Case Study: How DAOs can reward members
DAOs, perhaps more than any other organizational form, encourage member participation in governance. But it’s not enough to merely give honorable mention to active members or think that doing the right thing is reward enough.
This is why the DeXe protocol has built-in mechanisms for rewarding members for activity that helps the DAO grow.
Rewarding Proposals
Since governance happens via member proposals, it’s important to incentivize members to craft and submit well-thought-out proposals. One logical way to do that is by rewarding members with treasury tokens for proposals that move into the voting stage and pass.
There is a lot to consider here: do you reward just the ones who pass? This would leave out interesting and thoughtful proposals that have a lot of support but are ultimately rejected by the majority. And it’s important to have a whole spectrum of ideas in a DAO rather than having every proposal being voted “yes” on by nearly 100% of the voters (which seems to also lead to lower voter engagement).
On the other hand, rewarding governance tokens with real market value for every single proposal could tempt some DAO members to try to game the system and put forward a large number of irrelevant proposals that are bound to get a majority of “yes” votes like “Is our DAO the best? Y/N?” or “Ice cream is delicious, vote yes if you’re cool.” So keeping a balance is important.
Rewarding voting
It’s disappointing to see many of the top DAOs have low voting engagement. But neither is it right to get people voting just for the sake of a reward. Here too the rewarding needs to be helpful to the governance goals. In DeXe’s solution, this can be achieved in part by adjusting the length of each vote type, either allowing everyone to get their vote in or keeping it short enough that only those truly engaged will participate and get rewarded.
Rewarding technical tasks
To enact a passed proposal on-chain, it needs to be executed by a DAO member. It’s a small action but an important one for governance and motivation to participate in the DAO. DeXe’s DAO builder includes this reward as well.
Rewarding the DAO’s success
Not every reward has to be for a specific action done by members. DAO treasuries are a living thing, generating revenue if the DAO designs them to do so. So why not distribute dividends to DAO members right via DAO mechanisms? With DeXe, you can distribute treasury dividends specifically to the voting members of the DAO if you want to do so, encouraging governance participation.
Balancing the rewards
There are a number of ways to balance the rewards system and protect it from malicious actors. Aside from adjusting vote length and other parameters, you can also set validators to do a secondary vote on proposals to make sure no one is gaming the system.
The cool thing about DeXe protocol’s DAO builder is that nearly everything can be modified and customized to fit a DAO’s evolving needs. And that itself is very rewarding.
Stay tuned!
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