DAO on-chain voting: Myth or Reality?
We talked about off-chain voting via Snapshot here. Now let’s explore on-chain voting, the more authentically DAO way of governing if — and this is crucial — if it’s actually being used for frequent and meaningful DAO governance.
According to Messari Research, a mere 8% of DAOs use exclusively on-chain voting with further 15% using an on/offchain hybrid, leaving 77% abandoning the idea of onchain voting entirely.
This doesn’t show much confidence in on-chain voting. Looking at Snapshot proposals, the spikes often correspond with new DAOs launching (like Arbitrum). With off-chain voting being the easier option, one cannot help but ask: is DAO voting only done when it’s easy and there is hype from a launch?
On-chain voting options
As we covered in this Top 10 DAOs article, DAOs use a variety of tools for on-chain voting. For example, Uniswap is using its own Governance Portal for on-chain voting, ENS and Frax use Compound Governor, Lido uses Aragon, and Polkadot has a browser extension for on-chain voting. Tally is a popular tool as well.
In short, it’s a bit of a mess. There is no single tool for onchain voting similar to what Snapshot has done with offchain voting. Aragоn is trying to walk that path, albeit with mixed results.
How decentralized is the voting?
A research paper on onchain voting found the degree of centralization staggering, including that “less than 10 addresses having full control over most DAOs” per its analysis in the DAO Times. With some DAOs having tens of thousands of members, this is a sign that DAOs are currently extremely centralized.
Delegation should help but there are yet to emerge clear mechanisms for delegate selection and transparency. In fact, some delegation is not even active, as is the case for ENS and Gitcoin, where the token airdrop claim process required delegation and the delegate participation rate is very low.
Some delegates are known and communicate with their community frequently, being transparent about their voting logic and listening to feedback and concerns of the community. But that’s far from universal. Nor is information about delegates clear.
How are the voters to choose a delegate if even a simple bio is not provided?
Is there a point?
It is well known that governance participation in one protocol may earn eligibility for a free airdrop of some other protocol in the future. Thus, there are a lot of governance transactions that have no value for governance. For example:
Even conservative definitions of pointless transactions show Uniswap having an 88% voting power below 10 tokens, and 47% of votes having a voting power below 1 token, despite requiring 2.5 and 40 million tokens to submit and pass a proposal respectively.
And Uniswap is the DAO behind the leading AMM, handling millions of dollars in daily transactions and holding a treasury of $2.3B. If Uniswap’s governance activity is mostly useless, what hope do smaller DAOs have?
The Price is Not Right
It cumulatively costs DAO members millions of dollars to vote onchain, to send votes to delegates, and to perform other governance functions.
Having the voting onchain for transparency and record-keeping is important. But if so many of those votes are not actually affecting governance — which in itself seems pretty centralized — is the cost justified?
From the above, there is a clear lack of motivation to vote usefully and govern with a true plurality. In the DeXe DAO constructor, we are planning to solve these problems by making it easy to reward voting, proposal, and execution activity while also giving different voting types flexibility options (quorum, voting length, validator-only-voting, etc.).
It should also be easier to meaningfully govern when the onchain and offchain voting is easily accessible right from the DAO itself.
Certainly, the cost is a serious consideration. Using layer-two voting and other mechanisms to reduce gas costs should help. As does being clear on which voting matters are best left to offchain voting.
Onchain voting has the potential to be the primary and most authentic DAO governance mechanism. That would be a long way from where DAOs are today, but that hasn’t stopped DAO builders before and won’t now.
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