Cardano governance explained

After the Chang upgrade, Cardano’s current behavior and future are determined by the ada holders with the most stake in its success. Individual holders can vote on governance actions, or they can choose to delegate their power to registered representatives, similar to how they can delegate their stake to stake pool operators(SPOs).

Delegated representatives(DReps) are ada holders who register on-chain, allowing other community members to delegate their voting power to them. They act as 'parliamentary representatives' in Cardano’s decentralized governance system. A DRep's voting power is defined by the total amount of ada staked with them, giving them considerable influence when governance decisions need to be made.

Becoming a DRep

Any ada holder can become a DRep, and the process is straightforward. They must register via a platform like GovTool, which provides a user-friendly interface for managing on-chain governance actions. More details on how to become a DRep can be found here.

Once registered, DReps take on significant responsibilities as defined by CIP-1694. These responsibilities include:

• Reviewing and voting on governance actions submitted by others
• Accepting delegated voting power from ada holders.

When a DRep votes on a governance action, they vote with all the power delegated. This means they act not only for themselves but for every ada holder who has entrusted them with their voting power. This delegation and voting mechanism ensures that decisions in Cardano’s governance are weighted based on the amount of ada backing each DRep.

Cardano's governance structure: three pillars

To fully understand a DRep's role in Cardano, it's essential to look at the broader governance structure, which rests on three foundational pillars:

On-chain decision-making: defined by CIP-1694, this system brings governance actions on-chain, allowing every ada holder to participate directly or indirectly via a DRep.

Cardano constitution: a set of guiding principles that inform governance decisions and help ensure consistency in Cardano’s development.

Institutions: organizations like Intersect, Project Catalyst, the Cardano Foundation, and Input | Output(IO) play pivotal roles in supporting and shaping Cardano’s governance.

These three areas are intertwined and provide a comprehensive governance framework that drives both on and off-chain outcomes.

Roles in on-chain governance

As described in CIP-1694, Cardano’s governance revolves around three key roles:

DReps, who represent the ada holders who delegate their voting power to them.

Constitutional committee (CC), a body maintaining and upholding Cardano’s on-chain constitution. Learn more about the CC on the Intersect knowledge base.

Stake pool operators (SPOs), who are vital for maintaining the blockchain’s operational security and governance. Learn more about stake pool operations on the Cardano website.

Various combinations of these roles are involved in reviewing and voting on different types of governance actions. For example, some actions may require the constitutional committee's approval, while a combination of DReps and SPOs will decide others.

Governance actions

A governance action (GA) is a proposal initiated by a transaction submitted on-chain for voting. Governance actions have a set expiration period after which they are no longer valid. These actions encompass a broad range of proposals, from protocol updates to treasury withdrawals.

The types of governance actions defined by CIP-1694 include:

• Motion of no confidence
• New Constitutional Committee or Quorum size
• Updates to the Constitution
• Hard Fork Initiation
• Protocol Parameter Changes
• Treasury Withdrawals
• Informational Actions

Intersect voting tutorial

Since the first Change upgrade (Chang #1), all ada holders have been able to delegate an amount of stake equal to their ada holding to one or more delegated representatives (DReps).

Any ada holder can submit a governance action, but casting votes and interacting with these actions requires access to tools. While some may prefer using the command line interface, platforms like GovTool offer a more user-friendly experience with a graphical interface.

Voting with GovTool

If you don’t have one, create a compatible wallet and put something in it.

Go to https://gov.tools and click the Connect Wallet button. From this point on, follow the GovTool tutorial.

Voting with the command line

Again, create a compatible wallet if you don’t have one.

Download and install the Cardano CLI. From this point, follow the CLI tutorial.
The future of voting and governance

The Chang upgrade

Cardano’s governance is set to undergo an important upgrade known as Chang #2. This upgrade aims to decentralize the decision-making process further and strengthen the role of DReps in governance. It will introduce new mechanisms for distributing voting power more equitably, ensuring that large ada holders do not monopolize the governance process.

After Chang #2, the overall governance flow will see DReps taking on an even more central role. They will need to actively engage with the community, lobbying for votes and discussing governance actions to represent the best interests of the Cardano ecosystem. As voting power will be recalculated at every epoch, DReps must maintain a continuous dialogue with the ada holders who delegate to them, providing regular updates on their voting decisions and stances.

Transparency and accountability are critical in a decentralized system like Cardano’s. By holding DReps accountable, ada holders ensure their voices are heard and that governance actions reflect the community's will.

As Cardano evolves, so will the role of DReps within its governance. They are crucial to ensuring a fair and democratic decision-making process. DReps must be more engaging, fostering relationships with their delegators and actively participating in governance actions.

Make a difference and get involved

Think you have what it takes to be a DRep? Any ada holder can become a DRep by registering through platforms like GovTool. DReps are responsible for submitting, reviewing, and voting on governance actions for all those who delegate their voting power.

For those looking to get involved, now is the time. Whether you're an ada holder considering becoming a DRep or simply looking to delegate your voting power, the future of Cardano governance is in your hands. If you have any questions, ideas, or suggestions, please get in touch via email, X, or LinkedIn.