Systematic Methods to Democratic Governance in Decentralized Autonomous Organizations (DAOs)

Systematic Methods to Democratic Governance in Decentralized Autonomous Organizations (DAOs)
While the advancement of Decentralized Autonomous Organizations (DAOs) is generating a lot of excitement, it also poses a significant governance challenge – the potential monopolization of decision-making power by a handful of large token holders. The seriousness of this plutocracy problem cannot be overstated and requires a multi-pronged approach to protect the democratic integrity of DAOs. This article proposes an integrative governance model that brings together different strategies to secure, democratize and streamline DAO operations.

1. Faceted governance with delegated voting and random committees
The first cornerstone of this proposal is the establishment of a multi-layered, delegative-democratic system in the DAOs. Here, the structure of the DAO is divided into specialized committees, each of which deals with different areas of decision-making. These committees are made up of members randomly selected from all token holders, ensuring fair representation.
Within each committee, we propose a combination of quadratic and delegate voting. Square voting reduces the risk of dominance by high net worth token holders as the cost of casting additional votes increases exponentially. At the same time, delegated voting allows token holders to assign their voting rights to trusted representatives, ensuring their voice is heard even without their active participation in every decision. This model also encourages long-term participation in the DAO, as it rewards long-term ownership of the token with increased voting rights.

2. Futarchy and Harbinger Tax: two sides of the same coin
Secondly, the use of the Futarchy and Harbinger tax mechanisms is recommended. In cases where the outcome of a decision is measurable, Futarchy, a governance model based on market forecasts, can be used. Ensures that decision making is aligned with the most favorable predicted outcome for the DAO.
On the other hand, the mechanism of the Harbinger Tax acts as a check against the accumulation of majority chips of a single entity. In this model, any member wishing to gain significant control through massive token purchases must distribute or burn a percentage of their tokens, preventing an undue concentration of voting power.


3. Maintain equality through clear identity verification
The final pillar of this governance model is the “one person, one vote” principle, which is achieved through clear identity verification. It allows each member equal voting rights regardless of the number of their tokens. Nevertheless, the challenge of maintaining decentralization and anonymity should not be underestimated. To address this, the use of decentralized identity platforms or zero-knowledge attestation could be a viable solution.
While this proposed governance model may seem complicated, its design aims to ensure the democratic ethos of DAOs while remaining simple and efficient. This model aims not only to protect the DAOs from the control of a few powerful entities, but also to foster a balance of power and to encourage the active participation of all stakeholders in the prosperity of the DAO.

However, it is important to understand that while this model is promising, it is above all theoretical. Extensive testing, evaluation and modification would be required before implementation. Nonetheless, it offers a valuable blueprint for developing a robust, fair, and more democratic governance system within DAOs, and is therefore consistent with the broader view of the blockchain landscape. 

Author: Pooyan Ghamari, Swiss Economist and Specialist in Blockchain Technology

LinkedIn icon for email signatures - free download 20x20px LinkedIn

Instagram icon for email signatures - free download 20x20px Instagram

Twitter icon for email signatures - free download 20x20px Twitter

YouTube icon for email signatures - free download 20x20px YouTube