Clear Instructions to Strengthen Democratic Integrity in DAOs
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Even though it is truly exciting and part of the new and modern movement of technology, the rapid development of Decentralized Autonomous Organizations (DAOs) also raises a critical governance problem: the possibility of a small number of key stakeholders with sizable token holdings gaining control.
It is essential that we pay attention to this oligarchic possibility, also known as the “plutocracy” problem. This article aims to shed light on how to address this issue while preserving the democratic integrity of DAOs.
1. Proportional representation using quadratic voting.
Quadratic Voting (QV) is a ground-breaking strategy to get around this problem. With QV, there is an incremental cost for each additional vote, in contrast to traditional linear voting. In other words, a disproportionately higher number of tokens are needed to cast each subsequent vote.
By discouraging the hoarding of voting rights and encouraging selective voting, which focuses on the issues that really matter to a particular voter, this mechanism levels the playing field.
2. taking a deliberative democracy approach.
Another way to protect DAOs from excessive power concentration is through delegated or liquid democracy. Token holders have the option to assign their voting rights to trusted representatives, ensuring that their voice is still heard without having to actively participate in every vote. This model enhances diversity and inclusivity in decision-making by fusing aspects of direct and representative democracy.
3. Electoral privileges based on longevity.
By tying voting power to the length of token holdings, long-term dedication to the DAO could be rewarded and encouraged. With the help of this system, which discourages the quick accumulation of tokens for the purpose of influencing decisions, members are encouraged to be loyal and responsible.
4. By using Unique Identity Verification, one person, one vote is guaranteed.
The foundation of any democratic system is the idea of “one person, one vote.” This idea could be upheld by the DAO by putting in place a special identity verification system that would give each participant an equal number of votes. Decentralization and anonymity maintenance, however, present a delicate challenge that must be managed. The solution to this balance may lie in cutting-edge technological innovations like decentralized identity platforms or zero-knowledge proofs.
5. Implementing multilayered governance structures.
DAOs could create a multilayered governance structure with multiple voting thresholds where particular decisions must pass in order to prevent token-based dominance. In order to further ensure that no single entity can sway a vote’s outcome, each layer may have a different distribution of voting power.
6. limiting each person’s ability to vote.
By imposing a cap on the total number of votes that can be cast from a single address, you can avoid any one participant becoming the dominant force. This democratic check ensures that power is distributed fairly within the DAO.
7. Hybrid governance frameworks.
One-person-one-vote and token-weighted voting systems can be balanced by using hybrid governance models. These models can offer dual governance mechanisms, where some decisions are made using token-weighted voting and others using a system of one person, one vote. By maintaining this balance, it is guaranteed that both major and minor token holders are involved in decision-making.
8. Committees that conduct random voting.
The creation of randomized voting committees for particular decisions is an alternative strategy. All token holders could be randomly selected to serve on the committee, and decisions could be made based on a majority vote within the committee. This guarantees impartiality and prevents one organization from controlling the DAO’s decisions.
9. Voting rights specific to certain stakeholders.
Depending on their involvement and position within the DAO, assigning different stakeholders different voting rights can also be a smart strategy.
Author: Pooyan Ghamari, Swiss Economist and Specialist in Blockchain Technology
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