Delegation:
An important tool for DAO-based governance
This article explains how delegation works on DerivaDEX. Delegation is a common practice across many DAO-based organizations.
What is delegation?
Delegation assigns your “voting power” to another person.
DDX holders have the right to participate in on-chain votes with their DDX, with each DDX corresponding to one vote. This is known as “token-weighted voting”, and is a common model for token-based governance. (Alternatives include quadratic voting or one-vote-one-person voting, but we will not discuss these here as they are not currently implemented on DerivaDEX.)
“Voter apathy” is a problem for DAOs. Governance models often require a minimum vote participation (a quorum) in order for a proposal to be successful. On DerivaDEX, that number is currently approximately 2 million DDX. The reasoning behind this is to ensure that a large portion of the community is supportive of any passed proposal, mitigate risks of large holders co-opting governance, and to reduce spam governance proposals.
However, voter apathy can make achieving quorum difficult. So many protocols turn to a version of “representative democracy”… also known as delegation!
Delegation enables activist community members, who have a trustworthy track record (even if they themselves have smaller amounts of DDX / voting power) to make proposals and improve the vote participation levels.
How do I delegate?
There are several ways to delegate on DerivaDEX currently.
- Interacting directly with the DerivaDEX contract. DerivaDEX uses the Diamond Standard, (ERC-2535). Technically experienced users can call contract functions using the tool of their choice, such as Remix.
- Using the governance.derivadex.com UI, where one-step delegation is available.
How do I become a delegate?
This is done entirely with off-chain social coordination. Currently, both forum.derivadex.com and the Discord are convenient ways to present a case for yourself as a reliable and trustworthy delegate.
When do I need to delegate DDX?
Any time prior to a proposal where you want your delegate to vote with your voting power. A DDX voting-power snapshot is taken and used at the time of proposal submission.
Does delegation “lock” my DDX?:
Currently there is no lock period for voting. For a perspective on the benefits of lock-up periods, see this article from Jump Crypto.
What can I do if I disagree with my delegate’s position?
Simply undelegate. If you undelegate before the proposal is submitted, the delegate will not have your voting power for that proposal. If you want to undelegate after the proposal has been submitted, they will be able to vote with your vote power for that proposal but not moving forward.
Is delegation safe?
The delegate can not spend or send your tokens. They can only use the “voting power”, and only as long as you do not undelegate these tokens.
What happens to my voting power if I transfer/sell tokens?
If the recipient has already specified a delegate, then the tokens will automatically and immediately be delegated to that delegate. If not, then the recipient will retain voting power.
Do I need to delegate?
No! By default, you control your own voting power. It is always possible to vote with your own tokens. Delegation is just one tool available to you.
Get Involved!
DerivaDEX is still in open beta, and is always available for testing and feedback and other contributions at beta.derivadex.io.
For governance discussion and proposals, the forum (forum.derivadex.com) is ideal for long-form conversations.
To get testnet tokens and learn more about how to test the exchange and provide feedback, or to participate in the DerivaDAO, check out the Discord.
Finally — follow @DDX_Official on Twitter for the latest updates!
