Governance Proposal

A governance proposal is a formal, on-chain or off-chain submission that outlines a specific change or action for a decentralized autonomous organization (DAO) or blockchain protocol. It serves as the primary mechanism for enacting changes to system parameters, treasury allocations, smart contract upgrades, or core protocol rules. Proposals transform informal community discussion into executable directives, requiring a structured process of submission, review, voting, and, if successful, implementation. This process is fundamental to decentralized governance, shifting control from a central development team to the collective of token holders or delegates.

The lifecycle of a proposal typically follows a strict path. It begins with an Ideation Phase in community forums, where a Temperature Check gauges initial sentiment. A formal proposal is then drafted, specifying the change, its rationale, and often the required on-chain code. This draft enters a Review Period for technical and economic auditing. Following review, the proposal moves to a formal Voting Period, where governance token holders cast votes weighted by their stake or delegated voting power. Successful proposals that meet a predefined quorum and approval threshold are queued for on-chain execution, often via a Timelock contract for security.

Proposals can be categorized by their scope and impact. Parameter Change Proposals adjust system variables like block rewards or fee rates. Treasury Proposals request funding from the community treasury for grants, development, or marketing. Upgrade Proposals are critical, as they mandate changes to the core protocol logic or smart contracts, such as a hard fork or mainnet upgrade. Other types include Informational Proposals for signaling community sentiment and Governance Process Proposals that modify the rules of governance itself. Each category carries different risk profiles and thus may have distinct voting thresholds.

The technical implementation relies heavily on smart contracts. On Ethereum and EVM-compatible chains, frameworks like OpenZeppelin Governor standardize the proposal lifecycle. A proposal's content and logic are often encoded in calldata targeting specific functions. Voting power is typically derived from an ERC-20 governance token or an NFT representing a stake, with models including token-weighted voting, delegated voting (like in Compound or Uniswap), and conviction voting. The final execution is frequently mediated by a Timelock controller, which introduces a mandatory delay between a vote's passage and its execution, providing a last-line safety check.

Real-world examples illustrate the process. In Uniswap Governance, a proposal must pass a preliminary "temperature check" on Snapshot, a formal on-chain vote on the Uniswap Governor contract, and finally execution by the Uniswap Timelock. The Compound Protocol famously used its governance system to distribute the COMP token, and its community has passed numerous proposals adjusting collateral factors and listing new assets. These systems highlight both the power and challenges of on-chain governance, including voter apathy, plutocratic tendencies, and the security risks of managing upgradeable contracts through a decentralized process.

A governance proposal is a formal, on-chain or off-chain submission that initiates a change to a decentralized network. It typically includes a title, detailed description of the change, executable code (for on-chain actions), and a voting period. This structured format transforms community discussion into actionable decisions, moving from informal forums like Discord or governance forums to a binding vote. Proposals can range from simple parameter adjustments, like changing a fee, to complex upgrades like deploying a new smart contract or allocating funds from a community treasury.

The lifecycle of a proposal follows a standardized path. First, a temperature check or request for comments (RFC) is conducted off-chain to gauge community sentiment. If support is evident, the proposal is formalized and submitted on-chain, often requiring a deposit of the network's native token to prevent spam. Once submitted, it enters a voting period, where token holders cast votes weighted by their stake (e.g., one token, one vote) or delegated voting power. Quorum requirements must be met for the vote to be valid, ensuring sufficient participation.

After the voting period concludes, the proposal is executed if it passes the required approval threshold (e.g., a majority or supermajority). For on-chain governance systems like those used by Compound or Uniswap, passing proposals can be executed automatically by smart contracts. In other models, a multisig council or core developers may manually implement the approved changes. This entire process—from ideation to execution—embodies on-chain governance, ensuring the protocol evolves in a transparent and decentralized manner according to the collective will of its stakeholders.