Governance via Token Vote vs Governance via NFT Vote

Direct economic stake: Each vote is weighted by the holder's financial stake in the protocol's native token (e.g., UNI, MKR). This aligns governance power with financial risk and reward. This matters for large-scale DeFi protocols where major treasury and parameter decisions require skin-in-the-game.

Established tooling and liquidity: Fungible tokens are highly liquid, enabling easy acquisition and delegation. Platforms like Tally and Sybil facilitate delegation to expert representatives. This matters for maximizing voter participation and leveraging expert communities without requiring constant voter engagement.

One-person, one-vote sybil resistance: Voting power is tied to a unique, non-fungible identity (e.g., Optimism's Citizen NFT, ENS delegate NFTs). This matters for community-focused DAOs like Optimism Collective or Nouns DAO, where long-term, verified contributor alignment is prioritized over pure capital weight.

Granular, behavior-based rewards: NFTs can encode participation history and unlock tiered voting power or rewards. This enables retroactive funding models (like Gitcoin Grants) and attendance-based governance, as seen in Moloch DAOs. This matters for incentivizing specific, valuable contributions beyond capital provision.

Centralization of power: Large token holders (whales, VCs, exchanges) can disproportionately influence outcomes, leading to governance attacks or decisions that favor short-term speculation. This is a critical weakness for protocols seeking egalitarian or anti-plutocratic governance, as seen in critiques of early Compound and Uniswap proposals.

Acquisition and valuation friction: NFTs are illiquid and harder to price, creating barriers to entry. Delegation markets are nascent. This matters for protocols needing rapid, large-scale governance participation or where economic alignment is the primary governance signal. It adds operational overhead compared to simple token staking.

Direct capital alignment: Voting power is proportional to economic stake. This matters for protocols like Uniswap or Aave where governance directly controls treasury assets and fee parameters, ensuring voters are financially incentivized. High liquidity on DEXs like Uniswap V3 allows for easy entry/exit, supporting dynamic delegation.

Vulnerable to concentrated power: A single entity can amass tokens to dominate votes, as seen in early Compound proposals. Mitigations like vote-escrowed models (veTokens) used by Curve Finance and Frax Finance introduce time locks to align long-term interests, but core power dynamics remain tied to capital.

Non-financial signaling: Voting power is based on provable participation or achievement, not pure capital. This matters for developer DAOs like Developer DAO or gaming guilds like Yield Guild Games, where governance rights are earned through contributions, curating a specialized electorate.

Illiquid and complex to scale: Unlike tokens, NFTs are not fungible and harder to price, complicating delegation and vote aggregation. Protocols like Nouns DAO demonstrate this model for small, cohesive communities, but scaling to thousands of voters requires sophisticated Soulbound Token (SBT) infrastructure not yet widely adopted.

One-token-one-vote ties influence directly to economic stake, as seen in Compound and Uniswap governance. This aligns voter incentives with protocol health, as token value is at risk. However, it centralizes power with whales and funds, leading to potential voter apathy from small holders.

High liquidity enables easy entry/exit and facilitates sophisticated delegate ecosystems (e.g., ENS, Gitcoin). This allows token-less participants to influence governance by delegating to experts. The model is battle-tested, supporting Treasury management and parameter updates across DeFi.

One-person-one-vote models, like Proof-of-Personhood NFTs, enhance Sybil resistance for non-financial decisions. Used by Art Blocks for curator votes, it rewards long-term community membership and soulbound tokens (SBTs) can represent unique roles, preventing vote buying.

NFT metadata enables granular voting power (e.g., rarity-based weight) and specialized sub-DAO permissions. Projects like Nouns DAO use it for treasury allocation, where each NFT represents a full vote. This creates clear, tradable governance rights but can limit broad participation due to cost and scarcity.