Stewardship Council

The council's authority is typically enforced through a multi-signature (multisig) wallet, requiring a predefined quorum (e.g., 3 of 5 signers) to authorize transactions. This prevents unilateral control and distributes trust among council members.

• Example: A protocol's treasury or upgrade contract is controlled by a 4-of-7 multisig held by the council.
• Security Model: Reduces single points of failure compared to an admin key.

The council's powers are explicitly codified and limited to specific, pre-approved functions, preventing mission creep. Common responsibilities include:

• Parameter Adjustments: Updating fees, reward rates, or risk parameters.
• Emergency Functions: Pausing contracts in response to critical vulnerabilities.
• Treasury Management: Executing budgeted expenditures or grants.
• Upgrade Execution: Facilitating smart contract upgrades after community approval.

Council members are selected to represent diverse expertise and stakeholder groups, often including:

• Core Protocol Developers
• Community Representatives
• Independent Security Researchers
• Ecosystem Partners

Selection mechanisms vary, including appointment by a founding entity, election by token holders, or a hybrid model. Terms are often time-limited to ensure accountability.

A legitimate council operates with high transparency to maintain community trust. Standard practices include:

• Public Logs: All proposals, discussions, and transaction signatures are recorded on-chain or in public forums.
• Regular Reporting: Publishing summaries of decisions and treasury actions.
• Recall Mechanisms: Processes for the broader community (e.g., token holders) to remove underperforming or malicious members.

Stewardship Councils are often a transitional governance structure. Their long-term goal is to progressively cede control to more permissionless, on-chain mechanisms as the protocol matures.

• Example: A council may initially control upgrade keys, with a roadmap to transfer this power to a decentralized autonomous organization (DAO) using token-based voting after a set period.
• This path is known as progressive decentralization.

While both are governance bodies, key distinctions exist:

• Stewardship Council: Smaller, curated group; faster decision-making; executes pre-defined operations.
• DAO (Token-based): Large, permissionless membership; slower, broader decision-making via proposals and votes; sets high-level direction.

In practice, a council often acts as the executive arm of a broader DAO, implementing decisions ratified by token holders.

Implementing a Stewardship Council involves navigating core governance tensions:

• Accountability vs. Efficiency: Elected councils are accountable but slower; appointed experts are efficient but less directly responsible.
• Specialization vs. Representation: Should council members be top token-holders, subject-matter experts, or randomly selected citizens?
• Powers: Are they executive (can act), advisory (can propose), or veto-holding (can block)? These choices define the council's role within the protocol's checks and balances.

The council's primary function is to oversee and approve major protocol changes that are beyond the scope of routine proposals. This includes:

• Parameter adjustments for critical system variables (e.g., slashing penalties, inflation rates).
• Treasury management for large-scale fund allocations and grants.
• Emergency intervention to pause or upgrade the protocol in response to critical bugs or exploits.
• Strategic roadmap guidance and ratification of long-term development plans.

Council members are typically selected to ensure expertise and decentralization. Common models include:

• Election by Token Holders: The broader community votes on candidates, often using a token-weighted system.
• Appointment by Founders/Existing Council: Initial or subsequent members are appointed based on technical merit and community trust.
• Multi-Signature (Multisig) Wallets: Council authority is enforced through a multisig, requiring a threshold of signatures (e.g., 5-of-9) to execute any on-chain action, preventing unilateral control.

Several major protocols utilize Stewardship Councils as a foundational governance layer:

• Uniswap Foundation: The Uniswap Grants Council (UGC) is a 12-member body that reviews and approves grant proposals from the DAO's treasury.
• Compound Finance: The Compound Governance Council ("Compound Labs") holds administrative keys and can propose emergency changes, acting as a failsafe.
• Lido DAO: The Lido Node Operator Subgovernance Group is a council of experts that evaluates and onboards node operators to the network.

The council operates within a layered governance model, balancing agility with broad consensus.

• Proposal Pipeline: Most ideas originate in the community forum, are refined, and may require council review before a final token-holder vote.
• Checks and Balances: The council's powers are usually defined and limited by the protocol's on-chain constitution or governance contracts. The broader DAO can often vote to replace council members.
• Delegated Authority: It acts as a trusted delegate for complex, time-sensitive, or highly technical decisions where full community referendums are impractical.

Stewardship Councils introduce specific trade-offs in decentralized governance. Advantages:

• Efficiency: Enables faster decision-making on critical issues.
• Expertise: Concentrates decision-making with knowledgeable participants.
• Stability: Provides a consistent, long-term vision and guardrail against governance attacks. Criticisms:
• Centralization Risk: Can recreate centralized points of control, contradicting DAO ideals.
• Elitism: May distance the "core" governance from the average token holder.
• Complacency: Could reduce broader community participation in governance over time.

The role of a Stewardship Council is often designed to evolve or become obsolete as the protocol matures.

• Progressive Decentralization: Initial councils may have broad powers that are systematically reduced and transferred to automated smart contracts or broader voter mechanisms over a defined timeline.
• Sunset Clauses: The council's mandate or existence may have a built-in expiration date, requiring a renewal vote by the DAO.
• Upgrade Paths: The governance contracts that empower the council can themselves be upgraded by the DAO, allowing the community to redefine or dissolve the body if it no longer serves its purpose.

A governance token is a cryptographic asset that grants holders voting rights in a decentralized protocol. The relationship with a Stewardship Council varies: sometimes the council is elected by token holders, and sometimes it operates with delegated authority from them.

• Mechanism: Tokens enable proposals and votes on council membership or overriding council decisions.
• Example: UNI token holders vote on Uniswap governance proposals, which can include ratifying council actions.

A time lock is a smart contract function that enforces a mandatory delay between a governance decision (e.g., a council vote) and its on-chain execution. This is a critical security mechanism that allows the broader community to review and potentially veto malicious or erroneous actions taken by the council.

• Purpose: Introduces a final check-and-balance, enhancing protocol security.
• Standard Practice: Used by major protocols like Compound and Uniswap for all upgrades.

DPoS is a blockchain consensus mechanism where token holders vote to elect a limited number of validators, often called "witnesses" or "delegates." This model is conceptually similar to a Stewardship Council, where a trusted group is elected to perform critical network functions (block production) on behalf of the community.

• Analogy: The elected validators act as a technical stewardship council for the network's security and liveness.
• Example: Block producers in EOS or witnesses in Steem.

A protocol treasury is a pool of assets (often native tokens and accrued fees) owned and managed by a decentralized protocol. A primary duty of a Stewardship Council is often the governance and allocation of these funds for grants, development, incentives, and other ecosystem growth initiatives.

• Responsibility: Councils propose and execute budgets from the treasury based on community-approved frameworks.
• Scale: Major DAO treasuries often hold billions of dollars in assets.