The Problem with DAO Voting and How to Fix It
Governance failures in real-world DAOs and practical solutions to make DAO voting work for you.
In DAOs people are obsessed with voting and if you don’t vote enough you’re not DAO enough. If you would’t like folks just buying a token to vote on the future of your democracy then why would you want this in your DAO?
A proposal is biased, it’s an advert written by the person raising funds to get funds towards their project. A quick read is clearly not enough to make an informed decision and no one has the time or resource to filter proposals unless its their JOB!
This is exactly why in democracies we elect full time representatives whose full time job is to filter through proposals and ideas to figure out the best path forward. Yes, this has its issues but its the best model we have working at massive scale.
“But… we have several other models of DAO voting”
Voting is a core part of a DAO as it’s the mechanism for collective decision making and there are several web3 companies providing infrastructure and tooling for decentralized voting.
I studied DAO voting in 2022
I spent 2022 researching 12 mature Impact DAOs, had conversations with 30+ builders and learnt a lot about DAO voting. I also attended many DAO events like MCON, DAOist, Schelling Point at Bogota and actively engaged in DAO conversations. In addition, I hosted a podcast on DAO voting, inviting DAO builders and governance researchers.
How voting works
DAOs use a variety of voting methods however a common decentralized governance voting process looks like this:
Community member raises a proposal.
The proposal is discussed on discourse and a consensus is reached if the proposal should be put up for vote.
If considered for vote the proposal is listed for off-chain voting on a decentralized voting platform, the most popular being snapshot.
Some DAOs take it to the next level to record the final vote on-chain (which involves gas fee and therefore expensive) which then triggers a smart contract that contains the code on how the funds needs to be distributed as per the outcome of on-chain voting.
The on-chain voting leading to automatic fund disbursement is the reason why some confuse DAOs to be auto governed organizations.
The Tally vote is the autonomous part of the Gitcoin DAO where if the vote on Tally passes then funds will flow from the Gitcoin DAO multisig to the work streams multisig autonomously. - Saf, full time contributor, Gitcoin
Delegate Voting (aka Liquid Democracy) is the most common voting style employed at DAOs.
Saf a full time contributor (employee) at Gitcoin DAO explains:
Delegate voting basically means that not every member of the community or every token holder has the time or the resources to participate actively in governance.
The governance tasks involve reading all the different kinds of governance proposals, being active in the governance forum and being very aware and on top of the matters.
What we do at Gitcoin is we delegate our tokens to someone in the community who is active and responsible and has expressed interest in participating actively in governance. We delegate our tokens to them. They are called stewards, designated as voting delegates.
We use steward health - kind of like report cards that basically gives you an overview of all the different kinds of stewards that we have.
If the person you've delegated tokens to isn't participating then you can un-delegate your tokens and delegate them to someone else. Also if they're not voting the way that you want them to, then you can delegate your tokens to someone else.
I asked Scott Moore co-founder of Gitcoin on Delegate Voting
DC: So who decides the delegates? They come across like the elected officials, the ones who make decisions on your behalf. What’s the process of electing them as they have so much responsibility in terms of deciding where the money should go. How do they get nominated?
Scott: So that's an entirely liquid democratic process. A steward will basically just apply on the forum to become a steward, to ask for community support and anyone can redirect at any time their votes to that person.
This is very common across DAOs, it's become kind of a standard post Uniswap with DAOs like ENS or Optimism as well, where the goal is really to ensure that anyone can kind of switch their vote at any time.
At the DAOist event at Bogota I asked a panel of voting experts on who came up with the idea of delegate voting in DAOs. Their response
The problem with Delegate Voting:
Delegate voting seems like a workable approach but it runs into some of the same issues from the risk of delegates amassing power to low participation amongst token holders in vote delegation. Also DAOs do not seem to employ any strict selection and assessment process despite of delegates being trusted with immense voting power.
One Person One Vote
One person one vote is every DAO’s dream and is often called the “fairest of them all”, democratic way of governing. To be true to the value of decentralization most DAOs aspire for one person, one vote.
Proof Of Humanity (POH) employed one person one vote and had big issues with their DAO. Their ugly DAO battle played out on Twitter.
POH is a registry of unique non-repeatable humans built on the Ethereum blockchain. POH called themselves to be world’s most democratic DAO as every person authenticated on their protocol got one vote. And therefore anyone in their registry automatically became part of the DAO and had a vote on governance matters.
From the Impact DAOs Book, POH team decentralized governance played out as
Changes to the protocol can be proposed by anyone and are discussable by everyone. All registered users take a vote, and if there is a change or an update to the protocol, these are called ‘Humanity Improvement Proposals’.
The DAO uses a form of delegated voting style whereby registered users can transfer their vote to a representative to vote on their behalf.
Voting within the DAO has always been a contentious issue. The ‘one person, one vote’ model has led many to complain that most voters do not have enough knowledge or interest to vote optimally. They also suffered from low voting participation.
The problem with one person, one vote:
One person, one vote is a sybil resistance mechanism (as long as each address is authenticated) to ensure one unique person has one vote. However used for DAO governance it leads to everyone having to vote on every decision regardless of their expertise and knowhow of the subject matter. Even with delegate voting employed to reduce all token holder participation it may lead to not all token holders delegating their vote. Also POH suffered from low participation rate.
Problem with DAO voting
Voting fatigue when DAO members are required to deliberate and vote frequently. It leads to information overload and eventually members tuning out.
Lack of context and expertise resulting in poor decision making. Imagine marketing peeps deciding on engineering protocol decisions.
Democracy leads to bureaucracy. More processes, more proposals, more time away from the purpose.
Token holders and contributors not engaged on day to day basis given the power to decide on critical matters. People without skin in the game voting on organizational matters is bound to result in poor decision making and frustration amongst the core team members who are operationally immersed and better informed to take decisions. Also voting would mean not valuing the knowledge of the core team that has probably thought deeper and harder about these issues than the general community.
Voting leads to polarization. The thread below has a video of Frederic Laloux author of the book, “Reinventing Organizations” talk about voting and how it leads to polarization.
I’ve had push back within our Impact DAO as well. DAO members thought that we were not voting enough and therefore not being a DAO enough. That came as a shock to me as we discussed every idea in Discord and used emojis as a show of support. The only missing part was writing proposals and voting on snapshot. To me that seemed highly bureaucratic taking focus away from the tasks at hand.
The obsession with decentralization and voting is so strong that DAOs often lose sight on “why” they exist.
How to Fix DAO Voting
My recommendation to DAOs would be to think from first principles to design a governance process that makes sense to the DAO and it’s mission.
To be efficient and results driven consider the following:
Don’t vote on every matter. Keep voting minimal.
Have a tiered voting system. Some matters exclusively for the core team to decide and others for the general community.
Identify decisions more fitting for the core team than opening it up to the entire community.
Vitalik Buterin suggests:
One way to categorize decisions that need to be made is to look at whether they are convex or concave. When decisions are convex, decentralizing the process of making that decision can easily lead to confusion and low-quality compromises. When decisions are concave, on the other hand, relying on the wisdom of the crowds can give better answers. In these cases, DAO-like structures with large amounts of diverse input going into decision-making can make a lot of sense.
More on convex and concave decisions on Vitalik’s blog, DAOs are not corporations.
Discussions greater than Votes. Open discussion threads in discord and discuss the matter till everyone reaches an understanding. Encourage debates as its critical to understanding everyone’s perspective and mitigates the risk of polarization.
Enable decentralization at pod level. Pods are small working groups organized around different tasks.
Vitalik Buterin details pod level decentralization taking Ukraine DAO as an example.
UkraineDAO, on the other hand, works by splitting its functions up into many pods, where each pod works as independently as possible. A top layer of governance can create new pods (in principle, governance can also fund pods, though so far funding has only gone to external Ukraine-related organizations), but once a pod is made and endowed with resources, it functions largely on its own. Internally, individual pods do have leaders and function in a more centralized way, though they still try to respect an ethos of personal autonomy.
Two things that can help ensure that an organization built this way will actually turn out to be meaningfully decentralized include:
A truly high level of autonomy for pods, where the pods accept resources from the core and are occasionally checked for alignment and competence if they want to keep getting those resources, but otherwise act entirely on their own and don't "take orders" from the core.
Highly decentralized and diverse core governance. This does not require a "governance token", but it does require broader and more diverse participation in the core. Normally, broad and diverse participation is a large tax on efficiency. But if (1) is satisfied, so pods are highly autonomous and the core needs to make fewer decisions, the effects of top-level governance being less efficient become smaller.
All for Climate DAO enables decentralization at project level. If enough DAO members are committed to an idea, All for Climate DAO helps them setup their own multisig, fundraise and let the project members govern.
Keep discussions and voting as much as possible at your DAO’s place of work which in most cases is Discord than on an external platform. Remember every time you go somewhere else to vote there will be a drop in participation.
Marcus Aurelius of Klima DAO (22K+ token holders) and Federico Ast of POH (17K+ members) who have both learnt hard lessons in large DAO governance suggests find a middle path, don’t vote often, identify decisions for community vote and do not decentralize at an early stage with one person one vote.
If you have any questions or comments feel free to reach out on Twitter or here on Substack.
🐇 Go Deep
Research paper on The Dissensus Protocol: Governing Differences in Online Peer Communities. A great paper that contrasts two DAOs with two widely different voting mechanisms and the learnings.
Klima DAO core team member Marcus Aurelius shares his views on voting after a year full of DAO chaos. He suggests not to vote too much, keep it minimal.
Fedrico Ast, POH and Kleros Founder recommends 👇
Do not decentralize at an early stage with one person one vote
All for Climate DAO Founders Leen and Xavier on governance and voting
Scott Moore, Co-founder Gitcoin talks liquid democracy and delegate nomination
Saf of Dream DAO and Gitcoin compares governance and voting at the two DAOs
What a beautiful well of insights - very useful resource for any project looking to go on the DAO journey... Wen ReFi DAO DAO? ;)