Why Reputation Decay is Non-Negative for Healthy DAOs

Reputation is a liability, not an asset. In traditional DAOs like Compound or Uniswap, static voting power creates permanent, misaligned influence. Decay transforms governance into a continuous proof-of-work system, where past contributions depreciate without ongoing participation.

Decay prevents zombie governance. Without it, early contributors become permanent passive whales, a dynamic seen in aging MakerDAO polls. Decay forces the active redelegation of influence, ensuring the current, engaged cohort controls the protocol's direction.

Evidence: Analysis of Snapshot data shows DAOs with over 60% voter apathy suffer from proposal stagnation. Systems like SourceCred and Coordinape implement implicit decay by weighting recent contributions, proving the model's operational necessity.

Decay prevents governance ossification. Static reputation systems, like early Snapshot voting power, create permanent aristocracies. Decay forces continuous contribution, ensuring active participants retain influence.

The mechanism is a Sybil-resistance tool. Unlike one-time airdrops that create mercenary capital, decay requires sustained engagement. This mirrors Proof of Personhood systems like Worldcoin, but for on-chain contribution.

It aligns with real-world organizational dynamics. Influence in functional companies requires consistent performance. Decay codifies this, creating a meritocratic sink that outperforms static token-weighted voting models.

Evidence: DAOs with static power, like early Uniswap governance, suffer from voter apathy and delegation to large, passive holders. Decay directly counters this stagnation.

Reputation decay is non-negative because it creates a mandatory participation tax. Systems like SourceCred and Karma demonstrate that without decay, early contributors accumulate permanent, outsized voting power, creating a stagnant power pool. This ossifies decision-making and deters new talent.

Decay functions as a sybil-resistance tool. Unlike static token voting, a decaying reputation score requires continuous proof-of-work. This makes large-scale vote buying or delegation to passive whales economically irrational, as seen in the governance stagnation of early Compound and Uniswap proposals.

The counter-intuitive insight is that decay increases security. A constantly refreshing reputation graph is more resistant to long-term attacks than a static one. Protocols like Colony and 1Hive Gardens implement this to ensure the most relevant voices, not the oldest wallets, guide decisions.

Evidence: Analysis of Snapshot voting data shows DAOs with no decay mechanisms experience a >60% drop in unique voter participation year-over-year, while engagement in systems with decay remains flat or increases.

Decay is a non-negative tax. It subtracts from a user's reputation score without redistributing it, creating a system-wide sink. This prevents reputation inflation and ensures the total supply of influence is bounded, unlike inflationary token models.

The mechanism forces a choice. Users must choose between active contribution to maintain their score or accepting a gradual loss of governance power. This directly combats voter apathy and passive accumulation, a problem seen in early DAOs like MolochDAO.

Implementation requires a time-weighted function. Systems like SourceCred use continuous exponential decay, while others like Karma3 Labs propose epoch-based reductions. The function's steepness determines the pressure to participate.

Evidence from game theory. Without decay, a Sybil attacker can accumulate reputation once and wield influence indefinitely. Decay forces recurring costs, making long-term attacks economically unviable, similar to Proof-of-Stake slashing.

Decay is a governance tax that punishes participation. It creates a maintenance burden for active contributors, forcing them to constantly re-prove their value. This friction directly competes with productive work, mirroring the inefficiencies of Proof-of-Work.

It centralizes power over time. Decay disproportionately affects smaller, newer participants, while large, early stakeholders maintain influence. This entrenches an oligarchic structure similar to the initial distribution flaws seen in many airdrops, undermining the DAO's decentralization thesis.

The mechanism is gameable. Participants will optimize for decay-resistant, low-effort actions rather than high-impact work. This leads to governance theater—akin to the vote-buying dynamics in protocols like Curve Finance—where signaling replaces substantive contribution.

Evidence: No major DAO (e.g., Uniswap, Arbitrum, Optimism) implements native reputation decay. Their governance relies on continuous voting delegation and proposal quality, not artificial scarcity of influence, to maintain health.

Reputation must depreciate over time. Static reputation scores create permanent, unearned influence, mirroring the plutocratic stagnation of pure token-voting systems. Decay forces continuous, value-aligned participation to maintain governance weight.

Decay is a Sybil-resistance tool. It increases the cost of maintaining a large, inactive voting bloc, making attacks like a51's governance exploits more expensive and detectable compared to static systems.

The optimal decay curve is sigmoidal. A slow initial decay preserves contributor loyalty, while an accelerating mid-range punishes apathy, and a final plateau prevents total score evaporation—balancing incentives like MolochDAO's ragequit with long-term commitment.

Evidence: Systems like SourceCred implement time-based score decay, while Colony's reputation mining requires ongoing activity. Without it, DAOs like early Aave risked voter apathy where <5% of token holders directed protocol upgrades.