Co-Creation Sprint - Governance Mechanisms Discussion

[SEEDGov]

Hi all!

Our second item for the CCS revolves around governance mechanisms and how efficiency and legitimacy meet in order to drive Scroll’s success. As we know, times have changed from the original governance design, where some of the guiding principles met some major roadblocks when attempting to manage and scale the protocol.

Decentralization was often understood as a synonym of referendum-based voting, and therefore, governance systems heavily relied on this particular mechanism in order to make most of the decisions. This led to several issues, such as operational overhead, lengthy decision-making, rubber-stamping, back-door deals, and even so, there was no guarantee of a key proposal passing due to low participation, voter apathy and all of the symptoms that we already know of.

Web3 is becoming more competitive than ever, and therefore, accuracy and speed are key in order to stay in the race. In that sense, the North Star of governance should be to provide secure rails that empower Scroll’s ecosystem and increase SCR’s value and growth. The current proposition is to revisit how decisions are made currently, on how they can be adapted to this North Star.

Multiple Mechanisms for Multiple Decisions

Not every decision has the same nature, they vary in complexity, frequency, urgency and as many dimensions as we can think of. Therefore, we are aiming to introduce new decision-making mechanisms that still account for legitimate decisions but can optimize for each of those dimensions.

Optimistic Approvals
Once novelty but now rather common, optimistic approvals invert the charge by providing a negative signalling mechanism instead of having to support each of the given proposals or decisions. Two expected use-cases can be Protocol Upgrades, due to their very technical nature, and operational decisions, such as pre-approved fund transactions. The key component in terms of keeping accountability is the design of the veto-threshold that would pause the decision from executing, which is usually given by a % of the votable supply.

Council-Based
Optimizing for expertise is also a must in this new era of DAOs. Scroll itself has ventured into Councils in order to drive this forward with experiments such as the Ecosystem Growth Council, Community Council and Governance Council. This naturally represents delegating some of the decisions to dedicated structures that can execute swiftly and with high context. Refining the internal procedures, rotation and consensus mechanisms are also implied in the design of each of the Councils, which are also up for revisiting upon finalizing these first iterations.

Referendum-Based
Token-weighted voting isn’t going away as it stands as a programmatic right of any governance token. But its frequency and rails should be limited to major decisions that make up for the requirement of actually having to show up and vote, something that can be challenging, as we know. Vetoing an optimistic proposal, approving bianually DAO budgets, setting up or winding down Councils, or even voting on some very specific allocation should be the use cases of this mechanism that certainly don’t benefit from its recurrence.

Treasury Management / DAO Budget

The other item to be discussed within this CCS is the DAO’s treasury and its management. This discussion has been present for most of the past year, with some lengthy debates around the best possible approach. This surfaced some of the inefficiencies regarding managing the treasury itself, resulting in a high opportunity cost and deep uncertainty regarding the operating expenses and revenue forecasts of the DAO.

In that sense, having the DAO operating on a pre-defined budget that tightly follows the North Star is the best practical approach in order to mitigate this, with Foundation acting as a key stakeholder in the DAO’s financial health. Some derived items from this topic are the following:

Bi-Annual Voting
As mentioned, referendum-based voting should be kept for major decisions, such as this one. But instead of having a single per proposal approach, the general budget alongside its breakdown should be submitted to a vote twice a year in order to gather high-level sentiment over the overall direction of the expenses.

General budget → Council budget → Open budget
The general budget should include the specified breakdown to then, if approved, be rolled over to Councils in order to execute accordingly. Although the expectation is for councils to uphold most of the operational burden, a section of the budget is planned to be secured for DAO-led initiatives.

Program Ratifications
In order to drive accountability, programs should also be ratified upon a given cadence in order to keep up with the performance of Councils and the impact of their initiatives. A quarterly ratification should be reasonable in order to give time to adjust and adapt for another quarter before the bi-annual budget ratification.

[alexsotodigital]

As you know, I would like to emphasize that we add ‘Consent’ as a decision-making mechanism, especially for day-to-day operational tensions of delegates/contributors.

Consent Decision-Making (with Objection Review)

Proposals are passed unless a clear, reasoned objection is made. The Scroll Foundation (and/or people within that working team) retains the right to raise objections based on purpose/constitutional alignment; but must justify these transparently. A neutral facilitator helps arbitrate, ensuring safeguards without bottlenecks.

I believe this shift the DAO toward a more operationally viable mode of governance for low-impact operation decisions.

[404Gov]

I agree with the shift to optimistic approvals from referendum voting for technical upgrades and operational decisions. A council-based model makes sense—arguably more so than working groups, which tend to be more ephemeral and short-term in nature. Furthermore, allocating a defined budget to each council from the general budget is a welcome and refreshing approach.

That said, it is important to emphasize transparency, reporting, and accountability. Budgets should be clearly communicated, and every council and DAO-program receiving an allocation should be aware of the budget parameters and held accountable through clearly defined metrics and reporting.

[GozmanGonzalez]

I really appreciate this breakdown. It feels like a thoughtful step forward for Scroll governance. I like how it recognizes that not all decisions are the same and that one-size-fits-all voting hasn’t worked well in the past. The mix of councils, referendum voting for big decisions, and optimistic approvals for day-to-day stuff makes a lot of sense, it balances speed, expertise, and accountability.

I also think tying treasury management closely to a bi-annual vote and letting councils handle most operational work will reduce the noise and make execution faster. Quarterly program ratifications feel like a good way to stay on top of impact without slowing things down.

Overall, this approach feels practical but still respects the community’s voice. Excited to see how it plays out and how these mechanisms will actually work in practice

[jameskbh]

A few comments on my side

@SEEDGov

Optimistic Approvals
Once novelty but now rather common, optimistic approvals invert the charge by providing a negative signalling mechanism instead of having to support each of the given proposals or decisions. Two expected use-cases can be Protocol Upgrades, due to their very technical nature, and operational decisions, such as pre-approved fund transactions. The key component in terms of keeping accountability is the design of the veto-threshold that would pause the decision from executing, which is usually given by a % of the votable supply.

These need to be properly announced so that people know that something is happening and should/could be reviewed. Lido’s “easy-track” is not (IMO) properly tracked in the forum (where the DAO mostly lives), so there is no proper reviewing. (A simple thread when a new proposal is live should be enough)

@alexsotodigital

Proposals are passed unless a clear, reasoned objection is made.

Just a question: who defines if the objection was reasoned (enough to prevent a proposal to pass)?

[alexsotodigital]

GM @jameskbh;

@jameskbh

Just a question: who defines if the objection was reasoned (enough to prevent a proposal to pass)?

The person who determines whether an objection is valid or not is the facilitator: a neutral role elected by the group to guide the governance process.

The facilitator is expected to hold impartiality, and if they ever want to raise an objection themselves, someone else must temporarily step in to facilitate that decision-making moment.

Whether an objection is accepted follows a clear, predefined test.
The objection must meet all four criteria to be considered valid:

1. It would reduce the capacity of the group to enact its purpose or accountabilities.
2. It would limit the objector’s ability to fulfill their own role’s purpose or accountabilities.
3. This concern would not already exist without the proposal; so it introduces a new tension.
4. The proposal would necessarily cause that harm, or we wouldn’t have time to adapt before significant damage occurs.

This framework helps ensure objections are not just personal preferences or abstract fears. Instead, they must show tangible risk to the group’s functioning and relevance. The facilitator’s job is not to “agree” or “disagree” with the concern, but simply to test whether the objection meets those standards.

For more info, here is the facilitators guiding card for governance meetings (in Holacracy).

[Curia]

The introduction of multiple governance mechanisms makes sense, especially as Scroll shifts its priorities toward speed in order to compete with other protocols. Using “Optimistic Approvals” as a default mechanism can enable faster execution for technical and protocol upgrades, while council-based decision-making is well suited for proposals that require specific expertise.

For high-impact proposals that still require a referendum, will these proposals continue to require a minimum of three endorsements, as in the previous governance framework, or is this requirement being reconsidered under the new design?

[SEEDGov]

Thanks for all of the thoughtful feedback! Answering some Qs.

@jameskbh

These need to be properly announced so that people know that something is happening and should/could be reviewed. Lido’s “easy-track” is not (IMO) properly tracked in the forum (where the DAO mostly lives), so there is no proper reviewing. (A simple thread when a new proposal is live should be enough)

Agree on this one, although there’s a dedicated UI (as the one we are envisioning) it is true that Easy Tracks aren’t reflected on the forum which still stands as the primary communication tool.

@Curia

For high-impact proposals that still require a referendum, will these proposals continue to require a minimum of three endorsements, as in the previous governance framework, or is this requirement being reconsidered under the new design?

Endorsements are still being considered just that instead of Foundation itself it’d be the Execution Council (or the decided name) the one giving the required endorsement to submit the proposal to a vote.

[Juansito]

Hello, and thank you for the feedback shared in this thread.

I’d like to clarify a few important points regarding governance mechanisms and budget allocation, as there are some nuances worth highlighting.

Governance Mechanisms

While the DAO intends to adopt multiple decision-making mechanisms, it’s important to be practical and precise about their implementation. The vote scheduled for January is not a vote to immediately activate these mechanisms. Rather, it is an acknowledgment that the DAO agrees on the direction of introducing multiple governance mechanisms, enabling our in-house engineering team to begin working on their technical implementation.

These mechanisms will not be put into practice until the necessary technical infrastructure has been fully implemented and tested.

Budget & Treasury Allocation

I’d also like to clarify what the upcoming January proposal will cover in terms of budget and treasury management:

• The DAO will operate under a Treasury Allocation provided by the Scroll Foundation, set at an annual value of $1.52M USD, effective from January 1 through December 31 of each year.

• The Scroll Foundation Treasury team will manage fund disbursements on a quarterly basis, applying strategies aimed at reducing SCR emissions while ensuring a stable and operational budget for the DAO.

• The distribution of the Treasury Allocation across spending categories will be decided by the DAO on a biannual voting cadence. These votes will determine the high-level budget buckets.

• The upcoming proposal will define the distribution for the first semester of 2026 only. Allocation for the second semester will require a separate DAO vote.

Budget Amendments Included

The proposal also incorporates the following amendments to the budget structure:

1. Updated naming conventions and clearer breakdowns of each allocation category.
2. Introduction of a discretionary budget for the Operations Committee, ensuring flexibility for tooling and unforeseen operational expenses.
3. Separation of the Karma GAP expense as a distinct line item under the Accountability Committee.
4. Explicit scoping of allocations to cover only the first semester of 2026.

I hope this provides additional clarity on both the scope of the January vote and the sequencing of implementation. As always, feedback and questions are welcome.

[pmprojectz]

Clarity on these now means we can vote confidently in January and execute smoothly after. I have a few questions:

Treasury allocation is determined by the Foundation and provisioned quarterly, with biannual DAO distribution votes. If the DAO identifies an urgent funding need within 30-60 days of a budget cycle ( maybe a security incident or competitive opportunity) what would be the documented process for supplementary funding? Who approves it, what’s the timeline, and what would be decision threshold?

[blockful]

Optimistic governance is a mechanism already adopted by Lido and Optimism to reduce the number of decisions that need to go through full DAO processes, thereby preventing delegate fatigue. Arbitrum is also currently discussing the implementation of a similar mechanism for certain types of proposals. The downside, however, is that many proposals may go unnoticed by delegates and governance token holders. This is problematic, as any proposal that directly affects $SCR and governance participants should have proper visibility.

For this reason, while the adoption of optimistic governance is a strong idea, especially for more technical proposals, it is essential to establish clear ways to publicize these decisions. As @jameskbh has already mentioned here, this could include posting them on the forum and on Twitter, for example. Are there already discussions about the veto mechanism typically associated with this model?

Regarding the choice to keep many decisions centralized within Councils, this approach is understandable in the context of Scroll’s progressive decentralization phase. With this structure, Scroll DAO can be reactivated while still following the North Star defined by the Foundation. It is crucial, however, that the selection process for Councils and Committees is clear and transparent, so that delegates and governance participants can engage with the bodies they wish to contribute to.

Finally, about the treasury, it is noted that the Foundation will release the budget to the Scroll DAO on a semiannual basis. One question remains. Will these funds be held in $SCR or staked SCR throughout the term, or will they be converted into stablecoins to preserve the dollar value defined in the budget? This concern arises because $SCR has fallen by 74 percent over the past six months. Under such conditions, a projected semiannual budget of U$760.000 would effectively shrink to approximately U$197.000 by the end of the term.