Multiple Voting Systems In Decentralized Governance
Updated: Feb 7
#22 Governance Series
What if voting systems were a bit like pick-n-mix? Depending on the situation, different voting systems are employed.
A single voting system can’t answer every type of vote. DAOs continuously fail to explore these other models besides the standard token-weighted voting system.
Like the enzyme and substrate complex we learned about in Biology, each building block is different and tailored for specific situations. Substrates are tailored to fit into specific active sites of an enzyme and aren’t well suited to other active sites.
Similar to voting systems, a single voting system will not work in all cases; therefore, we should employ various voting systems tailored to particular situations.
The current landscape of Decentralized Governance Voting
Right now, most DAOs employ one voting system; one-token-one vote. There are other voting systems, but it is a rarity to see them.
Nearly all Decentralized Finance (DeFi) protocols solely employ a one-token-one-vote system, but as I explained in a previous blog, it is vulnerable to many flaws. However, nor do I see conviction voting, one-person-one-vote, or even JokeDAO as the sole answer to the current issues we see in governance.
A single voting system can only successfully answer some issues within decentralized governance. Voter apathy, plutocracy, and collusion, amongst many other problems, will continue to plague decentralized governance. Still, we need to find ways to mix-and-match different methods to minimize the dangers of each of these problems.
In our “One-Voting System” graph, voting systems might solve one problem, “Collusion” in this case, but it worsens voter apathy.
Extremities are more vulnerable to manipulation by malicious actors and can allow for governance attacks from various perspectives. Subduing these extremities can enable DAOs to worry less about attacks from malicious users.
With a “Multiple-Voting-System,” we can potentially minimize the extremities of each problem. Though they all might not be solved, it is far more realistic and sustainable to find a balance in these problems rather than allowing extremities to exist.
Similar to our lives, finding balance across our systems is healthier and more sustainable. We should focus on a range of pillars within our lives; food, exercise, relaxation, and sleep rather than focusing solely on one and sacrificing the others.
Would you prefer lifestyle A or lifestyle B?
I believe the combination of different voting systems, albeit difficult to implement, will enable DeGov to minimize certain types of dangers, thus enabling DAOs to create more sustainable voting patterns.
Multiple Voting Systems
Optimism is a layer 2 optimistic roll-up that launched its DAO earlier this year. They are here to help with the scalability of Ethereum and provide a more seamless experience for users with faster transactions and lower fees.
The Optimism collective has two types of governance systems in place, employed in each house; a Token house and a Citizens’ house. Each house has a different role within the Optimism ecosystem, and because of that, a different voting system is used in both houses. The belief is that the Token House will make decisions that are more conducive to plutocratic voting and the Citizens’ house will make decisions that are more suitable for a one-person-one-vote model.
If you haven’t claimed your airdrop, head to the Optimism website to claim your OP. As the name suggests, their token house utilizes a token voting system where OP holders can use their voting power. Initially, OP was airdropped to Optimism users based on certain metrics, but as OP is transferable, anyone can join the token house by purchasing OP.
Since the first vote in June 2022, there have been around 90 proposals in Optimism, and most proposals have been focused on either approving or rejecting grant fund requests in Season one and Season two.
S1 required token holders to research and vote on each grant request, leading to some voter apathy. This led to the formation of Committees in Season 2, where the Optimism community elected committees to perform due diligence on behalf of the community and provide a recommendation to either support or reject a grant request.
For S3, there will be a significant change, as a grants council will be elected, and they will directly approve or reject grants. However, OP holders will be expected to elect the council but will no longer vote on individual grant proposals.
We can expect a major shift in the average OP holders' responsibility since it previously focused on grant requests from the governance fund.
Recently, Optimism announced that the Citizens’ house would be going live soon! This will be the first iteration of the Citizens’ house, but don’t expect it to be the final product either. Both the OP Collective and OP Foundation will work together to improve the Citizens’ house as it grows in size.
The initial group of selected individuals (elected by OP holders and selected by the OP Foundation and previous rPGF participants) will use their voting power to fund projects retroactively through the Retroactive Public Goods Funding (RPGF).
In this system, only nominated individuals can participate in the Citizen’s House, and membership is non-transferable. Each individual has one vote, regardless of their OP voting power.
The Citizens’ House’s primary focus is to allocate funding for the public good. This is a key mission for Optimism, as they believe, and rightly so, that Open Source Software (OSS) has been a key proponent in pushing technology forward for the world.
Optimism rPGF-1 occurred last year, with individuals selected by the Optimism team. rPGF-1 distributed $1 million to 58 projects with 22 badge holders. Below you can see the top 25 projects who received retroactive funding via rPFG-1. All the projects who received funding via rPGF-1 can be seen here.
rPGF1 participants will be included in the Citizens’ House to participate in rPGF-2, allocating $10 million to public goods. After rPGF-2, we can expect to see the Citizens’ House role extend further beyond allocating retroactive grants.
As one of the first DAOs to have a bi-cameral system, I am intrigued to see the symbiotic play between these two houses to support the mission of Optimism and the Collective. Will they be able to complement each other to support each other's mission and ultimately further Optimism’s mission to become a leading layer two.
With Optimism’s commitment to continuous experimentation and innovation, I believe these two houses will look different every year or so, and for that reason, I believe that Optimism governance will play a pivotal role in paving the future of decentralized governance. Theory can only get us so far, and the practical experiments that Optimism introduces every season, are a step in the right direction.
Element Finance is a fixed-yield protocol currently live on the Ethereum and the Aztec network. Most DeFi yield is variable and locks your capital. Element aims to provide users and DAOs with improved capital efficiency by splitting deposited tokens into a Principal Token (PT) and Yield Token (YT). This enables DAOs to retrieve their original deposit (PT) and retain the YT to remain exposed to variable interest rates, or users can deposit to gain a fixed-interest rate.
Elements’ governance system is based on a token-weighted-style voting system with improved inclusivity with the use of a novel solution called Voting Vaults (assign voting power to different use cases and have it be denominated in their governance token) and the Governance Steering Council (GSC). The Council Protocol, can be seen as a DAO system. You can build, break and amend the different modules/tools of the protocol to suit your needs, such as amending the GSC’s responsibility based on the DAO’s view.
Unlike Optimism, Element Finance does not have any predefined rules to separate the distinction between the responsibilities held by the GSC and the average token holder. Charles St Louis (COO of Element Finance) provided some initial recommendations, but it is up to the Element DAO community to determine their responsibilities. The GSC is merely a concept/tool that enables token holders of the DAO to empower selected individuals and help scale decision-making for the DAO.
Similar to Optimism and other DeFi protocols, Element DAO employs a one-token equals one-vote system. ELFI was airdropped to early users of the protocol; however, ELFI is non-transferrable, but token holders can self-delegate or delegate to others.
However, Element DAOs token-weighted system comes with a twist. They have introduced Voting Vaults which enable the creation of assigning voting power to different types of tokens (other ERC-20s), reputation and identity, and positions (LP Positions). The voting power assigned to a voting vault can be customized as a multiplier of ELFI, to decrease or increase their power.
In practice, there is already a vesting voting vault, where those tokens in that vault have a reduced voting power than the traditional 1 token = 1 vote.
One example could revolve around voting vaults that give AAVE or COMP tokens voting power in Element DAO, with a multiplier of x0.1, therefore each AAVE or COMP token would give a voting power of 0.1 instead of 1.
All of Element Finance’s votes currently go through the token-weighted voting system and depending on the execution of the proposal, it goes through an off-chain (+ on-chain) vote. If a proposal involves any smart contract execution, it automatically becomes a protocol proposal. Element Finance has three types of proposals:
Off-chain vote + On-chain vote
Asset onboarding Proposal
Off-chain vote + Security Audit + On-chain vote
Once Element DAO has outlined the GSC’s responsibility in the DAO, we can expect to see less votes in the DAO and see more activity from the GSC.
Governance Steering Council
The GSC is a group of individuals with a minimum of 110k ELFI voting power through their holdings or delegation. The minimum quorum to become a GSC member can be and ideally would be dynamic relative to the circulating supply. In Element DAO, the quorum is currently static but could become dynamic based on 0.15% of the circulating supply.
As ELFI is non-transferrable, delegates must receive delegation from token holders to reach the threshold. However, it is an opt-in system, so it is entirely optional to be a part of the GSC.
As of now, the GSC currently does not have any main responsibilities, but they have the authority to push proposals directly on-chain and spend funds from their GSC treasury. Bobby via StableNode and Re’em via Component are currently exploring other GSC responsibilities with the community. Recently, they passed a proposal to introduce GSC compensation if GSC participants reach the minimum requirements in governance participation and voting. As their responsibilities increase, it would be expected to increase their compensation too.
For example, we could empower the GSC to handle the approval of compensation for service providers. Instead of making all ELFI holders vote on compensation for service providers, this process would be streamlined, so only GSC members would vote, but the power is not based on their ELFI holdings. We can enable the GSC voting vault, which enables them to utilize a one-person-one-vote system.
Each GSC member only has one vote, so in approving service provider A, it would successfully pass as there is a 60% majority in favor.
The GSC is a modular system, so each DAO has the ability to provide or revoke certain levels of responsibility to the GSC. Approving or rejecting service provider budgets is an example of a potential responsibility, but it is up to the community to determine their responsibilities.
This provides an avenue of experimentation, as we can’t expect token holders to vote on all proposals. Otherwise, we will end up with voter apathy. The GSC enables the ability to streamline certain responsibilities and empower those selected individuals to act on behalf of the community.
It is still early stages for the GSC, but we are very interested in exploring the different ways the GSC can help tackle certain governance problems. If you are interested in implementing the GSC in your DAO, then reach out to us at StableLab.
Voting and Beyond
The application of governance voting systems is far from many, but implementing various voting mechanisms will enable DAOs to identify which voting tools work in specific situations. Even though these multiple-voting systems are in their early stages, these experimentations of employing different voting systems will stimulate the necessary innovation we need to decentralize governance further.
Hopefully, it lights up a new path where token-based voting is no longer the primary voting system but a combination of voting systems to enhance their voting process. StableLab looks forward to playing a key role in supporting DAOs to explore these different voting systems to enhance their decentralized governance mechanisms.
In a future article, I will explore how DAOs can combine various voting systems, both with theoretical and practical examples.
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