Approval Threshold

Two distinct but related concepts govern proposal passage. Quorum is the minimum total participation (e.g., 20% of tokens must vote) for a vote to be valid. The Approval Threshold is the percentage of those votes that must be in favor (e.g., 51% for simple majority, 67% for supermajority). A proposal can fail by not reaching quorum, even if all cast votes are 'yes'.

Thresholds are not one-size-fits-all and can be configured for different proposal types to balance security with agility.

• Simple Majority: >50% approval. Common for routine parameter updates.
• Supermajority: e.g., 66.7% or 75%. Used for high-stakes changes like treasury spends or protocol upgrades.
• Absolute vs. Relative: An absolute threshold (e.g., 1M tokens must vote 'yes') is independent of turnout, while a relative threshold is a percentage of votes cast.

A well-calibrated approval threshold is a primary defense against governance attacks. A low threshold (e.g., 51%) makes a protocol vulnerable to a 51% attack where a malicious actor could acquire just over half the voting power to pass harmful proposals. High supermajority requirements (e.g., 67%+) force broader consensus, making attacks exponentially more expensive and difficult to coordinate.

The method of calculating the threshold's base dramatically impacts governance.

• Token-Weighted: The approval threshold is a percentage of total voting power, which is usually proportional to token holdings (e.g., 1 token = 1 vote). This is the most common model in DAOs.
• One-Person-One-Vote: Used in some decentralized identity systems, where the threshold is a percentage of verified participants, not their capital stake. This reduces whale dominance but introduces other identity challenges.

Approval is often evaluated at a specific snapshot in time.

• Snapshot Block: Votes are tallied at a predetermined block height. This prevents last-minute manipulation.
• Delegated Voting: Token holders can delegate their voting power to representatives or delegates. The approval threshold is calculated using this delegated power, making delegate selection a critical governance activity. A delegate with large delegated stakes can single-handedly meet a significant portion of a quorum.

An approval threshold is a predefined quorum or majority rule, expressed as a percentage of total voting power, that must be met for a governance proposal to be executed. Its primary purpose is to prevent malicious or low-consensus changes from being enacted, ensuring that only proposals with broad community support are approved. This mechanism is fundamental to on-chain governance models used by DAOs and protocol treasuries.

Different thresholds are used for different proposal types to align security with impact.

• Simple Majority (>50%): Common for routine operational decisions.
• Supermajority (e.g., 66%, 75%): Required for high-impact changes like modifying the protocol's core parameters or treasury allocations.
• Absolute Majority: A fixed percentage of total possible votes (including abstentions), making passage more difficult.
• Dual Thresholds: Combine a quorum (minimum participation) with a majority requirement, ensuring both engagement and consensus.

Setting the threshold incorrectly creates systemic risks.

• Too Low: Makes the protocol vulnerable to governance attacks where a malicious actor with a modest stake can push through harmful proposals.
• Too High: Leads to governance paralysis, where even popular proposals cannot pass, stifling necessary upgrades and responses to emergencies.
• Vote Buying & Collusion: A known threshold can be a target for attackers to acquire just enough tokens to meet it, a risk mitigated by mechanisms like rage-quitting or timelocks.

Thresholds are often encoded as upgradeable parameters within a governance contract, such as Compound's Governor Bravo or OpenZeppelin's Governor. Real-world examples:

• Uniswap: A 4% quorum and a simple majority for most votes.
• MakerDAO: Uses a Governance Security Module and executive votes that typically require a majority of participating MKR.
• Arbitrum DAO: Employs a tiered system where proposal types (e.g., budget, constitutional) have different thresholds.

The approval threshold interacts with several other governance mechanisms.

• Quorum: The minimum total voting power that must participate for a vote to be valid.
• Timelock: A mandatory delay between a proposal's approval and execution, allowing users to react to passed proposals.
• Voting Period: The duration during which votes can be cast, affecting strategic voting and threshold calculation.
• Delegation: The process where token holders assign their voting power to representatives, which consolidates power and impacts threshold dynamics.

The minimum percentage of eligible voting power that must participate in a governance vote for the result to be valid. A proposal may meet its approval threshold but still fail if it does not achieve quorum, preventing a small, active minority from making decisions for the entire community.

• Purpose: Ensures decisions have sufficient community engagement and legitimacy.
• Example: A DAO with a 20% quorum requires at least 20% of all governance tokens to be cast as votes.

The weight or influence assigned to a participant's vote in a governance system. It is typically determined by token ownership (one token, one vote) or via more complex mechanisms like vote delegation or time-weighted voting.

• Token-Based: The most common model, where voting power is proportional to the number of governance tokens held.
• Delegation: Allows token holders to delegate their voting power to representatives or experts.

Governance systems often implement different proposal categories with corresponding approval thresholds. This creates a tiered system where more consequential decisions require higher levels of consensus.

• Example Tiers:
  • Signal Proposal: Low threshold, for gauging sentiment.
  • Treasury Spend (< $100k): Moderate threshold.
  • Protocol Upgrade or Major Spend: Very high threshold (e.g., >66% or 80%).

Safety mechanisms that can delay or override a proposal that has met its approval threshold. A timelock introduces a mandatory waiting period between a vote passing and execution, allowing for final review. A veto (or guardian) power allows a designated entity to cancel a passed proposal under extreme circumstances.

• Purpose: Provides a final check against malicious or erroneous proposals that gain majority support.

The mechanism where the outcome of a governance vote is executed by a multi-signature wallet. After a proposal passes the approval threshold, authorized signers (often elected delegates or a core team) must cryptographically sign the transaction to enact the change.

• Role: Separates voting from execution, adding a layer of operational security and reducing the risk of smart contract bugs in the voting system itself.