Delegation in DAO Governance
Want to have a say in everything your favorite DAO is doing? That will cost you a lot of time, energy, and money. Protocols can have many proposals each week. Spending the time to stay up to date with the forum posts, researching each proposal to cast an educated vote, and actually, voting can take many hours of valuable time each week, not to mention the money it costs in gas to cast each on-chain vote.
This extra work does not sound appealing to many token holders, which is one reason why DAO voting turnout is so low. Many token holders do not have the time, knowledge, or gas money to stay up to date and vote on every proposal.
That's why delegation is important. Those who don’t want to vote can delegate their voting power to active members of the DAO that will cast votes on their behalf.
But how does a delegator know to whom they should delegate their votes? Platforms like Snapshot and Boardroom are powerful tools that provide lists of delegates, but lack other important information, such as how often they vote, participate in the forum, or how knowledgeable they are on certain topics.
Additionally, not all delegates are made the same. A Delegate is often considered anyone in the DAO with voting power. Recognized delegates are those who are more active, often more knowledgeable, and are willing to be held to a higher standard and represent the interests of others in the community. While these recognized delegates can be a great help to a DAO, if they are bad actors, they can gain too much power and take over a DAO.
Read this blog to learn how to use an effective, permissionless, recognized delegate program and avoid implementing a faulty delegate program that creates a centralized cartel of power that controls your DAO.
Why You Should Have A Recognized Delegate Program
To differentiate between regular delegates and those who go above and beyond, many protocols implement a recognized delegates framework. For example, MakerDAO’s recognized delegate program highlights the most active delegates as well as provides statistics on how often the delegate votes, how communicative they are, and what areas of expertise they have.
This provides potential delegators with a clear list of active delegates and makes it easier for them to find a delegate that best represents their views. Making delegation as easy as possible is crucial for DAOs as it leads to more delegation, which leads to more votes being used, which leads to safer governance.
Recognized delegate programs are also important to incentivize quality delegates to join or stay involved with a DAO. It provides a form of social clout to the delegate, which may provide them with extra abilities such as being able to post proposals, and also helps delegates receive more delegation, which allows them to have more power in the DAO and in some cases, leads to higher compensation for the delegate.
Dangers Of Recognized Delegates
Giving this extra social capital, ability, and voting power to a select group of people can cause serious centralization issues if not implemented properly.
As the proverb says, "those who most want to rule people are often those least suited to do it." It is important to ensure recognized delegates are worthy of their designation and to prevent bad actors from achieving this power.
If the recognized delegates program is implemented poorly, it could allow individuals to game the system to receive more votes and powers in the DAO. If a few bad delegates can claim the recognized delegate position and remain in power they may be able to gain control over the DAO.
The Dos of Recognized Delegate Programs
Set High but Realistic Qualifications
It is important to hold recognized delegates to a high standard. This can mean requiring them to vote on a certain percentage of proposals, providing reasonings for their votes, or requiring them to have a certain amount of voting power to ensure they are economically aligned with the success of the DAO.
For example, at Euler’s DAO, to be considered an active delegate, delegates must vote on at least 60% of the votes, provide reasonings for all their votes, and have at least 600 EUL delegated to them.
This limits those trying to game the system to receive recognized delegates' benefits. While systems can always be gamed, if the requirements are sufficiently high, even those trying to game the system will provide benefits to the DAO by being active voters and communicators.
However, it is also important to tailor the requirements to your specific DAO to ensure the requirements are achievable. If the requirements to qualify as a recognized delegate are too stringent, this could restrict the pool of recognized delegates. If only one or two delegates can qualify, then voting power can become extremely centralized as those looking to delegate their vote would only be shown one or two reliable candidates.
Creating requirements that not too many or too few delegates meet ensures delegators have a large enough pool of quality delegates to choose from. This leads to a safe distribution of delegated voting power and more efficient governance.
Make Your Program Permissionless
The recognized delegates program in a DAO should be automatic and permissionless. This means that any delegate that meets the requirements to become a recognized delegate and would like to be one is automatically granted the powers of recognized delegates and is added to the list of recognized delegates.
This ensures that there is no gatekeeping of the recognized delegates program. Delegates don’t need to lobby for the position or have special connections in the DAO and instead only need to be active members of the community. This shows the community that anyone willing to meet the requirements can achieve recognized delegate status, which could inspire new delegates to become more active in the DAO so they can be considered recognized delegates.
Allow Delegates to Opt In
Not every delegate wants to be held to the higher standards recognized delegates are held to. For this reason, it is important to make recognized delegates opt into the program. Not only does this ensure that they want the added responsibilities, but it also ensures that they understand the rules of the position.
For example, in MakerDAO, recognized delegates must sign a code of conduct. This forces them to acknowledge the extra requirements and recognize that they can be removed from the program if they do not live up to the responsibilities of a recognized delegate.
Compensate Recognized Delegates
Performing the necessary responsibilities of a recognized delegate takes a lot of time. Those that would make the best-recognized delegates often have high-value skills and could receive compensation from a variety of sources. If the recognized delegates are not compensated, then it will be hard for them to justify continue using their valuable time to work for free, and they will often leave the DAO.
In order to attract and retain high-quality delegates, DAOs must compensate their recognized delegates to ensure they keep these valuable delegates interested and involved. These recognized delegates are providing an important service to the DAO and helping to keep the DAO safe and efficient. Compensating them for this service helps to incentivize them to continue doing this job to the best of their ability.
The Don’ts of Recognized Delegate Programs
Let the Core Team or a Vote Choose Delegates
The core team may be aware of what is happening in the DAO and who the most active contributors are. However, allowing them to choose the recognized delegates leads to serious centralization issues. This allows the core team to control who has what powers in the DAO and may force the recognized delegates to agree with anything the core team says out of fear of being removed as a recognized delegate.
Voting recognized delegates into power may seem more democratic, but it also presents many centralization issues. Voters are often quite apathetic when voting people into power. This means fewer votes are used in the election proposal, which allows large token holders to control the vote. Recognized delegates will likely have large voting power and will be more easily able to keep themselves in power. This creates a plutocracy opposed to the desired meritocracy a recognized delegate program should have.
Additionally, having an election can turn the recognized delegates program into a popularity contest. This could incentivize potential recognized delegates to simply be likable and not voice dissenting opinions out of fear that they will be removed from their position, not because they weren’t doing good work but because they disagreed with large token holders. This stifles communication and limits the effectiveness of the DAO.
Automatically Make Large Voters Into Delegates
Many DAOs and DAO tools list the delegates in the order of the votes they have delegated to them. Some may theorize that those with the most votes delegated to them must have earned these delegations. However, the amount of delegators or amount of votes delegated is often not reflective of the quality of the delegate.
First off, most DAOs allow self-delegation, and even if self-delegation is not allowed, it is very easy to send tokens to different wallets and then delegate all the voting power to one address. This, again, leads to a plutocracy.
Secondly, delegation is often quite sticky. This means that delegators often delegate their vote only once and then forget about it. An early contributor to a DAO may be very active initially, earning many votes delegated to them. However, if they eventually stop being active in the DAO but are still listed at the top of the delegates list, they may continue to receive more and more delegated votes which would cause a large portion of voting power to go unused.
Additional Characteristics of Good Recognized Delegate Programs
Large Token Holders Split Their Voting Power Between Multiple Delegates
It is beneficial to the DAO if large token holders, such as large VC firms that are not active in governance, delegate their voting power so that more votes are cast. However, if they delegate all their voting power to one delegate, this does not help to distribute voting power and can cause a single delegate to be able to control the vote.
If, instead, the power is distributed across multiple recognized delegates; this still increases the total amount of votes used. Still, it keeps the voting process fair and prevents any one delegate from achieving too much power.
Annual Renewal of Recognized Delegate Agreements
It is important to have recognized delegates re opt-in to the recognized delegates program each year. This helps to ensure that they understand any new rules and are still willing to abide by the requirements. It also updates delegators on any changes that may have occurred to their delegate’s voting ability over the last year. This ensures all recognized delegates are kept up to date and that delegators stay informed on the status of their delegate.
The Future of Delegates Programs
At StableLab, we believe that a recognized delegates program is a great way to make it easier for delegators to find a suitable delegate, and incentivize delegates in the DAO to become more active and strive to reach recognized delegate status. Both of these things help the DAO grow to become safer and more efficient.
More DAOs are realizing the benefits of these programs and are attempting to implement them. However, these programs can cause more harm than good if they are not designed correctly.
This is where StableLab can help. We have first-hand experience in what works and what doesn’t. We work with DAOs to implement these and similar governance frameworks. Permissionless recognized delegate programs require an appropriately high level of requirements to ensure your DAO is decentralizing safely and sustainably.
Get in touch,
If you would like to support us in our governance efforts,If you and your team need guidance on governance-related matters, orIf you are a founder who is building something interesting in web3
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