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Makerdao’s Constitution and Restructuring Plan

Apr 7, 2023
5 min read

This blog post will cover:

  • The Maker Constitution
  • The restructuring plans: Endgame
  • MakerDAO community’s reactions to Endgame and the Constitution

On March 13, 2023, MakerDAO held a vote on adopting the platform’s Constitution, which is part of a bigger restructuring plan. The stablecoin DAI’s issuer decided to create a comprehensive document that explains the complicated governance system of the project and outlines its future development.

In this article, we will find out the Maker Constitution’s core propositions, the platform’s restructuring plans, and see the crypto community’s reaction.

The Maker Constitution

The proposal MIP101 to create the Maker Constitution appeared on the platform on January 31, 2023. This lengthy document goes into detail about the governance process with the goal to defend MakerDao from anyone who wants to take over the protocol.

The document authors stated that prior to adopting the Constitution, the system had a crucial vulnerability: it relied on the decisions made by MKR token holders too heavily. This could potentially result in governance attacks – stealing funds or the malfunctioning of the protocol due to the interference of hostile individuals or groups.

Thus, the Constitution introduces alignment engineering to protect the Maker protocol and community. This practice involves mechanisms, incentives, penalties, as well as shared habits that benefit the ecosystem. The goal of these robust measures is to build a self-balancing and sustainable governance system.

The Constitution introduced the term “SubDAO” – these are semi-independent DAOs connected to Maker Governance. The new Purpose System distributes token emissions to SubDAOs, and they use them on broad and charitable causes picked by community voting. The Purpose System is controlled through competition between the SubDAOs.

Initially, six SubDAOs will be launched with these functions:

  1. two DAOs that deal with governance operations of MakerDAO and other SubDAOs;
  2. two others interact with real-world assets;
  3. and the two last ones focus on decentralized innovation.

Additionally, the Constitution assigns the ecosystem’s participants to various roles with rights and obligations. For instance, the responsibility of constitutional conservers (CCs) is to control the governance by making sure that everyone follows the Constitution.

CCs have an opportunity to become constitutional voter committee members (CVCMs) or constitutional delegates (CDs). The first group generates position papers for voters to examine, while CDs oversee smart contracts that allow MKR token holders to delegate their MKR without sacrificing control over their tokens.

It is important to note that each of these community members can remove others’ listings if they think that the Constitution is violated.

The restructuring plans: Endgame

The Maker Constitution is a part of the system’s overhaul on a larger scale called Endgame. Created by MakerDAO founder Rune Christensen, the plan was suggested in October 2022. Its purpose is to decentralize the system even further and make it more resistant to censorship. The Endgame also involves lending a billion dollars from MakerDAO reserves to investors to earn profit. Previously, these funds were held in USDC.

This restructuring plan goes further than semi-independent SubDAOs — it calls for creating MetaDAOs, which are fully self-sufficient management units.

MakerDAO community’s reactions to Endgame and the Constitution

Even though both proposals were ratified by the majority of voters (80% in Endgame’s case and 76% for the Constitution), they raised some concerns among the users. The community is seemingly divided into two camps: those who are happy with the changes, and the skeptics.

Particularly, some users feared that the decentralization promised by Endgame will actually give more control to Rune Christensen. Moreover, the opposers of the restructuring plan noted that such a game-changing proposal was adopted with less than 15% vote participation.

Similarly, the Constitution did not have everyone on board with the changes. This time, some users feared that the Constitution might impose censorship.

In conclusion, MakerDAO seems to be moving very fast with serious changes that concern not only the governance model of the protocol but also the financial aspect of it among many others. Such ambitious plans have the potential to reduce the risks associated with the human factor. At the same time rushed decisions may have the opposite effect. Either way, it is worth keeping an eye on the developments of this situation.

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