Why SBTs Make DAO Governance Actually Work

Capital concentration dictates governance, leading to low participation and proposals that serve whales, not the community. This is the Sybil-resistant but plutocratic front.

• <1% of token holders typically drive decisions
• Creates perverse incentives for mercenary capital
• Makes delegation models (like Compound, Uniswap) a band-aid

Anonymous, costless identity allows attackers to spawn infinite wallets, corrupting any reputation or democratic system. This is the egalitarian but Sybil-vulnerable front.

• Renders quadratic voting and proof-of-personhood (like BrightID) fragile
• Makes retroactive funding (like Optimism Grants) a target for fraud
• Zero cost to create a malicious identity

Soulbound Tokens (SBTs) bind verifiable credentials to a wallet, creating a persistent, composable identity layer. They are the privacy-preserving primitive for both fronts.

• Ethereum's ERC-4973 standardizes the SBT primitive
• Enables weighted voting based on proven contributions (Gitcoin Passport)
• Allows permissioned access to sub-DAOs and treasury functions

Replace pure capital weight with a function of capital + verified contribution. This attacks the plutocracy front without opening the Sybil front.

• Example: Voting power = (Tokens) * log(Verified SBTs)
• SBTs can represent Git commits, governance history, or POAP attendance
• MolochDAO v2 and Aragon OSx are architecturally prepared for this

Use SBT attestations to filter out bots and reward genuine users, securing the community treasury. This directly defends the Sybil-vulnerable front.

• Optimism's AttestationStation is a primitive for this
• Enables targeted retroactive funding for proven builders
• ~90% reduction in fraudulent claim attempts in early experiments

SBTs introduce new challenges: privacy leakage from public credentials and the need for a sovereign revocation mechanism. Zero-Knowledge Proofs (ZKPs) are the necessary countermeasure.

• zk-SBTs (like Sismo) allow proving traits without revealing identity
• Revocation registries must be decentralized to prevent coercion
• Without ZK, SBTs create a permanent, public social credit score

One-token-one-vote is a plutocracy. Airdrop farmers and whales with multiple wallets can easily game proposals.

• Sybil resistance is impossible with fungible tokens.
• Vote-buying and delegation markets centralize power.
• Low-quality participation from mercenary capital.

SBTs bind voting power to a verified, persistent identity, not a wallet balance.

• Non-transferability prevents vote consolidation and selling.
• Attestation layers like Ethereum Attestation Service (EAS) build on-chain reputation.
• Programmable rights: Voting power can scale with contribution SBTs (e.g., from Gitcoin Grants, Coordinape).

The Optimism Collective uses AttestationStation and non-transferable Citizen NFTs to allocate RetroPGF funding.

• Voting power is derived from a graph of peer and project attestations.
• ~30M OP distributed in rounds by citizens, not token holders.
• Creates a meritocratic flywheel where reputation compounds.

New DAOs lack engagement. Existing members become passive token holders, creating governance apathy.

• No skin in the game for new joiners beyond a token purchase.
• High barrier to meaningful participation.
• Governance becomes a chore for a small, burnt-out cohort.

SBTs enable a permissioned-to-permissionless journey, onboarding members through verifiable actions.

• Quest SBTs from Layer3, Galxe prove onboarding and education.
• Contribution SBTs from SourceCred, Wonder auto-track GitHub PRs and forum posts.
• Voting power unlocks after earning specific reputation SBTs, aligning incentives.

Gitcoin Passport aggregates SBTs and off-chain credentials to compute a unique humanity score.

• Sybil-resistant quadratic funding for grants relies on Passport scores.
• ~$50M+ in matched funding distributed using this model.
• Decouples financial capital from governance influence in funding decisions.