This is the first piece of a series primarily focused on understanding how one of the most advanced decentralized organizations, Optimism is structured and how its decision-making systems function.
The anatomy of Ethers Phoenix - Dissecting the Optimism CollectiveThis is the first piece of a series primarily focused on understanding how one of the most advanced decentralized organizations, Optimism, a.k.a. 'Ethers Phoenix,' is structured and how its decision-making systems (governance) function. This series is a response to recent sentiment around newcomers' confusion and complexity regarding how governance in Optimism works. The goal is to help Optimistic friends understand Optimism and its governance better. P.S. No one here is a dummy, and it's always a good day to learn.
The advent of cryptocurrencies in early 2008 (Bitcoin: A Peer-to-Peer Electronic Cash System, 2008) has opened many doors for exciting and fundamental changes to how money, art, decision-making power, and organizations operate (Murray et al., 2021). One of these projects is Optimism (formerly known as Plasma group), which became vocal about its vision and mission in early 2020 (Optimism, 2020). Optimism aims to create socio-techincal solutions to the most significant problems experienced in the scaling of the Ethereum Virtual Machine (EVM) and Public Goods funding. Scalability refers to growing the overall number of network transactions without increasing transaction costs and public Goods are goods/services provided by individuals or organizations that are accessible to everyone for free e.g Open source software, Public Park or a Beach (Oakland, 1987).
(The Optimistic Vision, n.d.):
Vision (Short Version): Show that a new model of digital democratic governance is possible through a collective of communities, companies, and citizens united by a mutually beneficial pact to adhere to the notion that impact is profit — the principle that positive impact to the collective should be rewarded with profit to the individual by dispelling the myth that public goods cannot be profitable: *Read the Optimistic Vision. *Knowing more about the narrative that Optimism subscribes to, we can delve into understanding how and why it governs itself.
To understand the governance of Optimism, first we must know its components and who partakes in them. This brings us to the Optimism Collective, a group of companies and individuals working together to build and sustain Ethereum (What is Ethereum) through public goods funding (OP Docs, n.d., sec. What is the Optimism Collective?).
Before showcasing all the diverse members of the Optimism Collective it is essential to introduce what binds them together.
The main glue of the collective is the Optimism token (OP token) (OP Docs, 2023, sec. Token House). The core intended use of this digital token is both for decision-making power in the collective and for payment/rewards. The total amount of OP tokens that are currently in existence is about four billion (yes, 9 zero’s) OP tokens.
The governance system of the Collective: The Optimism Collective uses a bi-cameral governance system (Giannetti et al., 2020). This is an experimental system in web3 where some decisions are made through a token-gated democratic process where the amount of OP tokens one has, determines their voting power or influence (Optimism Governance Research Questions.pdf , 2023).
While other decisions are made through a process where one person/ organization = one vote. In this version, one vote is determined by a digital badge assigned to a person or organisation also referred to as a ‘soul bound’ token (Weyl et al., 2022). The process of receiving a badge is by the delegation of a certain amount of OP tokens to a candidates account/wallet. This indirectly still gives people who have OP tokens, the power over who decides about decisions that are reserved for the people that hold a badge. This collective is made up of many moving pieces, but the main pieces that we will cover to understand the decision-making power relations are:
Like many other tech start-ups Optimism’s founders went through the traditional VC route to raise funds to scale their ideas (McSweeney, 2021; Baldridge, 2023). The funds were received in exchange for a percentage of the total supply of the OP token (OP Docs, 2023 -b, sec. OP Allocations). Optimism memed the term VC investors into Sugar Xaddies as it is a commonly used cultural slang to describe someone that provides funds for someone in return of something else (“Sugar Daddy,” 2024).
The Optimism Lab is the main company that is developing the technical pieces that are needed to reach the vision of the Collective. It is the entity that manages and employs the core builders (various roles) to work on making Optimism a reality (OP Labs notion, 2024). Next to a traditional income, these contributors/employees are also entitled to a percentage of the total supply of the OP token (OP Docs, 2023 -b, sec. OP Allocations).
The ecosystem contributors can be seen as development companies/teams that OP Labs contract to further develop and maintain the Optimism technical stack e.g Code, Research, Design, Human resource etc. The Ecosystem Contributors are rewarded in a share of OP tokens as a form of long-term commitment e.g the recent BASE (a coinbase) contribution commitment (The Optimist Collective, 2023).
The Optimism Founda tion can be seen as the non-profit legal entity of Optimism (OP Docs, 2023.-c, sec. What is the Optimism Foundation?). Its board members are officially chosen through a token-gated democratic process where the OP token holders (Token house) decide to remove & add new board members (Ethereum-Optimism, 2023).
The foundation's main purpose is currently to administer the rest of the OP token supply, which has been distributed or still has to be distributed (Foundation Mid-Year Budget Update, 2024). The members of the Foundation do receive OP tokens and regular wages as payment for their time and labour.
Optimism decided to structure its token-based governance system in two houses. A token house, which is a group term for everyone (Accounts, organizations etc.) that has OP tokens and the Citizen House, which is an umbrella term for a thorough delegation of the OP token-selected group of individuals that hold an Optimism citizen badge (Working Constitution of the Optimism Collective, 2022).
The Token House is an umbrella term for every person, or entity that holds the OP token. The eventual role of this house is/ will be to collectively govern Optimism's final form, the ‘Superchain’ (more about this future parts of this series) through a series of token-gated direct and delegated democratic processes. In the Token House, the amount of OP tokens one holds is directly connected to the power of their voice when it comes to decision-making (Operating Manual v0.3.8: The Token House and Citizens’ House, 2024).
The Citizen House is an umbrella term for every person/entity that has a badge. A badge is usually obtained through a token-gated representative democratic process. Where the OP token holders (the Token House) delegate their tokens to respected individuals from the web3 space to represent them in decisions that are reserved for the Citizen House. In the Citizen house, each delegated badge holder has one vote (The Optimist Collective, 2022).
Now that we know the main actors of the Optimism collective and the polycentric governance types Optimism uses are laid out, we can touch upon the question of what exactly is being governed. To answer this diverse question, it is important to remember that the Optimism collective works with a bi-cameral system of governance (The reasons why this approach matters will be explained in future articles) whereby the Optimism Collective is trying to balance a plutocratic and a less-plutocratic space to collectively decide about various areas and directions the future of Optimism collective can go.
Like any aligned group of people and organizations, a strong narrative is key. In Optimism, the main narrative is the vision of creating an on-chain economy that funds public goods. The way this is achieved in other areas is through a series of collective agreements such as The ‘working’ constitution, Code of Conduct and the OPerating manual. Therefore, the Optimism narrative is also collectively governed by the OP Foundation (early stages) and the Token house/Citizen house.
The Optimism Foundation is the early steward of the Optimism Collective and how its governance model evolves. It’s a legal entity under the jurisdiction of the Cayman Islands with a preselected board of members, However, the OP Token house through token-gated democratic voting can still decide to remove the OP Foundation director and veto any changes that would affect the rights of OP holders in a material way through a proposal to do so.
Badgeholders are essentially chosen by OP token holders (the Token House). The Token House decides by delegating an amount of OP tokens to the registered person. Badgeholders in return are tasked to review the retrospective public good rounds that distribute a special OP token reserve for projects that have been beneficial for the Ethereum and Optimism ecosystem.
This is a small selected group of representatives that get voted in by the Token House to review OP grants and enforce rules regarding the application process. Various sub-committees are tasked to review grants with different intents (More about intents in the next section).
Grants can be defined as a sum of money/ goods or tokens given by an organization for a particular purpose. Within the Optimism Collective, grants are distributed as a sum of OP tokens to initiatives that promote the optimistic vision (Governance Fund Charter, 2022). The Optimism Foundation, Developer Advisory Board, Grant Council and its sub-committees are - next to the RPGF rounds which the Citizen house (badge holders) govern - the main governing bodies of the distribution of OP tokens through grants (Developer Advisory Board, 2023; ).
To ensure that the Optimism vision is being achieved, the Optimism narrative closely guides this grant program. To achieve this Optimistic vision, similar to the United Nations Sustainable Development Goals (SDGs) four intents (Goals) were shaped. These are: Progress towards technical decentralization, Grow the Superchain, Improve the Consumer Experience and Improve governance accessibility (Collective Intents: Season 5, 2023). They are here to guide the various missions towards optimistic outcomes. A visual provided by the OP Foundation (System on OP forum) below.
One of Optimism's core vision statements is the emphasis on public goods. To make sure all social positive impact driven by non-commercialized initiatives receive their reward for the social positive impact they provide. It is a core belief that is also reflected in their technical stack and what is being built for ‘The superchain’ but more about this in future editions.
To reward the past work of individuals and teams (retroactive) the Optimism Collective dedicated a generous amount of OP tokens to reward retrospective public goods (Optimism, 2022a). These are named the Retrospective Public Goods Funding rounds (RPGFs in short). These special retroactive public good grant rounds are governed by the Citizen House, a group of about 100 Badgeholders who as mentioned in previous parts receive their badge through a delegation process. There has however been some controversy around the RGPF rounds such as Self Dealing, Web3 native privileges etc.
Note:* In Optimism Collective, all governance realms are divided up into periods broken down in seasons, rounds or cycles. The calendar dates of these seasons and cycles varies but they are usually divided into months and weeks. For example, in the Season 5 governance; Grant review, submissions and voting happen between Januari 2024 date and May 2024. *
The main public facing mediums where many of the communication happens when it comes to feedback, discussions, grant application, voting, Delegation are the following;
Working on something aligned with the 4 Intents? Get a Grant!
Check out the Mission Application Guide and then:
Learn more about RetroPGF and how your past contributions may be rewarded for their impact in the future. Check out contribution ideas here!
Brace yourself for a wave of excitement as we unveil more pieces just like this one, each delving deeper into the intricate world of the Optimism Collective. These pieces aren't just about information – they're about empowerment! We're on a mission to enlighten YOU, our readers, about the boundless opportunities waiting in the realm of optimism. As we believe that a thriving community is an educated and informed community.
PS: We've got a bonus piece lined up that will zoom in on the ultimate Optimism collective end game: The Superchain (Stay optimistic!)
About the Author(s):
OP forum :* 0xR (Ruben)*X: @RRussel17
-Sociologist, User Interface and Experience designer for web3 and beyond. Ruben is an experienced decentralized governance researcher, writer and designer. He has been around the space since the introduction and usage of DAOs.
