Voting Weight Delegation

Voting weight delegation is the process where a token holder (the delegator) transfers their on-chain voting power to another address (the delegate) without transferring asset ownership. This creates a principal-agent relationship, where the delegate can vote on proposals using the combined weight of all their delegators. The delegation is typically non-custodial and can be revoked at any time, ensuring the delegator retains ultimate control.

Major DeFi and DAO protocols implement delegation in distinct ways:

• Compound & Uniswap: Use a built-in governance token (COMP, UNI) where holders delegate to an address (self or third-party) to participate in on-chain votes.
• MakerDAO: Employs a complex Delegate Adapter system, where MKR holders delegate to recognized Delegate Contracts that execute votes according to public platforms.
• Cosmos Hub: Uses a liquid democracy model where ATOM holders can delegate to validators, who vote on governance proposals proportionally to their staked share.

Token holders delegate their voting weight for several key reasons:

• Passive Participation: To engage in governance without the time cost of researching every proposal.
• Expertise Leverage: To align with a delegate (often a team or community expert) whose technical knowledge and voting philosophy they trust.
• Vote Aggregation: To increase the influence of a particular viewpoint by pooling voting power, helping proposals reach quorum or pass.
• Economic Incentives: In some liquid staking systems, delegators may earn rewards from a validator's governance participation.

A delegate assumes significant responsibility and faces distinct risks:

• Fiduciary Duty: Expected to vote in the best interest of their delegators, often maintaining transparent voting histories and rationales.
• Vote Diligence: Must actively analyze complex proposals, which can involve technical upgrades, treasury management, and parameter changes.
• Centralization Risk: High concentration of delegated power in a few addresses can undermine decentralized governance ideals.
• Slashing Risk: In Proof-of-Stake systems like Cosmos, a validator/delegate voting incorrectly on certain governance proposals could be subject to slashing penalties.

Voting weight delegation interacts with several key governance concepts:

• Liquid Democracy: A hybrid model where users can vote directly or delegate their vote dynamically on a per-topic basis.
• Quadratic Voting: A system where voting power increases with the square root of tokens held, often combined with delegation to mitigate whale dominance.
• Conviction Voting: A time-based model where voting weight increases the longer a token is locked on a proposal; delegation can be applied to this locked weight.
• Minimal Viable DAO (MVD): A governance pattern that often starts with simple token-weighted voting and delegation before evolving more complex structures.

When voting power is delegated to a few large entities, it can lead to centralization and the formation of governance cartels. This undermines decentralization and can result in decisions that favor insiders. Key risks include:

• Whale dominance: A single large delegate can sway proposals.
• Collusion: Large delegates may coordinate to control outcomes.
• Reduced voter diversity: The "wisdom of the crowd" is lost.

Delegators often fail to monitor their delegate's voting behavior, leading to low voter participation and unaccountable representatives. This creates security gaps:

• Passive malicious voting: Delegates may vote against the delegator's interests.
• Stale mandates: Delegation is often set once and forgotten, even if the delegate becomes inactive or changes alignment.
• Lack of recall mechanisms: Many systems lack easy tools for redelegation or slashing for bad behavior.

Delegation systems are vulnerable to Sybil attacks, where a single entity creates many fake identities to gain disproportionate voting weight. Mitigations include:

• Proof-of-Personhood: Systems like BrightID to verify unique humans.
• Reputation-based weighting: Basing voting power on verifiable contributions or tenure.
• Bonding mechanisms: Requiring staked assets that can be slashed for malicious behavior.

Liquid delegation tokens (e.g., veTokens) separate governance rights from underlying assets, creating new risks:

• Market manipulation: Governance power can be borrowed or bought temporarily to pass specific proposals.
• Complex attack surfaces: Interactions with DeFi lending protocols can create unexpected vote consolidation.
• Time-lock exploits: Mechanisms like vote-escrow can be gamed if the locking logic has vulnerabilities.

Protocols implement various designs to secure delegation:

• Partial Delegation: Allow splitting voting power across multiple delegates to diversify trust.
• Delegation Caps: Limit the maximum voting power any single delegate can accumulate.
• Cool-down Periods: Enforce waiting periods before redelegated votes become active to prevent rapid power shifts.
• Transparency Dashboards: Tools like Tally and Boardroom track delegate voting history and statements.

A token holder who transfers their voting power to a chosen representative, known as a delegate. The delegator retains ownership of their underlying assets (e.g., tokens) but forfeits direct governance rights for the delegated amount.

• Purpose: Enables participation for those lacking time or expertise.
• Rights: Typically retains the right to redelegate or undelegate at any time.
• Risk: Assumes trust in the delegate's judgment and integrity.

A hybrid governance model that combines direct and representative democracy. Participants can vote directly on proposals or delegate their vote to a trusted expert, with the flexibility to change delegates or vote directly on each issue.

• Core Principle: Transitive delegation – a delegate can further delegate votes they have received.
• Advantage: Creates a dynamic web of trust and specialized expertise.
• Blockchain Implementation: Used by projects like BitShares and DAOstack to create more fluid governance structures.

A delegation model where the delegate must stake or bond capital (often the protocol's native token) as collateral. This aligns incentives by putting the delegate's own funds at risk for poor performance or malicious actions.

• Purpose: Increases delegate accountability and skin-in-the-game.
• Mechanism: Slashing mechanisms can penalize bonded delegates for double-signing or inactivity.
• Example: Cosmos Hub validators require self-bonded ATOM; delegators add to this stake, sharing in rewards and risks.

A system where tokens are locked for a specified period to mint non-transferable governance tokens (e.g., veCRV, veBAL). Voting weight is proportional to the amount and duration of the lock.

• Key Innovation: Aligns long-term incentives by rewarding longer lock-ups with more power.
• Delegation: Users can delegate their non-transferable veTokens to a chosen "voter" to direct emissions or gauge weights.
• Primary Use: Controls liquidity mining incentives in DeFi protocols like Curve Finance and Balancer.

Security risks inherent in delegation systems that can compromise governance integrity.

• Vote Buying: Delegates offering direct payment for voting power, potentially leading to short-term profit over protocol health.
• Sybil Delegation: A single entity creating multiple delegate identities to concentrate power covertly.
• Lazy Delegation: Apathy leading to high concentration of power in a few default or well-marketed delegates, reducing decentralization.
• Mitigations: Include bonded stakes, identity verification, and delegation caps.