Case for Professional Organization as a Delegate
Updated: Mar 10
#10 Governance Series
MakerDAO is a leading DeFi protocol with almost $8 billion in TVL according to DeFi Llama. As the protocol becomes more decentralized, most of its critical decisions are made by MKR token holders. However, the protocol is increasingly complex as simply following up with the recent updates in the protocol will take significant time. Most of the retail investors are not interested in following up with all the updates of the protocol and the professional investors don’t have the time to do it.
As a result, the Maker protocol introduced the delegate initiative to allow Maker token voters to delegate their voting power. This initiative aimed to mitigate negative delegate liveness. It does so by attempting to balance continued participation and incentives. It utilizes different metrics to gauge this, such as MKR voting power, forum participation, etc.
The protocol has both recognized delegates and shadow delegates. The two types of delegates differ in distinct ways.
Recognised delegates must adhere to a list of requirements managed by the governance facilitators of MakerDAO. Although some recognised delegates may remain pseudonymous, they must still meet some specific requirements:
Sharing contact details
Publishing a delegate platform post
Appearing on live calls to MKR holders and community members to answer questions
Publicly agreeing to MakerDAO’s Code of Conduct
Shadow delegates are any delegate that has not met the requirements to become a recognised delegate. Some key differences are:
The ability to create private arrangements with individual MKR holders
Internal MKR holder voting via custodied assets (an additional shadow delegation use)
Compared to shadow delegates, recognized delegates have several more requirements to fulfill, as stated above. As long as they adhere to these responsibilities and meet certain performance metrics, such as their participation in voting and sharing in public about their reasonings for the vote, they get eligible for reward.
Delegates with more voting power delegated to them get more rewards. Unfortunately, even with rewards for delegates, top individual (not organisational) delegates have stepped down from the Maker protocol, which was a big loss for the protocol. Last year, Planet X stepped down as a Delegate.
And in 2022, MakerMan stepped down as a Delegate.
This issue is not unique to the Maker protocol, and we recognize that having a professional organization as a delegate instead of individuals has several advantages that would make resignation as a delegate less likely.
Incentives are not only about remuneration, but a mixture of rewards, which also include accountability and sustainability.
Positives of Professional Organizations
1. More Resources
Professional organizations can provide various resources for the delegates. The team can share experience and research working with numerous protocols. A16z’s delegate programme is one such example. They identify delegates, including non-profits, global businesses, crypto startups and university organizations, and defer voting power to them. They do this to “reduce surface-level concentration, but also enhance the quality and diversity of the governing body”, this is aimed broadly at helping to develop a higher-quality governing body.
In addition, oftentimes, rewards for delegates from the protocols are insufficient. The professional organization can help to fill the gap and encourage the delegate to continue to engage with the protocol. An example of potentially adequate compensation can be found in MakerDAO’s most recent revision of their delegate compensation, MIP78.
In contrast to this, Optimism’s delegate structure involves a promise of compensation, as of yet to be implemented.
2. Ability to Share Responsibility
DAOs involve various interests and participants. This also means there can be many long and sometimes even heated discussions that accelerate the burnout and leave delegates emotionally drained.
Working as a team can help to mitigate such instances by sharing, swapping certain responsibilities. For example, the team members can split responsibilities for different meetings or posts.
3. Professionalism & Best Practices
While many individual delegates are professional, as an organization, professionalism and best practices are more heavily executed. For example, at StableLab we only engage in delegation based on a strict code of conduct. Our governance policies have emerged from direct experience and are going through constant refinements and optimizations.
It is apparent that when seeking sustainable and competent delegate participation a professional organization is beneficial.
We can make the value proposition for a professionally specialized governance organization with an experienced team, competently backed by research and data. It will help to inform favorable governance decisions and remain continually engaged, while having the fortitude to rebuff complicated conflicts.
This may be an optimal solution when compared to an entirely individualistic approach or other organizations seeking to optimize for profit instead.
If you are looking to launch a sustainable DAO, interested in improving your existing governance or wish to have long-term professional delegates in your community, reach out to us.
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, or
If you are a founder who is building something interesting in web3