Is most DAO governance fake? Study of nonsensical DAO activity.
As noted by the DAO Times, DeepDAO did a deep dive into strange DAO proposal and voting patterns it dubbed “nonsensical DAOs” — tens of thousands of wallets making and voting on proposals have zero governance value and instead merely state meaningless facts or speculate about probable events. How problematic is this and what can be done about these nonsensical DAOs?
Familiar territory
In our own research, we have identified strange DAO governance voting and proposal behaviors. For example, in this article about Snapshot off-chain voting, we examined the case of two PancakeSwap communities — one real and the other mocking the entire governance process. At least PancakeSwap is a legitimate AMM with a large and active community.
But if you’ve been following our weekly State of the DAOs updates, you’ve likely noticed that the Top 5 of the most active DAOs includes a lot of mostly unknown DAOs. Let’s look at a couple in greater depth.
Iwan DAO
At the time of the writing of this article, Iwan DAO had 136 proposals in the past week, easily topping the list (with PancakeSwap being a distant second at 48). What could’ve been so systemically critical to warrant 19+ proposals/day? Apparently… logging weight.
In fact, most of Iwan’s proposals are about gauging weight. But there are “notable” exceptions, like this critical update with a long and complex explanation of the situation:
Given how substantial the above proposal is, it is no wonder that it is still active to make sure every vote counts. The only issue would be to fill the quorum since the DAO lists zero token holders, no treasury, 7 lifetime members (all named Iwan?), and yet 488 lifetime proposals.
Nonsensical as this DAO is, it still sits atop DeepDAO’s activity charts most weeks and skews the DAO space statistics.
2021eth
Another DAO with a strange name and — shockingly — zero DAOish activity is barely behind PancakeSwap with 47 proposals in the past 7 days. But anyone hoping to find any governance there will be severely disappointed as all of them are spam about memecoins, NFT drops, and the like. $PEPE, of course, is front and center.
Nothing wrong with dropping alpha on various NFTs and tokens — but this is not DAO governance. Easy enough to use Telegram/Twitter/Discord for these announcements.
Not surprisingly, 2021eth has zero tokenholders and nothing in its treasury. It does have 3.6k members though. Because apparently getting DAO proposal notifications is easier than unmuting Telegram.
How can this be fixed?
To be clear, censorship is not the way. If Iwan and 2021eth want to use a Ferrari to drive around a mini-golf course, fine. But this should not count as a DAO for compiling statistical sets of DAO governance. The data we are seeing is littered with nonsensical DAOs.
If there is reasonable suspicion that these DAOs exist at least in part to farm tokens from airdrops, it wouldn’t be hard for airdroppers to exclude them. Already, Arbitrum employed a sophisticated filtering mechanism for its own airdrop.
For serious DAOs, like PancakeSwap, more work is required to incentivize proper governance behavior. The proposals in the mock PancakeSwap DAO are active because the real one does not work to the satisfaction of a large enough percentage of PancakeSwap DAO’s members.
In the DeXe DAO constructor, DAO creators will be given more flexible power in determining the voting, quorum, and validator settings than what is available to current DAOs. The goal of this is to incentivize activity for each vote type — from the most minute technical one to the one altering the entire nature of the DAO. And this absolutely must include actual reward incentives for proposing, voting, and executing of approved proposals (as our DAO constructor does). A DAO only really works when any member can be the investor, employer, and employee at will (switching between these hats as desired, competing with other members for this on equal footing and in a transparent manner).
In short, the best cure of nonsensical DAOs are sensical ones.
Stay tuned!
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