Governance structures are essential for the adaptation and growth of Web3 projects. As these projects expand, the need for evolving governance mechanisms becomes evident.

This article explores the reasons behind delegating governance powers in Web3 businesses and dives into the advancements in Decentralised Autonomous Organization (DAO) tooling.

Challenges in Governing Large Web3 Businesses

Governing larger Web3 businesses presents several distinct challenges. Firstly, there's a broader group of stakeholders with diverse incentives and priorities, which complicates decision-making.

Secondly, the risk profile of governance decisions changes as projects scale, with higher financial and regulatory implications.

Moreover, the growth of DAOs brings about challenges in lowering barriers to meaningful contributions, maintaining operational efficiency, and coordinating decision-making at scale. Attracting and retaining contributors becomes harder as DAOs grow, and ensuring effective processes becomes more challenging.

Complexity of Governance Structures

As Web3 projects expand, their governance structures tend to become more complex. This evolution involves a balance between decentralization and centralization.

Establishing smaller groups within Web3 projects allows for focused decision-making and efficient governance, addressing the challenges posed by larger-scale operations.

Practical Application of Subgroup Delegation

Subgroup delegation serves various practical purposes.

• It enables access to specialized knowledge for nuanced decisions such as treasury risk management.

• Additionally, subgroups can facilitate the temporary concealment of sensitive information and encourage experimentation in governance processes.

Governance Tooling

The landscape of DAO tooling is diverse and expanding rapidly. This tooling includes various types such as -

• Voting tools

• Communications platforms

• Contributor tracking systems

• Treasury management solutions

• Security tools.

These tools are essential for effective governance and are expected to grow significantly in the coming years.

• Voting Tools

Tools like Snapshot, Tally, and Boardroom allow token holders to create and participate in on-chain governance proposals. They provide interfaces for viewing active proposals, delegate voting, and executing approved proposals.

• Snapshot

Snapshot is a decentralized voting platform that utilizes blockchain technology at its core. It enables community members to cast votes proportional to their token holdings.

Unlike conventional voting systems, Snapshot provides transparency, immutability, and security to the decision-making process by leveraging the inherent properties of blockchain networks.

This ensures that the voting process is tamper-proof, auditable, and resistant to centralized control or manipulation.

• Tally

Tally provides a framework for decentralized organizations to govern themselves by allowing token holders to vote on proposals, make decisions, and manage the protocol's parameters.

• Boardroom

Boardroom is a decentralized governance platform on Ethereum, used by decentralized autonomous organizations (DAOs) to make collective decisions.

Members submit proposals, ranging from small changes to significant decisions like protocol upgrades or funding allocations. Token holders then vote on these proposals, with voting power proportional to their token holdings.

Discussion features allow members to debate proposals before voting.

• Communication Tools

Platforms like Discourse, Discord, and Commonwealth facilitate discussions around governance proposals. Members can debate, share insights, and build consensus.

• Discourse

Discourse platforms are essential for engaging with and building communities around decentralized projects, protocols, and cryptocurrencies. Participants can discuss project updates, share insights, ask questions, and provide feedback.

• Discord

Discord serves as a central hub for building and nurturing communities around decentralized projects, cryptocurrencies, and blockchain technologies. Many projects create Discord servers where members can join, engage in discussions, and connect with like-minded individuals.

• Commonwealth

It aims to provide a framework for transparent, fair, and efficient governance by enabling token holders to participate in discussions, propose changes, and vote on proposals.

Any member of the DAO can submit a proposal to the Commonwealth platform. Proposals can cover a wide range of topics, including protocol upgrades, funding allocations, parameter adjustments, or any other decision relevant to the DAO.

• Contributor Tracking Tools

Tools such as Source Cred and Coordinape track contributions across GitHub, Discord, etc., and distribute rewards accordingly. This incentivizes participation.

• Source Cred

Cred is a reputation system that quantifies and measures contributions within decentralized autonomous organizations (DAOs). It assigns a numerical value, known as Cred, to each member based on their contributions, interactions, and impact on the community.

Cred enables DAOs to reward and incentivize active participation, fostering a culture of collaboration and accountability. Members with higher Cred scores often have more influence and voting power within the DAO, allowing for more effective delegation of responsibilities and decision-making processes.

• Cordinape

Cordinape is a platform that facilitates the decentralized distribution of "credit" or recognition within DAOs through a process known as "Apeing." Apeing involves members of a DAO assigning credit to each other based on their contributions and efforts.

This decentralized delegation of credit allows for the fair distribution of rewards, recognition, and responsibilities within the community. Using Cordinape, DAOs can promote transparency, trust, and collaboration among members, empowering them to allocate resources and decision-making authority based on merit and contributions to the organization.

• Treasury Management Tools

DAOs use tools like Juicebox to securely manage their treasury of funds and assets. They enable token distributions, payroll, investments, etc.

Juicebox allows users to easily create their DAOs with customizable parameters, such as token distribution, governance rules, and funding mechanisms. DAO creators can define how decision-making will occur within the organization and specify the roles and responsibilities of members.

• Security Tools

Multi-sig wallets like Gnosis Safe require multiple parties to approve transactions, reducing single points of failure. Reality.eth provides decentralized oracle services.

Gnosis Safe is a secure, non-custodial smart contract wallet designed for managing digital assets and executing transactions within the decentralized finance (DeFi) ecosystem.

It offers a user-friendly interface and advanced security features to protect funds and enable seamless interaction with decentralized applications (dApps) and protocols on Ethereum and other compatible blockchains.

Gnosis Safe allows users to create multi-signature wallets, enabling multiple parties to jointly control funds and execute transactions only when a predefined threshold of approvals is met, adding an extra layer of security and trust.

With features like customizable permissions, transaction confirmations, and integration with popular DeFi protocols, Gnosis Safe empowers users to securely store, manage, and transact with their digital assets in a decentralized and trust-minimized manner.

Conclusion

In conclusion, the dynamic nature of Web3 projects necessitates flexible and effective governance structures. By delegating governance powers and leveraging advancements in DAO tooling, Web3 businesses can navigate the challenges of scale, stakeholder diversity, and complex decision-making processes.