Democratic Principles and the State of Voting in Web3
This article outlines challenges posed by the utilization of blockchain tech to facilitate voting, as well as potential solutions. It is a sister piece to CRADL’s Cities & Crypto report, which explores blockchain and crypto specifically as new mechanisms to facilitate civic financing. This article was edited by Lauren Serota.
Web3’s primary promise is decentralization of the Internet. This is a shift away from the highly centralized organization of Web2, where a small group of tech firms control a large share of online activities and data, including their resulting IP and revenue potential. Although there is no consensus on the definition or direction of decentralization in Web3, the concept itself excites people. It is radically different from anything they’ve experienced in their online lives. While this shift introduces the potential for individuals to participate in more — and different — governance decisions in the future, it also presents an opportunity to rethink how current voting systems and governance structures could work with increased access and transparency.
Mirroring enthusiasm about decentralization in general, Decentralized Autonomous Organizations (DAOs) are increasing in popularity as a means of creating governance systems within Web3. Since DAOs lack traditional hierarchy, many people see them as a form of direct democracy — as opposed to democratic republics with representatives — or as a revolutionary way to organize private enterprises. These organizations have been created to oversee everything from social groups to carbon credit market management to community development, and have also given supporters of on-chain political voting a surge of hope. However, DAOs have proven challenging in both entrepreneurial and political applications.
Since DAOs make decisions by asking their members to vote, they must manage the administration of voting, identity management, counting of votes, and auditing. Any voting mechanisms that DAOs choose influences the value or weight of each vote, and possibly even the outcomes, which further complicates this process. The DAO’s fundamental lack of hierarchy means each community member must thoroughly understand the voting mechanisms if they want to observe the transparency of governance in action.
Although many on-chain voting processes are overseen by DAOs, some projects and organizations allow members to vote directly. Voting mechanisms such as token-based voting and quadratic funding have been used to gather input from community members and steer new initiatives. These systems have worked initially, though so far only on a small scale.
Advocates are eager to expand the use cases for blockchain voting. Some even promote on-chain voting as an equitable alternative to current political voting systems, citing its distributed ledger technologies and transparency. A few have even proposed using blockchain voting to solve alleged voter fraud in paper-based voting systems. This enthusiasm is far from universal; Some experts reject blockchain voting in democracies due to risks of hacking, silent vote tampering, privacy, and voter exclusion. In this article, we will explore some of the technological and organizational challenges that Web3 voting introduces, with a focus on token-based voting as a mechanism.
The role of Web3 in the evolution of voting
Some Web3 builders believe that systems built on the blockchain could address voter concerns over fairness and representation. Blockchain technology can register votes securely and allows for transparency in the voting process, which eases founded or unfounded fears of fraud. Given these factors, some thought-leaders believe that on-chain voting could revolutionize how private and public organizations are run because of its transparency.
However, blockchain-based voting systems are imperfect in their own ways. Their implementation currently faces challenges, including the following:
- New possible failure points: The introduction of technology to any process adds new possible points of failure. In this case, those include hacking, online vote tampering, and system malfunctions. Although blockchain technology is designed to be more secure than other forms of data codification, it is not immune to attacks or misuses. Hackers might not be able to change counted votes, but they could find (and have found) ways to vote multiple times as individuals through Sybil attacks. For example, on-chain voting for the NEAR Foundation/Forkast Shortlist of 20 Women in Web3 was skewed by a group of voters who used bots to multiply wallets to vote on a specific candidate. On one hand, blockchain transparency made it possible to see this vote manipulation. On the other hand, difficulty in pinpointing the source of the Sybil attack underlines an issue tied to all types of tampering: online identity. When hackers and bad actors cause friction in the Web3 space, it can be difficult to find them to hold them accountable. Requiring voters to meet a predetermined level of identifiability might help with ex-post accountability and with Sybil attack prevention. Some options include decentralized identifiers (DiD); Voluntary mechanisms of personhood identification, such as Proof of Humanity; and non-transferrable reputation tokens, such as SoulBoundTokens.
- Post-election risks of vote visibility: Although blockchain transparency can help combat fears of fraud, it also means that people’s individual voting decisions can be seen by other individuals. Employers, neighbors, even total strangers would be able to see evidence of people’s political views and choices. This produces a cooling effect on voters who fear retaliation or reprisal. Aware of this concern, builders have proposed preserving voter privacy and anonymity through the separation of votes and voter ID in two different blockchains.
- Need for voters to be Web3-savvy: Just because blockchain itself is transparent does not mean that every step is committed to chain (and thus transparent.) Nor does it mean that anyone can see and understand it, let alone audit it in the event of a recount. Currently, voting using blockchain would require election administrators, electoral authorities, independent monitors, and even voters to understand how to use and navigate Web3 systems and interfaces. If blockchain voting is meant to follow democratic principles, it needs Web3 infrastructure that includes user-friendly auditability, aggregation, and transparency across systems. The people who oversee elections must be able to audit the infrastructure to certify and monitor the electoral process. They can do this now with paper ballots, but lack the specialized Web3 knowledge to do it with blockchain voting.
More experimentation will certainly yield more challenges and more opportunities to improve how blockchains are implemented for voting use cases.
In the meantime, it’s worth taking a closer look at the basic design for on-chain voting: governance tokens.
Considerations for voting by governance token
Token-based voting mechanisms introduce tokens as an intermediary between the voter and the vote. Instead of following the democratic principle of one person equals one vote, one token equals one vote. DAOs use a few different voting mechanisms for their governance, but we are focusing on majority-based token-based voting since it is the simplest to implement in Web3, and currently the most popular.
Like all potential on-chain voting systems, token-based systems have transparency and ledger-recording baked in. This type of voting is often used to make decisions about a DAO’s growth and development, and has also been used successfully in steering private Web3 organizations such as Gitcoin and Zcash. (Gitcoin uses quadratic funding as a voting mechanism to allocate grants, but relies on simple token-based voting for its own governance.)
However, when it comes to voting in political elections or making decisions that impact resource allocation across large populations, token-based voting systems have several inherent problems.
Token-based voting is impacted by wealth concentration: In most cases, people (or wallet owners) decide how many tokens to commit for their vote on a given proposal. Chainalysis reported in June 2022 that 1% of token holders hold 90% of the voting power in ten major DAOs. So even in systems where one token counts for a single vote, votes from people with more tokens will have more impact on the outcome. Wealth concentration in token-based voting directly nullifies individual people’s voting impact. It also skews voting results and modifies the relative power of coalitions between voters, as MetaGov has shown in its analysis of Proof of Humanity’s proposals.
EXAMPLE: Social network Friends With Benefits (FWB) has a tiered price membership structure. In a recent proposal, FWB asked community members to decide if they should eliminate lower-cost options and only keep the most expensive one. People with the most tokens allocated in their vote voted to exclude members with lower-cost memberships.
Token-based voting can be inequitable and undemocratic: Most societies that have adopted voting mechanisms have done so to give their members a meaningful say in the decisions that impact their lives. Since token-based voting does not consider capping votes per individual, the system inherently favors voters who own more tokens. Using voting systems based on equity provided has worked in corporations, where shareholders with more stock are given a prioritized say in decisions. But for school board elections or determining property taxes, allowing certain voters to have more influence than others contradicts the fundamental principles of democracy. It also implies that some people are better or more valuable to society than others, an insult to human dignity. It is one thing to imbue democratic principles within Web3, and another completely different to use Web3 to facilitate democracy.
Token-based voting obscures key issues of identity and jurisdiction: Most current voting systems require voters to be residents or constituents of the community that will be impacted by the decision at hand. (As a resident of Dubai, you don’t get to vote on who should be mayor of London. Or how much of the city budget gets allocated to street repairs in Oshkosh, Wisconsin.) State and federal elections in the United States require voters to be citizens in order to be eligible. Most local governments in the United States also require citizenship, but some of them only require local residency to vote on community matters. However, in blockchain-based voting, tokens are not directly tied to either location or identity. A token-based voting initiative could identify how many people hold eligible tokens, but it would not be able to ascertain actual voter eligibility outside of token ownership.
EXAMPLE: CityCoins implemented token-based voting despite lacking a mechanism in their DAOs to verify people’s relationship to a city. Had the project become relevant, it might have aggravated wealth inequality in the decision-making of public goods allocation. Even with its current limited footprint, it gave non-residents a say in local issues that did not affect them directly.
Given the severity of these issues, political experts and Web3 builders may want to use caution when exploring token-based voting on a grander scale.
The path forward
The Web3 community is still developing use cases related to public impact, which means that now is the time to create parameters for on-chain voting. Designing equitable voting mechanisms now will help builders foster democratic principles from the start instead of correcting serious mistakes down the road.
For on-chain voting to address people’s concerns about fairness and accurate representation, DAO participants and Web3 builders will benefit from agreeing on how to handle transparency, security, auditability, identity, and identifiability of voters. Then, any organization that holds a voting process in the Web3 space can clarify that process to all participants. People will want to know if their votes will be more or less valuable than others.
In order to facilitate voting within Web3 applications, the Web3 industry and community should prioritize overcoming its own technological barriers before attempting to address voting issues that will enable governance in decentralized distributed systems. Leaving them unaddressed means that on-chain voting cannot reasonably be considered an alternative to current voting systems.
