The Aragon Network's quest for decentralized governance faces its biggest trial yet

The Aragon Network started out with a promise to decentralize dispute resolution. Now it is picking up the pieces from an internal dispute that it could not resolve.

In January, thirteen people resigned from the project including Jorge Izquierdo, the CEO of the firm stood up to develop new features and tools for the Ethereum-based network.

Izquierdo said at the time that the Aragon Association had made a series of decisions, mainly pertaining to governance, and that he disagreed with "both with the decisions themselves and how they were taken."

Much is unclear regarding the circumstances of the departures. Whatever happened, though, the story of the Aragon Network is only the latest illustration of how challenging it is to run and govern a decentralized organization.

What makes it unique is that it’s about a decentralized project dealing with the very headaches it is trying to help society solve. 

Now, the project — and perhaps also the idea behind it — faces its biggest test yet.

The Aragon Family

Speaking a few weeks after the resignations, Joe Charlesworth, the executive director of the Aragon Association, says the departed were unhappy with the direction of the network and the association's leadership.

“But I think these kinds of differences — in any network — they’re always going to be present to some extent, and not everyone’s always going to agree with everything,” he says.

To piece together an outline of what those differences were, some context is needed.

The Aragon Network is an Ethereum-based protocol whose mission is to give internet communities “unprecedented power to organize around shared values and resources.”

At its most basic level, Aragon is a collection of smart contracts that can be used as the foundation of a digital organization with a decentralized power structure. The technology can help settle votes in a boardroom or manage money amassed from a fundraise.

More than 1,700 so-called decentralized autonomous organizations (DAOs) run on the open-source software, meaning it supports more than 90% of the total assets under management (in the form of DeFi tokens) in the DAO market, according to data tracked by the website Deep DAO. Most if not all DeFi projects have a native token issued by way of a fundraise to help them get off the ground. These native tokens are often also used transactionally in whatever tools are built on the protocol.

Then there's the Aragon Association, a Swiss non-profit entity that is the legal steward of the project and which bears responsibility for dishing out the proceeds of its $25 million initial coin offering, staged in May 2017 and denominated in ETH.

It was this ICO that minted the Aragon Network Token (ANT), Aragon’s native currency. The primary use of ANT, according to Charlesworth, is as a mechanism for governance within the network. Holders of the token can vote on matters that influence the direction of the project, such as whether or not to acquire another business.

Today, Aragon’s treasury holds some $150 million consisting of a range of fiat and cryptocurrencies. ANT, meanwhile, has a market capitalization of more than $200 million at press time.

Finally, there is Aragon One, a Swiss firm formed by the founders of the Aragon project which has built many of the tools and services on the Aragon platform. Izquierdo, who will remain on the board of the Aragon Association, was the CEO of Aragon One.

“Within the network you have different contributing teams including developers and non-developers, and Aragon One is one of those contributing teams,” says Charlesworth.

But he admits that Aragon One, which is wholly separate from the association, has been especially important.

It in fact built a lot of the core infrastructure on the network, including Aragon Court — the Aragon tool designed for dispute resolution. (Aragon Court rebranded to Aragon Protocol in November last year.) Aragon One also built the Aragon client, which allows users to create and manage DAOs.

Family drama

It is not clear exactly what drove a wedge between these interrelated factions towards the end of last year. The key actors have been vague on the subject, only hinting at what they see as the crux of the issue.

What is clear, however, is that the Aragon project has undergone a period of significant change in recent months — and that this appears to be at the heart of the dispute that led to the mass resignations.

The acquisition of Vocdoni, another digital governance platform, seems like a good place to start. 

The very idea of a decentralized organization acquiring another organization is a strange one, but that is what the Aragon Association announced it had done on January 11 — the same day that news of Izquierdo’s resignation broke.

The association bought Dvote Labs OÜ, the company which built Vocdoni’s digital voting protocol and platform, for an undisclosed fee. 

Integrating Vocdoni into the Aragon platform is now a key short-term focus for the project. It will take a few months, but once completed Charlesworth hopes the blended platform will be considerably easier to use. The key reason? Cost.

Up to now, Aragon voting has taken place on the Ethereum network. But transacting on Ethereum has gotten expensive because the network has gotten so crowded. 

The high cost of using the blockchain has been an obstacle for many projects. It’s also one reason that so-called layer two networks, which promise to perform decentralized and cryptographically secure computation off-chain are so promising to Ethereum developers. 

“Many of the Aragon DAOs last year were struggling because of the voting costs,” Charlesworth says.

“It’s hard enough to get people to vote often in the best of times, but if you have to pay $30 or $50 to cast a vote, many people choose not to vote – or the kinds of things you can vote on are extremely limited and have to be very high value.” 

Vocdoni’s core product is Vocdoni Bridge, which enables off-chain voting on an Ethereum layer-two network. “What we’re going to get at the end of [the integration with Vocdoni] is the ability for DAOs to vote in a completely free way,” Charlesworth says.

There's also another upside, according to Charlesworth. “Vocdoni were initially planning on launching their own token but they agreed to use ANT, so that’s how it will benefit the Aragon community.”

Pushing for wider usage of a native token has become a popular strategy among DeFi networks. Lior Messika, managing partner of the blockchain investment firm Eden Block, said Aragon is trying to “incentivize and enable other protocols to adopt their standards, and utilize them in a way that is incentivized by crypto-economics.”

Messika is an investor in Pocket Network, a DeFi project which uses a version of Aragon governance. In short, Pocket Network uses Aragon Court so that its members can challenge each other should they feel that the rules of the network have been broken. 

Charlesworth seems to want to get even more than that from the acquisition, though. Vocdoni is “focusing pretty much exclusively” on selling decentralized governance technology to traditional organizations, including government bodies, private companies and public companies, he says. 

A breaking point

In a Twitter thread published January 11, Izquierdo said a series of governance-related decisions made by the Aragon Association while he was taking a two-week break was the cause of his resignation. 

Izquierdo did not say what those changes were, only that he “disagreed both with the decisions themselves and how they were taken.” As an association board member, Izquierdo said, he will keep “pushing for its true decentralization ASAP.”

The reference to decentralization echoed something the Aragon Association’s former governance lead, John Light, wrote on GitHub when he resigned on January 7. 

Light wrote that the association “no longer reflects my values, nor the values of the Aragon Manifesto.” Then he quoted from the manifesto: 

“If power becomes centralized, it doesn’t answer to anyone but itself. Decentralizing power is essential to minimizing corruption over time. We must strive to create systems in which a large number of diverse stakeholders have a say, in order for common goods to be responsibly governed by their communities.”

Izquierdo published excerpts from a similarly idealistic note he had sent to the association in a last-ditch attempt to avert the decisions, whatever they were, from being taken.

“Corporations have served humanity well and this form of organization has allowed for incredible human progress and has produced many things we can no longer imagine life without,” he wrote.

“On the other hand, it is clear that corporations cannot be the control and ownership vehicle for internet services and platforms with the unprecedented influence and scale that the internet enabled.”

He went on to call stopping important internet infrastructure from falling into the hands of a small number of corporations “the fight of our generation, akin to last century’s fight to eradicate fascism from Europe.”

Picking up the pieces

Twelve of 13 who resigned in January had worked for Aragon One, leaving a void in product development that the Vocdoni team will presumably fill to some extent.

“Vocdoni is an outstanding team and right now it is the only product team in the Aragon ecosystem,” Izquierdo recently told The Block. Izquierdo also said that he did not leave because of the acquisition.

Charlesworth says much of the infrastructure developed by Aragon One has now been handed over to other development teams.  

“I don't think the team is replaceable in any way and it has left a big void,” Izquierdo said. He believes that the Aragon One team came up with and has executed thus far the roadmap for an updated version of Aragon he called Aragon 2. Charlesworth says the Aragon Association is still planning to launch that update, which he called “Aragon V2,” around March.

The main component is called Aragon Govern, a new smart contract system meant to manage organizations on the blockchain in an efficient and decentralized way, running on top of Aragon Protocol. 

The new system is supposed to introduce changes to the way grants are made to developers on the network.

At present, developers who apply for a grant to build a DAO on Aragon are at the mercy of the Aragon Association’s committee, which decides who receives grant awards. These range from a few thousand dollars to half a million and are denominated in ANT, ETH and USDC. The association’s preference, however, is to use ANT in order to align incentives within the network.

“We’ve had some issues before where grants have been done by the Aragon Association and then not all the deliverables have been fulfilled and there’s this issue of subjectivity. So we hope to be able to solve this in a more decentralized way,” says Charlesworth.

In the future, Charlesworth says these decisions will be put in the hands of the “Aragon network DAO” and ANT holders — in essence thrusting decision-making power into the hands of the network’s developers.

Indeed, the final step in Aragon One’s roadmap was to launch the Aragon Network DAO, which Izquierdo described as “a DAO controlled by ANT holders that (would be) deployed that would govern Aragon Protocol and control ANT minting." 

“But there are some pieces, Protocol and Govern, that would need to fall in place first,” said Izquierdo.

Now the association must pick them up. That might be tricky, given that the goal is the transfer of both capital and clout to the network and away from the association.

The association, after all, is not a for-profit entity and its primary reason for being is to deploy the funds secured through Aragon’s ICO in a way that expands the network.

Does this mean that, eventually, the association will have served its purpose?

“We’re still long term thinking,” Charlesworth says. “We want to be able to transfer funds to the Aragon network DAO in a kind of measured way.” 

As for the community’s dramatic breakup, he says Aragon “means different things to different people.”

“Some people want to focus exclusively on DAOs, for other people decentralized governance is a lot broader than that,” he adds.

When asked to address the events that led to Izquierdo’s resignation, Charlesworth instead pointed to steps taken by the association to “further its own decentralization”: namely, that he and Jose Nuno had been appointed as executive director and chief legal officer, respectively, of the Aragon Association’s committee.

Perhaps “decentralization” also means different things to different people.

“Removing power from the co-founders has always been on the roadmap,” said Charlesworth. “It is not good governance practice for power to be concentrated in the hands of so few.”