Signaling proposal to allow Hub governance to execute clawbacks with ease

Summary

This proposal aims to introduce a ‘Claw Back’ tooling that would allow the Cosmos Hub community to recall all funding provided to DAOs, like the Atom Accelerator DAO (AADAO), back to the Community Pool through an onchain governance vote.

Please note that this proposal is NOT calling for the immediate dissolution of AADAO. Recent events have prompted conversations in the community and the DAO about restructuring the organization, but this proposal is unrelated to those issues. This proposal is to modify DAODAO tooling such that any ATOM Community Pool funded DAOs’ assets can easily be clawed-back by governance, if and when needed.

Background

The Hub’s community is the true owner of AADAO’s assets and is the sovereign voice enabling it. Meaning that, at any moment, the community could choose to halt the DAO’s activities, claw back funding and dissolve Atom Accelerator.

Motivation

The community’s supreme authority, via onchain governance, over all of AADAO’s activities isn’t new and has been part of the DAO’s Internal Protocols since inception.

That being said, if a community member wanted to introduce a proposal to claw back funds and disband AADAO, the process would be suboptimal right now:

  • Lengthy process: it requires a signaling proposal, after which the AADAO Multi-Signature signers must coordinate to transfer the funds back to the Community Pool.
  • Technically challenging: Multi-Signature coordination failures could lead to frozen funds. For example: Clawing back vested funds in Proposal 860 required a Software Upgrade.
  • Trust assumptions: In an ideal scenario, the Hub’s community shouldn’t be beholden to any additional trust assumption when it comes to governance-approved claw backs.

In order to eliminate unnecessary trust assumptions, account for technical failures and improve the process, AADAO has asked the DAODAO team to develop a clawback tooling… This tooling will allow any community member to initiate the process of recovering all funds custodied by DAO’s like AADAO, simply by creating a governance proposal on the Cosmos Hub. Upon passing, the clawbacks will be executed automatically.

It’s worth adding that while the main purpose of this development is to be leveraged directly by Atom Accelerator to strengthen the DAO’s accountability to the Cosmos Hub, the tooling will be made available for all to use.

AADAO will be the first to adopt this but it is our hope that it will become a standard practice amongst all DAOs mandated by the Hub in the future.

Implementation

If passed, AADAO will proceed to put in place the clawback tooling as proposed below.

Technical Implementation:

In order to maximize transparency, accountability and efficiency, AADAO leverages DAODAO for all its operations. DAODAO enables the existence of a hierarchical organizational structure via subDAOs, a feature that AADAO leverages.

Thanks to this, AADAO will be able to grant the Hub’s Community Pool address control over funds in the custody of AADAO.

A clawback control will be given to the governance account, allowing governance to execute messages on behalf of AADAO and its subDAOs

Once in place, any community member will have the ability to post an onchain proposal that, if approved, will execute the transfer of all assets custodied by AADAO back to the Community Pool.

Best Practices guidelines

While nothing prevents any community member from abruptly pushing a ‘clawback’ proposal onchain without prior notice, we would like to point out a few suggestions to follow when introducing a clawback proposal:

  • Before taking the proposal onchain, initiate a discussion on the Hub’s forum.
  • Include the reasoning and rationale behind the proposal.
  • Give AADAO (or other DAOs) the chance to reply and address the concerns motivating the proposal.
  • Any clawback proposal should account for grants and expenses in progress. In the event that a clawback is initiated, some funds should be excluded from the clawback to allow for the program to be closed out responsibly - covering the funding already committed to grants in progress, and some operational funding to allow for a skeleton team to close out the program.

Note:
- The goal of the suggested best practices isn’t to give AADAO the chance to defend itself. Instead the goal is to provide ATOM stakers the full picture and more context, in order to make informed decisions.
- Regardless of whether the proposed guidelines were followed or not, AADAO contributors commit to abiding by the outcome on any onchain vote that concerns AADAO.

Final Thoughts

Navigating recent events has been challenging for AADAO’s contributors. That being said, we’d like to pause for a moment and consider the upside to the future of decentralized governance on the Cosmos Hub:

While what the DAO experienced should have never happened in the first place, it was the way Atom Accelerator was structured that allowed for it to be detected and swiftly addressed.

Atom Accelerator relies on a group of contributors entrusted by the Cosmos Hub to steward its interests. Meaning that at any moment, if the community wills it, they can put an end to AADAO and retrieve all funding.

To complement Atom Accelerator’s decentralized ethos, the DAO established a trust in Guernsey, leveraging the jurisdiction’s tax neutrality for optimal asset management. Combined, these efforts guarantee the long-term financial health of the Hub’s assets by placing compliance directly on the shoulders of the DAO’s contributors. An approach that has proven efficient amid recent events.

Critical changes need to be made in order for AADAO to find a way forward. We’re currently working on the best way to do this and soon we will share our plans with the community.

But until then, we wanted to remind the community that AADAO contributors do and will always acknowledge the Hub’s governance as the overruling authority on all matters and we hope that this initiative will reinforce that commitment.

7 Likes

I think that’s a nice idea, however there are a few caveats (not that I do not support the idea, I do, but these needs to be thought about):

  • what if the pre-governance discussion starts, then the wallet owners see it and move their funds away so they can’t be clawed back this way?
  • if some of the funds were already spend, there’s no way to get them back this way

And obviously only those funds that were received via the CommunityPoolSpendProposal should be able to be clawed back, otherwise it can lead to a precedent like with Juno and its proposal 16 (which I think should have never happened and executed in the first place).

(All of these points above are also relevant for clawbacks via SoftwareUpgradeProposals, which doesn’t make them invalid.)

3 Likes

I think the ideal approach would be not using CommunityPoolSpend proposals, which can be clawed back, but instead something like a linear/milestone-based vesting. Imagine this: someone asks for funding, and instead of asking for a CommunityPoolSpend, a vesting account (or some kind of it, not sure about the internals, I’m just merely brainstorming and proposing the general approach here) is generated. If everything goes okay and the team delivers, it emits money either once the team reaches some milestones or linearly over time, but if not, the community (or AADAO) can propose cancelling this vesting account (or whatever it would be) and the portion of tokens that was not yet distributed would be just not distributed to a team, end of story.

Pros:

  • the whole amount is not distributed to the team, preventing cases like proposal 101
  • if the team does not deliver, cancelling the undistributed part of the grant would be way easier than clawing it back

Cons:

  • ???
3 Likes

Hey @freak12techno thanks for chiming in. These are all valid points to consider.

Regardless of how many measures we can put in place, there’ll always be a certain level of trust required when it comes to funding teams working on the Hub from the CP.
Technically speaking, there is nothing stopping teams that received funds from the Community Pool once a clawback process of any kind is initiated. This is why the process to get funding from the CP is long in the first place: based on the proposal presented, the community will have to assess the team, the likelihood of them delivering on their promises and whether or not the amount asked is justifiable.

The intended tooling that we aim to introduce isn’t supposed to replace the key trust assumption of trusting the team to not steal funds, instead it builds on it to make the clawback process easier, automated and accessible to any community member.

We fully agree on this. For example, grants approved by AADAO are subject to milestones and deliverables to unlock the full amount approved, which could be tracked on AADAO’s dashboard for issued grants.
However, it’s true that this process requires a centralized entity to set, negotiate and approve milestones which makes it tricky to implement at the governance layer… This is why we, AADAO, are funding Binary Builders to build the DRIP module which will provide funding disbursement to teams linearly. As a result this will reduce sell pressure on $ATOM and enable governance to halt future funding.
Once fully developed, a proposal to implement the DRIP module will be posted on the forum.

2 Likes

Awesome, thanks for explaining.

With that being said, I’m all in for adding a clawback functionality to Hub (or should it be sdk in general, I assume?) and would vote yes on the proposal once it’s on chain. Vesting approach would still be better, but given that it’s not there yet, having a clawback via governance is better than having nothing (except for clawbacks via SoftwareUpgradeProposal) at all.

3 Likes

Thank you for initiating this conversation, @ATOMAcceleratorDAO. Wishing the entire team are staying well. A few concerns:

1

If this statement is true, is there a deliberate effort from AADAO’s core team, and a linked Cosmos Hub Top 20 Validator, conceived through the grants program, in avoiding responding to the Aid Proposal for Earthquake Survivors in Türkiye thread?

This previous employee, let alone founder of a Top 30 Hub Validator, has an overdue response requested by the broader Cosmos Hub Community.


2

Not only does this further lessen the credibility of AADAO, let alone the ability to custody the hub’s community pool, if that is being understood correctly, this signals to the broader community that AADAO should indeed be dissolved, immediately.

Please note, this is not something necessarily wished upon for this DAO, as actions following recent incidents show sincere promise moving forward!

Lastly, in requesting the DAODAO team, consisting of a member who enabled Juno’s proposal 16, as @freak12techno brings up in this discussion, further leads to the unfortunate questioning of AADAO’s credibility, regarding accountability, in who to “trust.”


3

With all that said, I agree that this signaling proposal should move forward on-chain, if applying explicitly to DAO’s receiving funding from the CP.

I do agree, alongside the AADAO, with this statement below, if this signaling proposal is to move forward.

Looking forward to hearing your response.

Thanks for your thoughts on this @FHZ. I wanted to address an aspect of your post - about proposal 101.

NO, AADAO is not using the grants program to avoid responding to your questions about the Earthquake proposal. I don’t even really know what it means.

The Earthquake proposal, like many other “Community Spend Proposals” are in no way linked to AADAO; nor does AADAO have any power, influence or control over the people behind those proposals; nor is AADAO in any way responsible for the deliverables listed in these non-associated proposals.

I can see you have already brought this issue up in the thread below, and Grace (member of our Oversight) has already responded to you:

I would recommend not hijacking the current forum thread for the sake of healthy discussion.

For clarity, just reiterating that Atom Accelerator DAO had and has nothing to do with Proposal 101: Aid Proposal for Earthquake Survivors in Türkiye.

2 Likes

@Syed Thank you for your response!

Respectfully speaking, intentions were not to “hijack” this thread, but to enforce the accountability factor being stated here, on behalf of the members who requested for a response from the 101 thread. Believe it or not, the desire is to see AADAO succeed, for the good of the collective Cosmos Hub community.

Why AADAO does have “something” to do with Proposal 101, relates to the former employee, who is the founder of the Validator responsible for Proposal 101. If the individual left in March 2024, it falls in line with Hub community members requesting a response since the passing of Prop 101, dated February 23, 2023. Outside of this scope, you are 100% correct AADAO does not have relation to it, at the least, any longer.

Thank you for your time reading/responding, and apologize to you/AADAO for straying from the original intent of this direct thread.

1 Like