Shaking up DAO governance with delegates - Jen | Lido

Hey guys, my name is Jen and I'm from LA DAO. I'm contributing to light the DAO to DAO infrastructure value stream and today I will tell you about the solution we use to make decision easier. So to start just to remind light is liquid staking protocol uh which holds around 9 million Ethereum and which fully governed by DAO. what governance by DAO actually means. Just to remind to those who missed those fun DAO popular in crypto part, we have the system where the community make a proposals and LDO holders decide if this is this is a good idea for protocol or or not.

By decide I mean we have three stage governance. First stage is research forum proposal. So someone from the community literally anyone can come to the research forum and propose some changes for the protocol. Uh after that there are the discussion stage. After the discussion and alignment on forum we move into the offchain voting and if the proposal passed on offchain it can move to the onchain part.

Right now it doesn't sounds like like that but in reality when you have more than one proposal live this is actually chaos and to bit add a bit more color uh those parts those actors who decide it's LDO holders and now it's something around 50,000 Ldio holders and to decide anything at least 5% of total token supply need to be aligned that this is a good idea. So this is how regular day for voter in laida looks like as a person who work with this on the daily basis. I can say that decision making fatigue voting fatigue is real. The idea were great but the reality is hard. So we started to looking for the solutions how to make it easier to align and make decisions faster easier or at least with the less resources and one of our attempt was goose and this is the reason why I'm wearing this hat right now.

uh I'm not talking today about the good framework but to be honest I think that this is one of the greatest framework in lighter and if you are looking the way how to help DAO to align on the goals how to help DAO to set objectives you can check it here and probably adapt to your DAO if you have have one but today I'm going to talk about delegation um when uh We started to discuss delegation. It was pretty obvious like instead of deciding on 10 or something proposals monthly, you need once decide who will decide on those 10 proposals instead of you. Looks good. And actually the market also think that this is good. uh they said yes to it much earlier than we did because we have some concerns.

First of all, this is lead to centralization. That's obvious. It's much better to have a few token holders than one delegate in terms of decentralization. Second reason is that delegates usually not own tokens. So they don't have skin in the game and it's not really cool when someone without skin in the game deciding what to do and what risks takes and what not.

The third thing is that delegation make specific professional delegates market with some wide da expertise but in reality protocols don't need delegation expertise. they need specific market expertise or finance expertise or some other type of expertise to contribute to the protocol. And the last but not least actually no one guarantee you that delegates not burned out uh as your previous token holders did. same time um we had pretty tough decision making uh time in LA like no quorum strike this is really scary when you understand that DA can't move fast enough uh of course it depends and even in this time we were sure that if there are some emergency thing or something like that we will have quorum 100%. But same time we yet need to move fast also from the operational perspective.

So we decide that for today delegation are a necessary layer and propose it to the lio and DAO actually accept the proposal. So this is reality and actually that's why I'm making those talk. um delegation are criticized a lot right now from the market but yet there are no other solution to make those works. So so that's time uh no it would be like that uh so we said two core principles which we wanted to keep when we building the framework. First one is that token holders need to be yet owners of their token no matter what.

Uh and what we have here is um the design where token holders can delegate, redelegate any time, revoke tokens um and overwrite delegates decision which is also important in this system. If token holders voted somehow, delegate can't override it. And second principle, we don't want to have delegates instead of governance. We don't want it delegates who take over the governance. It was really important to us to save token holders who are participated yet active.

Beside the principles, you also need to make a few tradeoffs. That's what we did. First one is expertise versus open access. Um, as a DAO, you want to make it possible to everyone to participate in your delegation program, but same time to make sure that delegates will have delegations from token holders who actually have real skin in the game, you need to attract knowledgeable, reputable delegates. And when we built it, we made basic open framework.

Everyone can participate. But same time we incentivize and show in UI promoting only those who are have visible amount of LDO delegated and have a track record. Second is stable participation versus cost efficiency. Uh as you understand governance isn't easy. Uh and if you want stable participation you need at some incentives to stay with you to learn with you to evolve with the protocol but same time paying everyone for everything unsustainable.

So we have an incentivization program where if you attract visible amount of LDO right now it's 1 million um which is actually not a lot uh 0.1% of quorum uh and if you participate during the uh quarter you are will be incentivized but same time we are not paying to everyone for just activity. And the third one is signal versus no noise. It's really important just to build it the way that delegates have no pressure to comment on everything because any DAO have proposals which are obvious. This is just for protocol good and everyone understand it and no one need to discuss it further.

It just need to be done. Uh but have real expert feedback on controversial topic during the design part is really important. So we care what you think but not how often you post. Why do I think we did it well? So first reason is the forum discussion part.

Uh it raised and now we have more valuable comments, more discussions on the research forum uh than we had before. Second, right now 50% usually 50% of quorum consists of the voting power backed by delegates and it really value a lot and which is also important. Those delegates have their reputation and it's possible for token holders who have less time allocated for the governance participation to follow their decisions. And and the third is this year we have only one proposal with no quorum which is as you understand much better than previously. And my favorite part uh this quarter we propose to prolong delegate incentivization program and as I said delegates ma mainly on the research forum delegates participated in discussions and there were the discussion if this incentivization program deliver enough result to keep paying them and that's actually really great science.

that we achieved the possibility not to um not just to attract great delegates but also build something which is work as we wanted. So as a final slide uh I want to just one more time highlight that sometimes you need to do things that you don't really want to do but governance it's not for perfection but for just be able to work. So thank you. Okay, we can start with a Q&A session. We have first question there.

There's been a lot of talk recently about private voting for Dows and the hot topic at the moment is uh fully private voting where you're actually computing over encrypted data. So the votes are encrypted and the result is released and how people vote remains encrypted forever. Um that's really interesting in the context of delegation because if uh token holders who are delegating uh voting power to delegates don't get to see how the delegates vote, how do they know whether or not to choose a different delegate who may be more aligned with their interests? Have you thought about this topic uh yourself or as a DAO? uh as a DAO I think I can't say if the DA DA actually can think in uh we don't have any proposals regarding it my personal opinion here is the idea of private voting looks really good when you not trying to go deeper but when you try to go deeper you understand that it's hard to facilitate vote when you don't know how the actually if it's already somewhere close to quorum or in the middle or what's happening overall if you know this numbers it's really easy to track who voted anyway uh and also I think that yeah the problem that token holders can't understand how their delegate votes also exist uh I don't think that this is the main one for for for for the uh anonymity in voting.

I I don't think that this is the main one main one but yeah but if token holders will want it they voted for and let's see what happen. That's how D works.

Okay. Do we have any more on the right side? Yeah, I'm curious how you see uh if delegation has changed how the decisions are made beyond like its holders that or not so there is not skin in the game. uh you feel that there's any change on how people are voting on what types of decisions are being made, the reasons they have to make those choices like is it different now that there's more delegates from when there was only holders?

Um I think so. I think there are a few areas uh that will change a lot if you have only delegates voting because what I usually see that the delegates started to propose some services for the DAO and voted for it uh and get some granting which is not really optimal optimal way to work. Uh the other thing is um there are some votes which might be not aligned with the um some delegates value but would be really important for token holders business interests. And this is where the point um conflict of interest happens because delegates usually have some reputation in the community and if they're not accountable directly to token holders I I think it might work not really optim optimal for for token holder that's why we actually want token holders are able to override anything. Is that an answer?

Yeah. Uh okay. So considering that there is a different alignment uh do does light of governance have any type of uh security council right now that could veto a decision that goes against like something like not necessarily a security council but a second body of governance that's only holders or something like that. I know there's coming the whole

No, we don't need it because uh we have overrides power uh so like holders anyway able to redeside anything that delegates approved uh and also we are going to release in June the dual governance which is the tool that make it possible for ST holders oversee and withdraw their token from the protocol if there disagree uh with the LDO governance decision.

Okay, any more questions?

One more.

Oh wow.

Obviously AI is a hot topic. You already know the question. Um any plans to utilize AI in DAO governance?

To be honest, I don't believe in it. like uh you need to sorry uh like I need to learn on something on some data and uh the biggest amount of DAO have like three four five controversial proposals uh and all others just just with the supporting votes because everything happens on the discussion stage not on the voting stage usually. Uh and before we have the set of decisions which are less operational less rel um uh less um I don't know like if there would be the prediction market probably it would be possible to use AI there but for current state of dows I don't believe in Okay. It'd be funny if the gentleman on the right had another question.

Let's not do it.

Yeah. If you do, we can.

Okay. Um, any other questions? Maybe. Okay, then let's give Jen a big applause.