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Constitution of the Drift DAO

The Drift community governs itself and the Drift Protocol via the Drift DAO, the decentralised governance framework. The DAO follows a proposal process to vote on how the Drift Protocol is to be maintained and managed to promote a long sustaining ecosystem. Drift’s DAO governance is self-executing, meaning that the DAO’s votes about on-chain actions will directly have the power to effect and execute its on-chain decisions, without relying on an intermediary to carry out those decisions. Drift DAO is launching its community-led governance via a formal proposal process on Realms.

Membership

Participating in idea submission, commentary, proposal submission, and voting is restricted to Drift DAO members. Holding Drift Tokens is the only requirement for membership in the DAO.

DAO Constitution

This Constitution provides an overview of the governing framework for the holders of Drift, which shall be the governing body for Drift Protocol (as defined below).

Some of the rules and procedures in this Constitution will be enforced directly on a blockchain, and some will not. All rules are equally binding. Actions taken under this Constitution may be on-chain or off-chain actions. On-chain actions are those that are actuated directly by the governance parameters of the DAO as transactions on a blockchain. Off-chain actions are those that are actuated by other means.

Drift Improvement Proposals (“DIPs”) that can be executed on-chain will be submitted and implemented via the DAO’s Realms interface located here.

DIPs that must be executed off-chain will also be required to be submitted via the Realms interface. In the event that a DIP requires actions be taken by the Foundation to execute, the Foundation Directors or the Administrator, as appropriate, will (subject to applicable law) take such actions as needed to execute the DIP, while adhering to the Foundation Documents (including the Bylaws and this Constitution).

Governance Procedures

DIPs are the primary mechanism to update some function or standard and implement changes to DAO’s governance and operations and the Drift Protocol. DIPs can vary widely from proposing new products to performing smart contract upgrades. DIPs serve as a means of fostering community discourse and decision-making within the organization.

All DIP procedures, voting parameters and other governance mechanics can be amended or modified through DIP and tokenholder voting.

Governance Categories

There are three main categories for:

  1. Organisational (DIP-O) – proposals to upgrade the operational functions of the DAO including treasury, business development and marketing.

  2. Technical (DIP-T) – proposals to upgrade the function and evolution of Protocol or DAO governance including protocol fee splits, stake pool fees, and other features including the ability to adjust the on-chain functions.

  3. Informational (DIP-I) – proposals in relation to the future planning and strategy of Drift.

Proposal Timeline

  1. General Community Discussion

Ideas are discussed in a public governance forum (as designated by the Foundation from time to time which initially shall be located in the #governance thread on the Drift Discord: https://discord.com/invite/fMcZBH8ErM) by the community, with the author responsible for addressing feedback, questions, and suggestions.

Upon an author’s request, a DAO moderator (“DAO Moderator”) will confirm that an idea generally conforms to proposal guidelines (including that it fits within one of the categories initially enumerated below, which categories may be subject to further changes in accordance with a DIP related to the governance process). Once confirmed, and subject to the then applicable proposal threshold, the author(s) may move on to the next stage.

  1. Proposal Drafting

Refer to heading Protocol Template for further details.

The author should incorporate any feedback received from the community and may alter the template if necessary to communicate the proposal effectively. It is recommended that the DAO Moderator first confirms that the draft conforms to the Proposal Guidelines before submitting the proposal and informing the Administrator. After the Administrator has confirmed proposals have met the above criteria, the proposal will be posted on Drift’s governance forum for community discussion.

Until a DAO Moderator is initially appointed by the Administrator and in the event that at any point in time, there is no appointed DAO Moderator, the Administrator will perform these duties.

Non-compliance or contravention of Proposal Guidelines may result in the immediate rejection or invalidation of the proposal. Proposals that do not adhere to these guidelines may not be considered or vetoed by the Security Council. It is essential to review and ensure alignment with the Foundation’s governing principles and legal constraints before submission.

  1. Proposal Discussion

Once proposals have been posted to the forum, they will initially stay open for community discussion up to 14 days (the “Discussion Period”).

  1. Proposal Submission

Proposals can be submitted to Realms (as defined below) after the Discussion Period is complete.

Realms has a token minimum for proposals to be submitted from the community. Any tokenholder who meets this proposal threshold may submit their proposal directly. If not, the Administrator can assist to have the proposal submitted on their behalf.

The Administrator will review the proposal for practicality and safety for the DAO once submitted and will ensure the proposal strictly adheres to applicable laws and regulations. The DIP release will take place on the DAO’s interface located here or such interface as delegated by the DAO.

By submitting your DIP for vote in accordance with the Governance Procedures, you agree to submit to certain conditions, including any requirements under applicable laws and regulations and AML/KYC processes deemed necessary or advisable by the Foundation.

  1. Voting

The initial voting parameters for tokenholders is as follows, which may be subject to further changes in accordance with a DIP related to the governance process (the “Voting Parameters”):

One (1) token equals one (1) vote over any proposals submitted to the DAO (the “Voting Power”). This will allow all tokenholders to participate in the governance process proportionally. The DAO, via tokenholder vote, may establish guidelines for evaluating and approving the inclusion of additional tokens in governance in the future.

Voting Period: 4 days. The voting period is the period during which people can cast “Yes” or “No” votes).

Cooldown Period: 2 days. The cooldown period takes place after the voting period has ended and before the proposal is held up or executed. During the cooldown period, tokenholders can withdraw or vote “No”against open proposals, tokensholders cannot cast a new “Yes” vote during this period. Upon expiration of the cooldown Period, if the number of “No” votes is greater than the number of “Yes” votes, the proposal will not pass.

Hold Up Period: 2 days. The hold up period takes place after the voting period and cooldown period has ended. During this period, tokenholders and users can use this time to take any necessary actions before the execution of the proposal.

Delay Period: refers to the Cooldown Period plus the Hold Up Period.

Proposal Threshold: 20,000 token minimum (Minimum number of tokens a holder must have, or be delegated by third parties, to submit a proposal for a vote of the DAO)

Voting Threshold: At least 2% of total circulating supply must vote “yes” and the number of “yes” votes must be more than the number of “no” votes.

  1. Implementation

Approved proposals will be treated differently based on the nature of the change.

On-Chain Actions

For programmatic changes, tokenholders can execute approved proposals instantly following completion of voting and Delay Period.

Off-Chain Actions

For proposals requiring implementation by the Foundation, the Administrator will work with the author, appropriate service providers of the Foundation, and other parties as needed to execute the proposal. Due to the nature of off-chain actions, execution may not be immediate following the passing of a DIP. Certain off-chain actions may require Foundation Director approval, which may be vetoed in accordance with applicable law or for other reasons including inconsistencies with the Foundation’s purpose as set out in the Foundation Documentation.

The Administrator will provide updates on Drift’s governance forum no less than every two weeks on the status of any such implementation. If Foundation Directors exercise veto authority, disclosure and explanation for the veto shall be posted on the relevant DIP within two weeks of the proposal’s passing.

Proposal Template

All DIPs submitted to Drift Protocol DAO must contain the following:

  1. Name of Proposal - Two or three sentences that summarize the DIP.
  2. Category of the Proposal - specify which of the three main categories the proposal falls under.
  3. Summary – An explanation on what the proposal is for and why the DIP is necessary.
  4. Details and Specifications – Outline the details and steps required to implement the DIP including any breakdown of associated personnel, skills, resources, or costs involved.
  5. Key Terms – Include definitions on any specific terms relevant to the proposal or industry related jargon.
  6. Analysis for discussion – Set out the advantages and disadvantages of the DIP including any risks or benefits.
  7. Outcomes and/or Milestones (if applicable) - A brief summary of the desired goals and outcomes of the proposal.
  8. Next Steps – Relevant timing details including start date, milestones and completion period.

Proposal Conflicts

Should a proposal be in direct conflict with a proposal presently under consideration for voting, the latter proposal ought to be held back from voting until a resolution is reached on the initial proposal. This is to prevent the endorsement of contradictory stipulations.

In the event that a proposal is in direct opposition to an already approved proposal or identical to a previously unsuccessful proposal, it is not permitted to proceed to voting until three months post the implementation of the original proposal. This measure is in place to prevent the squandering of community resources.

Futarchy DAO

A Futarchy DAO will be established for tokenholders to make decisions on DRIFT grants that contribute to the Drift Protocol and community. The Futarchy DAO uses a system of governance proposed by Robin Hanson to give decision making authority in relation to DRIFT grants, to the markets. A DIP can be passed to increase the future scope of Futarchy DAO.

Security Council

A Security Council has been established by the Foundation and shall be composed of at least 5 members who shall be appointed in accordance with the Bylaws.

If a Security Council Member position is vacated, the tokenholders shall be required to elect a replacement as soon as reasonably practicable.

The Security Council may use discretion to bypass ordinary tokenholder voting or DIP procedures to implement emergency proposals and actions necessary to preserve the safety or security of the Foundation, the DAO and/or Drift Protocol, its users, or the Foundation’s assets. Examples of emergencies include but are not limited to security breaches, violations of core principles, network attacks, etc.

Security Council Meeting Procedures and Frequency

The Security Council must convene every four (4) weeks, or at its discretion, subject to a reasonable amount of notice to Security Council Members (each, a “Regular Meeting”). A Regular Meeting may take place via telephone, videoconference, or through a group chat application. The Security Council is required to have regular meetings to enable voting on DIPs and any such acts within the Security Council’s authority.

A quorum of a Regular Meeting consists of at least 3 Security Council Members. A Regular Meeting may not proceed without a quorum.

Only Security Council Members will be permitted to attend Regular Meetings, provided that the Security Council may permit any Foundation Representative (including the Foundation Directors, the Foundation Supervisor or the Administrator) to attend Regular Meetings, and may provide the Foundation Representatives with any and all information relevant to the business of a Regular Meeting. The invited Foundation Representatives will not be counted towards the satisfaction of a quorum for a Security Council Vote.

A Security Council Member may invite a non-Foundation Representative third party to observe or participate in Security Council discussion or to take notes of the Regular Meeting, subject to a simple majority vote of the other Security Council Members. The third party must be bound by a non-disclosure agreement with the Foundation or with the member that invited the third party. The third party will not be counted towards the satisfaction of a quorum.

Procedures for Review of DIPs

Security Council must devise a procedure to review DIP procedures and post to #governance thread on the Drift Discord: https://discord.com/invite/fMcZBH8ErM, once mutually agreed by the Foundation and DAO Administrator.

Procedure for Proposals from Security Council Members

Any Security Council Member may raise proposals for actions to be taken by the Security Council Members (a “Proposal”), among the Security Council Members, outside of Regular Meetings, in any written medium, including a Telegram chat. After a Security Council Member makes a Proposal, the Security Council should discuss the Proposal, giving sufficient time for dissenting views. Security Council Members should also describe any conflicts of interest. Security Council Members may request that any Proposals made outside of Regular Meetings be deferred to a Regular Meeting for a fuller discussion. The Security Council may choose to discuss such Proposal during the next scheduled Regular Meeting or to schedule a Regular Meeting more immediately.

After a discussion, the Security Council will vote on the Proposal according to the voting procedure described below.

Meeting Notes

The Security Council may appoint a Security Council Member, a representative of the Foundation, or an authorized third party to take notes of the Regular Meeting (the “Meeting Notes”).

Subject to a reasonable Security Council review and comment period chosen by the Security Council, Meeting Notes or outcomes will be shared publicly with the community on the #governance thread on the Drift Discord: https://discord.com/invite/fMcZBH8ErM.

Advisory Meetings

A portion of the Security Council may convene irregularly scheduled advisory meetings (“Advisory Meetings”). Advisory Meetings enable the Security Council to discuss a specific subject matter among a smaller group of Security Council Members. The same rules that apply to Regular Meetings will apply to Advisory Meetings, except that:

(ⅰ) There is no quorum requirement for an Advisory Meeting. (ⅱ) No Security Council Member may introduce a Proposal or vote on any outstanding Proposal at an Advisory Meeting. (ⅲ) The Security Council may or may not publish Meeting Notes from Advisory Meetings, at its discretion.

Emergency Meetings

In response to an imminent security threat to the Protocol or its community, any protocol utilizing the Token, or the Foundation, the Security Council may convene irregularly scheduled emergency meetings (“Emergency Meetings”). The same rules that apply to Regular Meetings will apply to Emergency Meetings, except that:

(ⅰ) An Emergency Meeting does not need to be convened with reasonable notice to Security Council Members or the Foundation Directors. (ⅱ) There is no quorum requirement for an Emergency Meeting. (ⅲ) The Security Council will not publish Meeting Notes from Emergency Meetings until the underlying security threat has been remedied or judged to no longer be a threat, in the Security Council’s sole discretion.

Each member of the Security Council shall have one (1) vote in Emergency Meetings.

Compensation of Security Council Members

Initially, the Security Council Member position will be paid an amount equal to $1,000 monthly, which shall be paid, at the election of the Foundation, in (a) USDC or (b) DRIFT. Any changes to the Security Council Member compensation shall be subject to approval by tokenholders.

Emergency Actions

The Security Council shall have a veto right of DIPs put forward by then relation to DIPs in certain circumstances including where tokenholders:

(ⅰ) violates any provision of the Bylaws, the Foundation Articles, this Constitution or any other document, policy or regulation as may be adopted by the Foundation; (ⅱ) violates any applicable law or regulation;
(ⅲ) is detrimental to the interests of the Foundation or the DAO (as determined by the Foundation Directors); or (ⅳ) is detrimental to the ongoing maintenance of the Drift Protocol.

The Security Council must not use its power to perform such Emergency Actions except in a true security emergency, such as a critical vulnerability that could significantly compromise the integrity, confidentiality or availability of Drift Protocol or the treasury.

After performing any Emergency Action, the Security Council must issue a full transparency report (at an appropriate time after the security emergency has passed) to explain what was done and why such Emergency Action was justified. The DAO shall be able to curtail or eliminate the Security Council ‘s power to perform Emergency Actions via approval and implementation of a DIP.

Non Emergency Actions

For legal or other reasons, including inconsistency with the Foundation’s purposes, the Security Council shall also maintain the ability to act outside of an Emergency Action pursuant to DIPs that have been approved by tokenholders in accordance with the DIP Process to perform protocol improvements and adjustments to certain parameters including, without limitation technical upgrades to programs critical to the protocol’s operation.

Initial Actions

Additionally, during the first 12 months of the DAOs existence, the Security Council is also permitted to execute regular course transactions, within reason, including:

(ⅰ)Treasury transfers for incentivizing the protocol’s growth; (ⅱ)other de minimis payments not related to incentivizing the protocol’s growth, which shall not exceed 1% of the token supply; or (ⅲ)technical upgrades. This provides operational flexibility as tokenholders slowly familiarise themselves with the DIP process.

Any such non-Emergency Action shall be communicated to the DAO by the Security Council and/or Administrator in the form of updates to the #governance thread on the Drift Discord: https://discord.com/invite/fMcZBH8ErM. Notwithstanding the above, the Security Council shall act in good faith and in accordance with the purposes of the Foundation as set out in the Foundation Documentation or DIP.

Definitions for inclusion of Constitution

Unless otherwise defined in this Constitution, all defined terms in this Constitution shall have the meaning ascribed to those terms in the Bylaws of the Foundation, as amended from time to time.

Administrator means the administrator of the DAO as defined in the Bylaws.

Bylaws means the Foundation’s Bylaws detailing the underlying governance structure for the Foundation.

DAO means the decentralised autonomous organisation formed to govern the Drift Protocol.

Drift Protocol means the decentralized trading exchange protocol built on the Solana blockchain that enables decentralised finance including the ability for users to trade spot crypto assets and perpetual contracts with leverage. The DAO can direct changes to the protocol source code or related parameters. The Foundation maintains a browser-based dashboard facilitating easy access at drift.trade.

Foundation or Drift Foundation means the Cayman Islands foundation company (the “Foundation”), that has been formed to serve the DAO. The Foundation aims to facilitate the growth of the Drift Protocol. The Foundation has adopted Bylaws and other required formation documents, necessary to establish the Foundation’s initial governance structure. The Tokenholders have the authority to make certain decisions in relation to the Foundation and the Drift Protocol as set forth in the Foundation Documents. The DAO will govern the Foundation via Tokenholder Vote, in accordance with the Foundation Documents (including through submitting and voting on DIPs).

Foundation Documents means the Foundation’s formation documents, including the Amended and Restated Memorandum of Association and Articles of Association.

Proposal Guidelines means the governing principles of the Foundation (as set out in the Bylaws) and all proposals must strictly adhere to applicable laws and regulations. Furthermore, any actions or initiatives proposed must be within the permissible bounds as set forth by the laws of the Cayman Islands, under which the Foundation operates.

Security Council means the council established by Foundation Directors in accordance with the Foundation Documents to represent the tokenholders.

Security Council means a member of the Security Council.