Voting Vault

The core innovation of a Voting Vault is that it allows a user to delegate their governance rights (e.g., voting power, proposal rights) while retaining full custody of their underlying assets. The vault acts as a verifiable claim on the user's assets, proving the delegatee's right to vote with them, but the assets never leave the user's wallet. This eliminates the custodial risk associated with transferring tokens to a delegate or staking contract.

Voting Vaults are designed to be protocol-agnostic. A single vault implementation can be used to wrap and delegate voting power from a wide variety of assets, including:

• Liquid Staking Tokens (e.g., stETH, rETH)
• Yield-Bearing Tokens (e.g., cTokens, aTokens)
• LP Positions (e.g., Uniswap V3 NFTs)
• Governance Tokens themselves This flexibility allows delegates to aggregate voting power from a user's entire DeFi portfolio through a single, unified interface.

Voting Vaults are built as composable primitives that integrate directly with on-chain governance systems. They function by:

• Registering with a governance contract (like a Governor).
• Exposing a standard interface (getVotingPower) that the governance contract calls to query a user's voting power at a specific block.
• This allows governance systems to seamlessly recognize and count votes from vaulted assets without modifying their core logic, enabling cross-protocol governance aggregation.

Security is paramount as vaults hold verifiable claims to user assets. Key security features include:

• Immutable Logic: Core vault logic is non-upgradable to prevent malicious changes.
• Transparent State: All delegations are recorded on-chain and publicly auditable.
• No Asset Movement: Since assets aren't transferred, the attack surface is significantly reduced compared to custodial models.
• Time-locked Delegations: Some implementations allow users to set delegation expirations or lock-up periods, providing an extra layer of control and security.

The primary use case is enabling sophisticated delegate ecosystems. Users can delegate the voting power of their complex, yield-generating positions to a trusted expert or DAO without sacrificing yield or custody. For example, a user holding stETH, Aave aTokens, and a Uniswap V3 position could delegate all associated governance rights to a single delegate via their respective vaults, empowering professional delegates with diversified, representative voting power.

The standard framework for Voting Vaults is defined by EIP-5805 (VotingVault) and EIP-6372 (Clock). Key technical components:

• VotingVault Contract: Holds delegation logic and state, returns voting power via getVotingPower(address user, uint256 blockNumber).
• Governance Integration: A Governor contract calls the vault to check power, using a standardized clock (EIP-6372) for timekeeping instead of block numbers.
• Registry Pattern: Often, a central registry manages which vaults are approved for use within a governance system, ensuring security and compatibility.

Enables liquid democracy by allowing token holders to delegate their voting power to a representative or themselves without transferring the underlying asset. This separates economic stake from governance rights, reducing risk and increasing participation.

• Key Feature: Non-custodial delegation.
• Example: A user can delegate their COMP voting power to a trusted community member while still using the tokens for lending on Compound.

Aggregates voting power from multiple sources (e.g., staked tokens, LP positions, vesting schedules) into a single, verifiable unit. This allows for complex governance strategies and participation in multiple protocols simultaneously.

• Mechanism: The vault acts as a unified interface for on-chain identity.
• Use Case: A DAO can use a vault to combine voting power from its treasury's staked ETH and its members' locked tokens to vote on a proposal.

Allows governance tokens to be used productively in DeFi (e.g., as collateral for loans, in liquidity pools) while their voting power remains active. This solves the liquidity vs. governance dilemma.

• Core Benefit: Unlocks capital efficiency.
• Example: A user can supply their AAVE tokens as collateral on Aave to borrow assets, while their voting power in the Aave DAO is still delegated via the vault.

Enables vote escrow models, where voting power is weighted by the duration tokens are locked in the vault. This aligns long-term incentives and is foundational for curve wars and protocol-owned liquidity.

• Mechanism: Longer lock-ups grant exponentially higher voting power.
• Protocol Example: Curve Finance's veCRV model, where CRV tokens are locked in a vault to receive boosted rewards and governance influence.

Facilitates participation in the governance of multiple, interconnected protocols from a single position. A vault can represent a basket of governance rights, enabling coordinated meta-governance.

• Strategy: A vault holding INDEX tokens could vote on Index Coop proposals while also using those tokens to vote on underlying component protocols like Aave or Uniswap.
• Benefit: Reduces transaction overhead for managing diverse governance portfolios.

Provides a secure, transparent, and programmable framework for DAO treasuries and institutional investors to manage their governance participation. It enables multi-signature control and clear audit trails for all voting actions.

• Key Feature: Separation of asset custody and voting execution.
• Application: A DAO's multi-sig can deposit treasury assets into a vault, allowing designated delegates to vote without direct access to the treasury funds.

The fundamental security distinction is who controls the underlying assets.

• Custodial Vaults: A trusted third party (e.g., a DAO multisig) holds the assets. This introduces counterparty risk and requires high trust in the custodian's security and integrity.
• Non-Custodial Vaults: Assets remain in the user's wallet or a permissionless smart contract. Security shifts to smart contract risk and the correctness of the vault's delegation logic, eliminating trusted intermediaries.

As with any DeFi primitive, the vault's code is the primary attack surface.

• Logic Bugs: Flaws in the delegation, withdrawal, or power calculation functions can lead to lost votes or locked funds.
• Upgradeability Risks: If the vault uses proxy patterns, a compromised admin key could upgrade to malicious code.
• Integration Risks: The vault must securely interact with external protocols (e.g., staking contracts, oracles). A vulnerability in an integrated protocol can cascade to the vault.

Voting Vaults create new dimensions for governance manipulation.

• Power Inflation Attacks: An attacker could exploit the vault's rules to artificially inflate their voting power without proportional economic stake (e.g., via flash loans or re-staking).
• Vote Delegation Hijacking: If delegation is mutable, a compromised private key could allow an attacker to redirect voting power.
• Timing Attacks: Manipulating the snapshot mechanism for voting power calculation to gain disproportionate influence.

The assets deposited in a vault are often not at direct protocol risk, but remain exposed to other financial hazards.

• Underlying Asset Volatility: The value of the delegated voting power fluctuates with the collateral asset's price.
• Slashing Risk: If the vault delegates to a slashed validator (in PoS systems) or a penalized service, the underlying assets can be partially lost.
• Liquidity Risk: Assets may be locked for a duration, preventing withdrawal during market stress.

Many vault implementations retain administrative functions, creating central points of failure.

• Pausability: An admin may have the ability to pause withdrawals or voting, which can be used maliciously or become a single point of failure if compromised.
• Parameter Changes: Control over fees, whitelists, or supported assets could be abused.
• Best Practice: Use timelocks and decentralized multisigs for any admin functions to mitigate these risks.

Assessing vault security requires due diligence on several fronts.

• Audit Reports: Reliance on audits from reputable firms is critical, but not a guarantee. Review the scope and severity of findings.
• Formal Verification: Some projects use mathematical proofs to verify critical contract properties.
• Bug Bounties: An active, well-funded bug bounty program is a strong indicator of a project's security posture.
• Time in Production: A vault with a long, uneventful track record (e.g., Yearn's yVaults) provides empirical evidence of robustness.

A Bribe Market is a secondary ecosystem where projects or individuals offer incentives (often tokens or fees) to governance token holders or delegates in exchange for their voting power on specific proposals. Voting Vaults are central to this as they hold the delegatable power.

• Platforms: Protocols like Hidden Hand or Paladin facilitate these markets.
• Purpose: Aligns short-term economic incentives with governance outcomes, though it raises questions about vote buying.

Composability refers to the ability of Voting Vaults to be integrated and built upon by other DeFi protocols. This enables Power Aggregation, where vaults from different protocols can be combined into a single, more potent voting position.

• Example: A meta-governance vault that accepts deposits of multiple governance tokens (e.g., AAVE, COMP) and delegates them as a unified bloc.
• Impact: Creates sophisticated political entities and professional delegate platforms within DAOs.