The past few weeks have been very interesting at MakerDAO—we’ve seen a ton of discussions about long-term topics such as Maker’s mission, the RWA strategy, MKR tokenomics and more. I have also read a lot of critique on the state of Maker governance. With this post I’d like to zoom into one particular problem that Maker governance is facing today: Low governance participation rate.
With this post I hope to achieve the following:
- Highlight the problem and its potential causes;
- List potential solutions on multiple time horizons;
- Spark a discussion on how to initiate some of these improvements.
Below are some other critiques on Maker governance that I’ve read over the past few weeks but won’t address in this post. I feel either not mandated or not qualified to address these.
- Low delegate retention rate (eg. delegates pursuing other opportunities in the space or laying down their role as delegate);
- Discontentment with the MIPs framework (eg. too lengthy, too bureaucratic, greenlight polls not effective);
- Insufficient financial alignment between MKR holders and CU contributors;
- Legal liability concerns of governance participants.
“Low governance participation rate in MakerDAO”
Even though Maker is the oldest and biggest DeFi DAO and the quality of the discussions on our Governance Forum is (arguably) high, not a lot of individuals actively participate in governance votes (ie. polls and executive votes). Some data points to support that claim:
- Of all the MKR tokens in circulation (~901k), only ~172k are currently locked in chief and protecting the protocol from governance attacks. That’s less than 20%. Only ~80k MKR tokens have voted on the latest executive proposal.
- Three recent governance polls which were arguably important only saw up to 21 unique voters, including delegates—representing no more than 108k worth of MKR voting power (example 1, example 2, example 3).
What’s interesting to note is that the governance participation rate in more recent, smaller DAOs is much higher. Let’s consider BanklessDAO as an example; even though their governance proposals are significantly less complex compared to the proposals we see at MakerDAO, their voter turnout is outright impressive (>700 individual votes for some proposals, without explicit incentives!).
Although there are other protocol DAOs which are dealing with even lower participation rates, I would argue that we should prioritise addressing this challenge in order to further decentralise MakerDAO governance. Whatever long-term direction Maker decides to pursue, it cannot succeed without a healthy and engaged governance ecosystem. We need a diverse set of individuals to consider and research proposals, vote, and actively advocate for their views.
1. Negative financial incentives:
— High cost of participation due to gas fees. Our voting system relies on Ethereum L1 transactions, which have been increasingly expensive due to high blockspace demand.
— Opportunity cost of locking MKR in Maker governance vs ‘putting it to work’ in DeFi for yield.
— No explicit positive financial incentives to participate in Maker governance (besides defending the protocol from governance attacks).
2. High complexity:
— Proposals are increasingly complex and require specific knowledge and/or due diligence in order to form an opinion on the matter.
— Information relevant to governance proposals is often scattered throughout the Governance Forum, Discord servers, various dashboards, and more.
— Difficulty keeping track of all the proposals and their status (eg. someone engages in discussion on the Forum but does not notice the vote going live).
3. Low perceived impact of individual MKR voting power:
— MKR token voting makes for a plutocracy, where the voting power of some whales and delegates are orders of magnitude bigger compared to most holders. This perceived minimal impact might demotivate active participation.
4. Low composability with the industry:
— Active participation in Maker governance involves moving your MKR tokens around on L1. Although I realise that this mechanism was designed deliberately to prevent governance attacks, it ends up excluding a lot of MKR holders who are not necessarily misaligned with the success of Maker.
— A recent example of this is @Mringz of Index Coop who was eager to get the MKR tokens in the DPI index active in Maker governance—today this accounts for >23M USD worth of MKR! We did not succeed in finding a solution to enable this.
— Although @Growth-Core-Unit and @dux-core-unit have been working hard to help custodians (eg. Anchorage, Coinbase Custody) enabling Maker governance participation for their clients, it involves a lot of custom development and therefore takes a long time.
— Maker governance does not integrate with today’s most popular DAO governance aggregators and tooling such as Snapshot, Tally, Boardroom and Commonwealth.
“How might we improve the governance participation rate in MakerDAO?”
- Set up gas cost reimbursement program for recognized delegates. Is @SES-Core-Unit still working on this?
- Make more use of forum sentiment polls for soft consensus seeking. We might want to consider using less on-chain polls for soft consensus seeking and defer to forum polls instead, since these do not incur gas costs. I personally like @LongForWisdom’s recent thread on gauging sentiment regarding the Clean Money vision.
- Temporarily use third-party tooling for polling. We might want to consider integrating with Snapshot for gasless voting on some eligible governance proposals, which might incentivise smaller MKR holders to participate.
- Approach Maker’s voting system as modular and run experiments. Instead of aiming to completely revamp the Maker voting system, we could run isolated scaling experiments against various components in parallel. Examples would be 1) trying to implement a fork of Snapshot into the Governance portal for polling, 2) experimenting with snapshot voting on rollups (eg. StarkWare!), 3) experimenting with moving on-chain governance to L2. Credits to @colby who shared this perspective with me earlier and who’s doing exciting work on this front.
- Explore incentives for voting. I personally like Snapshot’s built-in POAP support for votes as I’ve experienced this non-financial incentive being sufficiently powerful to activate me. Another idea I read about was exploring unique NFTs for certain voter milestones, similar to the governance forum badges. We might want to run some experiments with this to test effectiveness.
- Completely redesign Maker’s voting system in relation to improved tokenomics. If we end up improving the MKR tokenomics we might want to take the opportunity to redesign the Maker voting system from scratch to address the problems mentioned in this post.
- Move governance polling to L2. We adopt a L2 scaling solution that does not compromise in the security and trustlessness of L1 Ethereum and fully integrate this solution into the Governance Portal, which would enable near-gasless voting.
- Create tooling for tracking the status of governance proposals. @GovAlpha-Core-Unit did a great job at this through creating the Governance Tracker spreadsheet—I’d love to hear how @Recognized-Delegates have been using this and whether it’s been useful
- Seeks ways to aggregate relevant information for voters. This is something we’re looking into at @dux-core-unit—we already came up with some relevant feature ideas for the Governance Portal that we’ll prioritise early next year.
- Create more educational content related to governance. I know that the @Content-Production CU is doing excellent work here—creating high-quality videos that should help new voters find their way. We might also want to refresh the user-facing governance documentation—I would love to collaborate on this with @GovAlpha-Core-Unit
- Have designated subject-matter experts in the DAO. We could explore ways to make it easier for voters and delegates to understand which themes are being addressed by a governance proposal, and who are subject-matter experts. This has been partially addressed by @rune’s concept of Decentralized Voter Committees (DVCs). We might even want to consider paid SMEs outside of the DAO.
I’d like to repeat that the above is not an exhaustive list of problems, causes and potential solutions—it’s merely an attempt at aggregating the comments I have read over the past weeks, complemented with my own views.
My assumption is that the most effective method for increasing governance participation in MakerDAO would be removing friction in the voting process. This can be achieved through 1) lowering costs of participation through reimbursing today’s most important governance participants (ie. our beloved recognized delegates) and seeking to mitigate gas expenses asap—and through 2) enabling effective decision-making through aggregating relevant information related to governance votes. Therefore I would love to collaborate with some of you to set up experiments and initiatives focussed on these two goals.
Please feel free to share thoughts on this post format, any additions to the problems/causes/solutions mentioned above, or any other ideas for improving the governance participation rate. I sincerely hope this post sparks some discussion that eventually leads to initiative.
Thank you for reading!