Summary
TrueFi is currently transitioning into a new operational structure, with many operations and assets being transferred to the Board of Directors. Before completing this move and supporting with the bidding process for service providers, recent issues have exposed inconsistencies in how TrueFi’s established governance procedures are followed. Resulting in causing misalignment for new potential participants entering into TrueFi governance. This proposal aims to restore governance integrity by re-establishing these governance processes, addressing conflict of interest concerns, establishing a policy regarding the Canceller role function, and transferring the Canceller role to a multi-signature wallet controlled by Independent members of the community and Board of Directors.
Abstract
Introduction The past weeks have highlighted major gaps in TrueFi’s operations and governance. Firstly, the previous main contractor has decided to remove themselves from leading the operations. Secondly, issues were highlighted in the proposal process by a new technical provider, highlighting clear deficiencies in TrueFi’s governance, specifically in understanding the governance process and addressing potential conflicts of interest from the Board and service providers alike. The Board is currently working on the first point by liaising with and onboarding service providers and supporting to create aligned proposals that will be put forward to the DAO. A separate proposal will be put forward addressing that in the near future. This proposal is separately focused on the pool second point, the highlighted governance issues.
Upon further investigation, we have assessed that the initial governance forum process has not been followed by all participants, especially in regards to:
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Non-compliance with established governance protocols: This includes the naming conventions of Forum Proposals which require the TrueFi Improvement Proposal (TFIP) structure, Forum proposals being subject to 3–5 days of discussion, and including a “For” or “Against” poll
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Lack of Community Engagement: There needs to be more active participation from community members outside the current operators, affecting the ability for tokenholders to engage with significant governance decisions.
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Inadequate Onboarding Process for Partners: Proposals are moving to on-chain voting without ensuring partners are fully onboarded and compliant with the TrueFi Board’s required Anti-Money Laundering (AML) laws.
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Governance Role Mismanagement: The Directors underestimated the scope of their role, leading to inconsistencies in governance enforcement and limited bandwidth, highlighted by inadequate onboarding support for new DAO participants.
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Unclear Canceller role function: As part of on-chain governance process, both an elected group of technical contributors to TrueFi, alongside the DAO Board shall hold the Canceller multi-signature wallet. However, there was no clear policy in regards to reviewing Timelocked proposals that are considered harmful to the protocol or its users.
Proposal for Governance Restoration
Compliance with Governance Protocols: All forum proposals must follow the TFIP structure, be subject to a 3–5 day discussion period, and include a “For” or “Against” poll.
Enhancing Community Engagement: Encourage active participation from all community members to improve engagement and decision-making.
Board’s Role in Reviewing Proposals: As part of the transition of Wallfacer being the core service provider and according to the initial proposal for the Board’s role, the Foundation will take over the multi-signature wallets connected to the Canceller function. The Board’s role includes reviewing incoming and approved Timelocked proposals for modifications or outright veto.
Neutrality and Conflict of Interest: DAO Board members are elected by, serve at the pleasure of, and may be terminated by stkTRU holders. The neutrality of the Board’s individual Directors is crucial. Potential conflicts of interest should be disclosed and mitigated promptly. It is likely that service providers may come from the network of current TrueFi participants, mitigating these potential conflicts of interest as seen in the Teragon proposal which disclosed Bastion Trading as an advisor and enabled the Directors to maintain neutrality through an internal Chinese wall allowing members to voice their singular opinions independently. Furthermore, Cicada and Wallfacer noted that they would potentially have a conflict of interest regarding the canceller vote on the Teragon on-chain proposal and decided to abstain. Such transparency and community support are essential, aligning with the suggested canceller wallet policy.
Board’s Role in Onboarding and Compliance The Board primarily supports the governance, legal, and compliance process for the TrueFi protocol, including onboarding new partners. The Board will support the enforcement of the established governance protocols in the future. Additionally, it is suggested that partners should onboard before their proposal goes on-chain to ensure compliance with our required AML laws. This process protects the DAO and limits the need for the Canceller function in the future, as partners will be aligned internally; be able to discuss confidential, commercially sensitive information; and the provision of KYC documents will act as a deterrent to harmful behaviour.
Simplified Governance and Snapshot Utilization In response to concerns regarding the complexity of governance and the low participation, we propose a more streamlined approach. A middle ground, requiring a longer process using Snapshot for significant developments, while allowing exemptions for renewals and minor adjustments.
Proposed Changes for Exempted Proposals:
1. Termination of Contracts:
- Exemption: The termination of a contract proposed by the Board of Directors due to reasons such as legal risks, failure to reach KPIs, and other risks can be exempted from the lengthy Snapshot process to allow for swift action.
2. Status Quo:
- Exemption: Renewals of existing agreements or minor adjustments previously mentioned in a TrueFi Improvement Proposal (TIP) can skip the extended Snapshot process.
3. Smaller Treasury Adjustments:
- Exemption: Treasury adjustments including swaps of TRU to ETH, WBTC, or stablecoins below 1.5 million USD can skip the extended Snapshot process.
For these exempted proposals:
- A 72-hour voting period on the forum will be required.
- A forum poll, if deemed necessary, will be conducted.
- A 72-hour Tally vote will be held.
Proposed Changes for Non-Exempted Proposals: For proposals not falling under the above exemptions:
1. Forum Posting:
- A 72-hour posting period on the forum is required to introduce the proposal.
2. Snapshot Vote:
- A 48-hour Snapshot vote will be conducted with the options: “OK to vote on Tally,” “Not OK to vote on Tally,” and “Abstain.”
- At least 5% of staked TRU must participate in this Snapshot vote to meet the quorum.
3. Amendment Period:
- If the 5% quorum is met, with a majority negative vote, a 72-hour period will follow to allow for any amendments or discussions before the proposal is posted to Tally.
4. Tally Vote:
- After the amendment period, the proposal will be posted to Tally for the final vote.
- During this time, TrueFi Foundation will ensure the onboarding of the client and proposed business, assuming all other qualifications are met and there are no technical or procedural issues warranting the Canceller’s intervention.
Transferring the Canceller Multi-Signature Wallet To ensure governance clarity and accountability, and pending their public confirmation, it is proposed that the canceller function should be transferred to new addresses held:
- 2 community members (@TylerEther and @StrategoHoldings)
- 3 current Board of Directors (@vandynathan, @ferengi, @TheSkyHopper)
- 1 Cicada member (@CicadaSefton)
We would recommend a 4-out-of-6 wallet structure to ensure neutrality and independence but this depends on the number of candidates that make public statements regarding their desire to hold a canceller role. Conflicts of interest must be disclosed, and steps must be taken to mitigate them.
A minimum of 3 candidates are required for this canceller multi-signature wallet:
- If there are 3 candidates, this will result in a 2 out-of-3 wallet policy.
- If there are 4 candidates, this will result in a 3-out-of-4 wallet policy.
- If there are 5 candidates, this will result in a 3-out-of-5 wallet policy.
- If there are 6 candidates, this will result in a 4-out-of-6 wallet policy.
Candidates can either publicly or privately disclose their preferred wallet address that will be added to the canceller multisignature wallet to the Board.
Clear Definition of the Canceller Role: It’s vital to define the Canceller role, which reviews approved and Timelocked proposals, with the power to freeze code merges or veto proposals if they are deemed harmful to the protocol or its users.
Canceller Function Usage We propose the following criteria for the Canceller function:
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Any Tally Transaction not referenced in the Truefi Forum (and obviously relevantly referenced) will be cancelled.
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Any Tally Transaction that is notified to have a legitimate technical flaw will be cancelled.
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Any Tally Transaction (even if there is a corresponding Forum Proposal) where the Proposed Partner party has not been onboarded (KYC and AML cleared) will be cancelled for transactions where more than 5,000 USD value is being transferred.
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Any Tally Transaction that does not follow the following procedure will be cancelled:
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A forum post must be made with the appropriate “[TFIP-XX]” prefix in the title with the next sequential number of the TFIP on it. The category of the post must be made to be “Proposal”.
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The TFIP must be left for 96 hours before a vote on Tally vote is initiated.
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There must be an announcement by the proposer that the vote would be on Tally by the initial proposer on the forum prior to placing the proposal on Tally.
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The proposal must include at least a description of each Tally transaction to be submitted.
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The Tally Transactions must coincide with the description of the Tally Tx on the Proposal.
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A proposal must also provide the terms and conditions that the DAO can unilaterally terminate its arrangement with the service provider (if it is relevant). Such examples are termination upon not meeting interim KPI metrics.
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A proposal must also acknowledge that payment streams (Sablier streams) as part of their service contract may be terminated despite the best efforts of the DAO and cancellers, and/or incentive payments proposed via future tally payments are subject for such proposals passed by a quorum and majority votes at that time, even if KPIs were completed. The DAO and Foundation are not responsible for these circumstances.
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A proposal must provide a procedure for any handing off items at the end of the contract to the DAO (or Foundation) including a timeline.
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The proposal must have a set of terms and conditions that can be mostly transferred to a legal agreement between TrueFi Foundation Ltd and the counterparty where the contract value is greater than 5,000 USD, with satisfaction to the Board. The Board cannot unreasonably refuse that the terms and conditions are not in such format. An agreement draft may be provided (with NDA) to the TrueFi Foundation if significant parts of the agreement should be private.
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Extraordinary Discretionary Cancellations: If the Board, each individually, believes that the Forum Proposal was passed through highly divergent economics or control metrics from standard practices, then the Board has the right to use the Canceller function. Either on the forum or on-chain, reasons for the cancellation must be provided by each who has canceled the passed tally vote.
If governance rules are not met, the Board must unanimously vote to cancel and will approach the additional cancellers to use their address. If all the rules are followed, but there is still potential harmful activity a canceller believes merits the use of the Canceller function, then cancellers must provide adequate reasoning.
Next Steps
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Discussion Period and Forum Poll: This proposal will be open for discussion on the TrueFi Forum for a period of 3 days for community feedback with a non-binding poll to gauge community sentiment.
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Proposed cancellers: Within these 3 days, each proposed candidate will write publicly that they will accept the canceller role. The wallet policy will be dependent on the number of proposed candidates who publicly come forward and accept their candidacy.
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Snapshot Vote: A 48-hour Snapshot vote will be conducted with the options: “OK to vote on Tally,” “Not OK to vote on Tally,” and “Abstain.” At least 5% of staked TRU must participate in this Snapshot vote to meet the quorum.
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Amendment Period: If the 5% quorum is met, with a majority negative vote, a 72-hour period will follow to allow for any amendments or discussions before the proposal is posted to Tally.
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On-Chain Vote: Upon a successful Forum proposal, the final proposal will be brought to all stkTRU holders for an on-chain vote on Tally. If approved, the necessary transactions will be executed automatically.
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Implementation: If the on-chain vote passes, the governance process will be re-established as outlined, and the Canceller role will be transfered to the multi-signature wallet controlled by the Independent Board of Directors and the mentioned individuals. The onboarding process for partners will also be implemented as described.
