Thursday, May 23, 2024

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For many reasons—from saving gas costs by bundling votes to token holders not having time to maintain the context to thoughtfully vote on proposals—delegation has emerged as the primary mechanism for DAOs to boost governance participation and make decisions more effectively.

DAOs like Uniswap, Arbitrum, Optimism, and ENS are all delegate voting DAOs, meaning token holders can delegate their voting power to an individual or group to vote for them.

Being a token holder in a delegate voting DAO is a powerful role. By delegating tokens, you’re assigning voting power, and therefore decision-making power, to another address. So how do you choose the delegate that will best represent your interests?

We interviewed delegates across the ecosystem to hear the standards they would set when delegating their tokens. Let’s cover the broad topics they recommended token holders look into when determining who they should delegate to.

Are their incentives aligned with yours?

Simona Pop, advisor for the Optimism Foundation, Government Strategy at Element Foundation, and Public Goods Steward at ENS, said, “It’s essential to make sure the delegate’s values and long-term vision align with yours. They should share a common perspective on the broader objectives of the DAO, as well as an interest in the paths to achieving said objectives.”

Superphiz, delegate for Diva, Hop protocol, and part of the Oracle DAO at Rocket Pool, shared some questions to consider about incentive alignment. “What are their goals in crypto? Are they profit maximalists? Web3 builders? Ecosystem developers? How does that align with your values?”

One of the ways token holders can identify value alignment is by looking at their voting history. This is one of the advantages to votes being onchain: there’s a transparent record of voting history.

Questions to consider:

  1. What incentives does my delegate have to behave in a certain way?
  2. Are they part of another team that might want to push a certain initiative?
  3. Are they being paid by the DAO, or not?
  4. Do they have a deep understanding of the DAO and its mission? Are they the right person for the job?

Simona Pop mentioned “Knowledge and Context” as an important category to look into when finding the right delegate. “This is a VERY important one that many people miss – a deep understanding of the DAO’s mission and the wider ecosystem it operates in. This enables them to make informed decisions.”

It can be hard to know what the delegate is thinking about the DAO and its mission, so this is when delegate mission statements and member profiles can play an important role. If the delegate shared an announcement with a plan for how they want to use their delegation, this can be part of your decision.

Another quality to look for in delegates is having opinions they’re willing to stand by, even if they’re not the most popular opinions. Diversity of ideas and contrarianism is healthy for a DAO, because debate means ideas are pushed up against and molded into their best form, rather than just letting the first iteration pass.

Delegates that always vote with the majority might be doing so to keep their delegation. This can be a centralization problem, because if most delegates are following the crowd, then the number of delegates actually making a decision is significantly lower.

“I look for delegates that have a strong vision and aren’t afraid to take contrarian positions,” said Carl Cervone, a Gitcoin delegate who is also a token holder who has delegated in Arbitrum, Optimism, and ENS.

The contrarian positions should be made thoughtfully, however. Max Lomuscio recommended token holders look for delegates who have “a previous track record of making smart decisions.” In other words, if they’re taking the minority stance, do you believe they’re doing so for a good reason?

Transparency of intention, not just action, was also raised. “They should be trustworthy and transparent in their intentions and actions,” said Simona. “You may look for a proven track record of acting ethically and consistently with the best interests of the community in mind.”

Delegates who share the rationale behind their decisions may be more trustworthy than those who do not.

Transparency is also important because it can showcase that the delegate cannot be easily lobbied or bribed.

“I want to double down on integrity, said Griff Green, delegate for Optimism, Arbitrum, ENS, and others. “As a delegate in various ecosystems, I get lobbied all the time from groups that are trying to pass proposals and have even been offered bribes! Crypto politics is just as dirty as regular politics is said to be.”

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