Decentralized autonomous organizations or simply DAOs are known for their absence of central authority in running their operations.
And replacing that central authority, DAOs utilize their communities and the opinions of their communities to make all the important decisions that could impact their development. Implementing this decentralization and a fair voting process is a herculean task. To this day, no one can claim that they figured out the ideal voting process.
The requirements of voting processes differ from one DAO to another based on their purpose, the size of their community, and the pace of their operations.
To satisfy various requirements, multiple voting mechanisms have emerged, and here are some of them.
Token-based Quorum Voting Mechanism
This is one of the most basic and popular DAO voting mechanisms.
As the name implies, a quorum with a specific threshold of votes or tokens would be set in this system. Unless the participating number of DAO members doesn’t pass the threshold in the voting process, the proposal cannot be passed. If the threshold is met, the decision with the majority of votes is chosen.
It is an easy and straightforward method of voting.
It also encourages community participation which is one of the key characteristics of a DAO. But it is hard to pick a perfect quorum. A quorum that is too high can lead to the failure of proposals due to a lack of participation. A low quorum can lead to an easy pass of proposals but could lead to bad practices that could risk the growth of DAO.
It is hard to maintain active community participation. All people have to do is stay inactive to sabotage a vote. And in some cases, people with a high number of tokens can manipulate the vote in their favor.
DAOs that use this mechanism are Compound and Curve etc.
Quadratic Voting Mechanism
Quadratic Voting enables users to vote multiple times.
They can vote as many times as they want to show how strongly they want the proposal to pass/ But the cost of the votes increases with every vote. If a user wants to vote n number of times, then the cost of votes would be n².
It could be said that voting power is directly proportional to the financial power in this voting mechanism.
This system eliminates the risks posed by relative majority voting, and the strong opinions of users could be showcased. But people with high financial ability can manipulate the votes. Participation through fake identities is also a big threat as people might vote through multiple accounts to manipulate the vote. Strict proof of identity is essential in this case.
Conviction Voting Mechanism
In this system, users can vote on a proposal ahead of time.
The weight of the vote increases with time. The proposal is passed as long as a certain amount of conviction is received from all the combined votes. A participant can remove the vote and change their decision in the middle of the process, but the weight of the vote that they gained until then will be drained.
This system eliminates the risk of manipulation of votes through financial means and last minutes attacks to sabotage the proposals.
Faith in the proposal is rewarded instead of wealth. Instead of majority the consistent beliefs are valued. But the voting process for proposals is way too long.
Holographic Consensus Voting
The Holographic Consensus records information and reconstructs a consensus.
In this method, community members are allowed to use their tokens to bet ‘for’ or ‘against’ a proposal’s passing or failure. This allows the members to show their beliefs on proposals. The users who predicted accurately will be rewarded and the others will lose their stakes.
If the majority of bets are placed on a proposal to pass, it is boosted and the decision is made based on a relative majority vote without a need for Quorum.
Multi-Sig Voting Mechanism
The Multi-Sig mechanism aims to be a balance between central authority and decentralization in an organization.
DAO members have the power to signal proposals and the vote is executed by a pre-determined centralized community. This mechanism is fast and effective in case urgent decisions are needed to be made. But in a normal case, there is a risk of centralized committees abusing their authority for their own benefit which defeats the purpose of DAO.
Liquid Democracy
Liquid Democracy shares the principles of general political democracy.
In this system, DAO members vote for trusted experts of their choice, and these elected members are given the authority to make the necessary decisions.
Even though this system is fast and straightforward, this poses the exact same drawbacks as traditional political democracy. The manipulation through corruption and bribery could impact DAO’s growth and individual decisions might be prioritized.
Rage Quitting Mechanism
It is also called Withdrawl Protocol.
This is one of the methods that could tackle the disadvantages of relative majority voting processes. It also utilizes sponsorship to ensure better security in the voting process. In this method, a proposal needs to be sponsored before the voting could begin.
And if and after it receives majority approval the proposal will enter a grace period.
Within this period participants have the choice to withdraw their votes. If there is not enough support by the end of this period, the proposal will not pass. Even though the process reduces the risk of majority votes hijacking the process, it takes a lot of time and is not suitable when taking effective decisions in an urgent situation.
Permissioned Relative Majority Voting Mechanism
This is one of the simplest and most straightforward methods of voting a DAO could have.
The deciding factor is the number of votes ‘for’ or ‘against’ the proposal. There is also no minimum requirement or quorum threshold for the voting process which gives a lot of power over decisions and funds to even a sole participant.
The process is simple and quick, but unless strictly regulated there is a high risk of bad practice. One way to minimize the risk is the implementation of sponsorships which is already adapted by MolochDAO.
As mentioned earlier, there is no such thing as an ideal voting mechanism. Every mechanism has its pros and cons and a DAO has to implement what works for them, their purpose, and the community. What do you the best mechanism is? Let us know.
