Waves Blockchain Founder Explores New DAO Model to Improve Crypto Governance
Sasha Ivanov, the founder of the Waves blockchain, says he has a way of tackling some of the governance shortcomings apparent in managing decentralized autonomous organizations (DAOs), including the risk of manipulation and voter apathy.
DAOs form the backbone for numerous decentralized applications (dapps), such as Uniswap, Compound and Aave, in which token holders propose and vote on changes or updates that affect a project’s future.
Existing DAOs based on simple token governance models and weight-based voting systems grant voting power proportional to the number of governance tokens a holder has. That leaves them open to exploitation by well-capitalized manipulators who can also take advantage of non-accountable and apathetic voters.
“Simple token governance seems attractive on paper, but has proven ultimately to be inadequate,” Ivanov said in a statement. “Without sufficient accountability built into governance models, bad actors and those who wish to disrupt the decision-making process have no deterrent and will keep on gamifying the system.”
Instead, Ivanov developed Power Protocol, a set of rules and incentives to encourage community participation. The protocol is designed to set and then measure key performance indicators (KPIs) and offer financial rewards and penalties to facilitate accountable, transparent and efficient community collaboration. The first DAO to utilize the Power Protocol is Waves’ Power DAO.
These KPIs, if fulfilled, result in rewards for participating communities. Conversely, if they’re not met, a community can be penalized as a portion of its staked governance tokens is destroyed. This may help disincentivize predatory behavior from large token holders who may vote favorably on proposals solely to gain token rewards.
Power Protocol can be implemented in third-party DAOs. By limiting individual users’ total voting power, the model can successfully mitigate the risk of potential damage from bad actors and increase efficiency of any DAO, be it financial, charitable, private or governmental.