada holder would be operating as their own “DRep.”
4. Voting Mechanism: “one Lovelace = one vote”.

New Governance Bodies

• Constitutional Committee: this group of elected representatives ensures the Cardano Constitution is respected. The committee as well as the constitution can be replaced via governance actions.
• DReps: DReps represent “the will of the people” via the power of their ada. Our crew here at Lido Nation is building a platform for all DRep to showcase their campaign for attracting and interacting with delegators. Keep an eye out for an announcement soon. SPOs: Stake Pool Operators are the backbone of Cardano in many ways. Under CIP-1694 they also get to vote to ratify governance actions.

Governance Action Types

The types of governance actions that can be proposed are also defined in CIP-1694.

1. Motion of No Confidence: Addresses the state of confidence in the constitutional committee. A passing vote on this motion would lead to an unplanned replacement of the committee.
2. New Constitutional Committee/Threshold: Changes to the committee’s composition or threshold. For example, a proposal could call for a larger committee, or for different stakeholders to be represented.
3. Constitution Updates: Modifications to the Cardano Constitution itself, which could lead to minor or major changes to any of this!
4. Hard Fork Initiation: Non-backward compatible upgrades. Hard Fork changes are significant steps forward in a blockchains functionality. Each hard fork results in a new “Major version” of the chain.
5. Protocol Parameter Changes: Various updates excluding “major versions,” which would entail a hard fork. You can learn more about Cardano Parameters if you check out the “parameters” tag in our library.
6. Treasury Withdrawals: Movements of funds from the treasury, for example for the ongoing funding of Project Catalyst.
7. Info: Non-impactful on-chain records. These are great for running on-chain temperature checks. They may, for example, be a good way to ratify annual operating budgets prior to individual treasury withdrawals per budget line item.

When the Chang hardfork happens, Cardano will enter a brave new era of total community control and management of the infrastructure. The current 7 master keys will be destroyed and all governance action going forward will only be possible with the approval of at at least two of the 3 new governance bodies. If you hold Ada, now is a defining moment to get your Ada staked (if not already) and consider participating in governance. The rules and changes put into place over the next year or two will have lasting effects, for many epochs to come. Jump in, participate, and if you have any questions reach out in the comments or on a social media near you @lidonation.