Agora is a set of Plutus scripts that compose to form a governance system. Users deposit governance tokens into stakes, which allows them to create and vote on proposals. Voting weight is equal to the staked amount. These proposals specify effects on-chain with meaning to those involved in the governing organization called a DAO (or “decentralized autonomous organization”).

Example of proposal effects include:

In Agora, these effects are arbitrary and can be added to the system at any point. This is useful, because it means proposals can adapt to changing needs.

This document provides a non-technical overview and introduction to governance, DAOs, the components involved, and the trade offs taken by Agora. No prior knowledge of on-chain governance or knowledge of Cardano’s UTxO model is necessary, making this document suitable for both technical and non-technical readers.


Introduction: Governance and DAOs

Governance is the process of decision-making within a particular system, organization, or society, usually done by an entity with elevated authority. In society, the obvious example is a country’s government, which makes executive decisions, decides on laws, and enforces them. Sufficiently large systems are subject to overhead, both with respect to time and to resources. Often, this means elective democracy or autocracy is employed to reduce the overhead.

The advent of internet technology, cryptography, and consensus protocols has allowed a new form of governance to be born: on-chain governance. On-chain governance is a form of governance which is algocratic; it’s governs by algorithm (read: computer software). The term “on-chain” is well-explained in this page: On-chain and off-chain. The use of on-chain governance in a particular community forms a “Decentralized Autonomous Organization”[1], or DAO. So how do DAOs work? Well, essentially it’s a “direct plutocracy”, built on cryptocurrencies and smart contracts.

Actors use their public keys — their wallets — to partake in the governance process. They create transactions which represent creating proposals, voting on proposals, and executing proposals. It’s worth noting that a number of things that are often involved in governance is not managed explicitly by the DAO. Discussion of proposals isn’t something that’s announced on-chain, or even necessarily linked to a public key.

The goals for a DAO are very different from traditional governance systems, in that the material effect of its functioning rarely results in physical actions, but digital ones instead. Thankfully, they still serve a purpose within their limited scope of abilities, for managing various financial systems that live on blockchains.

The following characteristics are important for a DAO’s functioning:

Governance in Agora

<aside> 💡 This section describes the step by step process by which on-chain governance takes place in Agora, as well as all of the components involved. Agora makes opinionated decisions which are a result of Cardano’s EUTxO model.

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In Agora, governance starts with stakes. Each actor can deposit their governance tokens into a stake. Collectively, all stakes are called the staking pool. Having a staking pool makes it possible manage the relationship between voting weight and the governance tokens. It’s worth noting that individually, each stake belongs to a single user. And only that user can withdraw from their stake.