In this essay I will make the point that democracy is bad and we should all just pick a decision maker and leave it at that.

In reality though, democracy in online communities is as hard to implement as it is in behemoth and calcified societies. The decentralised and rapidly evolving state of amorphously democratic web3 communities, often leaves them open to bad actors with concrete plans. But democracy is good.

DAO governance attacks

Can be viewed as legal, hostile takeovers that nobody sees coming. Often times voting rights are proportional to your holdings of a given token and so snap votes can be swayed with token buying. If the potential payoff for the vote outcome can benefit a party, then the amount benefitted could be more than the cost of the tokens required to clinch the vote. Sneaky members can take flash loans and buy up majority of governance tokens, start a ‘give me all the money’ proposal, and vote to pass the proposal, all in a single block.

Because the rewards are so huge ($182 million in the above example) the incentive to work at hacking governance is huge. All manner of techniques are being employed and it somewhat erodes the level of trust in a system and forces you to think, do we really need all this democracy? The more governance DAOs give the people, the more can be taken from DAOs. Do we really need to let 0xladylover69 have his say in treasury issuance? Is it worth 182 million?

When everyone is the leader there is no leader. When every decision must be put on trial, decision rates slow to a crawl. This is antithetical to the notion of web3 DAOs and their rapid course correction and evolution. But democracy is good?

So how can DAOs protect themselves from this kind of thing?

They can make it harder and less worthwhile for covert operations to come to fruition. For one, don’t let proposals have access to wallets or chain capabilities. Lower the stakes. Instead of voting on how much do we transfer to xyz, vote on allowing core team permissions. Democracy is still democracy if done this way, it doesn’t have to be all or nothing.

Another thing DAOs can do is reduce the ease of obtaining governance power. Lower liquidity for power. Drop supply, or increase demand for these tokens so that the outcome value of manipulating voting is less than the value of required tokens needed to do it. Of course increasing value on something is always far easier said than done, so in this dynamic, dropping supply seems to be a better option. In reality there are many methods to handbraking and authenticating actions including time-locking tokens after purchase and KYC-ing users. There’s even a very unique web3 solution that involves being ready to fork at a moments notice in order to simply migrate away from any untoward trajectories.

Vitalik has extensive thoughts on this issue and has written an in-depth paper on the issue here.
Its a level or two above the scope of this blog entry but the gist is that there are ways to do it without giving up decentralisation – including splitting the financialisation away from governance tokens, and even evolution into non-coin governance.
Try telling a discord server there’s not going to be a coin…

In the continuing saga of trying to find real world applications of blockchain technology (that can’t be achieved through centralised information systems), democracy seems to be ripe for the disrupting. Tokens, forks, complicated math, and abstractions beyond comprehension may one day boil down into the system that everyone uses to have their say. Until then keep your eyes open for dodgy DAOs.