The Vote is Law. Referendum Outcome over Social Contract

A commonly quoted concept regarding on-chain governance and in OpenGov referenda is the “Social Contract” idea. This concept is most commonly used within constitutional law and political Philosophy but on our context is often pushed as a way to describe an implicit communal intention to enact blockchain governance.

When it comes to on-chain governance, we want to propose the idea of the referendum outcome as the only possible way to enact a social contract as opposed as a social contract enacting the on-chain actions which in reality, the concept of social contract can be used arbitrarily as an argument at any moment without any consideration of the CURRENT will of token holders.

The main argument against Social Contracts as a valid concept for Polkadot on-chain governance has its root on the different types of governance structures as well as an impossibility to enforce such social contracts.

The three main types of on-chain governance are: no on-chain governance (or more succinctly developer directed governance), On-chain governance limited to intention signaling and on-chain governance directly enacting by referenda outcomes (Polkadot’s OpenGov). The social contract concept applies more to the two earlier forms of on-chain governance: no-on chain governance and intention signal governance. The reasoning for this is simple. Both forms of blockchain governance don’t enact automatically whatever the DAO vote decides on so that enactment has to rely on the social pressure from the community to the developers. Let’s explore this concept with an example.

On Arbitrum’s governance, AIP-1 Arbitrum's first on-chain vote ever, became a source of controversy as the vote of a 750M budget was denied conclusively by the on-chain vote only to find out that according to the Arbitrum Foundation AIP-1 was nothing more than a formality ( and consequently informing the community that 50M of the treasury was already on the move

After heavy backlash of the whole Ethereum community, the Arbitrum foundation decided to keep the 700M in a community wallet until an appropriate budget is agreed upon.

This incident shows that when a DAO’s only power is to signal the voter’s intentions, the real power lies with the holders of the accounts and keys that these funds are managed by. These votes will only become an inconvenience when the key holders have decided to do something and the vote goes against the intended actions. In such a case, the social contract concept becomes important but ultimately unenforceable, because developers are the true responsible parties for the enactment of the desires of the token holders.

Comparatively, when a Polkadot referendum outside of the tracks “nice to have” and “remark” are executed. They will be enacted immediately leaving the need for external enforcement out of the picture. Consequently, a reliance on social contracts when all enactment occurs immediately and on-chain sounds redundant and unnecessary.

But what happens when such social contracts are applied elsewhere? Like continuations of funding. The simple answer is that the will of the active token holders will be almost immediately enacted through voting. One good example is the fulfillment of milestones. This is usually done so that work can proposers can prove themselves and their skills in the work they are set to do. If they fail or the work is perceived as no longer needed or it’s insufficient, then the next milestone is not paid for. Proposers should not expect all milestones to be funded. In a similar way, bounties should not expect continuous refills no matter what or continued referenda shouldn’t expect the continuous approval of their projects.

After all, when it comes to OpenGov, the vote is (on-chain) law and it doesn’t require a public declaration or a “constitution” that all parties ought to abide by. The on-chain reality is rather simpler than expected where concepts like “social contracts” become moot in favor of the actual on-chain enactment of the token holders will.

Published by: Saxemberg on May 10, 2024