DAOs are considered a valuable innovation for institutional design. DAO Governance, however, is regarded by most as Hobbesian—wild in character, with weak alignment among participants—or decentralization theatre—with a small group of wealthy elites standing behind the curtain pulling the strings.
This characterization is probably unfair for all DAOs, but considering the worst case is helpful if we want robust solutions.
Weakly-aligned
The most common complaints of weakly-aligned DAO Governance include the following:
Self-dealing & Collusion. Delegates have strong incentives to engage in transactions that benefit them personally at a cost to tokenholders, as seen in Decentraland's attempts to elect a committee member after their election victory was determined by a single vote from someone long-suspected to be a scammer.
There have been repeated claims that a select few have the power to extract significant resources from NounsDAO.
Free-riding. DAO governance systems allow delegates to maintain their voting power with little-to-no effort, encouraging delegate free-riding. MakerDAO monitors its paid delegates' participation in voting and communication, with compensation tied to maintaining agreed levels.
Resource wasting. With minimal incentives to seek high returns, risk-averse delegates commit resources to inbound, low-risk, low-return projects.
Strongly-aligned
DAOs need strong alignment between governance participants to achieve their potential. Where their potential is:
To help DAOs achieve their potential, we introduce stronger incentives for delegates and voters to increase alignment between participants in DAO governance.
Our pilot attempts to validate that new governance features can augment voter and delegate incentives to increase alignment.
Delegate Compensation. By increasing, or in most cases, introducing delegate compensation, we expect to increase the pool of delegates and increase the cost of bribery.
Competitive Elections. By making elections competitive, we expect voters to increase the probability a delegate is selected that represents their preferences and is competent enough to complete the governance work required of them.
Periodic Elections. By introducing periodic elections, we expect to limit the probability that underperforming, weakly-aligned delegates retain voting power for long or are incentivized to stand for election.
Delegate Monitoring. By providing a monitoring service, we expect to increase the cost of bribing delegates and reduce the overhead for voters to evaluate a delegate's performance when considering them for re-election.
Aave Pilot
We were recently awarded a grant by Aave Grants DAO to run a pilot with Aave.
We're starting with a simple implementation for the Aave pilot, detailed here.
If you'd like to participate as a Delegate or a Voter, please join the #delegates channel in our Discord.