This section focuses on the DAOs previous and current architecture, explaining precisely how governance is executed in practice and who is involved in that process.
The Morpho Association comprises researchers, engineers, and contributors who first imagined the Morpho Protocol.
The Morpho Association deployed the foundational Multisig of the Morpho DAO. The signers include nine association members and require five signatures to approve a transaction, making it a 5/9 Multisig.
In June 2022, the association deployed the first instance of the Morpho Protocol and transferred its ownership to the 5/9 Multisig.
The next natural step in the evolution of Morpho's governance is to enable any MORPHO token holder to vote for the evolution of the DAO.
Snapshot, a native web3 service that provides voting interfaces for those participating in DAO, is utilized for off-chain voting for Morpho Governance.
Implementing off-chain votes and governance proposals still requires the 5/9 Multisig to execute the transaction, and while it is not a fully trustless process but a step in the right direction.
In DeFi, A 5/9 Multisig is considered one of the most secure setups. However, with added security comes a more laborious and time-consuming execution. This is particularly evident when a quick, non-critical execution such as pausing a market is required. Having the capability to execute such transactions puts the protocol in a better position to handle potential emergencies.
Hence, a second 3/9 Multisig, Morpho Operator, was deployed. Using Zodiac Role Modifier, the Morpho Protocol can give 3/9 Multisig an operator role, allowing it to perform emergency functions on behalf of the 5/9 Multisig:
- (Un)pause a given market.
- Enable/Disable P2P matching for a given market.
- Update non-critical matching engine parameters.
The Morpho Operator can also:
- Set the
p2pIndexCursorfor a given market.
- Transfer the fees generated by a given market to 5/9 Multisig.
This is the current state of the DAO's architecture.
The motivation behind the next evolution of Morpho’s Governance was two parts: an opportunity to implement modular decentralization and the need for a timelock.
Ownership of core contracts was transferred from the original 5/9 Morpho DAO Multisig to a new ownerless safe, a Delay Modifer module was deployed, and an Invalidator role was given to 5/9 multisig.
This architecture allows fully fledged contracts such as Morpho-Aave-V2 to be decentralized while maintaining the option to stay lean for nascent deployments and other aspects of Morpho Governance. The timelock provides users and integrators with an added layer of security.
At this point, the governance system is rather complex. The below diagram shows the architecture of the Morpho Governance:
Current DAO Architecture
- Utilizing a Guard Scope to eliminate signers, an ownerless Safe Multisig (Morpho V1 Admin) is the owner of Morpho core contracts:
- 3.Morpho Proxy Admin
- 4.Morpho Vaults
- Delay Modifer introduced a 24-hour timelock on transactions initiated by Morpho DAO.
- Only Morpho DAO, a 5/9 Multisig, can initiate transactions to the delay modifier. It has an Invalidator role allowing it to invalidate a transaction in the delay modifier if the transaction was proposed initially.
- Only the two modules - Delay Modifier & Role Modifier - can interact with this Morpho V1 Admin.
- Morpho Operator, a separate 3/9 Multisig designed to be more nimble, has an Operator Role allowing it to perform emergency functions as mentioned in Step 3.
This section outlines possible implementations or changes to the current governance infrastructure to introduce further decentralization.
Under the current architecture, MORPHO holders can vote on proposals, but they cannot enforce the implementation of proposals on-chain. It relies on the 5/9 Multisig bridging off-chain votes to the practical on-chain implementation. Therefore, Multisig signatories could choose not to implement a proposal even if approved by Governance.
One solution is the Zodiac Reality Module: a governance module that enables the on-chain execution of off-chain decisions through a bonding mechanism. More on the Reality Module can be found here.
Another option is the Zodiac Governor Module, which enables a seamless transition from a Multisig into a DAO with on-chain voting while maintaining flexibility and optionality. More on the Governor Module can be found here.
Either option allows both holders, through a vote, and the 5/9 Multisig to send transactions to the Delay Modifier to update core Morpho contracts.
This would be done by introducing a transaction guard on the 5/9 Multisig, preventing it from submitting transactions to the Delay Modifier. The 5/9 Multisig would maintain the Invalidator Role.
The result: only approved snapshot votes can transmit updates to the core contracts through the Delay Modifier, but the 5/9 Multisig can invalidate transactions during the timelock period.
Above all, the final step in achieving complete decentralization is depreciating the 5/9 Multisig and leaving the DAO with full control of the protocol. It will likely only be implemented once the community is comfortable with DAO infrastructure and its decentralization.