DAO Review
Decentralized autonomous organization (DAO) coordinates people into making collective decision, in a decentralised way (no central authority). The core of DAO is implemented in smart contracts.
DAO Limitation:
It is not feasible to get everyone to vote on everything. Furthermore, it is not practical to expect that everyone has the expertise to vote on every proposal. Governance scalability is to maximize the number of decisions that can occur in a given period of time, and maximize the number of voters’ participation in any decision.
Delegation is one possible solutions to the scalable problem. The voters delegate their voting rights to other voters who are equipped with more in-depth knowledge of the proposals.
Two-tier DAO Governance:
In the first tier, the decision is token weighted (one token, one vote). In the second tier, it is based on non transferable soul-bound NFT (one person, one vote).
Voting Mechanism:
Conviction voting: voters express voting preferences in proportion to the proposals that voters choose, and voting is time weighted continuously
Holographic consensus: localize voting decision, allow decisions in a DAO to be made locally, as long as these decisions are ensured to be in line with the global opinion of the DAO
Quadratic voting: reduces the impact of wealth on voting power, even out the distribution of voting power
Square root voting: voting power is square root weighted by tokens represented by the delegates. This prevents few large token holders from dominating the protocol’s governance.
Governance Systems:
Governance Bravo: implemented in on-chain smart contracts, from Compound protocol.
Governor: implemented in on-chain smart contracts, from OpenZeppelin.
Snapshot: off chain voting, without gas fees
DAO Attack Vectors:
Voting buying, plutocracy, sybil attacks: bribing other votes, purchasing a large amount of tokens to amplify one’s vote, splitting the token holdings into many accounts to gain more influence over a decision
Last minute vote swings: voters weigh in with vote at the end of the session to tip the balance to their favor.
Voter apathy: many voters are not engaged in voting
Treasury hack: the reserve tokens in the DAO treasury can be stolen
Governance Bravo:
It is created by Compound protocol. Aave and Uniswap are also using Governance bravo for their protocol governance. The github link is shown as below.
The COMP token, Governance Bravo, and timelock together govern the Compound protocol. The Governance Bravo smart contracts allow the community to propose, vote, and implement changes through the administrative functions of a COMP token.
The diagram below depicts the Compound governance process.
To illustrate the process flow corresponding to the smart contract:
The propose method at line 74 of https://github.com/compound-finance/compound-protocol/blob/master/contracts/Governance/GovernorBravoDelegate.sol#L74 will create the proposal.
The queue method at line 123 of https://github.com/compound-finance/compound-protocol/blob/master/contracts/Governance/GovernorBravoDelegate.sol#L123 will queue the proposal if state is successful.
More in-depth review is to follow.