On-Chain Governance and Voting: Exploring the Landscape of Decentralized Decision-Making

The scope of governance in a project significantly impacts its dynamics. With less governance, it remains nimble, which can reduce the risk of poor decisions and minimize conflict. However, this approach might also lower buy-in and trust, potentially making the project less appealing to users and keeping governance processes hidden behind the scenes. On the other hand, more governance can enhance buy-in and trust, attract users, and ensure that decision-making is explicit and transparent. Yet, it often slows down the decision-making process, increases the risk of bad decisions, and expands the scope for potential conflicts. Balancing the extent of governance is crucial to aligning the operational efficiency with its community engagement and transparency goals.

Challenges and Proposed Solution

Traditional and on-chain political organizations face similar challenges, including voter apathy, Sybil attacks, and majoritarianism. In traditional systems, emotional engagement often mitigates voter apathy, but this is difficult to replicate in a decentralized, self-executing contract. Instead, financial incentives, such as returns from equity or remuneration, tend to be more effective. However, this approach presents its own issue: individuals might invest in a corporation, sway decisions to their advantage, drive the prices up, and short/square off their positions.

To address this, consider the founder, who is usually the most invested in terms of time, finances, and emotion. They are deeply committed to the company’s success. To capture this commitment in the context of on-chain governance, we propose a token called 'POWER' which combines a time-based holding token 'TIME'— which appreciates in value with extended holding, active participation through employment and substantial investment.

But how do we measure "participation"? Participation could be quantified through contractual commitments and performance evaluations, where corporations provide scores or feedback contributing to a reputation score in the scope of the company. This, combined with mechanisms like those proposed by the CNC Portal to measure micro-contributions in open source projects/institutions, could create a robust metric for determining part of the POWER token allocation. This approach rewards early adopters and values the time held.

Additionally, delegation and liquid democracy offer promising solutions to voter apathy, providing a way for stakeholders to influence decisions while maintaining engagement.

On-chain voting and governance present a compelling vision for transparency and decentralization, but they encounter significant challenges related to voter and transaction anonymity. While solutions like TornadoCash aimed to address these concerns by anonymizing transactions, their association with illegal activities has led to regulatory backlash. A more promising and compliant approach is the use of Zero-Knowledge Proofs (ZKPs), which allow for the verification of votes or transactions without revealing the underlying details. ZKPs strike a balance between maintaining privacy and ensuring accountability, enabling secure, anonymous participation in decentralized systems while adhering to legal and ethical standards.

To combat sybil attacks, we also could introduce a combination of a staking mechanism which requires every user to stake a minimal amount of crypto coupled with Layer8 identity solutions or GitCoin Passport .

Comparison of Voting Systems

Voting systems can be primarily classified into two categories:

• Token based voting
• One person one vote

Token-Based Voting Systems

• Single Token Voting: Each token represents one vote.

• Quadratic Voting: Voting power increases quadratically with the number of tokens used.

• Delegated Voting (Liquid Democracy): Voters delegate their voting power to others.

• Proof of Participation: Voting power is based on engagement or contributions.

Traditional Voting Systems

• One Person, One Vote: Each participant has equal voting power.

• First-Past-the-Post (FPTP): The candidate with the most votes wins.

• Ranked-Choice Voting (RCV): Voters rank candidates, with votes redistributed until a majority is reached.

• Cumulative Voting: Voters allocate multiple votes to candidates in multi-winner elections.