One of the key pillars for Cardano's viability is active community engagement and participation. This necessitates an effective governance mechanism. Using an iterative, anti-fragile approach and setting high standards for effective decision making, IOG provides the Cardano community with the mechanisms and human-processes required to help decide & build the future of Cardano.
IOG plans to deliver this through absolute Liquid democracy - collective decision-making through direct participation and dynamic representation.
Liquid democracy is a concept of hybrid governance system that stands somewhere between representative and direct democracy. Ada holders can choose to vote directly, or delegate their votes to domain experts called Delegate Representatives (dReps_)_. This democratic culture plays a key role in Cardano's long-term sustainability as a public blockchain system.
Liquid democracy is also about the staking benefits. Cardano’s delegation mechanism is based on a liquid democracy, meaning that staked ada are never locked and can be utilized at any time. Other platforms use a third-party protocol to make staked tokens liquid, which has the potential to introduce security problems.
Project Catalyst is a program that allows ada holders to directly vote on and allocate funds from the Cardano Treasury to start-up projects building applications, tools and products for Cardano.
Catalyst brings governance to Cardano by allowing the community to self-determine priorities for growth.
To do this, Project Catalyst is divided into a series of funds, which are deployed approximately every twelve weeks. These funds are used to elicit ideas in the form of proposals from participants. Each proposal is focused around a challenge issued by the Project Catalyst team or the Project Catalyst community. The proposals then go through a community refinement process where they are vetted for feasibility, auditability, and impact by a group of incentivized community advisors. Once the proposals have been finalized, they are voted on by the community and ada funds are distributed to the successful projects.
Catalyst enables people to realize great ideas and implement them, but funding is only part of the journey towards success. Other factors, such as education, mentorship, collaborations, and product roadmap development are also needed to nurture projects and help them formalize a business plan and effective go-to-market strategy.
Catalyst Circle and Community Participation
The Catalyst Circle is a “human sensor array” acting as the representative body for all the different groups participating in Project Catalyst. The Circle monitors the current state and future plans regarding governance in Catalyst. It detects and discusses concerns, objections and opportunities arising within the Catalyst ecosystem. The Circle might discuss, for example, the definition of amounts allocated to challenges Fund over Fund; changes or conditions to incentive parameters; the Catalyst API, etc.
By recording meetings and capturing actions in a backlog accessible to all, this activity provides a view into the hopes, wants, needs, and concerns of the community within Project Catalyst. The Circle is also responsible for determining its own future shape and defining the election processes for Circle v3.
The Circle exists to fulfill four key goals:
To facilitate communication between the different functional groups
To provide a heads-up when red lines are crossed within a certain group
To suggest improvements on plans and processes that shape Project Catalyst
To define the election process for upcoming Circles
There are also numerous examples of community-led governance initiatives in addition to Catalyst. One significant example is the Cardano DeFi Alliance. The Cardano DeFi Alliance is a consortium of projects with the primary mission of standardizing Plutus and Cardano best practices within the Cardano ecosystem. It aims to drive composability across Cardano DeFi protocols. The DeFi Alliance offers a framework to Plutus protocol development teams who are focused on collaboration of key issues and their strategic development.
Cardano’s ecosystem also encourages broad community participation. The Cardano improvements proposals program (“CIP”) allows ada holders and other third parties to build applications on the Cardano blockchain. The CIP describes standards and processes and provides general guidelines and information to the Cardano community. It is a formal, technical communication process that exists off-chain.