Spotlight: The Current State of DAO Governance

How Decentralized Governance shapes Autonomous Organizations and Communities in the Web3 space

DAOs define web3

Blockchain projects and communities are continuously looking for innovative ways to disrupt the technology industry around them and establish web3 as a driving force for good. With DAOs (decentralized autonomous organizations) on the rise, governance is becoming an important part of the picture.
Organizations are increasingly looking for more efficient ways of involving their communities in the project’s development, in the most cost-effective and time-saving manner, while maximizing cooperation. seems to be the crowd’s favorite when it comes to this — a portal for casting votes on submissions and proposals.

Voting on
Voting on

What is Snapshot?

Snapshot is a decentralized, feeless, off-chain voting system preferred by many DAOs for managing community governance and decision voting.

It leverages IPFS — a decentralized file storage protocol, removing the single point of failure risk. Snapshot is free to use and feeless. Creating proposals and voting happens “off-chain”, meaning that neither proposal creators nor voters encounter any transaction costs.
The protocol also offers a dozen different types of voting mechanisms (discussed below), giving organizations more flexibility and better fitting their needs: so-called ‘strategies’.

How does Snapshot work?

When casting votes on Snapshot, voters sign wallet messages instead of transactions. Message signing makes voting feeless, but it also makes determining the validity of the vote and estimating the “voting power” easy — the voter’s public wallet address, the token amount in the wallet and a plethora of other data points can be taken into account.

Voting can be done with ERC20 tokens, but also with NFTs (including POAPs). POAPs can also be used as a proof-of-vote.

When creating a voting proposal on Snapshot, the individual also decides on a Snapshot Block Number. This tells the protocol at which block number -produced or yet to be produced- to take a snapshot (hence the name) of the current state of wallets holding the eligible tokens, determining the “voting power” of those wallets. After this point, no trading or moving of the tokens will affect the wallets’ voting power.

It’s generally recommended not to share when the snapshot was or will be taken to prevent voters from acting maliciously (i.e. buying a large number of tokens before the snapshot or spreading the tokens across multiple wallets in hopes of increasing one’s voting power or swaying the vote in their favor).

What should be communicated clearly, however, is when the voting window occurs. The voting window is the only period when votes can be submitted to the proposal — it is coded into the strategy and can vary from a few hours to days or even weeks, fully customizable.

Snapshot offers proposal notification services using bots, and organizations can freely use them to keep their communities informed about upcoming proposals via most popular social channels such as Discord, Telegram, Twitter, Slack, Email, or Webhook.

We’ve mentioned that Snapshot offers a plethora of interesting types of voting mechanisms for communities to choose from, which include:

  • Single choice voting — each wallet chooses only one option to support and does so with its entire voting power.
  • Approval voting — each wallet “approves” any number of options they want to support and their voting power is spread evenly across the approved choices.
  • Quadratic voting — inspired by quadratic funding; each wallet spreads its voting power across any number of options. However, the number of voters is favored over the number of tokens an option receives (i.e. an option that receives 10 votes of 1 token will be ranked higher than an option that receives 1 vote of 10 tokens); this method is preferred to minimize the voting power of whales.
  • Ranked-choice voting — each wallet ranks its choices from most to least preferred. Then, each wallet’s top choice is inspected and if one has more than 50% of all votes — it wins. If not, the choice with the least votes gets eliminated and another round of voting is issued. This process is repeated until either one choice gets more than 50% or all other choices are eliminated.
  • Weighted voting — wallets can “approve” options similarly to Approval voting, but they may also choose what portion of their voting power they want to give to each choice. is the centerpiece of many web3 teams is the centerpiece of many web3 teams

How to use Snapshot

For DAOs to start using Snapshot, they need to create a ‘Space’ for themselves. Spaces are dedicated, customizable pages that display all voting proposals and their necessary information.
Creating a Space is free, but does require a registered ENS name. No matter if the project is built on Polygon, Harmony, Solana, or any other blockchain, a registered ENS name on Ethereum is required.

The number of Spaces on Snapshot had been growing exponentially as of late, with over four and a half thousand Spaces including the likes of UniSwap, AAVE, and Gitcoin.

To vote on Snapshot, community members only need to have a set-up wallet such as Metamask, connect it to Snapshot, find their projects’ Space, and vote on the open proposal/s.
Voters aren’t limited to just one Space. They can join multiple ones if they choose so, however, their voting power is not shared across different Spaces.

Snapshot problems and potential solutions

Token-based voting (even with the implementation of different mechanisms such as quadratic voting) is still heavily influenced by whales because voting power is primarily derived directly from token allocation.

Many have pointed out drawbacks of this kind of system, such as:

  • Lack of incentives for voters to “come out and vote” (a story old as time itself). It’s not uncommon for proposals to be decided on by just a handful of voters.
  • Potential for a conspiracy between certain voters and proposal creators by getting insider information of when the snapshot will occur, giving a heads-up to those voters to load up on tokens, and/or spreading them across multiple wallets to increase their voting power.
  • A disproportionate amount of voting power by community leaders, often the project’s core team, due to their token allocation often being around 20% of all tokens.

These drawbacks warn us that DAOs will need to expand their governance tools way beyond token-weighted voting. Even Ethereum’s co-founder, Vitalik Buterin, has expressed his concerns regarding token-based voting on his blog in August of 2021.

There are promising solutions on the horizon, however. Snapshot’s developer team has been very vocal about encouraging integration with other protocols, and one protocol has stuck out with really interesting potential solutions.

**Orange Protocol **presents itself as a “trustless, decentralized provider of a portable reputation for Web3”. It uses on-chain and off-chain data aggregation to generate reputation proof in the form of “Verifiable Credentials” and NFTs. Think of it as a private, digital document, containing all of the data you want it to contain, as an NFT that only you control, and only you can give permission to access that data.

Orange introduces two new concepts to further enhance DAO governance:

  • Reputation-based Voting — instead of deriving voting power solely from token allocation, Orange creates a score for users based on multiple data points such as their track record, contributions and engagement in the DAO (but also other DAOs), how long they hold the eligible tokens, etc… These scores are then integrated into Snapshot to create a deeper and more accurate picture of the voter.
  • Reputation-based Airdrops — using portable reputation, DAOs can reward members proportionate to their engagement and contributions to the DAO and do so in a much more accurate manner. This should encourage proper activity in the DAO as users are incentivized to act for the benefit of the whole community instead of only themselves.

Reputation-based Voting enhances DAO governance further

Why Reputation?

In what we commonly refer to as “Web2”, user data, and with it digital reputation (in the form of retweets, followers, subscribers, reviews, ratings, etc.) is owned by tech companies. Reputation is also chained to those platforms and can be deleted without the user’s consent. We’ve all witnessed countless de-listing of users over the years and even if sometimes justified, we still have to ask ourselves if the amount of power that centralized entities wield over their users is reasonable? Especially when platforms like Twitter and Facebook have become digital manifestations of what used to be town halls or public districts.

“Web3” promises to change the status quo by giving users ownership and control over their data and with it, their online reputation.
With the emergence of DAOs, reputation becomes that much more important in the digital realm, as the entire DAO’s structure revolves around the reputation of the members within it.

The District Registry

Protocols like Snapshot and Orange could be pioneering standards under which we operate online in the near future. DAOs might become the de facto organizational structure for many companies as remote work and digital self-sovereignty becomes the new normal. All in all, DAO governance has come a long way in recent months, but it also still has a long way to go. DAOs will need to iron out a number of issues that hinder their growth and success.

For district0x, integrating a snapshot portal for voting in the district registry was a step in the right direction toward a more inclusive and active governance structure. Now it is up to the community to use the portal to its full potential, to build new applications on top of it, or to connect it with other integrations, to further decentralize governance while incentivizing participation.

It is highly likely that the registry will see a strong increase in submissions once Ethereum’s high gas issues will be solved, or the team migrates its dApps to more cost-effective chains, such as MemeFactory on Polygon. A strong, battle-tested governance platform will be fundamental to the long-term success and scalability of any project.


Joining the district0x DAO

For more information about the district0x network:

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