UMA DAO Funding Proposal Process

At the start of the year, Risk Labs, the Foundation which established the UMA protocol, transferred 35 million UMA tokens to the UMA DAO. This put 35% of the original mint directly under the control of UMA tokenholders.

This article provides further details about how these funds are held and managed by the UMA DAO.

UMA already has an established decentralized governance system for technical proposals, such as contract upgrades, collateral currency additions and price identifier specifications. They are subject to a technical review both by the UMIP community review team and the core UMA team.

Funding proposals require more qualitative judgement and extended discussion. Consequently, we are expanding our governance process to facilitate the deliberation required for the expenditure of UMA DAO treasury funds.

The UMA tokens were transferred from the Risk Labs foundation to the governor contract of the UMA DAO. This contract is permissionless and anyone can make an on-chain UMIP proposal to reequest funding with a proposer bond of 5K UMA tokens, which are returned in the event of a successful proposal which is successfully passed in an on-chain vote of UMA tokenholders.

It is acknowledged that such a bond represents a significant investment, and potential risk as well as a level of technical knowledge in making on-chain proposals. Risk Labs is therefore prepared to take on the responsibility and token risk for writing the on-chain proposal for proposals that have passed a soft consensus process detailed below.

Stage 1 — Discord Temp Check

A dedicated channel in the UMA DAO discord server has been established to provide visibility over all UMIPs that are proposed. People wishing to put forward an improvement proposal should first post a brief summary (1 sentence) of their proposal in a dedicated Discord channel, to establish whether there is broad support for the proposal in principle.

Stage 2 — Discourse Proposal

Once proposers feel that they have received sufficient support in the discord, a formal proposal should be submitted to the non-technical UMIPs section of the UMA discourse. This proposal should detail the on-chain transactions that would be executed in the event of proposal support, and should cover the key areas as detailed in the template in that section. A poll can be added at any time with a 7 day close to pass to snapshot. Non-technical proposals will be discussed on the Community call that occurs within that 7 day window following technical proposal reviews.

Stage 3 — Snapshot Vote.

In the event of a proposal on discourse receiving majority support (no quorum requirement), a vote will be established on UMA’s snapshot space to be voted on in a five day window. For a proposal to successfully pass and thereby attract Risk Labs assistance in funding the proposal bond and setting up the on-chain proposal, it will require a simple majority in favor with a quorum of 10% of circulating supply of UMA.

Stage 4 — On-chain vote

Once a proposal has successfully passed all three prior stages, Risk Labs will propose on chain and front the required 5k $UMA bond. A successful on-chain vote will result in the requested funds move directly from the UMA DAO governor contract to the wallet(s) identified in the proposal.

It should be noted that UMA is a permissionless protocol. Should a requester prefer a more speedy process, or where the proposal has not attracted the required level of support in the previous stages, a proposer may move straight to stage 4, and be subject to only technical review, however it would then be their responsibility to write the on-chain proposal and commit the bond, which would be forfeited to the UMA DAO in the event of an unsuccessful outcome to the on-chain vote.

The UMA DAO would like to see greater decentralization in UMA token holdings as well as increased participation in securing the UMA protocol through voting in the Data Verification Mechanism (DVM). It is hoped that distribution of treasury holdings of UMA will strengthen the protocol by transferring treasury UMA into the hands of those who recognize the power and value of the UMA protocol, and who wish to contribute to UMA’s mission to make financial markets universally accessible.

UMA DAO Funding Proposal Process was originally published in UMA Project on Medium, where people are continuing the conversation by highlighting and responding to this story.