Legislature
The Legislature Branch of United Stands of Lemonade is governed by a two-house system. The Token House is made up of OP holders and their delegates, and the Citizens’ House is a one-person-one-vote system based on reputation.
This two-house design is intended to help overall Lemonade ecosystem make good decisions and avoid common pitfalls in token-based governance systems. Tokenholders represent one constituency out of many, and are not always the right unilateral owners for decisions that don’t involve the economics of the system. Creating two distinct branches of governance with different membership criteria allows the United Stands of Lemonade to match constituents’ incentives with different types of decisions. It also helps avoid concentration of power, enact safeguards via checks and balances, and evaluate decisions from broader perspectives.
Lemonade aims to build a governance system that will stand the test of time and help the entire ecosystem flourish into a vibrant self-sustaining economy.
This proposed structure is not a commitment or blueprint for exactly how governance processes will be introduced and implemented: it’s highly likely the governance will learn from initial experiments and make modifications to the processes outlined here.
A snapshot of the decision matrix looks like the diagram below:
Governance Goals
There are two primary goals of Legislature’s governance system:
1.
Capture resistance. Governance plays a key role in securing the anti-capture and censorship resistance of the Lemonade protocol, platform and products. Governance should
make it possible for chain or network operation to continue without reliance on any individual entity;
prevent any one entity or small group of entities from being able to control or censor the protocol, platform, products or its functions.
2.
Resource allocation. Governance’s second primary responsibility is to allocate resources effectively to support the Lemonade’s vision and accrue sustainable value to the Ecosystem. Vision & value may often be in conflict, and allocating resources effectively involves a blend of short- and long-term thinking. This includes allocation of:
Token treasury
Platform and Product Revenue from subscriptions
Marketplace revenue from ticketing and community smart contracts
Protocol revenue from the Lemonade Superchain sequencer
Design Principles
Design decisions for the Legislature’s governance system should be made in line with five key principles:
1.
Governance minimization. The set of governance responsibilities that are encoded onchain or formalized in voting processes should remain as minimal as possible. The United Stands of Lemonade aims to reduce governance to its essence and to avoid introducing regulation where freedom can achieve the same result. This principle is key to encouraging permissionless innovation. In practice, this looks like a minimal set of (1) onchain governance processes to upgrade Lemonade marketplace and protocol contracts and tune the economic parameters of the system, and (2) offchain social processes to maintain a healthy inclusive community which removes barriers to easy and fun participation.
2.
Iteration. Lemonade is decentralizing iteratively to increase the chances of building a healthy system that lasts for the long-term. This means the Foundation will play a role in establishing processes, help the Collective through its first few rapid feedback loops in improving those processes, then reduce its role over time. This also means the design principles and goals outlined may be invalidated or updated along the way. This iteration gives United Stands of Lemoande a chance to learn how to make thoughtful decisions using an un-intuitive but essential loop, i.e., introduce a governance process that involves active participation, then gradually work to automate or minimize it over time. Doing so will then shift responsibility to adjust the autopilot when necessary, not to keep two hands on the wheel.
3.
Forking. The ability to fork and the ability to exit are critical to protect individual freedoms. All of the core software and tooling required to build on the Lemonade Platform should be open source, freely available, and easy to use such that a fork is always a viable alternative. This isn’t just about vibes: in crypto, where credible commitments not to extract are what makes decentralized platforms valuable, this is a competitive advantage. Participants will be more likely to join the Lemonade platform if they have the ability to make an alternative.
4.
Balance. Influence in governance must extend beyond financial stake to value humanhood and intelligent life. The centralizing force of plutocratic token governance must be balanced with Citizenship. Giving voice and power to different constituents allows the Collective to match decisions with voters’ incentives, rather than building a solely plutocratic system. Checks and balances prevent capture.
5.
Impact = Profit. A key part of the Lemonade Vision is to ensure that every individual is rewarded in proportion to their positive impact to the Protocol, Platform and Products. We believe this to be the most important target in the pursuit of solving global coordination problems and creating a better future. Our economy is an expression of our collective needs, wants, and ethics. Lemonade Governance is ultimately responsible for enacting this fairness ratio that is key to the Lemonade Vision.
Design Overview
The responsibilities of Legislature can be categorized into one of the two primary goals of the governance system: Capture Resistance and Resource Allocation. Within each category, governance responsibilities are identified as (a) the exclusive responsibility of one or the other house, (b) a responsibility where one house drives proposals and the other house may veto, or (c) as a truly shared responsibility subject to approval by each house. This system is designed to help each house play to its strengths and avoid deadlock.
The Lemonade Token House is made up of $LEMON tokenholders and their delegates. Tokenholders and their delegates are expected to be rational economic actors interested in preserving or increasing the economic well-being of the United Stands of Lemonade. Therefore, the Token House is responsible for decisions that affect business parameters of the system such as inflation or the variables that govern sequencer selection. Token voting distribution is wide and permissionless, and helps represent the free market in the decision making process.
In contrast to the Token House, the Citizens’ House uses a one-person, one-vote system. Citizens are meant to represent individual human stakeholders of the Collective: builders, users, and community members who are aligned with the project’s values and are interested in the long-term benefit of the United Stands of Lemonade. Therefore, the Citizens’ House is responsible for decisions that may require prioritizing long term growth ahead of other goals –decisions like allocating funding to public goods that support Lemonade Stands. In the long term, the Citizens’ House is expected to expand to include the thousands or millions or billions of humans interacting with Lemonade ecosystem.
Governance responsibilities given to each house will change over time as Lemonade participants iterate towards its long-term governance-minimized end state. This includes introducing highly manual governance responsibilities (e.g. inflation adjustments, or Passport holder allowlists) that are intended to be replaced by automated smart defaults from iterations on how to govern these vectors appropriately. It may also include transitioning powers from the responsibility of the full governance body to a subset of governance participants who are empowered by their broader governance base. In these early chapters of the United Stands of Lemonade governance, many of these iterations will be designed or implemented by the Lemonade Foundation taking insipration from Optimism, Vitalik and other history. Eventually this must transition to the responsibility of United Stands of Lemonade governance participants itself. This meta-governance power marks the end of the Foundation’s stewardship and entrusts the governance community with continued experimentation towards a healthy end-state for Optimism.
Problem Space #1: Capture Resistance
Lemonade Legislature’s first responsibility is to ensure that no single party can unilaterally control, censor, halt, or otherwise extract rent from Lemonade. A decentralized compute layer is hardly valuable if controlled by a centralized entity. Governance helps the ecosystem make decisions in the absence of any one person or organization that is “in charge.”
The responsibility to uphold capture resistance can be broken down into two broad categories:
hard powers: governance powers that are eventually encoded and executed onchain, and
soft powers: social norms the governance community upholds, not enforced onchain but by the community’s ability to fork.
1/ Hard powers
Protocol Upgrades refer to the ability for governance to make changes to the Lemonade protocol and smart contracts itself. This is a crucial responsibility of governance that ultimately makes the community the steward of Lemonade’s core protocol functionality. Protocol upgrades will be approved by the Token House, subject to a Citizens’ House veto. The Token House is the primary approver because of its broad reach and likelihood of representing business interests that depend on the Lemonade Stack’s functionality. The Citizens’ House veto power guards against capture of the Token House and increases the resilience of the overall system.
Initially, protocol upgrades are approved by the Token House and executed manually by the Lemonade Foundation. In the coming Seasons, the United Stands of Lemonade may implement a Security Council within the Executive Branch responsible for executing upgrades following the will of governance. Eventually, execution of protocol upgrades will be fully onchain. On a far enough time horizon, we can expect protocol upgrades to become less and less common as the protocol nears feature completeness. We look to protocols like Optimism, Ethereum and Bitcoin as a model for what mature decentralized protocol upgrades look like.
Chain Selection is the ability to make choices about which blockchain does the Lemonade network expand on as an L2 or L3. Initially, the Lemonade Foundation will be responsible for this decision, and in time the decision will be via an explicit governance power driven by the Token House, with Citizens’ House power to veto. Lemonade Superchain selection is an important economic decision. The Token House is well-incentivized to make sure the network selection is fair and beneficial for the United Stands of Lemonade. The Citizens’ House veto power guards against the capture of the Token House related to network selection.
Initially, Lemonade Foundation is starting leaning towards a Superchain as an L2 on the OP Stack, while also considering an L3 on Base.
Eventually, network selection may be fully automated based on verifiable and pre-agreed upon processes, enabling the network set to be selected and maintained without active governance intervention.
Citizenship Eligibility is the responsibility of the Legislature governance to select new humans to participate in the Citizens’ House of Lemonade. Citizenship Eligibility will be determined by the Citizens’ House; the Token House will have the power to veto. Assuming good long-term values alignment with the Collective, Citizens should be incentivized to grow a set of voters that make quality decisions about Retroactive Rewards and overall Treasury allocations. A Token House veto guards against capture of the Citizens’ House or moves to consolidate power.
To date, Citizenship expansion has been administered by the Foundation. In the future, the Foundation will propose an expansion algorithm that Citizens vote to approve. Ultimately, Citizens may govern a citizenship selection algorithm directly that runs across identity data in the Lemonade AttestationStation developed by the Executive branch on Ethereum Attestation Service. In its final minimized form, the Citizens’ House has established a battle-tested onchain selection process; updates to the contracts that govern selection can be made as necessary by the Citizens’ House in collaboration with the Executive Branch of Lemonade.
2/ Soft powers
Code of Conduct Enforcement is the responsibility of governance to uphold and enforce the Lemonade Code of Conduct, as well as Fundamental Rights and Duties outlined in the Constitution. Each house may govern the code of conduct for its own members. The best cultural and values-based enforcement for governance communities should come from within that specific community. Today, CoC violations are processed with administration from the Foundation. In future Seasons, the community will iterate on this approach:
Director Removal is the right of governance to remove a director of the Lemonade Foundation. Director Removals are approved by both the Token House and Citizens’ House. Stewards of the Lemonade Foundation should be accountable to the entire community.
This right is enforced and upheld by the legal documents that underpin the Lemonade Foundation’s commitment to the United Stands of Lemonade. As Directors are not represented onchain, this responsibility does not have onchain enforceability.
Problem Space #2: Resource Allocation
The second primary responsibility of Lemonade Legislature is to allocate the Lemonade’s resources to help it achieve its goals. This is a piece of essential governance that requires human intervention, especially in its early stages. Resource allocation comes in four forms:
Allocation of Protocol Revenue
$LEMON Treasury Management
Lemonade Platform & Product revenue from Subscriptions
Lemonade Marketplace Revenue from Ticketing and Community smart contracts
Allocation of Protocol Revenue is the responsibility of governance to determine how to direct surplus ETH generated by the Lemonade protocol. Lemonade L2/L3 will generate revenue through transaction fees paid on Lemonade Mainnet. Part of these transaction fees is used to post data to Ethereum L1, Optimism L2 or Base L2, and pay for other expenses associated with running the protocol, and the remainder of the fee is accumulated as surplus revenue that can be directed by the Legislature for the benefit of the ecosystem. In the future, the sequencing and proving networks that help run the Lemonade protocol may also provide sources of revenue for the United Stands of Lemonade.
By default, surplus protocol revenue will be allocated to Retroactive Rewards. The Token House may vote on proposals to divert a portion of the surplus protocol revenue for other purposes as they see fit. These proposals will be subject to veto power by the Citizens’ House.
Protocol Revenue is a crucial lever in the United Stands of Lemonade. In its early stages, the default allocation to Retroactive Rewards to Lemonade Stands and projects that grow the Lemonade ecosystem. As the United Stands of Lemonade matures, the Token House is entrusted to propose deviations from this default for the health of the Lemonade ecosystem. Citizens’ House veto powers help hold the Token House accountable and prevent short term optimization at the expense of long term sustainability.
In the future, a proposal type will be introduced for proposing modifications to the allocation of surplus protocol revenue. These proposals may begin with certain safeguards, like a cap on possible allocations. Proposal powers for high-level budgeting decisions may additionally be delegated to elected representatives as the Token House sees fit. The long term minimized state of this governance responsibility could include some thoughtful automation to determine revenue allocations based on indicators of whether Lemonade should be in a “growth” stage or “value” stage.
$LEMON Treasury Allocation is the responsibility of Legislature to direct how the existing $LEMON token treasury is allocated. This has several components:
The Ecosystem Fund, which is directed by Token House governance.
The Retroactive Reward Fund, which is directed by Citizens’ House governance, subject to a Token House veto.
The Seed Fund and Unallocated portions of the token treasury, which are initially administered by the Foundation, and will eventually be directed jointly by both houses in collaboration with the Executive Branch
Foundation Budget Approvals, which are governed jointly by both houses.
Inflation adjustments, which are governed by the Token House, subject to a Citizens’ House veto.
This distributed ownership of the OP Treasury allows for flexibility and gives each house a clear mechanism to allocate tokens for the development of the United Stands of Lemonade. Initially, treasury allocations will be administered by the Foundation, and will gradually move onchain as the governance system matures and becomes more resilient. In the long term, as most of the Treasury is circulating, this power will boil down to the governance of inflation, which can be automated to a thoughtful set of defaults based on the economic health of the United Stands of Lemonade.
Retroactive Rewards are the responsibility of governance to allocate to Lemonade Stands and projects that have provided a positive impact towards building a healthy economy for the United Stands of Lemonade. These grants may refer to either (a) $LEMON tokens from the Retroactive Rewards Fund portion of the token treasury (see $LEMON token Allocation), or (b) Profits generated by the Lemonade Protocol in ETH that governance has decided to allocate to Retroactive Rewards or Ecosystem Fund. Specifically, this power includes:
Retro Rewards Scope: the ability of governance to update the scope, metrics, and impact evaluation criteria used in determining how RetroReward Grants are allocated to Lemonade Stands. In line with the principle of governance minimization, this should be a soft power.
Project Allocations: the ability of the Citizens’ House to make specific individual project-level decisions about how the Retro Rewards Scope is applied to allocate grants. This is the corresponding hard power for Retroactive Rewards.
Both components above are the responsibility of the Citizens’ House. Citizens are selected as individual humans who are interested in the long term health of the United Stands of Lemonade, and, Retro Rewards is a long term investment in United Stands of Lemonade growth.
Today, the Foundation identifies Retro Rewards scope and Citizens make Allocation decisions. Eventually, Citizens will govern the Retroactive Rewards scope themselves.
Legislature
The Legislature Branch of United Stands of Lemonade is governed by a two-house system. The Token House is made up of OP holders and their delegates, and the Citizens’ House is a one-person-one-vote system based on reputation.
This two-house design is intended to help overall Lemonade ecosystem make good decisions and avoid common pitfalls in token-based governance systems. Tokenholders represent one constituency out of many, and are not always the right unilateral owners for decisions that don’t involve the economics of the system. Creating two distinct branches of governance with different membership criteria allows the United Stands of Lemonade to match constituents’ incentives with different types of decisions. It also helps avoid concentration of power, enact safeguards via checks and balances, and evaluate decisions from broader perspectives.
Lemonade aims to build a governance system that will stand the test of time and help the entire ecosystem flourish into a vibrant self-sustaining economy.
This proposed structure is not a commitment or blueprint for exactly how governance processes will be introduced and implemented: it’s highly likely the governance will learn from initial experiments and make modifications to the processes outlined here.
A snapshot of the decision matrix looks like the diagram below:
Governance Goals
There are two primary goals of Legislature’s governance system:
1.
Capture resistance. Governance plays a key role in securing the anti-capture and censorship resistance of the Lemonade protocol, platform and products. Governance should
make it possible for chain or network operation to continue without reliance on any individual entity;
prevent any one entity or small group of entities from being able to control or censor the protocol, platform, products or its functions.
2.
Resource allocation. Governance’s second primary responsibility is to allocate resources effectively to support the Lemonade’s vision and accrue sustainable value to the Ecosystem. Vision & value may often be in conflict, and allocating resources effectively involves a blend of short- and long-term thinking. This includes allocation of:
Token treasury
Platform and Product Revenue from subscriptions
Marketplace revenue from ticketing and community smart contracts
Protocol revenue from the Lemonade Superchain sequencer
Design Principles
Design decisions for the Legislature’s governance system should be made in line with five key principles:
1.
Governance minimization. The set of governance responsibilities that are encoded onchain or formalized in voting processes should remain as minimal as possible. The United Stands of Lemonade aims to reduce governance to its essence and to avoid introducing regulation where freedom can achieve the same result. This principle is key to encouraging permissionless innovation. In practice, this looks like a minimal set of (1) onchain governance processes to upgrade Lemonade marketplace and protocol contracts and tune the economic parameters of the system, and (2) offchain social processes to maintain a healthy inclusive community which removes barriers to easy and fun participation.
2.
Iteration. Lemonade is decentralizing iteratively to increase the chances of building a healthy system that lasts for the long-term. This means the Foundation will play a role in establishing processes, help the Collective through its first few rapid feedback loops in improving those processes, then reduce its role over time. This also means the design principles and goals outlined may be invalidated or updated along the way. This iteration gives United Stands of Lemoande a chance to learn how to make thoughtful decisions using an un-intuitive but essential loop, i.e., introduce a governance process that involves active participation, then gradually work to automate or minimize it over time. Doing so will then shift responsibility to adjust the autopilot when necessary, not to keep two hands on the wheel.
3.
Forking. The ability to fork and the ability to exit are critical to protect individual freedoms. All of the core software and tooling required to build on the Lemonade Platform should be open source, freely available, and easy to use such that a fork is always a viable alternative. This isn’t just about vibes: in crypto, where credible commitments not to extract are what makes decentralized platforms valuable, this is a competitive advantage. Participants will be more likely to join the Lemonade platform if they have the ability to make an alternative.
4.
Balance. Influence in governance must extend beyond financial stake to value humanhood and intelligent life. The centralizing force of plutocratic token governance must be balanced with Citizenship. Giving voice and power to different constituents allows the Collective to match decisions with voters’ incentives, rather than building a solely plutocratic system. Checks and balances prevent capture.
5.
Impact = Profit. A key part of the Lemonade Vision is to ensure that every individual is rewarded in proportion to their positive impact to the Protocol, Platform and Products. We believe this to be the most important target in the pursuit of solving global coordination problems and creating a better future. Our economy is an expression of our collective needs, wants, and ethics. Lemonade Governance is ultimately responsible for enacting this fairness ratio that is key to the Lemonade Vision.
Design Overview
The responsibilities of Legislature can be categorized into one of the two primary goals of the governance system: Capture Resistance and Resource Allocation. Within each category, governance responsibilities are identified as (a) the exclusive responsibility of one or the other house, (b) a responsibility where one house drives proposals and the other house may veto, or (c) as a truly shared responsibility subject to approval by each house. This system is designed to help each house play to its strengths and avoid deadlock.
The Lemonade Token House is made up of $LEMON tokenholders and their delegates. Tokenholders and their delegates are expected to be rational economic actors interested in preserving or increasing the economic well-being of the United Stands of Lemonade. Therefore, the Token House is responsible for decisions that affect business parameters of the system such as inflation or the variables that govern sequencer selection. Token voting distribution is wide and permissionless, and helps represent the free market in the decision making process.
In contrast to the Token House, the Citizens’ House uses a one-person, one-vote system. Citizens are meant to represent individual human stakeholders of the Collective: builders, users, and community members who are aligned with the project’s values and are interested in the long-term benefit of the United Stands of Lemonade. Therefore, the Citizens’ House is responsible for decisions that may require prioritizing long term growth ahead of other goals –decisions like allocating funding to public goods that support Lemonade Stands. In the long term, the Citizens’ House is expected to expand to include the thousands or millions or billions of humans interacting with Lemonade ecosystem.
Governance responsibilities given to each house will change over time as Lemonade participants iterate towards its long-term governance-minimized end state. This includes introducing highly manual governance responsibilities (e.g. inflation adjustments, or Passport holder allowlists) that are intended to be replaced by automated smart defaults from iterations on how to govern these vectors appropriately. It may also include transitioning powers from the responsibility of the full governance body to a subset of governance participants who are empowered by their broader governance base. In these early chapters of the United Stands of Lemonade governance, many of these iterations will be designed or implemented by the Lemonade Foundation taking insipration from Optimism, Vitalik and other history. Eventually this must transition to the responsibility of United Stands of Lemonade governance participants itself. This meta-governance power marks the end of the Foundation’s stewardship and entrusts the governance community with continued experimentation towards a healthy end-state for Optimism.
Problem Space #1: Capture Resistance
Lemonade Legislature’s first responsibility is to ensure that no single party can unilaterally control, censor, halt, or otherwise extract rent from Lemonade. A decentralized compute layer is hardly valuable if controlled by a centralized entity. Governance helps the ecosystem make decisions in the absence of any one person or organization that is “in charge.”
The responsibility to uphold capture resistance can be broken down into two broad categories:
hard powers: governance powers that are eventually encoded and executed onchain, and
soft powers: social norms the governance community upholds, not enforced onchain but by the community’s ability to fork.
Problem Space #2: Resource Allocation
The second primary responsibility of Lemonade Legislature is to allocate the Lemonade’s resources to help it achieve its goals. This is a piece of essential governance that requires human intervention, especially in its early stages. Resource allocation comes in four forms:
Allocation of Protocol Revenue
$LEMON Treasury Management
Lemonade Platform & Product revenue from Subscriptions
Lemonade Marketplace Revenue from Ticketing and Community smart contracts
Allocation of Protocol Revenue is the responsibility of governance to determine how to direct surplus ETH generated by the Lemonade protocol. Lemonade L2/L3 will generate revenue through transaction fees paid on Lemonade Mainnet. Part of these transaction fees is used to post data to Ethereum L1, Optimism L2 or Base L2, and pay for other expenses associated with running the protocol, and the remainder of the fee is accumulated as surplus revenue that can be directed by the Legislature for the benefit of the ecosystem. In the future, the sequencing and proving networks that help run the Lemonade protocol may also provide sources of revenue for the United Stands of Lemonade.
By default, surplus protocol revenue will be allocated to Retroactive Rewards. The Token House may vote on proposals to divert a portion of the surplus protocol revenue for other purposes as they see fit. These proposals will be subject to veto power by the Citizens’ House.
Protocol Revenue is a crucial lever in the United Stands of Lemonade. In its early stages, the default allocation to Retroactive Rewards to Lemonade Stands and projects that grow the Lemonade ecosystem. As the United Stands of Lemonade matures, the Token House is entrusted to propose deviations from this default for the health of the Lemonade ecosystem. Citizens’ House veto powers help hold the Token House accountable and prevent short term optimization at the expense of long term sustainability.
In the future, a proposal type will be introduced for proposing modifications to the allocation of surplus protocol revenue. These proposals may begin with certain safeguards, like a cap on possible allocations. Proposal powers for high-level budgeting decisions may additionally be delegated to elected representatives as the Token House sees fit. The long term minimized state of this governance responsibility could include some thoughtful automation to determine revenue allocations based on indicators of whether Lemonade should be in a “growth” stage or “value” stage.
This distributed ownership of the OP Treasury allows for flexibility and gives each house a clear mechanism to allocate tokens for the development of the United Stands of Lemonade. Initially, treasury allocations will be administered by the Foundation, and will gradually move onchain as the governance system matures and becomes more resilient. In the long term, as most of the Treasury is circulating, this power will boil down to the governance of inflation, which can be automated to a thoughtful set of defaults based on the economic health of the United Stands of Lemonade.
Both components above are the responsibility of the Citizens’ House. Citizens are selected as individual humans who are interested in the long term health of the United Stands of Lemonade, and, Retro Rewards is a long term investment in United Stands of Lemonade growth.
Today, the Foundation identifies Retro Rewards scope and Citizens make Allocation decisions. Eventually, Citizens will govern the Retroactive Rewards scope themselves.
Retroactive Rewards are the responsibility of governance to allocate to Lemonade Stands and projects that have provided a positive impact towards building a healthy economy for the United Stands of Lemonade. These grants may refer to either (a) $LEMON tokens from the Retroactive Rewards Fund portion of the token treasury (see $LEMON token Allocation), or (b) Profits generated by the Lemonade Protocol in ETH that governance has decided to allocate to Retroactive Rewards or Ecosystem Fund. Specifically, this power includes:
$LEMON Treasury Allocation is the responsibility of Legislature to direct how the existing $LEMON token treasury is allocated. This has several components:
The Ecosystem Fund, which is directed by Token House governance.
The Retroactive Reward Fund, which is directed by Citizens’ House governance, subject to a Token House veto.
The Seed Fund and Unallocated portions of the token treasury, which are initially administered by the Foundation, and will eventually be directed jointly by both houses in collaboration with the Executive Branch
Foundation Budget Approvals, which are governed jointly by both houses.
Inflation adjustments, which are governed by the Token House, subject to a Citizens’ House veto.
Retro Rewards Scope: the ability of governance to update the scope, metrics, and impact evaluation criteria used in determining how RetroReward Grants are allocated to Lemonade Stands. In line with the principle of governance minimization, this should be a soft power.
Project Allocations: the ability of the Citizens’ House to make specific individual project-level decisions about how the Retro Rewards Scope is applied to allocate grants. This is the corresponding hard power for Retroactive Rewards.
1/ Hard powers
Protocol Upgrades refer to the ability for governance to make changes to the Lemonade protocol and smart contracts itself. This is a crucial responsibility of governance that ultimately makes the community the steward of Lemonade’s core protocol functionality. Protocol upgrades will be approved by the Token House, subject to a Citizens’ House veto. The Token House is the primary approver because of its broad reach and likelihood of representing business interests that depend on the Lemonade Stack’s functionality. The Citizens’ House veto power guards against capture of the Token House and increases the resilience of the overall system.
Initially, protocol upgrades are approved by the Token House and executed manually by the Lemonade Foundation. In the coming Seasons, the United Stands of Lemonade may implement a Security Council within the Executive Branch responsible for executing upgrades following the will of governance. Eventually, execution of protocol upgrades will be fully onchain. On a far enough time horizon, we can expect protocol upgrades to become less and less common as the protocol nears feature completeness. We look to protocols like Optimism, Ethereum and Bitcoin as a model for what mature decentralized protocol upgrades look like.
Chain Selection is the ability to make choices about which blockchain does the Lemonade network expand on as an L2 or L3. Initially, the Lemonade Foundation will be responsible for this decision, and in time the decision will be via an explicit governance power driven by the Token House, with Citizens’ House power to veto. Lemonade Superchain selection is an important economic decision. The Token House is well-incentivized to make sure the network selection is fair and beneficial for the United Stands of Lemonade. The Citizens’ House veto power guards against the capture of the Token House related to network selection.
Initially, Lemonade Foundation is starting leaning towards a Superchain as an L2 on the OP Stack, while also considering an L3 on Base.
Eventually, network selection may be fully automated based on verifiable and pre-agreed upon processes, enabling the network set to be selected and maintained without active governance intervention.
Citizenship Eligibility is the responsibility of the Legislature governance to select new humans to participate in the Citizens’ House of Lemonade. Citizenship Eligibility will be determined by the Citizens’ House; the Token House will have the power to veto. Assuming good long-term values alignment with the Collective, Citizens should be incentivized to grow a set of voters that make quality decisions about Retroactive Rewards and overall Treasury allocations. A Token House veto guards against capture of the Citizens’ House or moves to consolidate power.
To date, Citizenship expansion has been administered by the Foundation. In the future, the Foundation will propose an expansion algorithm that Citizens vote to approve. Ultimately, Citizens may govern a citizenship selection algorithm directly that runs across identity data in the Lemonade AttestationStation developed by the Executive branch on Ethereum Attestation Service. In its final minimized form, the Citizens’ House has established a battle-tested onchain selection process; updates to the contracts that govern selection can be made as necessary by the Citizens’ House in collaboration with the Executive Branch of Lemonade.
2/ Soft powers
Code of Conduct Enforcement is the responsibility of governance to uphold and enforce the Lemonade Code of Conduct, as well as Fundamental Rights and Duties outlined in the Constitution. Each house may govern the code of conduct for its own members. The best cultural and values-based enforcement for governance communities should come from within that specific community. Today, CoC violations are processed with administration from the Foundation. In future Seasons, the community will iterate on this approach:
Director Removal is the right of governance to remove a director of the Lemonade Foundation. Director Removals are approved by both the Token House and Citizens’ House. Stewards of the Lemonade Foundation should be accountable to the entire community.
This right is enforced and upheld by the legal documents that underpin the Lemonade Foundation’s commitment to the United Stands of Lemonade. As Directors are not represented onchain, this responsibility does not have onchain enforceability.