For the first time, LSK token holders will be able to vote onchain on proposals to allocate funds, and/or shape the general direction of Lisk.

For example, projects and applications building on Lisk will be able to use the Lisk DAO to submit funding proposals. The Lisk community will then vote on whether the project is eligible for funding. In addition to funding proposals, users can also create general proposals, allowing them to recommend directions for the Lisk project or suggest specific changes to deployed smart contracts.

You know it: decentralization has always been a core ideal of Lisk, embodying one of the key principles that make blockchain technology so exciting and innovative. While the technology itself upholds this ideal, certain aspects of blockchain projects, such as governance, are much harder to decentralize. For instance, who can merge pull requests? Who manages the sequencer? Who decides on the allocation of funds? In reality, providing a fully satisfactory decentralized solution to all these questions is not easy to achieve.

To address this challenge, we have undertaken various efforts in the past, such as introducing Lisk Improvement Proposals (LIPs) and establishing the Lisk Research forum. These initiatives allowed the community to stay informed about protocol updates in advance, understand detailed specifications and motivations behind changes, draft their own proposals, and provide feedback before proposals were finalized and implemented.

Now, Lisk is experiencing its biggest change since its inception by advancing towards decentralized governance:

We are proud to introduce the Lisk DAO!

In a nutshell, the Lisk DAO has two main purposes:

• To involve the community in the general decision-making process, and
• To create a new community-led funding program to allocate funds where they are most needed.

The Lisk DAO will be launched at the beginning of June, starting with only a few simple rules that may evolve as needed in the future. Once established, the DAO can be used to create proposals that shape the governance process and the overall direction of the Lisk project. This approach allows us to learn and grow together, developing a decentralized governance system that enhances the well-being of the Lisk project, its community, and beyond.

How it is Implemented

The following tools and services will soon be available for participating in the Lisk DAO:

Discussion

• The Lisk Governance Forum: This is where discussions regarding Lisk governance happen. This platform is dedicated to discussions about Lisk governance. Draft proposals are created and debated here before they are finalized and submitted onchain. The forum accommodates a range of discussions, from informal talks to fully developed proposals intended for governance polls. Additionally, there is a special category for delegates to interact with the community and vice versa.
• Lisk DAO Chat: A space for general discussions about governance. Connect with other Liskers and stay updated on developments within the DAO.

Onchain Voting

• Lisk Portal: Stake your LSK tokens via the Lisk Portal and receive voting power.
• Tally: The platform used to create and vote on proposals for the Lisk DAO. Here, users can cast their votes on proposals or delegate their voting power. This platform will be available once the Lisk DAO is launched.
• Contracts: Based on OpenZeppelin’s Governor contracts, this platform, combined with Tally as the user interface, enables the onchain voting process.

Tally and Governor are popular and battle-tested tools for onchain governance, already used by other major DAOs, including Arbitrum, Aave, Uniswap, and ENS.

Voting Power

Every account holding LSK can stake a specific amount of LSK tokens to gain voting power and staking rewards. Here's how it works:

1. Stake Tokens: Lock your tokens for a specified duration (between 2 weeks and 2 years) on the Lisk Portal.
2. Receive Voting Power and Staking Rewards: Obtain voting power and staking rewards proportional to the amount of tokens locked.
3. Delegate Voting Power: Use Tally to delegate your voting power to yourself or another delegate.
4. Redeem Tokens: After the locking duration ends, redeem your staked tokens.

Initially, the voting power of a locked token will remain constant throughout its locking duration. However, it is possible to boost the voting power by up to 200%, with the boost being proportional to the remaining locking duration.

Voting Power Calculation

Locked tokens provide voting power proportional to the amount of tokens locked. Specifically, 1 locked LSK provides one unit of voting power, equivalent to 1 vpLSK.

Boosting the Voting Power

Users have the option to pause the countdown of the locking period on the Lisk Portal. This means the countdown towards the end of the locking period is paused until the user decides to resume it. When pausing, the user receives a boost in voting power, calculated as lockedAmount * (1 + remainingLockingDurationInDays / 365), allowing voting power to increase by up to 200%. Another benefit of pausing the locking period countdown is that staking rewards do not decrease daily as they normally would.

Proposal Types

Two types of proposals can be created within the Lisk DAO:

Funding Proposals

• Purpose: To receive a specific amount of funds to an address.
• Intent: These proposals aim to provide grants to individuals or projects with promising ideas that add value to the Lisk ecosystem, requiring specific funding to achieve their goals. They can also be used for retroactive funding for projects that have already proven their value.
• Binding Nature: Funding proposals are binding, meaning that if approved, the recipient receives the amount specified in the proposal.
• Source of Funds: Funds for these proposals are spent from the DAO treasury.

General Proposals

• Purpose: To propose changes to protocol parameters or the overall direction of the project.
• Scope: These proposals can cover a wide range of topics related to the governance and future development of the Lisk ecosystem.

Binding and Non-Binding Proposals

• Binding Proposals:
  • Funding Proposals: These proposals are binding, meaning that once approved, no one, including the Onchain Foundation, can prevent the transfer of funds.
• Non-Binding Proposals:
  • General Proposals: These can be either binding or non-binding. For non-binding proposals, the Onchain Foundation will evaluate whether the proposal is safe, secure, consistent with the scope of Lisk governance, and can be implemented in a legally compliant manner. If these criteria are met, the Foundation will act diligently and in a commercially reasonable manner to implement the proposal.

Treasury

The treasury of the Lisk DAO holds all the funds over which the community can decide. The treasury is not managed by the Onchain Foundation. Instead, funds from the treasury can only be transferred through successful funding proposals.

Initial Funding

45,000,000 LSK tokens are newly minted and added to the Lisk DAO according to the following vesting plan:

Optional Extra Funding

Additional 100,000,000 LSK will be released to the DAO treasury over the following 7 years, if the DAO members approve the corresponding proposal. Please read our previous blog post LSK 2.0: Migration to an ERC-20 Token to learn more about the Lisk DAO funding.

How to Get Involved

Join the Lisk Chat: Join the chat in the #lisk-dao channel

• Stay up to date with what’s happening in the Lisk DAO
• Get in touch with other DAO members

Participate in the Discussion: Discuss with other DAO members in the Lisk Governance forum

• Create your own draft proposals
• Or just throw in some ideas even if you don’t feel confident to draft a fleshed-out proposal

Get Your Voting Power: Stake LSK tokens on the Lisk Portal to receive voting power.

• Pause your locking period countdown in the Staking Dashboard to boost your voting power by up to 200%.

Please not, Onchain voting is restricted until the official launch of the Lisk DAO in June. From then, you will have access to the Lisk DAO Tally instance, which will allow you the following:

• Delegate Your Voting Power: Delegate your voting power to a delegate of your choice.
• Vote on proposals: Self-delegate your voting power on Tally to vote on proposals.
• Become a Delegate: Receive delegations from other users and vote on behalf of them.
• Create proposals: Create your own proposals for the Lisk DAO.