Problems
Problem Space
The problem space is DAO Governance, in particular:
- DAO Governance Corruption, including Capture, Collusion, and Opportunism
- DAO Governance Attacks, including Capital Structure Exploitation
Properties
- Stakeholder. Any individual, collective, or entity that experiences externalities due to the actions of the DAO, e.g., Token-holder, user, delegate, staker/miner.
- Participant. Any individual, collective, or entity that participates in governance
- Preference. A stakeholder's subjective, comparative evaluations over a range of options, e.g., a miner prefers to increase the block reward over reducing rewards or keeping rewards constant
- Objectives. The goal or set of goals that constitute the DAO's organizing purpose, e.g., "Buy the constitution," "Fund Public Goods"
- Acts. The set of actions or decisions the DAO's governance mechanism can produce and its stakeholders consider, e.g., Add a new asset as collateral in our lending protocol, remove a particular voter's voting power, increase token supply, offboard a contributor, suspend the protocol
- Outcomes. The set of outcomes the DAO's governance mechanism can achieve through its actions, e.g., Token Price increases or remains stable, protocol users increase
Dimensions
To measure the effectiveness of a DAO's governance, we consider the following dimensions:
- Stakeholder Representation. The distribution of voting power relative to DAO stakeholders, i.e., users, token holders, stakers, and liquidity providers.
- Preference Representation. The degree to which governance participants can express their preferences concerning the DAO's objectives, e.g., a voter does not believe the voting mechanism is legitimate
- Alignment. The consistency of a decision when compared to a desired outcome
- Coherence. The consistency of a series of decisions when compared to one another concerning a desired outcome
- Legitimacy. Power granted by governance participants to the governance mechanism through their ongoing implicit agreement to be bound by its decisions
Problems
Corruption Problems
Opportunism
Where a single stakeholder or group of stakeholders receives rewards for acting in self-interest while punishing all other stakeholders and producing outcomes that do not align with the DAO's objectives.
Example: Proposing or voting for salary increases or against salary cuts during a budget-cutting exercise.
Symptoms:
- Deviation between outcomes and objectives
- Increase in actions or decisions that do not align with objectives
- Illegitimate diversion of funds
Capture
Where a minority group of stakeholders possesses the power to dictate the DAO's actions to serve their self-interest while punishing all other stakeholders and producing outcomes that do not align with the DAO's objectives.
Example: Plutocracy, Bureaucracy
Symptoms:
- Deviation between outcomes and objectives
- Increase in actions or decisions that do not align with objectives
- Illegitimate diversion of funds
Collusion
Where two or more stakeholders or stakeholder groups operating within or outside the boundaries of the DAO cooperate for their mutual benefit, to the detriment of all other stakeholders and the DAO's ability to achieve its objectives.
Example: Vote Buying
Symptoms:
- Deviation between outcomes and objectives
- Increase in actions or decisions that do not align with objectives
- Illegitimate diversion of funds
Attack Problems
Capital Structure Exploitation
Where an individual or group can exploit vulnerabilities in the DAO's governance mechanism to extract capital.
Example: Treasury Drain Attacks, Price Manipulation Attacks, and Arbitrageurs.
Symptom:
- Illegitimate diversion of funds