In this guide, we'll explore the DAO Governance process and what to evaluate before creating your DAO.
We'll lay out the main differences, risks, and limitations of distributing voting power.
Governance is a large topic and this guide can give you a starting point, upon which you can experiment and iterate from.
DAO governance is who can make decisions and how those decisions are made.
Your governance model impacts:
Governance is a huge and complex topic, and many DAOs are leading the way in experimenting and iterating on new voting mechanisms and best practices. There is a world of governance left to unpack beyond the scope of this guide. But, for most DAOs, starting simple is the best way to make real progress and move forward.
There are two main choices for deciding who can vote:
1. All token holders: All those who have your DAO’s governance token are entitled to participate.
This is a common choice if your DAO already has a token or if you’d like those with larger token holdings to have more governance power.
2. Specific people / authorized wallets: Only the wallets you authorized can participate.
This is a natural choice if you don’t have a token already, and even if you do have a token, you may decide to use the allowlist approach to introduce an additional gating on who can vote. This method is compatible with NFT-based voting as well: simply make an allowlist of wallets that hold the governance NFT.
Now that you’ve decided who you’d like to be able to vote, it’s time to determine how they will cast their votes.
In 1 token = 1 vote governance, an individual’s voting power is directly proportional to the number of tokens they hold. So, if a token holder has 2% of tokens, they have 2% of the total available voting power.
If you chose “all token holders” as your voting group, then having the token-based voting mechanism is the typical choice.
When is it typically chosen?
In 1 authorized wallet = 1 vote governance, the voting power is the same for every wallet on the allowlist. So, if one wallet holds 2% of tokens, and another wallet holds 5%, they still have the same voting power as long as they're both on the allowlist.
This option is typically used when the DAO doesn't have a token. So, if you have chosen “specific people / wallets” in who can participate, then wallet-based is the typical voting mechanism.
When is it typically chosen?
This is typically chosen if:
Aside from the most common voting mechanisms mentioned here, there is huge innovation happening in the space. There is experimentation with delegated voting, quadratic voting, predictive consensus, anonymous voting with zero-knowledge technology, conviction voting, and more. We’re continuing to research these areas and will be adding more voting options over time.
Wallet-based voting sounds quite abstract, but it is a way to easily set up some of the most common types of DAOs.
How to start your DAO as a Multisig
You could authorize only five wallets, and effectively function as a multisig - whereby five wallets ultimately have the final say on passing proposals (even if they represent others who vote off-chain, for example).
There are some technical differences between a multisig and setting up five wallets with Aragon (it is technically voting, instead of signing), but in practice, it provides the same governance mechanism. The main practical difference is that by starting with a multisig setup on Aragon, you have the flexibility to change your governance as you grow.
How to function with subDAOs
You may decide you want to have subDAOs, which act as independent DAOs within a larger DAO. For example, you may want to create a marketing subDAO for marketing decisions - implying moving money to a separate treasury only for marketing, which can be decided on by people in the marketing subDAO.
How to gate governance rights
You may decide to gate governance rights to certain people. Here are a few examples:
While using wallet-based voting for different types of gating is a simplistic solution, it is a good way to get started and try out what works for your DAO.
DAOs risk being attacked through governance, especially those with large treasuries. While all DAOs should be aware of what can go wrong and try to minimize those risks, you should be aware of the complexity that comes with additional layers of governance safeguards.
Some known challenges are:
Every DAO is different, and the key is starting simple so you can learn and adapt for your situation. A typical evolution might look like:
Remember that your governance model doesn’t have to be set in stone. With a vote and the right community process, you can change your governance. This is likely to happen, because your needs change as your DAO grows and learns.
You could approach this by:
In DAOs, it’s a healthy practice to keep iterating as your circumstances change.
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