Coin Voting has got a lot of bad press recently. It has been criticised for aiding plutocracy and being vulnerable to attacks by large token holders (i.e. whale attacks). Less talked about, but probably more impactful is that Coin Voting also enables all token holders to participate in decisions, and more often than not, the token holders are not particularly known to the core team (a common result of attracting token holders through high APYs or other profit-oriented motives). In many DAOs, token holders are not a community but a group of strangers.
Naturally, any core team would feel uneasy with this situation, and many chose to delay decentralising governance. However, the desire to decentralise is still there (whether for regulatory risk, idealism, or scalability), and so different alternatives to Coin Voting have been popping up, mostly around NFT-based governance.
One of the best things about web3 is the freedom to experiment, and I think looking for alternatives is great. But when it comes to Coin Voting, I feel we're rushing to throw away the baby with the bathwater.
As humans, we tend to like simple systems. They’re easy to understand and make us feel in control. Unfortunately, most simple systems are counterproductive as they fail to account for reality's endless nuances and complexities.
The debate on Coin Voting has unfortunately fallen prey to our love of the simple, by taking Coin Voting in isolation and choosing to either damn or redeem it. So in the following lines, I hope to explore a different approach, one where we use Coin Voting as part of a mesh of mechanisms that, together, can mitigate the negatives and amplify the positives.
For context, the mechanisms and overall system design I’m about to discuss are thought of as a general blueprint for applications built on top of a blockchain, not necessarily for the governance of a blockchain itself.
Back to our system design, I’ll start by listing some of the issues and benefits of Coin Voting, and then I’ll propose a series of mechanisms that, together, I believe can make Coin Voting a rather useful base for governance.
We mentioned three key problems with Coin Voting:
To those, let me add the following:
On the other hand, some of the positives of Coin Voting are:
We’re exploring combining the following mechanisms:
Taken together, these mechanisms reduce plutocracy and the danger of whale attacks and empower high-context holders, also reducing voter apathy. They also sustain the positives of taking skin-in-the-game into account, being relatively permissionless, and enabling direct signalling of preferences (as opposed to principal-agent problems).
What these mechanisms don’t address is the tyranny of the majority. However, we could address this through tools like Conviction Voting where the threshold to approve a payment depends on the size of funds requested and, if holders keep supporting an initiative, their voting power increases over time. I have personally refrained from including it in the list above as many DAOs, lacking top-down strategy setting, struggle with convergence.
Hopefully, as we develop more tools for collective alignment and collective sense-making that fill the top-down management gap, we'll then be able to introduce mechanisms that limit the tyranny of the majority. If this space for cultural tools and decision-making interests you, we're creating a DAO to advance this work, we'll soon announce ways to contribute, invest, and learn more through our mailing list.
As a final note, the above system is obviously not perfect but no system is. The art is curating the right mechanism for each situation, a topic we'll expand upon in subsequent articles. I look forward to hearing your feedback and hopefully engaging in deeper discussions so we can further evolve human collaboration.
Special thanks to Griff Green and Daniel Benarroche for their great feedback that helped me improve this article. Please attribute any remaining lapses in thinking to me.