We’re excited to announce that Penumbra’s latest testnet includes our full governancemodel. We can’t wait for you to come give it a try: join our discord to getstarted!

On Penumbra, anyone can submit a governance proposal, and both active validators and theirdelegators can vote on proposals. Keeping to the principle of accountability for validators andprivacy for delegators, validator votes are public and attributable, whereas delegator votes areanonymous. Proposals can request a signaling vote, alter chain parameters, call for a chain halt inan emergency, and — perhaps most excitingly — spend funds from the newly-implemented ✨PenumbraDAO✨.

Proposal NFTs

Penumbra manages control over governance proposals using a novel “proposal NFT” mechanism: thesubmitter of a proposal escrows the deposit upon submission, in exchange for an NFT representing theescrowed deposit. Whoever holds this NFT controls the submitted proposal: they may withdraw itbefore voting concludes, and afterwards, regardless, they may redeem the NFT for the originalescrowed proposal deposit, provided that voters did not vote to slash the deposit.

This model is simpler than the “deposit period” mechanism used by the Cosmos Hub and others: itrequires the whole deposit to be supplied up-front by the proposer. We expect the governance forumto act as a “layer 2” for governance proposals, coordinating on the proposal to be submitted inadvance of its submission, and we don’t know if non-custodial coordination of deposits will be aproblem in practice; if this becomes burdensome, we’d rather build off-chain tooling to help peoplecollaboratively submit proposals.

Vetoing NoWithVeto

Unlike in many Cosmos SDK chains, Penumbra does away with the NoWithVeto vote option, keeping only“yes”, “no”, and “abstain”. Spam proposals are instead discouraged by a slashing mechanism: theproposal deposit is burned in its entirety if the percentage of “no” votes exceeds a certain highthreshold (on our testnet, currently this is 80% no:total).

Simplicity Is Enough

Governance is a dynamic process that ultimately involves community members, which means it makessense not to come up with an ahead-of-time complete solution for every aspect of that workflow. Therelatively simple governance model that will ship with Penumbra’s mainnet launch is sufficient to“bootstrap” an upgrade to more complex governance features, should the community desire them,because it enables the vital on-chain coordination necessary to come to consensus on such a futureupgrade.

The Details

In this model, proposals will fall into one of four categories: signaling, parameter-change,emergency, and DAO-spend:

Signaling proposals signal community consensus about something, without having a mechanizedeffect on the chain state when passed. Often, they propose software upgrades, or are used as amechanism to gain consensus prior to future proposals.

Parameter change proposals mechanize changes to the chain parameters. Chain parameters arevariables which govern the behavior of the chain. Many of them control economic properties like thebase staking reward rate and the slashing penalty. When a parameter change proposal is passed, thechain parameters are updated automatically so that all validators will use the new parameters infuture blocks.

Emergency proposals are meant when a rapid coordinated response to a crisis is needed: they havethe special property that they are immediately passed when two thirds of the voting power has voted“yes” on them. An emergency proposal may also halt the chain immediately upon its successfully beingpassed, to allow validators to coordinate an emergency upgrade.

Finally, DAO spend proposals specify a transaction to be executed which has access to the fundsin the Penumbra DAO. The DAO is a single publicly viewable account into which anyone can freelydeposit funds of any denomination, but from which funds can only be spent by the successful passageof a governance proposal. The Penumbra DAO, managed solely by on-chain governance, strongly supportsdecentralized control over the future of the Penumbra protocol: all stakeholders will be able todetermine the future evolution of the protocol not merely by voting on proposals to alter it, butalso by allocating funds to the organizations and individuals they deem best suited to carry outthat work.

Go Forth And Govern

Decentralized governance has a critical role to play in ensuring a bright future for the Penumbranetwork. Right now, we at Penumbra Labs are hard at work testing the corner cases of this new work,and we invite you to join us as a participant in our testnet. Join us on Discordand play with democracy on the Penumbra testnet today!