Voting strategies for dummies
Learn 5 different DAO voting mechanisms in less than 5 minutes!
This story is part of an ongoing series on how to organize your own investment club with DAOs ! Make sure to check out the introduction here.
Last time, we talked about using tools such as Snapshot to add voting functionalities to your DAO, which is crucial to have in order to ensure democratic decision-making processes. Those who have already used Snapshot in the past will know that there are tons of options in terms of voting mechanisms. Here, I’d like to give you a quick overview on some of the 5 major voting strategies !
Token-based quorum voting
Being the most basic form of voting strategy, quorum voting only requires that a certain number of DAO members vote on a proposal. Once that threshold has been met, the decision with the most votes wins! If there aren’t a sufficient amount of participants, the vote fails. As it is a token-based mechanism, the number of votes a member has is proportional to the DAO governance tokens that the member owns (usually 1 token = 1 vote).
Although simple, this voting strategy has its flaws:
- finding the appropriate threshold value is difficult. A threshold that’s too high would make for slow decision making processes as its often difficult encouraging active participation from all DAO members. On the other hand, a low threshold value would mean that a small amount of active members could make all the decisions, making it a non-democratic process.
- members with the most token can have too much power, as the voting weight of members with less tokens could potentially be overshadowed by said whales. Also these members can bribe or manipulate others with their financial power, endangering the democratic process.
Quadratic voting
Similar to what we’ve seen previously, in this mechanism the cost of casting a vote is linked to tokens. Here however the cost of casting a vote evolves quadratically: 1 vote would cost you 1 token, 2 votes 4 tokens, 3 votes 9 tokens and so on. This addresses the previous issue of having whales overshadow others with their tokens, since now it would cost them exponentially more to have more votes than others (n votes would cost you n² tokens).
Only members who truly believe in a decision would pay the price to cast their votes, so this system is less prone to bribery. Yet there is still the issue of members with low financial power of having low decision power as well (more so now as the cost evolves quadratically).
Conviction voting
Unlike the previous methods which relied on tokens as a utility, this strategy uses time as a utility. Members of the DAO can vote on different in-progress proposals, and the longer their vote stays the same, the more importance and weight it gains. If a vote on a proposal changes, then the vote’s utility diminishes.
This means that members who are firmly believe in a decision, and maintain a vote for a longer period of time are more likely to see their decision win. Conviction voting eliminates the risk of having members with more tokens gain more power within the DAO. The downside however is that it makes decision making a very time consuming process, and the strategy is poorly adapted for proposals needing quick voting and execution (in cases of emergency for instance).
Multisig voting
This strategy relies on having a centralized and predetermined committee execute the decisions that are voted on by DAO members. It is a mechanism that is very common among DAOs that use voting platforms such as Snapshot to conduct polls: once a proposal closes on the platform and the results are out, the owners of the keys of a multi-signature wallet (usually the core members of a Web3 protocol) proceed to executing the proposal (modifying a smart contract, transferring or burning tokens etc.).
Although this method partially compromises decentralization, the advantage is that it can make for fast and quick decisions, especially during crucial periods. And of course, since voting platforms such as Snapshot are simple and free-to-use, it makes for a highly scalable method.
Liquid democracy
Liquid democracy consists in assigning votes to specialists who will participate in an electorate to cast votes on behalf of DAO members. Members trust that these experts will make more informed decisions that will benefit the DAO as a whole. It resembles how presidential elections work in certain parts of the world like the US, with the added possibility for DAO members to transfer delegation or assigning new participants to the electorate.
Like the previous method, it is a more centralized strategy but also brings the benefit of being quicker, more efficient and also more reliable.
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