Soft power is execution abstraction. The future of blockchain infrastructure is not faster L1s but systems that abstract execution away from users. Protocols like UniswapX and CowSwap pioneered this by letting users specify a desired outcome—an intent—instead of a rigid transaction path.
dao-governance-lessons-from-the-frontlines
Blog
The Future of Soft Power in Hard-Coded Systems
An analysis of how influence, reputation, and network effects—not just smart contract rules—govern decentralized organizations, with lessons from Compound, Optimism, and Aragon.
introduction
THE SHIFT
Introduction
Blockchain's next evolution moves from hard-coded execution to soft, user-defined intent, fundamentally altering power dynamics.
Hard-coded systems are inefficient. Traditional blockchains require users to be network operators, managing gas, slippage, and MEV. This creates a coordination tax that intent-based architectures eliminate by delegating pathfinding to specialized solvers.
The battleground is solver networks. Value accrual shifts from L1 validators to intent-solving layers like Anoma and SUAVE. These systems create competitive markets for fulfillment, turning block space into a commodity and user experience into the moat.
Evidence: UniswapX, since launch, has settled billions in volume by outsourcing routing, demonstrating that users prefer declarative over imperative transactions. This is the template for all future on-chain interaction.
thesis-statement
THE SOFT POWER SHIFT
Thesis: Code is a Floor, Not a Ceiling
The ultimate governance of a protocol is determined by its social and economic layers, not its immutable smart contracts.
Smart contracts are a governance floor. They define the minimum viable ruleset, but the social consensus on top dictates their interpretation and evolution. This is why DAOs like Arbitrum and Uniswap spend more time on forum debates than code upgrades.
The most valuable protocols are social primitives. Bitcoin's proof-of-work is a technical mechanism, but its real power is the global belief in its monetary policy. Ethereum's social slashing of the DAO fork established a precedent more powerful than any line of Solidity.
On-chain voting is a feature, not the system. Aragon and Snapshot provide the tools, but off-chain signaling through forums and delegate ecosystems like those in Compound or MakerDAO drives actual decisions. The code executes the will; it does not create it.
Evidence: The Lido DAO's governance of stETH, a $30B+ asset, operates through a complex, off-chain delegate democracy. The smart contract is static; the power resides in the elected Node Operator set and tokenholder votes.
key-trends
SOFT POWER IN HARD-CODED SYSTEMS
Key Trends: The Rise of the Social Layer
Protocols are shifting from pure financial primitives to social coordination layers, where governance, identity, and reputation become the new moats.
01
The Problem: On-Chain Governance is a Plutocracy
Voting power is directly tied to token holdings, leading to apathy, low participation, and control by a few large holders. This creates a governance attack surface and stifles innovation.
- Result: <5% voter participation on average.
- Consequence: Proposals serve whales, not users or builders.
<5%
Voter Turnout
Whale-Driven
Outcomes
02
The Solution: Reputation-Based Voting (e.g., Optimism's Citizens' House)
Decouple governance power from capital by issuing non-transferable reputation (NFTs/SBTs) based on proven contributions. This aligns voting power with long-term ecosystem alignment.
- Mechanism: Airdrop voting power to active users and builders.
- Impact: Incentivizes meaningful participation over financial speculation.
Non-Transferable
Voting Power
Builder-Led
Governance
03
The Problem: Sybil Attacks Undermine Credibility
Without a cost to identity creation, any on-chain metric—from airdrop farming to governance—is easily gamed by bots creating thousands of wallets. This dilutes value for real users.
- Attack Vector: Zero-cost identity creation.
- Damage: Renders social graphs and reputation systems useless.
Zero-Cost
Attack
Bot-Infested
Metrics
04
The Solution: Proof-of-Personhood & Social Graphs (e.g., Worldcoin, ENS)
Leverage biometrics (Worldcoin) or persistent, costly identities (ENS) to create a Sybil-resistant base layer. Build social graphs (Farcaster, Lens) on top to map relationships and trust.
- Foundation: 1 human = 1 identity.
- Utility: Enables credible reputation, curated airdrops, and trusted communication.
Sybil-Resistant
Base Layer
Social Capital
As Asset
05
The Problem: DAOs Are Corporations in Disguise
Most DAOs replicate corporate structures with treasuries, payroll, and proposals, but with ~100x the coordination overhead. They lack the social tools for efficient, large-scale collaboration.
- Inefficiency: Decision latency measured in weeks.
- Outcome: Contributor burnout and stalled execution.
Weeks
Decision Latency
High Burnout
Contributor Churn
06
The Solution: Modular Contribution & Credentialing (e.g., Coordinape, Guild)
Replace monolithic governance with modular tools for task assignment, compensation, and credentialing. Use platforms like Coordinape for peer rewards and Guild for role-based access, creating a fluid labor market.
- Shift: From proposal voting to bounty execution.
- Result: Faster iteration and merit-based reputation accrual.
Task-Based
Coordination
Meritocratic
Reputation
THE FUTURE OF SOFT POWER IN HARD-CODED SYSTEMS
The Governance Participation Gap
Comparing governance models by their ability to convert token ownership into active, informed participation.
| Governance Metric | Direct Token Voting (e.g., Uniswap) | Delegated Democracy (e.g., Optimism, Arbitrum) | Futarchy / Prediction Markets (e.g., Gnosis, Omen) |
|---|---|---|---|
Typical Voter Turnout | 2-5% | 15-30% (via delegates) | N/A (Market-based) |
Proposal Creation Cost | $50k - $250k (gas + time) | $5k - $20k (delegate alignment) | Market creation fee (<$1k) |
Voter Information Burden | High (read all proposals) | Low (delegate research) | Medium (price signal analysis) |
Sybil Attack Resistance | Low (1 token = 1 vote) | Medium (delegate reputation) | High (capital at risk) |
Speed of Execution | 7-14 days | 3-7 days | < 24 hours (market resolution) |
Formalizes 'Soft Power' | |||
Mitigates Plutocracy | |||
Primary Failure Mode | Voter apathy / whale dominance | Delegate collusion / cartels | Market manipulation / oracle failure |
deep-dive
THE SOFT POWER STACK
Deep Dive: The Mechanics of On-Chain Influence
On-chain influence is a programmable layer of governance, capital, and information that shapes protocol evolution without direct control.
Soft power is hard-coded. Influence in decentralized systems is not a social construct; it is a function of token-weighted voting, delegated staking, and liquidity provisioning. This transforms political capital into a quantifiable, on-chain asset.
Governance is a coordination game. Protocols like Optimism's Citizen House and Arbitrum's Security Council demonstrate that influence requires structured delegation. Pure token voting fails; successful systems separate proposal power from execution power.
Liquidity is the ultimate veto. A whale providing liquidity on Uniswap V3 or Curve dictates price stability and fee generation. This economic influence often outweighs a governance vote, creating a de facto executive branch.
Information asymmetry creates alpha. Entities running EigenLayer operators or Flashbots searchers gain privileged system insight. This data advantage is monetized through MEV extraction, creating an influence feedback loop.
Evidence: Lido Finance's ~30% Ethereum staking share gives its DAO outsized influence over network consensus and the future of restaking protocols like EigenLayer, demonstrating soft power's tangible impact.
case-study
THE FUTURE OF SOFT POWER IN HARD-CODED SYSTEMS
Case Studies: Soft Power in Action
Governance is evolving from token-weighted votes to a spectrum of influence mechanisms that shape protocol behavior without direct on-chain enforcement.
01
The Problem: Protocol Capture via Token Voting
Direct on-chain governance is slow, low-participation, and vulnerable to whale dominance. Hard-coded upgrades create winner-take-all battles, as seen in early Compound and Uniswap proposals.
- Low Participation: <5% token holder turnout is common.
- Voter Apathy: Complex proposals delegated to often-opaque delegates.
- Coordination Failure: Inflexible rules prevent nuanced compromise.
<5%
Voter Turnout
Whale-Driven
Outcome Risk
02
The Solution: Optimism's Citizen House & RetroPGF
Separates proposal funding (Citizen House) from technical upgrades (Token House). Uses Retroactive Public Goods Funding (RetroPGF) to reward positive-sum contributions after the fact, aligning incentives with ecosystem value.
- Soft Incentive Alignment: Rewards are discretionary, not contractual.
- Merit-Based Allocation: $100M+ distributed over 4 rounds to developers & educators.
- Reduces Governance Attack Surface: Core protocol changes remain hard-coded; community growth is soft-powered.
$100M+
RetroPGF Allocated
2-Tier
Gov Model
03
The Solution: EigenLayer & Restaking as Credible Commitment
Transforms staked ETH into a reusable soft-power collateral. Operators opt into Actively Validated Services (AVS) slashing conditions, creating a cryptoeconomic reputation layer beyond native protocol tokens.
- Collateralized Soft Power: $15B+ in restaked ETH signals credible commitment.
- Programmable Trust: AVS like AltLayer and EigenDA bootstrap security via slashing consents.
- Decouples Security from Governance: Influence stems from staked economic weight, not just voting tokens.
$15B+
Restaked TVL
AVS Slashing
Enforcement
04
The Problem: DAO Treasury Mismanagement
Massive, static treasuries (e.g., Uniswap's $4B+) earn minimal yield and are targets for extraction proposals. Hard-coded multi-sigs create centralization bottlenecks and operational risk.
- Capital Inefficiency: Idle assets underperform inflation.
- Proposal Spam: Constant pressure to deploy funds for marginal gains.
- Security vs. Agility Trade-off: Slow, secure multi-sigs hinder responsive treasury ops.
$4B+
Idle Treasury
High Risk
Extraction Target
05
The Solution: MakerDAO's Endgame & SubDAO Autonomy
Decomposes the monolithic DAO into specialized, self-governing SubDAOs (Spark, Scope) with delegated operational authority. Uses Alignment Artifacts and Scope Frames to enforce cultural and risk parameters softly.
- Distributed Execution: SubDAOs act with agility within hard-coded risk bounds.
- Cultural Enforcement: Alignment Conservers can veto proposals violating core principles.
- Scalable Governance: Moves beyond one-DAO-fits-all to a modular ecosystem of aligned units.
6+
Specialized SubDAOs
Aligned Autonomy
Core Principle
06
The Future: Intents & Solver Networks as Soft Power
User intents (declarative desires) shift power from hard-coded execution paths to competitive solver networks, as pioneered by UniswapX and CowSwap. Solvers compete on fulfillment, with reputation and fees as soft-power levers.
- Market-Driven Execution: Best execution emerges from solver competition, not a fixed contract.
- Reputation-Based Trust: Solvers like Across build credibility via successful fills.
- Protocol as Coordinator: The core contract sets rules; the network provides the service.
Intent-Based
Paradigm Shift
Solver Competition
Enforcement
counter-argument
THE INCENTIVE MISMATCH
Counter-Argument: Isn't This Just Recreating Old Power Structures?
The shift from hard-coded execution to soft power in intent-based systems risks re-centralizing control under new, less accountable technical elites.
Intent-based architectures shift power from protocol code to the solvers and fillers who execute user goals. This creates a new coordination layer where economic influence, not code, dictates outcomes. The risk is a cartel of dominant solvers forming, similar to MEV searchers on Ethereum today.
The validator analogy fails because solvers have more discretion. A validator's job is binary; a solver's involves complex optimization and private order flow. This discretion is a vector for rent extraction, turning public blockchains into backends for private, profit-maximizing networks.
Evidence exists in DeFi today. Look at the solver market concentration in CowSwap or the relayer dominance in Across Protocol. These are early, specialized intent systems where a few actors capture most of the value and dictate transaction inclusion.
takeaways
STRATEGIC IMPERATIVES
Takeaways for Builders and Investors
The next wave of blockchain dominance will be won not by raw TPS, but by who best governs the interfaces between systems.
01
The Sovereignty Trap: Hard-Code Everything, Control Nothing
Monolithic L1s and rigid L2s are losing the narrative war. The future is a constellation of specialized execution layers (EigenLayer AVS, Celestia rollups) and intent-based networks (UniswapX, Across).
- Key Benefit: Capture value at the coordination layer, not the execution layer.
- Key Benefit: Future-proof against the next architectural paradigm shift.
$15B+
Restaked TVL
~80%
Cross-Chain Volume
02
Intent-Based Architectures Are the New Moats
Abstracting transaction construction to specialized solvers (like CowSwap and UniswapX) creates a powerful, sticky user experience. This is soft power in action.
- Key Benefit: ~20-40% better execution prices via MEV capture and aggregation.
- Key Benefit: User acquisition becomes frictionless; the solver network is the product.
40%
Better Price
1-Click
UX
03
Interoperability is the Real Total Addressable Market
Bridges (LayerZero, Axelar) and shared security models (EigenLayer, Cosmos) are not features—they are the foundational plumbing. The value accrues to the standard-setter.
- Key Benefit: $100B+ opportunity in securing and messaging between 10,000+ rollups/chainlets.
- Key Benefit: Protocol revenue shifts from base gas to interoperability premiums.
$100B+
TAM
10k+
Chains
04
The Modular Stack is a Commodity; Coordination is King
DA (Celestia, EigenDA), sequencing (Espresso, Radius), and execution (any EVM chain) are becoming cheap and abundant. The winning protocol will be the one that orchestrates them seamlessly.
- Key Benefit: ~90% cost reduction in data availability unlocks new app designs.
- Key Benefit: Build defensibility through superior developer UX and economic alignment, not technical exclusivity.
-90%
DA Cost
Commodity
Infra
05
VCs: Bet on Protocols That Capture the "Coordination Premium"
Invest in stacks that govern flow, not just state. This means intent solvers, cross-chain messaging arbiters, and restaked security markets.
- Key Benefit: Recurring revenue from being the essential intermediary in a multi-chain world.
- Key Benefit: Network effects are stronger in coordination layers than in isolated execution environments.
Recurring
Revenue
Strong
Moats
06
Builders: Own the User, Not the Chain
Your application should be chain-agnostic by design. Use account abstraction (ERC-4337) for seamless onboarding and intent-based systems for best execution. Let users be wherever they want.
- Key Benefit: Zero user awareness of underlying chain dynamics.
- Key Benefit: Instant compatibility with every new L2 and L3, capturing first-mover advantage.
Chain-Agnostic
Design
ERC-4337
Standard
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