Token-Gated Governance

The foundational principle where a user's influence is quantified by their token holdings. Common implementations include:

• One-token-one-vote: Simple linear weighting.
• Quadratic voting: Power increases with the square root of tokens held to reduce whale dominance.
• Time-weighted voting: Voting power is boosted by the duration tokens are locked (e.g., veToken models). This mechanism directly aligns financial stake with decision-making authority.

A spam-prevention mechanism requiring a minimum token balance to create a governance proposal. This ensures only serious, financially committed participants can initiate votes, conserving network resources. For example, a DAO may require a proposer to hold 0.1% of the total token supply or delegate votes from others meeting the threshold. This gate maintains proposal quality and focus.

A system allowing token holders to delegate their voting power to other addresses (delegates or representatives) without transferring custody. This enables:

• Expert-driven decisions: Users can delegate to knowledgeable community members.
• Voter apathy mitigation: Passive holders can still participate.
• Flexible governance: Delegation can be revoked at any time, creating a liquid democracy. Platforms like Compound and Uniswap use this feature extensively.

The final phase where passed proposals are enacted on-chain. Timelocks are a critical security feature: they impose a mandatory delay between a vote's approval and the execution of its encoded transaction. This delay allows the community to review the executed code and provides a last-resort window to exit protocols if a malicious proposal passes. It is a defense against governance attacks.

Governance tokens often grant control over a protocol's community treasury—a pool of assets (native tokens, stablecoins, NFTs) used for grants, incentives, and development. Token-gated votes authorize specific transactions from this treasury, such as:

• Funding developer grants via grant programs.
• Allocating liquidity mining rewards.
• Executing strategic token buys or burns. This makes treasury management a primary governance activity.

Token holders govern key protocol parameters, allowing decentralized adaptation without centralized control. Common gated parameters include:

• Fee structures: Adjusting swap fees or interest rates.
• Risk parameters: Modifying collateral factors or liquidation thresholds in lending protocols.
• Smart contract upgrades: Authorizing migrations or new feature deployments via proxy contracts. This feature embeds continuous evolution into the protocol's design.

The most common model where each governance token equals one vote, directly linking economic stake to political power. This creates a one-token-one-vote system, often implemented via ERC-20 or ERC-721 standards.

• Examples: Uniswap (UNI), Compound (COMP), Aave (AAVE).
• Mechanism: Voting power is typically non-transferable during active proposal periods to prevent vote buying.
• Trade-off: Can lead to plutocracy, where large holders dominate decisions.

A representative model where token holders delegate their voting power to experts or community leaders, known as delegates. This improves efficiency and participation for less active holders.

• Examples: Optimism Collective, ENS DAO.
• Process: Delegates vote on proposals, and their voting weight is the sum of all tokens delegated to them.
• Benefit: Reduces voter apathy and allows for informed, consistent participation by dedicated delegates.

A mechanism designed to reduce the power of large holders by making the cost of votes increase quadratically. It measures the intensity of voter preference more accurately than one-token-one-vote.

• Formula: Cost = (Number of Votes)².
• Purpose: To prevent whale dominance and better reflect the preferences of a broader community.
• Implementation: Used in Gitcoin Grants for funding allocation and proposed in various DAO governance experiments.

A continuous, time-based voting model where voting power accrues the longer a token holder supports a proposal. It is designed for ongoing funding decisions rather than binary yes/no outcomes.

• Mechanism: Users stake tokens on proposals; their conviction (voting power) grows over time, signaling sustained demand.
• Use Case: Primarily for DAO treasury management and participatory budgeting, as seen in Commons Stack and 1Hive.
• Outcome: Funds are automatically allocated once a proposal reaches a predefined threshold of total conviction.

A hybrid model where token-based voting is used to signal sentiment, but the actual on-chain execution of decisions requires approval from a multisignature wallet controlled by elected or appointed signers.

• Structure: Governance token holders vote on proposals, but a Gnosis Safe with a council of 5-of-9 signers executes the transaction.
• Rationale: Adds a layer of security and operational efficiency, mitigating the risk of malicious proposals or smart contract bugs in the voting module.
• Example: Early DAOs like The LAO and many protocol treasuries use this model.

Governance rights are granted based on ownership of specific NFTs rather than fungible tokens. This ties membership and voting power to unique assets, often used for exclusive clubs or reputation-based systems.

• Mechanism: One NFT = one vote, or voting power is derived from NFT traits (e.g., rarity, achievements).
• Examples: Proof of Stake DAO (Moonbirds), Nouns DAO (one Noun, one vote).
• Advantage: Aligns governance with long-term community membership and contribution, not just capital.

A system where token holders can delegate their voting power to other addresses, enabling a fluid and representative governance model without transferring asset custody. This creates delegates or representatives who vote on behalf of others.

• Security Benefit: Reduces voter apathy and increases participation from knowledgeable community members.
• Risk: Concentrates power in a few delegates, creating centralization risks and potential for bribery or collusion (vote buying).
• Example: Compound's Governor Bravo and Uniswap's delegation system.

Specific threats targeting the integrity of on-chain governance processes.

• Token Whale Attacks: A single entity acquires a majority of governance tokens to pass malicious proposals.
• Flash Loan Attacks: Borrowing a large sum of tokens temporarily to gain voting power for a single block.
• Proposal Spam: Flooding the governance system with proposals to exhaust community attention or block legitimate votes.
• Time-Based Attacks: Exploiting timing delays between proposal submission and execution.

Critical security layers used to enforce checks on executed governance decisions.

• Multisig Wallets: A Gnosis Safe or similar that requires multiple signatures to execute a passed proposal, preventing a single point of failure.
• Timelocks: A mandatory delay between a vote passing and its execution. This provides a security window for the community to react if a malicious proposal slips through.
• Combined Use: Most major DAOs (e.g., Uniswap, Aave) use a combination: proposals execute via a timelock-controlled multisig.

Mechanisms to prevent a single entity from creating multiple identities (Sybils) to unfairly influence governance.

• Token-Based: The base layer of resistance; acquiring many tokens is costly.
• Proof-of-Personhood: Supplemental systems like BrightID or Worldcoin to verify unique human identity, often used for non-financialized voting (e.g., retroactive funding rounds).
• Constitutional Models: Frameworks like Conviction Voting or Holographic Consensus that mitigate Sybil influence through time-based weighting or futarchy.

The ability to fork (copy and modify) a protocol's code and state is a ultimate governance mechanism and security backstop.

• Community Tool: If governance fails or is captured, the community can fork the treasury and protocol to a new chain with fairer rules. This threat incentivizes good governance.
• Examples: The forks of Compound to create Tribe DAO, and the seminal fork of The DAO that created Ethereum Classic.
• Consideration: Forking requires social coordination and may fragment liquidity and community.

The economic design linking governance rights to the protocol's financial success, which impacts security.

• Pure Governance Tokens: Only confer voting rights (e.g., Uniswap's UNI). Value is purely speculative on future utility, which can lead to low voter turnout.
• Fee-Sharing / Revenue Tokens: Tokens that entitle holders to a share of protocol fees (e.g., Maker's MKR via the Surplus Auction). This aligns economic and governance incentives, making attacks more expensive.
• Security Risk: If the token has no cash flow, its value—and thus the cost to attack governance—may be low.

Quadratic voting is a governance mechanism designed to reduce the influence of large token holders (whales) by making the cost of casting additional votes increase quadratically. It is an advanced form of token-gated governance that aims for more equitable outcomes.

• Mechanism: A voter allocates a budget of "voice credits." The cost to cast n votes for a single proposal is n² credits.
• Goal: To reflect the intensity of preference among voters rather than pure capital weight.
• Implementation: Used by Gitcoin Grants and proposed in various DAO governance frameworks.

Delegated voting is a system within token-gated governance where token holders can delegate their voting power to a representative or "delegate" who votes on their behalf. This addresses voter apathy and enables governance by informed participants.

• Flexibility: Delegation is typically non-custodial and can be revoked at any time.
• Delegate Platforms: Protocols like Compound and Uniswap have built-in delegate registries, and tools like Tally and Boardroom provide profiles for delegates.
• Benefit: Allows for a representative democracy model, where knowledgeable community members can steward large amounts of voting power.