How to Go About Democratic Governance in Decentralized Autonomous Organizations (DAOs)?

Last Modified:21 Jun 2023 11:55:54
How to Go About Democratic Governance in Decentralized Autonomous Organizations (DAOs)?
While the development of Decentralized Autonomous Organizations (DAOs) has created a lot of excitement, it has also created significant governance issues – a small number of large token holders can monopolize decision-making power. The seriousness of this plutocratic problem cannot be overstated and requires a multifaceted approach to preserve the democratic integrity of the DAO. This paper proposes a comprehensive governance model that includes various strategies to secure, democratize, and simplify DAO operations.


1. Sophisticated governance with delegated voting and random selection
The first cornerstone of the proposal is to establish a multilateral, delegated democracy within the DAO. Here, the DAO structure is divided into specialized committees, each of which deals with a different area of ​​decision-making. These committees consist of randomly selected members from the entire pool of token holders, ensuring fair representation.
In each committee, we offer secondary voting and proxy voting. Squared voting reduces the risk of rich token holders dominating, as the cost of additional voting increases exponentially. At the same time, delegated voting allows token holders to assign their voting rights to trusted representatives, ensuring that their voice is heard even if they are not actively involved in each decision. The model also encourages long-term participation in the DAO as it rewards time spent holding tokens by increasing voting rights.


2. Treasures of Futarchy and Harbinger - two sides of the same coin
Second, the Futarchy and Harbinger Tax mechanisms are recommended. In case the results of decisions are quantifiable, Futarchy, a governance model based on a prediction market, can be used. This ensures that decisions are aligned with the DAO's most favorable predicted outcomes.
On the other hand, the Harbinger Tax mechanism can control the accumulation of majority tokens by a single entity. In this model, any participant aiming to gain significant control by purchasing large tokens must distribute or burn a certain percentage of tokens, preventing excessive concentration of voting rights.


3. Maintain equality with unique authentication
The final pillar of this governance model is the "one person, one vote" principle, which is enforced through unique identity verification. It gives equal voting rights to all members, regardless of their symbolic number. However, the challenges of maintaining decentralization and anonymity cannot be underestimated. To solve this problem, the use of decentralized identity platforms or zero-knowledge proofs can offer a viable solution.


Although this proposed governance model may seem complex, it is designed to ensure the democratic spirit of The DAO while remaining simple and efficient. The purpose of this model is not only to protect the DAO from the control of a few powerful entities, but also to promote the balance of power and encourage all stakeholders to actively participate in the development of the DAO.


However, it is important to understand that the model, while promising, is largely theoretical. It requires extensive testing, evaluation and modification before implementation. It is a valuable blueprint for creating a stable, fair and more democratic governance system for The DAO, thus aligning it with a larger vision for the blockchain landscape. 

Author: Pooyan Ghamari, Swiss Economist and Specialist in Blockchain Technology

LinkedIn icon for email signatures - free download 20x20px LinkedIn

Instagram icon for email signatures - free download 20x20px Instagram

Twitter icon for email signatures - free download 20x20px Twitter

YouTube icon for email signatures - free download 20x20px YouTube