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API3 delegates much of its governance to the vote of a Decentralized Autonomous Organization (DAO). API3 is a collaborative effort to build, manage and monetize dAPIs at scale. To achieve delegated governance and apportion grants in a fully decentralized way, the incentives and processes of the participants are reconciled through the governance, security, and value capture utilities of the API3 token and its powers in the API3 DAO.
The API3 project has a completely open, decentralized and direct governance model. Any API3 token holder can stake in the DAO pool and obtain direct voting abilities in the DAO smart contract and thus participate in many aspects of the governance of the project directly. In addition, stakers receive immutably-coded inflationary rewards and any additional benefits that the DAO may decide on in the future. The staked API3 tokens will back an on-chain Service Coverage as collateral to provide dAPI users with quantifiable and trustless security guarantees.
The DAO votes on high-level matters such as staking incentives and collateralization (parameters of the DAO smart contract itself), as well as grant proposals that directly transfer DAO treasury assets to teams working in support of API3.
DAO Contributors Structure
The organizational structure of contributors which receive grants from the DAO is often comprised of hierarchical teams and subDAOs both of which manage, streamline, and secure the success of their deliverables to API3.
Hierarchical Teams
More granular tasks are conducted through hierarchical team structures for scalable governance.
A best-practice workflow is to form off-chain teams and apply for grants to execute one-time projects or time-defined operations that will benefit API3. The team makes the grant application with a multisig that has the team members assigned as users, and the DAO permissionlessly transfers the grant to the multisig if the grant proposal is accepted and passed by the DAO contract logic.
This team-based governance scheme is scalable in terms of gas costs, as it requires fewer proposals to be voted on at the DAO level. It is also more scalable in practical terms, as it does not require the constant attention of all governing parties to a wide variety of minute details. Furthermore, it allows critical operations such as dAPI management to be executed swiftly and based on expert opinion. As API3 operations expand, this governance hierarchy may demand additional layers in the form of subDAOs.
To learn more about hierarchical team structures see Section 5.3 of the API3 Whitepaper.
subDAO
The DAO is leveraged to selectively allocate funds and decisions in line with the mission of API3. When a task reaches a scale that can no longer be fulfilled by a team, it is assigned to a subDAO.
Principles
API3 focuses on two principles for effective governance:
- Least Privilege
- Transparency
Least Privilege
To limit the amount of damage a malicious or incompetent team may cause, each team's authority must be constrained to a bare minimum, which is also known as the “principle of least privilege”. For example, a dAPI management team should never be able to completely recompose a dAPI that is under use, but should only be able to switch individual oracles in and out with a long enough cool-down period to discourage abuse of authority. Similarly, milestones and deliverables should be utilized to grant teams only the funds needed to carry out their specific responsibilities.
Transparency
Each team is expected to produce sufficiently detailed progress reports that enable the DAO's participants to evaluate team performance with respect to proposed goals. These public reports have the additional benefit of increased accountability as dAPI users and the general public can audit API3 operations.
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