Why Proposal Thresholds Are Gamed by Whales

Proposal thresholds are a centralization vector. They are a simple spam-prevention mechanism that filters proposals based on a minimum token vote requirement. This creates a direct financial gate, ensuring only well-resourced entities can initiate governance.

Whales game this to control agendas. Entities like Jump Crypto or a16z can single-handedly meet thresholds, allowing them to front-run community sentiment. This bypasses the need for grassroots consensus-building seen in protocols like Uniswap's early stages.

The result is plutocracy, not democracy. The system selects for capital concentration, not idea quality. This is evident in Compound's governance, where a handful of addresses control the proposal pipeline, effectively deciding which upgrades are even debated.

Evidence: In 2023, an analysis of Top 20 DAOs showed over 60% of successful proposals were sponsored by entities holding >1% of the governance token supply, directly correlating threshold size with proposer concentration.

Agenda-setting is ultimate power. A whale with 5% of tokens can block all proposals, dictating which ideas reach a vote. This creates a veto-based governance system where minority factions control the political discourse.

Thresholds create a cartel economy. Large holders like a16z or Jump Crypto form implicit coalitions to meet proposal minimums. This gatekeeps innovation, favoring incumbent projects like Uniswap or Compound over grassroots DAOs.

Voting power is a secondary concern. Once a proposal is live, the vote is often a formality. The real battle is fought in backchannel deals to achieve quorum, a process gamed by platforms like Snapshot and Tally.

Evidence: In MakerDAO, a single entity needed just 0.02% of MKR to submit a proposal, yet the effective threshold for serious consideration is a whale coalition controlling >5%. This filters out 99% of community ideas before a vote.

Thresholds create predictable attack surfaces. A fixed token threshold for submitting proposals is a static target. Whales time their token acquisitions to cross this line precisely, enabling low-cost, high-impact control over the proposal agenda.

Vote delegation amplifies centralization. Protocols like Compound and Uniswap use delegation to boost participation, but it consolidates voting power. A whale can amass delegated votes from passive holders, creating a de facto veto bloc without owning the tokens outright.

Snapshot voting enables sybil-resistant gaming. While Snapshot prevents double-voting, it does not prevent a whale from splitting funds across hundreds of addresses (sybil identities) that all vote identically. This obfuscates their total influence and skirts reputation-based defenses.

Evidence: The a16z veto. In a 2022 Uniswap vote, venture firm a16z used its 15M UNI delegation power to single-handedly swing a governance proposal, demonstrating how delegated capital trumps distributed sentiment.

Token-weighted thresholds create plutocracy. The primary defense against spam proposals is a minimum token stake, which directly equates governance power with financial power. This design ensures that only the largest holders, or whales, can formally set the protocol's direction, marginalizing smaller but knowledgeable participants.

The spam filter is gamed. Whales use their position to gatekeep the governance agenda, submitting proposals that serve their financial interests while blocking competing ideas. This creates a de facto proposal cartel, as seen in early Compound and Uniswap governance, where a handful of addresses controlled the queue.

The alternative is chaos. Without a capital cost, governance forums like Snapshot and Tally would be flooded with spam, meme proposals, and Sybil attacks, rendering the process unusable. The threshold is a crude but effective denial-of-service filter that every major DAO, from Maker to Aave, has adopted out of necessity.

Evidence: An analysis of early Aave governance shows over 70% of failed proposals were blocked for not meeting the threshold, not on substantive grounds. The system filters for capital first, merit second.