Quorum-as-a-Service (QaaS)

The Limitations of Current DAO Quorum Models, Benefits of Mobilizing Yield Assets in Governance, and Value of Quorum-as-a-Service.

Problem: Excessively High Token Quorum Requirements.

Today, one of the greatest barriers to effective and accessible governance is oppressively high quorum thresholds. In the context of DAO governance, quorum typically means the portion of the total circulating supply of tokens that must participate in a given proposal in order for that proposal to be considered valid.

A few examples of current quorum requirements include:

• Aave: 320,000 Aave Tokens (~$19,000,000)
• Sushi: 5,000,000 SushiPowah (~$4,500,000)
• ENS: 100,000 ENS Tokens (~$9,000,000)

These thresholds create a tremendous barrier to the distribution of governance and decision-making beyond the confines of the immediate team.

Using Aave as an example: of the protocol’s 250+ proposals, ~236 passed with ~0% (yes, zero percent) dissonance. Meaning ~100% of participants voted unanimously for the same proposal outcome. In the vast majority of these cases, the same five or so wallets made up nearly the entirety of all voting authority, to the effect of 99.9% of the representation. The residual 0.01% of authority is typically shared by north of 1,000 far smaller wallets.

Of the 14 semi-contentious to contentious proposals (>5% dissonance), half failed to achieve quorum.

What does this mean?

a.) When the largest wallets aren’t present, and their massive weighting is removed, the remaining voters are typically much more dynamic and diverse of thought than they would otherwise appear.

b.) If we consider general dissonance a sign of increased community thought and discourse when compared to the typical unilateral vote, it's a shame to see that some of the most community-engaging proposals fail to achieve quorum due to the non-participation of a few large wallets.

So, in effect, community engagement becomes a non-relevant factor. Regardless of the level of debate at the community level, an inability to secure the participation of the largest wallets amounts to proposal failure through a lack of quorum. However, successfully garnering the participation of any of these large wallets immediately dictates the outcome, relegating all prior community debate and voting to a mere fractional percent of the total vote.

We recognize this issue isn’t unique to Aave, and our intention is not to blame Aave or any other DAOs for that matter. The vast majority of DAOs in the space, and the people behind them, are well-intentioned and willing to continuously expand enfranchisement, explore better solutions, and further embrace decentralized governance. And, to that, we are happy to work closely with each DAO in building a better and more robust ecosystem. However, this is an appeal to the notions that:

A. Quorum requirements are often needlessly high:

In principle, it is hard to imagine a rationale by which an individual with a significant vested interest in a project (often $100k, $500k, $1m, or more) fails to meet even a fraction of the required authority needed to break into the realm of consideration.

While in practice, many DAOs already function completely viably without the imposition of such steep quorum.

StakeDAO recently reduced its quorum requirement to 10%, or about $2m. Saddle Finance operates at just a 3% quorum threshold.

On the other hand, DAOs such as Bankless (which we would like to commend for their commitment to true, distributed governance) have sparked engaging conversations around the exact issues of high quorum detailed above after having battled with, and eventually having voted to remove, excessively high thresholds set forth in their initial constitution, which ultimately amounted to excessive gridlocked.

Most recently, Bankless has moved into discussions pertaining to a reduced and dynamic quorum model, which modifies thresholds based on moving averages of community engagement. They’ve further highlighted that the limitations of a high static quorum have become increasingly apparent in bearish markets and periods of contracted general participation in the ecosystem at large. Notably, this highlights that with greater commitment to distributed governance by allocating authority to more, smaller wallets instead of fewer, larger wallets, this problem becomes more relevant. The more distributed a DAO’s governance is, the less it can rely on controlling wallets to pass proposals. Thus, if quorum is too high, any drop in community participation, as is seen in bear market conditions, can quickly lead to a standstill.

These obstacle serves to exclude the vast majority of any DAO’s community from participating meaningfully and through this disincentives massive sums of valuable perspectives and thought capital.

B. Needlessly high quorum requirements add friction to the ecosystem which stifles partnership and progress:

Many projects struggle for months to achieve, or ultimately not achieve, baseline quorum for partnerships and proposals. This happens across numerous DAOs. Surprisingly often, this is even a struggle faced on a project's own, or their parent project’s, DAO.

This painstaking process would be worthwhile if it actually amassed broad-based community support. More often than not, however, it is not a true community support initiative. Instead, the process essentializes down to petitioning one of a handful of large actors for weeks on end.

As a result, proposal authors spend tremendous amounts of time vouching for individual support at the expense of actually establishing partnerships or building. This depreciates the growth of both the proposal authors and the receiving DAO.

Moreover, this schema sidelines the DAO’s community from being a voice in determining what is or isn't a worthwhile partnership or endeavor. This initiates a negative feedback loop, where lack of impact begets complacency and lower participation, which in turn exacerbates the overall lack of community impact.

C. A collective failure in the verticals above is a collective failure to social, and potentially legal, obligations to decentralization.

Quorum can add value in filtering extraneous proposal creation, aligning author-outcome interest, and limiting sneak-past, malicious, or otherwise disagreeable proposals. However, it is too often, and to too great a degree, the frontline of defense when other, less friction-oriented solutions can be, or are already, implemented.

In an arena by which a strong, engaged community is the lifeblood and barometer of a true and viable DAO, we as an industry have an obligation to strive toward expanding participation, inclusion, and enfranchisement, and there are certainly less restrictive moats against the issues above.

(We’ll discuss this further in a future publication.)

Source of the Problem: It Isn’t Just DAO Policy

While we’ve discussed how high quorum barriers manifest in DAO governance, and the limitations which they impose, it's important to recognize that this isn’t strictly a matter of policy.

Quorum limitations are half of the equation, which is further compounded by a general lack of token participation. In fact, often fewer than 1% of tokens are regularly used to vote, while 99% remain entirely dormant. As a result of non-participation, these already high minimum participation requirements become that much harder to realize.

However, Event Horizon contends that a large portion of the 99%, the billions of dollars of dormant supply, can be mobilized. And, Event Horizon has carefully aligned interests and incentives to do so.

Solution: Mobilize Yield Assets

While the vast majority of tokens are not presently active in governance, massive quantities are mobilized for liquidity provision and yield generation. Event Horizon is designed to bring this underutilized authority online.

As described here, Event Horizon functions as a yield farm, which mobilizes its yield pools as voter blocks.

Summary: The yield from DAO assets staked into Event Horizon is consolidated within the community-owned treasury, and the principal ExDAO stakers are emitted a dollar-proportional amount of HVAX tokens commensorate with the amount of value their staked capital has generated for the treasury. These HVAX tokens then represent proportional ownership of treasury assets, as to prevent value bleed, as well as proportional voting rights with regards to Event Horizon itself as well as how Event Horizon’s assets are mobilized when governing other DAOs.

By unifying large swaths of otherwise disparate yield seekers into a single vault, Event Horizon solves the two greatest social hurdles to yield farmer participation in governance (we’ll discuss structural barriers in a future publication):

• Coordination: Coordinating individual yield farmers is difficult. Rather than requiring hundreds of individuals to exit their yield positions, vote, and then re-enter their previous yield positions once more, all pool assets will be mobilized through this flow at once and as a single block.
• Motivation: Many yield seekers simply aren’t interested in governance. To accommodate for this, Event Horizon does not require the yield farmers' active participation. Instead, Event Horizon relies on implicit delegation by which governance-interested parties mobilize the authority of yield seekers. Importantly, whether or not a farmer decides to participate in voting, they will still benefit proportionally from any bribes or bounties accrued as Event Horizon votes. (This is detailed further below under ‘Quorum-as-a-Service’.)

Implicit delegation is a model by which the full governance block mobilizes in favor of the consensus of those who do vote, thereby implicitly delegating the authority of those who don't vote. Ideologically, implicit delegation represents an effort to shift the paradigm around means of influence from capital-centric to participation-centric.

Where direct voting allocates influence along the lines of capital, and explicit delegatition allocates influence along the lines of popularity contests (which often reflect capital), implicit delegation places value emphasis on willingness and active participation.

(More to come in a future publication.)

This brings us to the two modes of quorum establishment found through Event Horizon:

• Direct Participation: Because Event Horizon mobilizes large sums of previously dormant authority and moves this authority as a block, and because implicit delegation rewards participatory parties with outsized voter authority, voting through the Event Horizon will in almost all situations amount to a far greater voter footprint. This greater footprint offers greater progress toward, or the direct establishment of, quorum. This mode of engagement simply requires ownership of the HVAX token and is particularly suitable for retail voters.
• Quorum-as-a-Service: Owning HVAX tokens for direct participation may not always be the most effective mode of engagement. In periods of higher participation, purchasing an impactful sum of HVAX tokens may be a costly endeavor and could require more commitment to the Event Horizon ecosystem itself than vouching for a single proposal on an external DAO would demand. Moreover, there may be additional limitations for projects and teams when it comes to the outright purchasing of HVAX tokens. Instead, would-be proposal authors may place a non-obligatory bounty on the Event Horizon’s instantiation of, or participation in, an External DAO proposal. It is important to highlight that, unlike bribes, bounties are non-obligatory. To properly realize its end state as the non-partisan governance layer of the broader space, it is imperative that Event Horizon not become a sellsword entity, and that it retains its sovereignty as an autonomous community and collection of communities. Thus, the HVAX token holders are under no requirement to accept external bounties. However, when bounties are accepted, the bounty reward is emitted from escrow to the community-owned treasury which in effect serves as an additional form of APR for all HVAX token holders, inclusive of the strict yield farmers. This model opens the possibility for several interesting outcomes such as bounties on contentious proposals being placed on both, or all outcome sets, allowing the Event Horizon to claim a reward agnostic of which direction the community chooses to vote. (More on bounties in a future publication.)

Conclusion:

The pervasive issue of high quorum requirements and low community participation in DAO governance models calls for innovative solutions, such as Event Horizon’s proposal to mobilize yield assets. This approach shifts influence from being capital-centric to participation-centric, catalyzing an increased engagement of the wider community. By creating coordinated voting blocks from yield pools and introducing non-obligatory bounties for proposal participation, Event Horizon provides an appealing avenue toward achieving quorum thresholds. When packaged as a Quorum-as-a-Service, this mechanism can be used to achieve notable revenue and yield over market rate for the Event Horizon community.

Although the team has contributed tremendous amounts of time and effort in aligning interests and in creating a solution that best balances all stakeholder needs, we cannot emphasize enough that Event Horizon is more than just its team. It will require a wide community of participants and champions of the space to sculpt the best possible meta-governance layer for the space at large. Whether you support our approach or vehemently disagree, we encourage you to join the conversation in our discord: ( https://discord.gg/aHXbW7gtzY ). Feedback of all kinds will only help harden and improve Event Horizon.

The Event Horizon is the world’s first DDAO (DAO of DAOs) — uniting the long-tail end of non-participatory governance token holders under a single governing body, as a unified and ever-growing voter block to enable multiplied governance authority across all DAOs within the greater ecosystem. The core mandate of Event Horizon as a protocol is to generate surplus growth in ExDAO terms. That being said, Event Horizon, like a force of nature, holds no innate agenda of its own. Using this authority to sculpt the future of the space is up to you, the community. We believe strongly in the importance of the enfranchisement of the broader retail audience as a core means to allow for the shaping, strengthening, and growth of the defi space in the years to come.

With this, you, for the first time have a platform to establish a meaningful voice in the most important infrastructures in the space, not because of your capital means, but because of your willingness to affect change and make a better ecosystem for all. This opportunity will be furthered through future developments in Event Horizons delegate representative system (details coming soon). Despite current disillusionment, the opportunity for you and the broader community to have this meaningful voice is already there, it is simply a matter of unifying and mobilizing the 98% of dormant authority.

Event Horizon is more than any one individual and more than its team. And, you, simply through a desire to participate can rise to become an important and impactful voice within Event Horizon and the growing sphere of influence it garners across DeFi. This is just the beginning.