The LAO: Previewing Delegated Voting
DAOs have suffered from voter apathy. The LAO will implement delegated voting to help solve this issue and bring better decision-making processes to The LAO, while also potentially opening up avenues for third-parties to help direct LAO investment decisions.
Blockchains make voting and allocating assets a breeze. These two functions sit at the core of today’s organizations and are helping to power DAOs and other new experiments with internet-native organizations. So long as anonymity is not a concern, you can trivially record and tally token holders’ votes on a blockchain, using off-the-shelf smart contracts like those provided by MolochDAO. If certain voting thresholds are hit, assets can be directed to one or more parties, streamlining how organizations operate. These two functions can be thought of as organizational primitives, granting disparate groups of people from across the Internet the power to pool assets and direct them for a productive purpose.
Even though blockchains lower the cost of voting and certain organizational activity, they do not eliminate or address the human cost of casting votes or taking organizational actions. Participating in organizations requires work; it takes substantial and sustained attention to absorb the information needed to participate and make an informed decision.
That’s why it’s hardly surprising that we’ve seen voter apathy creep into the DAO space. Even though a DAO makes it easy to pool votes, it doesn’t solve the issue of getting people to vote in the first place.
With The LAO, we’ve been sensitive to these issues and are incorporating delegated voting in our extension of the MolochDAO governance code. Practically, this function allows LAO members to assign their votes to agents, as well as provide more security by separating their voting and economic interests between different private Ethereum keys, which themselves might have different levels of authorization in order to sign effective transactions (see, e.g., Gnosis Multisignature Wallet). For example, a LAO member might associate their withdrawal or “ragequitting” rights to a securely-stored hardware wallet, but then also, for ease of use, delegate their voting shares to a more flexible MetaMask browser wallet or the address of agent that can fulfill their voting duties as proxy.
In many ways, delegating voting replicates corporate proxy voting. Today, for many corporations and other organizations, shareholders or members are able to designate another party to vote on their behalf by executing a written authorization. For corporate decisions, when a shareholder votes “by proxy,” they are instructing another party to vote according to his or her choices through a proxy ballot.
By allowing shareholders to more fluidly align on key decisions through delegated proxies, participation can be more inclusive and efficient as not all shareholders need to attend meetings or ‘watch the calendar’ in order for their voices to be effectively counted.
In the LAO, we’ve replicated that functionality, in an attempt to address existing voter apathy concerns with LAOs. Members will be able to easily designate another member to vote on their behalf and help make investment decisions. Specifically, once a project is nominated, it will move into member voting. Members will be able to review materials submitted by the project and vote on whether to provide funding. During this process, members will be able to discuss the project “off-chain” and OpenLaw will help collect any additional materials needed for the members to make a decision and arrange for any follow-up meetings or other conversations needed for members’ to make a decision.
With delegated voting, members can delegate all of their votes to a third party at any point in time and they will have the ability to revoke that delegation, as well. Delegated voting will only impact investment decisions and will not impact a member’s ability to withdraw their capital or ragequit.
Broadly, delegated voting points to a future where members can assign their votes to other members or potentially even third parties (like investment advisors who would receive a fee). A good showcase of such limitations is notable when looking at something like SelloutDAO — a dApp that was created to allow members of a DAO to effectively lease out the governance rights of their tokens.
As seen in the above video, this vote delegation process should be fairly seamless and could untether some of the functions that currently are reserved for general partners in a venture fund or other managers in private equity funds. LAO members could delegate their voting rights to third parties and, over time, certain third parties could develop a reputation (and potentially fees) for performing advisory services.
If there is an ecosystem of LAOs, these third parties could further develop a reputation for being able to spot and identify promising projects, even though they do not necessarily have capital at their disposal to meet accreditation requirements under US or other jurisdictions’ laws.
Delegated voting with The LAO thus achieves two objectives. First, it holds out the potential to decrease voter apathy and increase the quality of group decisions. Second, it opens up The LAO to third parties who may be able to assist members make investment decisions (assuming they are appropriately licensed), effectively helping to create an ecosystem of participants around The LAO.
Stay tuned for interesting updates and DAO partnerships, founding members of the LAO and more information on how to get involved with the public sale early next year!
We are always looking for input and feedback to make sure that we can take the next step in the evolution of DAOs. Please continue to abreast of any updates through our Twitter, Telegram and Medium page or hit us up at hello@thelao.io.
