Equitable Voting Protocol for DAOs

A proposal to fix DAO voting rights.

Let me start by stating that my mind is blown away by some of the web3 projects such as Stellar, Radix, and API3. And, I’m super excited for the future DAOs, the spirit of the communities behind them, and the potential for the incredibly positive impact it could have on our societies. However, for web3 to achieve scale, we need to continue working on solving issues such as interoperability, security, scalability, governance, and costs.

Technology, no matter how great, is just a tool. How we use the tool determines the impact on our societies.

If you’re working on solving any of the key challenges listed below, I’d love to collaborate on open-source research.

Some of the key challenges facing DAOs
— Legal Liability
— Accountability
— Incentives
— Governance
— Compliance

Let’s dive into voting rights, a sub-section of governance. Given my experience with investment management across public and private distressed securities, I’ve got a fairly good grasp of corporate governance issues. To my surprise, when it comes to voting rights, some DAOs have adopted not-so-great practices from the conventional corporate world.
This shouldn’t be construed as a criticism of DAOs, since I appreciate that DAOs are at a nascent stage and are evolving at a rapid pace.

m corporate entities? The clear answer is, no. Let’s review examples of voting rights of existing DAOs to get a clear picture of how $$ can control the destinies of DAOs. MakerDAO — Anyone can buy voting power via purchasing $MKR on the open market. MolochDAO — Capital and approval by members is required to secure voting rights shares. One can’t buy access to the DAO on the open market. Moloch DAO is incredibly well structured, especially the fact that the voting shares are non-transferable. Another great feature of Moloch is “ragequit” — Every time there is a vote, one can decide to exit (“ragequit”), turning non-transferable voting shares into transferable “loot tokens”, and have the option to destroy loot tokens in exchange for exit and get a proportional amount of treasury.

But there is a fundamental issue — One needs to pay in $ETH to join Moloch.
1 share costs 1 ETH. 1 share = 1 vote.

Why is this a problem?

Money can tip the scales of the voting power.

How do we fix this?
Let’s start with a question; Is money power tipping the scales of the DAO votes a problem? To answer this question, let’s define DAO.

DAO : Built by the members, for the members, doesn’t discriminate between wealthy and not-so-wealthy members.

Now that we’ve established the definition, let me present the proposal for fixing DAO voting rights.

The solution is derived from matching members’ incentives with non-monetary contributions. A DAO (as defined above) would commence with equal voting rights for all members.
1 member = 1 vote
Non-monetary contributions = % of voting rights.

Over time voting rights % would increase for members who earn voting rights via non-monetary contributions. This further incentivizes the members who contribute to the growth of the DAO. The implementation of EVP requires a separation of voting rights from monetary contributions.

Let’s call it Equitable Voting Protocol : EVP Purpose :

— Money neutral : $ independent voting rights
— Incentives : match incentives w/ non-$ contributions

A DAO could create 2 types of Tokens:

Community Token = Voting rights, not transferable. Is issued to members and workers in exchange for their non-monetary contribution.
Financial Token = No voting rights, transferable. Is issued to investors and donors.
Both Tokens have equal rights on the Treasury Assets.
Now, we need to think about adding a liquidity feature to the Community Token. The simplest way to structure this would be :

Option to convert % of Community Token into Financial Token.

For example; you hold 100 Community Tokens and would like to convert 10% to Financial Tokens. You end up diluting your voting rights by 10% and receive 10 Financial Tokens that are tradable in the open market.
In this event, the Total Token Supply does not change. Community Token supply reduces by 10 & Financial Token Supply increases by 10.

Another option is Token Buyback — The Treasury buys the Community Tokens and extinguishes them, thereby reducing the supply of the Community Tokens. In this event, the Total Token Supply reduces by 10.

The EVP ensures that DAO members’ rights are not diluted by Financial capital, this is a crucial piece for aligning incentives, and enabling equitable distribution of power.

Let’s make the creators win.

Credits to David Phelps for the inspiration and input.

I’d appreciate thoughts on Equitable Voting Protocol : EVP.
Feel free to DM on Twitter Alice Chikara.

Love and peace
Alice