Introduction
As Decentralized Autonomous Organizations (DAOs) grow in size and scale of operations, more stakeholders begin to play a key role in governance, and the stakes often get higher as the total value locked in the protocol continues to grow.
With all this positive growth, the typical governance process that the DAO adheres to may prove inefficient in circumstances where an emergency has taken place. These situations could range from finding a bug in the smart contract to a governance attack where one individual attempts to claim the treasury for themselves. In order to efficiently cater to emergency situations that may come up, it is essential for a DAO to have a governance process designed for emergencies. This is where the fast-track process comes in.
In this piece, we will be exploring what the fast-track process is, how it works and the various additional considerations that governance leaders at various DAOs must consider before implementing a fast-track process.
What is a fast-track proposal?
A fast-track proposal is an expedited version of a DAOs traditional proposal process, which is intended to enable the DAO to reach a consensus in time-constrained circumstances. As the ecosystem is constantly evolving, there are circumstances where a delay in implementing a change could become quite costly to the DAO. Fast-track processes are designed to cater to these time-constrained circumstances.
How does a fast-track proposal work in practice?
The illustration above is an example that does not mirror any particular DAOs Governance Process
There is no typical example of how a fast-track process should work; various DAOs adapt the fast-track process to the peculiarities of their community, therefore fast-track processes are hardly uniform across different DAOs.
Although there are key similarities between most fast-track processes, the distinctions lie in how each fast-track process interacts with and adapts to certain aspects of the DAOs traditional governance process.
For example, at Aave, a Fast-Track Proposal would involve a Governance thread for 24h, followed by a Snapshot with an immediate vote open for 48h. Once the vote closes on Snapshot, the Aave Community multisig will enforce the outcome of the proposal.
On the other hand, at Paladin, the DAO uses a Paladin Emergency Proposal process as its version of a fast-track process, the Paladin DAO categorizes various emergency circumstances and ascribes various governance approaches to each.
Features of a good fast-track proposal
Short Duration: It has to be swift while keeping the community informed.
Categorization of possible risks and opportunities: Include categorizations of possible circumstances where the fast-track process will apply. Through this categorization of circumstances, the DAO ensures that the likelihood of the fast-track process being abused is reduced.
For example, a DAO could state that a fast-track proposal would be applicable where there is a bug in the protocol’s smart contract, or market conditions have forced a drastic change in circumstances. In terms of oppurtunities, it could specify that where there is time constrained financial opportunity for the DAO, a fast-track may be applicable subject to review.
Immediate intervention by Core Team in certain scenarios: In circumstances where user funds are at risk, or there is a bug in the DAOs smart contract, it is essential that the core team intervenes immediately to resolve the issue. After the issue has been resolved, the core team can release a statement on the forum, explaining the issue and why the circumstance had to be resolved immediately without going to governance.
For DAOs that are earlier in their operations, we would recommend forming a Governance Council. It is important to acknowledge that a fast-track proposal process can be abused, however, it is important to build in a Governance Council that could veto any malicious proposals. For example, an individual could institute a fast-track proposal to claim the entire treasury and if the vote passes, the treasury would belong to them, however, if there is a Governance Council, such a malicious proposal would not pass.
Why should a DAO have a fast-track proposal?
The primary reason why a DAO needs to have a fast-track process, would be to empower the community with a counter-measure to unforeseen circumstances and emergencies. As the crypto ecosystem continues to iron out its best practices, there are still a number of things which could go wrong, such as a smart contract exploit or bug could render a Protocol destroyed if there is no immediate intervention by members of the community. A fast-track proposal process ensures that such an intervention can still take place with some measure of community consensus.
Should fast-track proposals only be used in emergencies?
Although fast-track proposals were originally designed for emergencies, the fast-track proposal process can also be a viable opportunity that could be beneficial to the DAO.
For example, if there is a treasury management decision that could generate value for the protocol; under the strict definition of a fast-track proposal, a financial opportunity cannot be classified as an emergency, however, if there is a time constraint or limit to the financial opportunity, then it would be reasonable to include “time constrained viable opportunities” under the category of circumstances in which a fast-track proposal process could be applied to. Another example, if the DAO had a time-constrained opportunity to purchase a strategic asset like CRV through an Over Counter Transaction (OTC), at a favourable price point, the traditional governance process would take too long, therefore using a fast-track process to tap into this opportunity would provide more value to the DAO.
Examples of where fast-track proposals have been used
A number of protocols use fast-track proposals, however, in this piece, we will explore proposals from Aave and Euler.
[ARC] V3 Borrow Cap Recommendations (Fast-track) (2022-12-05): This proposal added Borrow Caps for 7 assets and amends the borrow cap of 9 assets, due to market conditions it was important that these recommendations were implemented quickly, this is where the fast-track process comes into play.
eIP 31 Fast-track - move WBTC to an explicit Wrapped Bitcoin Chainlink oracle: This proposal was intended to change the WBTC oracle to a WBTC-ETH to encourage more precise asset pricing. At the time, the oracle valued wBTC as BTC, and failed to account for the risk of wBTC trading at a different price.
As the ecosystem develops, more DAOs will implement fast-track processes to cater to the possible emergency circumstances that could come up.
Dangers of having no fast-track proposal
The primary reason why a DAO needs to have a fast-track process, would be to empower the community with a counter-measure to unforeseen circumstances and emergencies. As the crypto ecosystem continues to iron out its best practices, there are still a number of things which could go wrong, such as a smart contract exploit or bug could render a pProtocol destroyed if there is no immediate intervention by members of the community. A fast-track proposal process ensures that such an intervention can still take place with some measure of community consensus.
Conclusion
Unforeseen circumstances are an inevitable part of every sub-sector in the crypto ecosystem. This is why it is imperative for DAOs to have processes in place to make decisions during emergencies. A well-designed fast-track proposal can function as an effective risk management tool in these unforeseen circumstances, as the ecosystem develops, fast-track proposal processes will become more common and various iterations of the process will be designed to meet the needs of various DAOs.
How can StableLab help?
Through active participation as Professional Delegates in Maker, Optimism, Aave, Balancer, Element Finance and many more DAOs, StableLab has developed expertise in designing governance frameworks that cater to the peculiarities of the DAO in question.
As it concerns all things governance, including fast-track proposals, StableLab is the leading Governance Firm providing governance-related services in the ecosystem. If you have any questions about designing a fast-track proposal process for your DAO or any Governance relates issues or ideas you may have, feel free to reach out to us at hello@stablelab.xyz.
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