[DAO:9e4f9dd] Limit Max VP accounted in a vote from a single address

Governance
1

by 0x5b5cc427c1d81db4f94de4d51d85ce122d63e244 (Fehz)

Linked Pre-Proposal

Should the DAO limit the max VP accounted in a vote from an address?

Summary

This governance proposal seeks to address the issue of whale voting and VP distribution within the DAO community.

Abstract

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.

Motivation

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)

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VP Distribution

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.

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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).

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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)

Specification

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

Examples:

  • 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.

Conclusion

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.

Bibliography

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

Vote on this proposal on the Decentraland DAO

View this proposal on Snapshot

2

Will this account for the upcoming system that will let a single wallet delegate to multiple wallets?

3

Sounds like there is a very big gap in your proposal, the person that has the VP can easily split his VP So, I know what you were trying and that its for a better cause but i dont see this working.

4

Stops estates/districts and creates added security/documentation risk fir bad actors

5

so anyone with liquid mana has the ability to do whatever he/she likes but estates not sounds like a compression to land owners. Instead of awarding land owners for holding their land we surpress them “bad proposal” tbh

6

How about requiring the districts to delegate their VP to people that own land within the estate? Just found out that people within a specific estate, Not X, one person has a large amount of land within a district, but has 0 VP because the owner of the district controls it all. If we state that land comes with VP then that should be held true. Otherwise why would anyone want to own land within one?

Also, how about a cap on the amount of VP land can equate to. So after 100,000 VP in land, the amount to acquire more VP means you have to acquire more land than normal to gain anymore. So if land = 1000 VP after 100,00 VP in order to acquire more 1,000 VP it becomes 10 land = 1,000 VP or 1 land = 100 VP. Something like that? Just some thoughts

7

Voting Yes, it’s not a perfect system, but is good enough™

Will encourage people with too much VP, that may not be voting now, to vote.

And if the 50% limit is 500k, for example, someone with 4M VP would need to divide that VP into 8 accounts. Not impossible, but cumbersome and noticeable enough to discourage it for a while.

And those 8 accounts will have event a lesser impact on smaller proposals with lower limit.

8

I am voting NO because an address doesn’t have to represent only one individual.
If we want other organizations to be part of Decentraland progress, we need to allow them to vote in groups. I dont see how single individuals can take good decisions.

What if other DAOs want to be part of our progress but they are suppressed by this ?

This seemed to be targeted at specific people and this is not the solution.

If there is something I am misunderstanding, please let me know so we can debate and discuss

9

I spent a long time thinking about this, knowing that it would benefit liquid holders over illiquid holders, however the VP amounts cap is still so large, I only see it affecting very few people, of whom it is likely to only impact by 25-30% of their VP at most on the majority of categories.

For now, I think it’s worth a try, obviously any MANA voters can split their votes up still, but I think unless they have 4M+ VP, it’s unlikely to be a major issue. Districts having a massive VP has been both a blessing and a curse, so I really think this is one of those strategies we really need to test out to sense impact.

Let’s see, and we can roll it back if it causes issues, or while we work on diversifying VP to the community and creators.

10

This is a tough one. I agree with the general principle of limiting the scale of individual voting power, so one fickle or self-interested party can’t dictate the results. But this particular approach isn’t fair across the board. It seriously hampers districts and other organizations, as @Poutine said, but it only mildly inconveniences other whale voters.

There might be one or two districts that vote in unpredictable ways, but most districts are responsible voters (or rarely vote at all), and all of them represent many people who contributed Mana to their formation back in the day. We’ve decided to vote against this proposal for now because of the way it disenfranchises districts and large estate holders. But maybe the ideas in this proposal could be reworked in the future. The “no single voter over 50%” concept is sound if it can be applied more fairly.

11

Limit Max VP accounted in a vote from a single address

This proposal is now in status: REJECTED.

Voting Results:

  • Yes 32% 5,865,184 VP (57 votes)
  • No 67% 12,161,201 VP (34 votes)
  • Abstain 1% 4,800 VP (3 votes)