Why Delegatable Reputation Will Power the Next Generation of DAOs

Current DAOs conflate capital with competence, leading to low-quality governance and voter apathy. Sybil attacks are trivial, and whale dominance skews outcomes.

• <5% of token holders typically vote.
• Decisions favor short-term financial plays over long-term health.
• Vote buying and delegation markets are inefficient and opaque.

Otterspace issues non-transferable soulbound badges as on-chain reputation. DAOs can delegate voting power based on proven contributions, not token balance.

• Enables progressive decentralization: core teams retain control but can delegate to experts.
• Composable reputation: Badges from Gitcoin, Optimism can be used across DAOs.
• Creates a merit-based layer atop existing token models.

Karma maps expertise and contribution history into a graph, allowing for precise delegation of voting power on specific topics (e.g., treasury management, protocol upgrades).

• Context-aware delegation: A developer delegates tech votes, a marketer delegates growth votes.
• Dynamic weight: Reputation decays with inactivity, preventing stale power accumulation.
• Integrates with Snapshot and Tally for immediate utility.

Projects like Worldcoin or BrightID solve for unique humanity but not for quality. Preventing Sybils is necessary but insufficient for good governance.

• Proof-of-Personhood is a binary gate, not a reputation signal.
• Does not measure competence, trustworthiness, or historical contribution.
• Creates a flat, uninformative identity layer.

Protocols like ARCx and Spectral treat reputation as a scorable, composable asset that can be used in DeFi. This creates tangible utility for good actors.

• Reputation-based credit scoring for undercollateralized loans.
• Lower fees or increased rewards in protocols for high-reputation addresses.
• Turns soft social capital into hard financial utility, aligning incentives.

The endgame is fractal governance (inspired by Frax Finance) combined with vote markets (like Astral). Reputation determines who can create sub-DAOs and sell their voting power efficiently.

• High-reputation members can spin off autonomous working groups with delegated treasury.
• Efficient vote markets allow reputation-holders to monetize their attention and expertise.
• Creates a competitive market for governance quality, not just capital.

Reputation systems are only as strong as their initial identity layer. A compromised Proof-of-Personhood or social graph oracle (like BrightID, Worldcoin) at genesis creates a permanent, untrustworthy foundation. This leads to a fatal feedback loop where bad actors can bootstrap legitimacy.

• Attack Vector: Compromise the initial attestation ceremony or oracle data feed.
• Systemic Consequence: All downstream delegation and voting power is poisoned from the start.
• Mitigation Reference: Requires robust, multi-prover identity stacks with slashing conditions.

Delegatable reputation must be explicitly separated from token-based voting power, or it recreates plutocracy with extra steps. If reputation is tradable or can be easily delegated to capital-rich entities (e.g., via liquid delegation tokens), whales simply buy influence.

• Attack Vector: Whales offer high yields or payments for reputation delegation.
• Systemic Consequence: Reverts to ve-token model flaws, nullifying the "meritocratic" advantage.
• Mitigation Reference: Implement non-transferable soulbound reputation, cooldown periods, and delegation limits.

Passive delegation creates concentrated, unresponsive power centers. If top delegates (e.g., a16z crypto, Lido DAO) become inactive or malicious, the system seizes up. This is worse than token voting, where inertia is diffuse.

• Attack Vector: Delegate apathy, coercion, or exit scam.
• Systemic Consequence: Mass voter disenfranchisement and protocol stagnation, as revoking delegation has high coordination costs.
• Mitigation Reference: Require continuous activity proofs, implement automatic undelegation on inactivity, and cap delegate power share.

Most reputation scores will be calculated from on-chain/off-chain data oracles. If the reputation calculus depends on manipulable metrics (e.g., GitHub commits, forum posts, simple transaction volume), it invites gaming. This creates reputation inflation, devaluing the governance asset.

• Attack Vector: Sybil farms spam low-quality contributions or transactions to game the scoring algorithm.
• Systemic Consequence: Reputation dilution makes the signal meaningless, collapsing the system's trust layer.
• Mitigation Reference: Use zk-proofs of unique humanity, time-locked metrics, and adversarial ML detection.

The promise of portable reputation across DAOs (e.g., using Ethereum Attestation Service) is also its greatest systemic risk. A reputation collapse or exploit in one major DAO (like Aave or Compound) can spill over and destabilize all connected protocols, similar to financial contagion.

• Attack Vector: A governance hack in DAO A invalidates the reputation used as collateral in DAO B.
• Systemic Consequence: Cross-protocol insolvency and loss of confidence in the entire reputation primitive.
• Mitigation Reference: Implement risk-tiered reputation, quarantine periods, and allow DAOs to set their own whitelists.

High-reputation delegates making governance decisions could be deemed de facto directors, attracting regulatory scrutiny (e.g., SEC, MiCA). This creates a major disincentive for competent participants to accept delegation, creating a "liability sink."

• Attack Vector: Regulators target top delegates of a DAO that faces legal action.
• Systemic Consequence: Adverse selection where only reckless or anonymous actors accept delegation power.
• Mitigation Reference: Requires clear legal wrappers, liability shields, and potentially zk-proofs of delegation to maintain privacy.