Improving DAO’s Cooperation with Better Participation Mechanisms

With the emergence of blockchains, organizations needed a new decentralized organization model, the DAOs. See how we can increase cooperation in these communities in an intelligent way.

7 min readMay 31, 2022

Overview

Imagine a vending machine that not only takes your money and gives you a snack in return, but also uses that money to automatically order the goods. This machine also orders the cleaning services and pays its rent by itself. Also, as you put money into that machine, you and other users have the right to say which snacks will be ordered and how often the machine should be cleaned. There are no managers, all these processes were pre-written in code.

A DAO or a Decentralized Autonomous Organization works something like this. The idea of this management model has been circulating in the cryptocurrency community since Bitcoin managed to get rid of intermediaries in financial transactions. Likewise, the main idea behind DAO is to establish a company or an organization that can function absolutely without hierarchical management.

How it works?

To work, DAOs rely on a number of mechanisms that ensure their operation at all times. The first of these mechanisms is related to the ability to program actions and execute them according to certain parameters. With this, the DAO gains the ability to perform actions autonomously. Viewed more simply, this programming would become the set of rules that govern the DAO and the most common way to program actions is through smart contracts.

The second mechanism is a consensus protocol. Its role is to ensure that decisions made within the DAO are taken by the consensus of its parties. No factors outside the network and you want to participate directly in it can change or make decisions.

Then DAO has a third mechanism that relies on token issuance or medium of exchange. The purpose of this mechanism is to ensure a means to financially support the DAO. In addition to allowing users to gain voting power and at the same time be an exchange mechanism and economic reward.

Finally, they have a fourth mechanism whose purpose is to record everything that happens in the DAO. This task falls to blockchain technology, where all information is stored to be publicly accessed and ensure its security. The union of these four elements is what allows the operation of a DAO at all times.

For a better explanation recommend the video below.

The Landscape

Just as in real life people come together to do different activities, in blockchain DAOs come together for different types of applications and purposes.

Problems

Given what DAOs are and how they work, let’s take a closer look at the potential problems most of them face or will face.

Power of the whales

As votes are based on tokens, voters with a lot of purchasing power have a lot of electoral power. So if there is financial inequality in the community (many people with little money and few people with a lot), only the most fortunate will be able to choose the proposals and changes in the protocol, leaving aside the voice of most members, something that is not so interesting when we look for intelligent cooperation.

Only token voting

Today’s most important DAOs (AAVE, Sushi, Uniswap, PancakeSwap and more) use the Snapshot for the voting system. And there you can vote on any DAO’s proposals by having their governance token.

Despite Snapshot being the most used, only token voting creates a breach for intruders in your party. Very rich people who have never heard of your community can simply decide on anything that makes sense or not because they have your voting power access easily.

For example, the MIT Technology Review considers that giving voting power only for money does not give security that the decisions made will be intelligent, or even a guarantee a financial return for investors.

Syntethix and Uniswap only token vote model

Solutions

Quadratic Voting

Invented by researcher Glen Weyl and widespread by Vitalik Buterin, Quadratic Voting (a.k.a Plural Voting) is a voting method created to better reflect the preference of a community in collective decisions.

Basically, electors of this community have their governance tokens which are converted to “counted votes” according to their square root. So if you put one voice credit on an issue, that is one vote; four credits are two votes; nine credits are three votes, and so on.

This participation mechanic encourages more people to vote in groups because voting alone starts to become much more expensive as each vote costs to the power of 2, where 1 vote — $1, 2 votes — $4, 3 votes — $9, 4 votes — $16.

So this technology can be confidently deployed in DAOs’ voting systems to prevent small groups from deciding for an entire community just because they have more purchasing power than everyone else, protecting your organization with technology and democracy.

And QV is a technology that goes far beyond just votes, it is used to finance projects, grants, and among other means that will need a more intelligent use of your money. You can check actual uses of the Quadratic concept in Gitcoin Grants, Pomelo and clr.fund.

But Quadratic concepts are not too simple, so for better understanding, I recommend this collection of articles made by RadicalxChange. The technology is well pointed out in Experimental Voting Effort Aims to Break Ethereum Governance Gridlock and Quadratic Voting: A New Way to Govern Blockchains for Enterprises.

Reputation Voting

Really the token voting system is the best we have so far, but as was said earlier leaving these weights only in real money leaves their governance system fragile for any rich internet troll to mess with.

To avoid code exploitation and other problems caused by malicious choices, the voting design will need another weight type addition, and a good choice is your reputation.

As a solution to choosing changes and proposals in a fairer way, you will need a reputation score on that DAO, a metric that can be measured by participation time, deliveries made, games won (if it is a DAO of a game), in short, a ranking that you can climb only with experience and time.

This mechanism touches on a democratic system of votes, where not only money will matter when making decisions, but also your experience invested in the organization. Before only money was counted when voting, now time too. In other words, the more familiar with the community the more power your vote will have.

An example of a weighted reputation score

In this example below, you can check how the reputation score weight would work on your votes. You multiply your governance tokens by your reputation score, then you obtain your vote sum, a metric that will decide the votes. Of course, this is a very simple mathematic model, so feel free to choose your better weights for reputation score.

After a better unification and connection between networks, this reputation score pattern could be not only used in one DAO but among several as if it were a blockchain experience badge located in your best wallet

Conclusion

We have reached the year 2022 with incredible community styles around the world, and the ones that are standing out on the web are the DAOs, which are a result of the best technology of consensus with democratic and smart administration policies, that is, everyone can participate and have the chance to choose.

And despite being one of the most advanced community mechanisms we have so far, today we have in most parts of the DAOs the 1 dollar 1 vote voting mechanism that still leaves an unbalanced favor for those who have greater purchasing power than other community members.

So it’s up to us to analyze and study these available voting concepts and technologies that give voice and opportunity to all members who wish to add to the community. And so we will continue to walk every day toward fair and intelligent cooperation.