Sundae v3 Administration - Discussion

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Hello Sundae DAO Community!

Now that the vote for an initial fee structure is underway, I wanted to start a conversation about the next decision point for the DAO.

Context

The current design for the v3 protocol has 3 administrator roles, each with different administrative responsibilities, and the DAO needs to select who should fill those roles. The protocol is designed so that each of these can be controlled by a public key hash, a multisig quorum of many public key hashes, or even a smart contract. In the fullness of time, we envision these responsibilities being governed by a smart contract, but to avoid delaying the launch of the v3 contract, we’d recommend choosing a suitable multisig for each.

Background

The three administrative roles are as follows:

Metadata Administrator

In the current design for the v3 contracts, each pool NFT and LP token is a CIP-68 compliant token. This means that we can provide a delightful user experience for liquidity providers by attaching an image, name, ticker, and decimal places for the LP tokens in the users wallet, including customized logos for each different pool.

Here’s a sneak peek at what one of these might look like:

image
image1920Ă—1920 325 KB

The metadata administrator is authorized to set and update this metadata for each pool that is created.

Treasury Administrator

As explained in the previous governance discussion, the v3 contracts will collect protocol fees. These fees will be collected to the pool, and periodically swept from each pool into a treasury contract. Spending from this contract will require a full on-chain vote by the DAO, making this liquidity truly “protocol owned liquidity”.

The treasury administrator is the only one authorized to sweep these funds from the pool contract to the treasury contract; they are responsible for deciding the frequency and timing of those transactions.

The treasury administrator is also authorized to set the staking address for each pool, and is responsible for balancing delegation among a number of pools according to a policy at the direction of the DAO.

Additionally, if the DAO was required to vote on a proposal for each expenditure (such as paying scoopers regularly), it would create a cognitive drain that would discourage participation in governance overall. To avoid this, the DAO can also set an “allowance”; each time the treasury administrator submits a transaction to withdraw the protocol fees, they are allowed to also withdraw up to some fixed percentage to cover these costs.

Settings Administrator

Finally, the settings administrator is able to update several protocol settings, including:

  • The settings administrator (to rotate keys if needed)
  • The treasury administrator
  • The metadata administrator
  • The list of authorized scoopers
  • The base fee
  • The incremental fee
  • Any extension data

Decision

The DAO needs to decide on each of these administrators. Sundae Labs would be happy to take any or all of the roles, and we are also open to a multisig configuration with other trusted projects or community members to introduce a system of checks and balances.

Before we can create a temperature check, we wanted to start a discussion and solicit community feedback. Some points of interesting discussion:

  • Is the DAO willing to trust Sundae Labs with these responsibilities?
  • Does the DAO want a multisig arrangement for any of these rules? If so, what threshold / quorum should we target?
  • Who (people or projects) should Sundae Labs approach about being a member of one of these multisigs?
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I believe Sundae Labs has the technical capabilities to handle these responsibilities

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same and as usual the DAO should have the option to change that if the community so chooses.

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Treasury Administrator As explained in the previous governance discussion, the v3 contracts will collect protocol fees. These fees will be collected to the pool, and periodically swept from each pool into a treasury contract. Spending from this contract will require a full on-chain vote by the DAO, making this liquidity truly “protocol owned liquidity”.

This would be a pretty huge step forward for Cardano. AFAIK, this would make Sundae the only DEX with true POL, and real value for governance tokens. Right now the standard on Cardano is to conduct governance votes (doesn’t matter whether onchain or off-chain) but the actual result of the vote isn’t binding and ultimately users still have to trust the project teams to process the vote. This is especially dangerious when it comes to POL, because in truth current POL on Cardano is not actually owned by the protocol, it is owned by the project teams who promise to spend it in accordence with the desires of the protocol. This means ultimately there is no true objective intrensic value to governance tokens, they don’t actually own anything, or have any direct influence on how the POL is spent.

I am very much in favor of this, I think it would be setting a huge positive example for the ecosystem. It would also make Sundae the first DEX governance token with intrensic value (ie regardless of whether the project team wants to or doesn’t want to follow through with the results of a governance vote to spend the POL, the result is completely binding and the POL will be spent in the manner described by the proposal).

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Yes, exactly!

This has always been our long term plan, and we’ve talked about the difference a lot publicly, but it was such a huge leap of faith to trust any set of contracts back when we launched.

We now feel that the ecosystem has matured enough that we’re comfortable recommending a specific governance system to the DAO. There are a number of systems we could use, so this design leaves it flexible, and will likely be another decision the DAO has to make before the launch of v3.

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Sundaelabs should be trusted with these responsibilities without a doubt

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I have full confidence in Sundae Labs abilities and integrity if entrusted with all of these roles and would vote in favor of it. With Labs being a US based entity I do wonder about the decentralization aspect of it. Many DAOs strategically position treasury roles outside of the US in the interest decentralization and given the uncertain regulatory environment in the US. That said if labs legal advisors don’t foresee any issues then I’m all for it.

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It’s worth noting that the treasury itself would be a fully on-chain treasury, governed by a smart contract in the DAO’s control.

The “treasury administrator” here is only responsible for

  1. the frequency and timing of “treasury sweeps”, which take the ADA recently earned by trading fees and deposits it in the treasury; for example, this might be done once per week, or once per month, depending on how much each pool has earned in that interim.
  2. determining which SPOs the stake pools are delegated to.
  3. Each time the treasury administrator does a “treasury sweep”, they are allowed to retain a percentage of the revenue, to cover administrative costs, such as paying scoopers or hosting costs. This percentage is set independently by the “settings administrator”, and only at the will of the DAO.

The actual exposure that the protocol has to any of these administrators is ultimately relatively low.

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This looks to me like a winner. Cannot wait for a temp check vote followed by on chain voting!

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We were hoping that someone would propose at least one external party to participate on the multisig, but perhaps that decision can be made later.

I’ll convert this to a temperature check soon, and start the discussion for the next big decision :sweat_smile: