Many Decentralized Autonomous Organizations (DAOs) face a big problem: low voter turnout. This is a problem even though these DAOs manage millions of dollars. A new solution is emerging: paying members to participate in governance. Let’s explore if this is a good idea.
The Problem: Voter Apathy in DAOs
Voter participation in many DAOs is incredibly low, often in the single digits. Even large DAOs like Uniswap and Maker struggle to get more than 10% of their members to vote on important decisions. This lack of participation undermines the whole idea of decentralization, as a few powerful members (“whales”) end up making all the decisions.
The Solution: Governance Mining
The idea is simple: pay people to participate. DAOs are trying to turn passive token holders into active participants by offering rewards. Let’s look at some examples.
Uniswap’s Generous Rewards
Uniswap, a popular decentralized exchange, pays its delegates up to $6,000 per month in UNI tokens. To get this money, delegates must meet certain requirements, like voting at least 80% of the time and actively participating in discussions. The community overwhelmingly approved this program (99%!), showing strong support. Early results suggest it’s working, with increased participation and better-quality discussions.
GnosisDAO’s Non-Monetary Approach
GnosisDAO took a different approach. Instead of cash, they gave voting power to selected delegates. Ten delegates each received a significant amount of voting weight, but they lose this power if they don’t vote regularly. This aims to improve voter turnout without directly spending DAO funds.
Other DAOs Following Suit
MakerDAO, another established DAO, also pays its delegates based on performance. Smaller DAOs are also experimenting with reward systems, showing that this approach is becoming increasingly common.
Does Paying for Governance Work? The Good and the Bad
Early results from these incentive programs are positive. DAOs are seeing better voter turnout and more thoughtful discussions. However, there are concerns:
- Moral Hazard: Will this attract people only interested in the money, not the project itself?
- Centralization:
Paying a few key delegates could concentrate power in their hands, undermining decentralization. - Cost: While the costs are relatively small compared to the total value of the DAOs, there are concerns about long-term sustainability.
The Future of DAO Governance
Incentivizing participation is becoming a popular strategy in the DAO world. Initial results are promising, but the long-term effects remain to be seen. The next few months will be crucial in determining if these programs can truly improve DAO governance without creating new problems. The ultimate goal is to find a balance between encouraging participation and maintaining true decentralization.
