The Future of Token Voting

In a rapidly evolving digital landscape, decentralized autonomous organizations (DAOs) are at the forefront of pioneering governance models. The Tally HowToDAO conference in Istanbul is a testament to this evolution, bringing together thought leaders to discuss the impact and potential of token voting at a sold-out event venue.

Embracing a New Governance Paradigm

The Tally HowToDAO Istanbul conference emphasized token voting as a cornerstone of modern DAO governance. CoolHorseGirl from Tally, a market leader front-end solution for onchain governance, provided a keynote with a comprehensive overview of token voting, exploring its various forms and underlying principles. She highlighted how token voting aligns the incentives of all stakeholders involved in a DAO, ensuring that governance decisions reflect the collective will and long-term interests of the community.

In terms of economic aspects, she pointed out a variety of methods to prevent governance from being economically driven, such as using non-transferable tokens, as practiced by SafeDAO. Another approach involves vesting contracts that allow contributors to vote with tokens, thus ensuring their vested interest in the DAO's success. The adaptability of token voting was further underscored by its compatibility with established token standards like ERC-20 or ERC-721, enhancing its scalability and integration into diverse blockchain infrastructures.

The significance of a robust go-to-market strategy, especially in challenging market conditions, was another focal point. Token voting was recognized as a powerful tool to amplify project visibility and community engagement, underpinning the success of numerous prestigious projects. However, she also highlighted the challenges inherent in token voting systems, such as susceptibility to economic attacks and the need for equitable token distribution. Solutions like conviction voting were discussed as means to mitigate these issues, ensuring that token voting remains a transparent and verifiable method for community engagement - but that's not the only solution. The development of governance is ongoing, and the industry is evolving daily.

One of the pioneers in the voting space is DEXE DAO Studio. Recently, they launched a new product that enables any DAO to find the token voting model that suits their needs. They focus on several aspects of the voting lifecycle: first, they remediate some fundamental problems, such as the principal-agent dilemma, systemic inefficiency and lack of stakeholder engagement. Then, they find the right incentive model to push the DAO forward.

According to Dmitryi, the co-founder of DEXE, they are now also working on innovating in information flow. They enable users to choose their preferred way of communication to get informed about recently submitted proposals and DAO events, ensuring that important information is noticed in a sea of thousands of unread Discord messages.

During the subsequent panel discussions, experts like Disruption Joe, Joshua Tan, and Mashal Waqar delved deeper into the intricacies of token voting. They addressed the critical concern of voter apathy - a persistent problem in governance systems. One cause of this issue is the need for more incentives, which is fairly straightforward. Another is that there might be little voting onchain, but there is still a lot of discussion on the social consensus layers, which can generate sufficient engagement. Therefore, the key to success is figuring out how to reflect it onchain in a user-friendly manner. Lastly, Joshua pointed out that not voting to stay credibly neutral is a reasonable approach to avoid conflict of interest, which is present everywhere.

Next, Joe proposed innovative solutions to distribute decision-making power broadly, thereby diluting conflicts of interest and ensuring a more neutral and credible governance process. Examples like RetroPGF at Optimism were cited, where the widespread distribution of decision-making authority minimizes the impact of individual conflicts of interest.

The conference concluded with the notion that token voting is not just a governance mechanism but a gateway to a more inclusive, transparent, and agile form of community-driven decision-making. The journey ahead for DAOs and token voting is filled with opportunities for innovation and growth, promising a better future for decentralized governance.

Challenges and Pathways to Improvement

Addressing the challenges associated with token voting was a critical aspect of the HowToDAO conference. Many discussions revolved around navigating the risks of economic manipulations - such as vote-buying, - and the intricacies involved in token distribution and locking periods.

Experts at the conference, including Jana from the Rari Foundation, presented in-depth insights into their pioneering approaches to governance. The RariDAO has adopted a delegate system where community members act akin to politicians, creating their brand and presenting their vision and work to the community. This system allows delegates to earn more tokens based on metrics of their success and reputation within the community, directly tying their decision-making power to community interests and their performance. This method creates a dynamic where delegates are incentivized to stay true to the community's values and interests. If they fail to align with the community or perform poorly, they risk losing delegated tokens and their influence within the DAO. This approach fosters a governance model that is responsive, accountable, and deeply rooted in community engagement.

On the other hand, Pocket Network, represented by ADZ, has taken a different approach to the reputation-based governance. Understanding the technical complexity of their project, Pocket Network limits token distribution to a select group of individuals who possess the necessary technical insight and understanding of the project. This strategy ensures that decision-making is in the hands of those best qualified to understand the protocol and its needs. While maintaining a sufficiently large group to keep the organization decentralized, Pocket Network accentuates the importance of informed and knowledgeable governance, ensuring that those with decision-making power are fully equipped to contribute effectively to the protocol's growth and success.

These two examples - Pocket Network and the Rari Foundation - highlight the diversity and adaptability of reputation-based governance models within the DAO space. Both approaches, though different in their execution, underscore the importance of aligning governance mechanisms with unique needs and challenges of each DAO. As these models continue to evolve and put into practice, they provide valuable insights into the potential of tailored governance systems in fostering effective, responsive, and community-aligned decision-making in DAOs.

Looking Ahead and Author's Note: Unfolding the Potential of Token Voting

As the H2D conference concluded, it left us optimistic about the future of decentralized governance - particularly through the lens of token voting. The unanimous sentiment underscored the need for continuous innovation and adaptation in the realm of token voting practices. In a world where DAOs are venturing into new, uncharted territories, the flexibility and diversity offered by token voting methods become essential in navigating the unique challenges and embracing the opportunities of decentralized governance. This journey forward is marked by a collective eagerness to explore, experiment, and refine governance models, pointing towards a vibrant and dynamic future for DAOs and their communities.

As the author of this piece, my conviction that token voting will persist stems from the inherent flexibility of its system, which is crucial for accommodating the wide variety of types and sizes of present-day organizations. The landscape of DAOs is no longer confined to traditional categorizations like small, medium, or large. We see both global companies still considered small, and local organizations successfully engaging a significant portion of their community - especially when driven by impactful causes. In such a diverse ecosystem, the agility of token voting becomes indispensable, as it offers tailored governance solutions for each unique entity.

Furthermore, token voting empowers individuals by giving them a choice to be involved: imagine working at a company like OpenAI and being asked for your opinion on major company decisions. Engaging employees and contributors in the decision-making process, rather than having them accept findings from the top, transforms how organizations operate. This was evidenced by the case of MakerDAO, where, despite the drama surrounding some proposals, the decisions were ultimately made via voting, which resulted in them being accepted and respected by all parties involved. This non-violent approach to governance, where asking for opinions precedes acting on ideas, can eliminate the need for drastic measures like strikes or petitions. It represents a more democratic way of steering an organization, where everyone's voice is heard and valued.

In a world that longs for openness and harmony, token voting emerges as a tool and a model pathway to more democratic, transparent, and harmonious organizational governance. It is an avenue that respects the opinions of its stakeholders, making governance a collective, participatory journey. As we continue to navigate the ever-changing landscape of DAOs and decentralized systems, the role of token voting in designing more engaged, peaceful, and inclusive systems cannot be overstated. It’s a beacon of hope and a testament to the power of collective decision-making in shaping the future of organizations and communities alike.

Author Bio

Puncar is passionate about supporting the web3 ecosystem through designing the right incentives, tokenomics, and governance structures.

BanklessDAO is an education and media engine dedicated to helping individuals achieve financial independence.

This post does not contain financial advice, only educational information. By reading this article, you agree and affirm the above, as well as that you are not being solicited to make a financial decision, and that you in no way are receiving any fiduciary projection, promise, or tacit inference of your ability to achieve financial gains.