Token holding is a primitive state. It represents capital at rest, requiring active management for yield, governance, or utility, which creates a constant cognitive tax on users.
the-state-of-web3-education-and-onboarding
Blog
The Future of Onboarding: From Token Holding to Skilled Delegation
The next wave of effective DAO participation requires evaluating delegate platforms and governance specialists, not just acquiring voting power. This is the shift from capital to competence.
introduction
THE SHIFT
Introduction
User onboarding is evolving from passive token acquisition to active delegation of specialized tasks.
Skilled delegation is the next abstraction. Users will express desired outcomes (intents) and delegate execution to specialized agents, similar to how UniswapX delegates routing or Across delegates bridging.
The interface becomes an intent layer. Wallets like Rabby and Safe will shift from signing simple transactions to setting parameters for automated, multi-step strategies managed by delegated solvers.
Evidence: The rise of ERC-4337 Account Abstraction and intent-based architectures proves the market demand for removing execution complexity from the end-user experience.
thesis-statement
THE PARADIGM SHIFT
The Core Thesis: Capital to Competence
The next wave of user onboarding shifts the primary requirement from passive capital to active skill, forcing protocols to build for delegation.
Token holding is insufficient. The complexity of modern DeFi and restaking creates a competence gap that capital alone cannot bridge. Users must now understand slashing conditions, validator selection, and cross-chain security.
The market demands delegation. This gap creates a new product category: skilled delegation platforms. Projects like EigenLayer and Babylon are not just protocols; they are talent marketplaces for cryptoeconomic security.
Protocols become talent aggregators. Success depends on attracting competent operators, not just token holders. This inverts the traditional liquidity-first model, prioritizing operator quality over sheer TVL.
Evidence: EigenLayer’s restaked TVL exceeds $15B, but its real innovation is the curated operator set that applications like EigenDA and AltLayer delegate to for security.
market-context
THE INCENTIVE MISMATCH
The Current State: Governance is Broken
Current token-based governance prioritizes capital over competence, creating a system where voting power is divorced from technical expertise.
Token-weighted voting fails. It conflates financial stake with governance skill, empowering whales and funds to decide on technical proposals they cannot evaluate. This creates a principal-agent problem where token holders lack the expertise to judge the agents (developers) they are meant to oversee.
Delegation is a band-aid. Platforms like Snapshot and Tally enable delegation, but the default is to delegate to whales or influencers, not domain experts. This recreates the same power structures under a different name, as seen in the Compound and Uniswap delegate leaderboards.
Evidence: In MakerDAO's Endgame overhaul, less than 1% of MKR holders actively vote. Most power rests with a handful of delegates, yet there is no formal system to verify their technical competence or alignment with long-term protocol health.
key-trends
FROM HOLDING TO GOVERNING
Key Trends Driving the Delegation Economy
The next wave of user onboarding shifts from passive token accumulation to active, skill-based participation in protocol governance.
01
The Problem: Voter Apathy and Plutocracy
Token-weighted voting creates governance capture by whales and funds, while retail holders lack time/expertise. This leads to <5% voter participation on major DAOs and decisions made by a tiny, often misaligned, minority.
- Result: Stagnant protocol development and misallocated treasuries.
- Opportunity: Unlock the ~95% of dormant governance power.
<5%
Avg. Voter Turnout
95%
Dormant Power
02
The Solution: Professional Delegation Markets
Platforms like Llama, Boardroom, and Tally create liquid markets for governance influence. Skilled delegates build reputations and compete for delegations from token holders.
- Mechanism: Delegators earn fee revenue or token rewards for their voting performance.
- Outcome: Aligns incentives, professionalizes governance, and creates a new DeFi primitive for political capital.
$100M+
Delegated TVL
10x
More Voters
03
The Enabler: Delegation Vaults & Yield
Protocols like Element Fi and Stake DAO bundle delegation rights with yield-bearing strategies. Users deposit tokens into a vault that automatically delegates to a curated set of experts.
- Benefit: Users earn yield and contribute to governance without active management.
- Trend: Turns governance tokens into productive, dual-yield assets (financial + governance APY).
Dual-Yield
Asset Class
Auto-Compound
Governance APY
04
The Future: On-Chain Reputation Scores
Systems like Orange and Karma track delegate performance across DAOs, creating portable, verifiable reputation. This moves beyond simple token weight to merit-based influence.
- Metric: Score based on vote participation, proposal success, and community sentiment.
- Impact: Lowers barriers for new, skilled delegates and provides transparency for delegators.
Cross-DAO
Portable Rep
Merit-Based
Influence
05
The Catalyst: MEV & Intent-Driven Delegation
Just as UniswapX and CowSwap abstract complexity for traders, intent-based systems will emerge for governance. Users express a goal (e.g., "maximize protocol revenue"), and a solver network finds the optimal delegate.
- Analogy: Flashbots for governance.
- Outcome: Democratizes sophisticated strategy, moving from manual delegate selection to outcome-based delegation.
Intent-Based
Paradigm
Solver Networks
New Actors
06
The Risk: Centralization and Cartels
Professional delegation risks creating new centralized points of failure. A few large delegates or delegation cartels could control vast voting blocs, replicating traditional political party structures on-chain.
- Mitigation: Requires anti-collusion mechanisms, term limits, and quadratic voting models.
- Trade-off: The efficiency of delegation vs. the resilience of direct democracy.
Cartel Risk
Critical Threat
Anti-Collusion
Required Tech
THE FUTURE OF ONBOARDING
Delegate Platform Feature Matrix
Comparing platforms that transform token holding into skilled delegation, moving beyond simple staking.
| Feature / Metric | EigenLayer (Restaking) | Karak (Universal Restaking) | Symbiotic (Multi-Asset Restaking) | Obol (DVT for Delegation) |
|---|---|---|---|---|
Primary Asset Class | LSTs, Native ETH | LSTs, LRTs, Stablecoins, LP Tokens | LSTs, LRTs, Stablecoins, ERC-20s, NFTs | Validator Nodes (DVT Clusters) |
Delegation Target | Actively Validated Services (AVSs) | Restaked Services | Modules (AVS-like) | Ethereum Consensus (via DVT) |
Avg. Operator Commission | 5-20% | 10-30% | Not Yet Established | 10-25% |
Slashing Insurance Pool | ||||
Native Delegation UI | ||||
Time to Unstake (Avg.) | ~7 days | ~7 days | Not Yet Established | N/A (Ethereum Exit Queue) |
Avg. TVL per Operator | $50M+ | $5-20M | Not Yet Established | 32 ETH min. |
Supports Non-ETH Assets |
deep-dive
THE SKILL GRAPH
Evaluating a Delegate: Beyond Reputation Scores
Onboarding shifts from passive token holding to active delegation based on verifiable, on-chain skill credentials.
Delegation becomes a skill graph. Future governance requires delegates to prove expertise in specific domains like MEV, treasury management, or cross-chain security. Reputation scores from Tally or Boardroom are insufficient; they measure activity, not competence.
On-chain credentials are non-transferable proof. Systems like Ethereum Attestation Service (EAS) or Disco will issue soulbound credentials for completing protocol-specific courses or passing simulations. This creates a verifiable skill ledger separate from token wealth.
Protocols will curate delegate whitelists. DAOs like Optimism or Arbitrum will maintain vetted registries of delegates credentialed in their stack's nuances. Delegation moves from a popularity contest to a meritocratic matching engine.
Evidence: Optimism's Citizen House already separates token voting from badge-holder voting, a primitive form of skill-based delegation that will become the standard.
risk-analysis
THE INCENTIVE MISALIGNMENT PROBLEM
Risks and Failure Modes of Delegation
Delegation is not a set-and-forget action; it's a dynamic principal-agent relationship with systemic risks.
01
The Lazy Capital Problem
Delegators often chase APY, not governance quality, leading to vote apathy and protocol capture. This creates a market for low-effort, high-yield staking pools that optimize for fees, not security.
- Result: >60% of governance tokens are typically delegated, yet <5% of tokenholders vote.
- Failure Mode: Whale validators or cartels can dominate governance with delegated votes they did not earn through merit.
>60%
Tokens Delegated
<5%
Voter Turnout
02
The Oracle Risk in Reputation Systems
Platforms like ENS and Optimism's Citizen House rely on off-chain reputation oracles to identify skilled delegates. This centralizes trust and creates a single point of failure.
- Result: A corrupted or manipulated oracle can blacklist competent delegates or promote malicious ones.
- Failure Mode: The system regresses to a permissioned council, defeating the purpose of decentralized credentialing.
1
Central Oracle
100%
Trust Assumption
03
Liquid Staking Derivative (LSD) Dominance
Entities like Lido and Rocket Pool become de-facto governance oligopolies by aggregating stake. Their governance decisions are made by a small set of node operators or DAO members, not the underlying delegators.
- Result: ~32% of Ethereum stake is controlled by Lido, creating systemic consensus-layer risk.
- Failure Mode: Protocol upgrades or forks can be held hostage by a few LSD governance committees.
~32%
Eth Stake Share
21
Lido Node Operators
04
The Delegation Tax & Fee Extraction
Professional delegates (e.g., in Compound or Uniswap) take a percentage of rewards (e.g., 10-20%) as a fee. This creates a misalignment: the delegate's profit is maximized by attracting more capital, not necessarily by making better decisions.
- Result: Delegates become asset gatherers, competing on marketing, not governance acumen.
- Failure Mode: Skilled but less-known analysts are crowded out by well-funded delegate platforms.
10-20%
Typical Fee
0
Performance Bond
05
Smart Contract and Slashing Risk
Delegating stake in PoS networks (e.g., Cosmos, Solana) exposes capital to slashing penalties for validator misbehavior. Delegators often have no visibility or control over their validator's operational security.
- Result: A single validator bug can lead to collective slashing of thousands of delegators' funds.
- Failure Mode: Insurance protocols like Umee or EigenLayer add another layer of smart contract risk and complexity.
5-100%
Slashing Penalty
24/7
Ops Risk
06
The Sybil-Resistance Dead End
Systems that reward skilled delegation (e.g., Gitcoin Passport) must solve identity. Current solutions rely on centralized verifiers or easily-gamed social graphs, creating a barrier to true meritocracy.
- Result: Whales can still buy influence by sybil-attacking the reputation system or bribing verifiers.
- Failure Mode: The most "skilled" delegates may simply be the best at gaming the credentialing system, not the protocol.
High
Gameability
Low
Decentralization
future-outlook
THE DELEGATION PIPELINE
The 24-Month Outlook: Specialization and Syndication
Onboarding will shift from passive token holding to active, skill-based delegation through specialized syndicates.
Onboarding becomes delegation. New users will not manage keys or sign transactions. They will delegate capital and intent to specialized syndicates via smart contract wallets like Safe{Wallet} or Privy. The user experience is a single signature to join a managed portfolio.
Syndicates outcompete solo staking. A DeFi syndicate optimizing for MEV-capturing yield will outperform a user manually providing liquidity. An NFT syndicate with on-chain reputation for alpha will outperform random minting. Specialization creates professional-grade access.
The pipeline is intent-based. User expresses a goal (e.g., 'earn yield on ETH'). An intent-solving network like UniswapX or CowSwap routes it to the optimal syndicate. Settlement uses account abstraction standards (ERC-4337) for gas sponsorship and batched execution.
Evidence: EigenLayer's restaking TVL exceeds $15B, proving demand for delegating cryptoeconomic security. This model will expand to every on-chain activity, from gaming guilds to prediction markets.
takeaways
THE FUTURE OF ONBOARDING
TL;DR: Key Takeaways for Builders and Voters
The next wave of user growth requires moving beyond simple token holding to systems that capture and delegate user intent and skill.
01
The Problem: Passive Capital is a Governance Liability
Token-weighted voting concentrates power with whales and funds, not skilled participants. This leads to low-quality proposals and voter apathy.\n- Result: <1% of token holders typically vote on major proposals.\n- Risk: Protocol direction is set by capital, not competence.
<1%
Voter Turnout
Whales
Decide
02
The Solution: Delegate Skills, Not Just Voting Power
Build credential-based delegation markets where users can delegate specific skills (e.g., treasury management, smart contract review).\n- Mechanism: Use attestations (EAS) and soulbound tokens to prove expertise.\n- Benefit: Aligns governance influence with proven competence, not just token balance.
Skill-Based
Delegation
EAS
Credentials
03
The Infrastructure: Intent-Centric User Journeys
Onboarding must start with user intent ("I want yield"), not asset movement. Systems like UniswapX and CowSwap solve this for swaps; governance needs its own intent layer.\n- Flow: User expresses goal -> Specialized delegate executes -> User gets outcome.\n- Tech Stack: Requires account abstraction and intent solvers.
Intent-First
Flow
AA
Enabler
04
The Metric: Shift from TVL to Total Value Influenced (TVI)
Measure protocol health by the quality of capital allocation, not just its quantity. TVI tracks capital deployed under skilled delegation.\n- Impact: Incentivizes building delegation tools over mere liquidity mining.\n- Signal: A high TVI/TVL ratio indicates an engaged, competent ecosystem.
TVI
New Metric
Quality > Quantity
Focus
05
The Build: Modular Reputation Oracles
Reputation must be portable and composable across protocols. Build oracles that aggregate on-chain activity (Gitcoin Grants, Optimism Attestations) into a delegation score.\n- Example: A delegate's score in Compound governance informs their weight in Aave.\n- Requires: Standardized schemas and zk-proofs for privacy.
Portable
Reputation
ZK
Privacy
06
The Incentive: Align Delegator and Delegate Rewards
Current systems reward delegates with tokens, creating misalignment. Tie rewards to long-term protocol performance metrics (e.g., treasury growth, protocol revenue).\n- Model: Use vesting streams (Sablier, Superfluid) that unlock based on KPIs.\n- Outcome: Delegates are incentivized as long-term stewards, not mercenaries.
Performance
Based Pay
Stewards
Not Mercenaries
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