by 0x5b5cc427c1d81db4f94de4d51d85ce122d63e244 (Fehz)
This governance proposal seeks to address the issue of whale voting and VP distribution within the DAO community.
This governance proposal advocates for the introduction of a maximum participating VP limit from a single wallet for casted votes. This will apply to every proposal with predefined voting options (Yes/No/Abstain), mitigating the potential for undue centralization and single-handedly approvals.
There are multiple positions in the ecosystem discussing the problems of token-weighted voting mechanisms for decentralized organizations (See Vitalik, 2021 and Chapman, 2021) but the reality is that most of the bigger DAOs out there used this approach from the early days and continue to do so. That’s partially because changing core-governance design is a haunting and risky task that demands a lot of engagement and politics between the community and major stakeholders of the project.
In Decentraland, specifically, the initial governance design of 1 token - 1 vote for our utility token (MANA) and 1 token - N votes for NFT assets made sense in the beginning. However, in the light of history, we are seeing how early decisions regarding other aspects of the protocol (such as initial LAND distribution, and the formation of Districts, among others) are negatively impacting the DAO’s ability to make decisions in a more democratic and representative way. As we recognize the challenges of modifying the fundamental token-weighted voting mechanism we would like to propose improvements to the current system to move it closer to an ideal state.
Some of the collected evidence for this proposal and the adopted approach comes from the findings and insights of the paper authored by Mitchell Goldberg and Fabian Schär "Metaverse Governance: An Empirical Analysis of Voting Within Decentralized Autonomous Organizations, 2023”.
As stated by the cited authors, there are vast differences in VP and its distribution “Some addresses control large amounts of governance tokens, others extensive LAND estates, or large collections of names. VP may also be a result of delegation by other entities. In any case, these high VP voters have a significant say in the outcome of a proposal.” (Goldberg, M. et al. p13)
Currently, there are approximately 5,000 historically active members of Decentraland DAO. However, as evident in the chart below, of the 99.7M total active VP, near 50% of VP is controlled by only 19 wallets.
One of the most significant issues appears when voting outcomes suddenly flip, especially when this occurs very close to the end of the voting process. The authors gathered evidence regarding this issue and pointed out that they found “evidence for proposal outcomes that were changed close to the conclusion of the proposals voting periods. Sometimes the outcome was changed by a single ‘last minute’ voter with a very high VP” (Goldberg, M. et al. 15).
Another major concern revolves around funds appropriation through grant proposals, particularly when high-voting power individuals are involved: “Approx. 45% of grants have effectively been approved by a single entity that may or may not be the person who proposed the grant. While lobbying and trying to extract rent through grants and tenders is a concept well-known in traditional governance systems, a pseudonymous setup could worsen this problem.” (Goldberg, M. et al. 20)
Implement a limit for the maximum VP accounted from a single address to 50% of the threshold for each proposal type:
- POI, Catalysts, Names Bans - 50% Limit
- Draft Proposals - 50% Limit
- Linked Wearables - 50% Limit
- Grants - 50% Limit
- Governance - 50 % Limit
- Hiring - 50 % Limit
- Pitch, Tender, Bid Proposals - 50% Limit
- POI, Catalysts, Names Bans [500k VP threshold] => 250k VP Limit
- Draft Proposals [1M VP threshold] => 500k VP Limit.
- Linked Wearables [4M VP threshold] => 2M VP
- 20k Grant [2M VP threshold] => 1M VP Limit
- 80k Grant [4.4M VP threshold] =>2.2M VP Limit
- Governance [6M threshold] => 3M VP Limit
- Hiring [6M threshold] => 3M VP Limit
- Pitch Proposal [2M VP threshold] => 1M VP Limit
- Tender Proposal [4M VP threshold] => 2M VP
This measure aims to ensure that no individual or entity can exert disproportionate influence, preventing dominance and reinforcing the DAO’s commitment to decentralized and democratic governance, as an alternative to traditional shareholder corporations. Moreover, this limitation encourages a robust decision-making structure, valuing major stakeholders input by allowing them the freedom to exercise their voting power. Simultaneously, it mitigates the sense of undue influence, as their vote won’t unilaterally alter the outcome of a proposal due to the 50% cap, ensuring the DAO’s collective autonomy.
It is important to be noted that the proposed cap percentages on voting power (VP) from single wallets, set at 50% of the voting threshold, will remain a fixed parameter even in the event of potential adjustments to VP thresholds in the future. While the specific VP thresholds for various proposal types may evolve as the DAO’s landscape shifts, the principle of limiting individual voting power to 50% remains unwavering.
Acknowledge that the proposed VP limit scheme will not be failproof until we have a sybil attack defense mechanism, but its effectiveness is enhanced by the operational costs associated with splitting assets for MANA and LAND holders. Moreover, it remains infeasible for ESTATE and Delegated VP holders, further reducing the risk.
Whale voting has been a subject of ongoing discussion within the DAO community, both in private channels and public forums. This situation has made clear that there’s an expressing need to address the concerns related to the disproportionate influence of large holders that can lead to centralization and unequal decision-making power within the DAO.
The proposed approach seeks to implement changes in a manner that allows the DAO to experiment and adapt gradually, considering the importance of the VP distribution strategy as a foundational aspect of the DAO’s governance model. This approach is the first, and one of potentially multiple ways to address this specific issue with an eye towards adapting our current system without starting from the ground up.
This governance proposal not only marks an essential step towards addressing the issue of whale voting and VP distribution but it is also a strong statement from the DAO and its expectations in the long term. Setting VP limits, aims to promote a more equitable and balanced decision-making process. Additionally, the proposed rollout strategy allows the DAO to assess the impact of these limits on grant and governance proposals, learn from the results, and make informed adjustments to the limits over time.
Goldberg, M; Schär, F (2023): Metaverse Governance: An Empirical Analysis of Voting Within Decentralized Autonomous Organizations, 2023
Buterin, V (2021): Moving beyond coin voting governance
Transparency Dashboard: DAO Transparency Report Dashboard