Types of Voting Mechanisms

Voting is the foundation of decentralized governance, allowing stakeholders to influence decisions, allocate resources, and shape the future of a DAO. However, different voting mechanisms have varying levels of fairness, security, and resistance to manipulation.

Token-Based Voting

How It Works

• Each token represents one vote (1 token = 1 vote).
• The more tokens a participant holds, the greater their voting power.
• Used in most DAOs due to its simplicity and direct alignment with token ownership.

Pros

• Simple and widely adopted – Easy to implement using ERC-20 governance tokens.
• Aligned incentives – Token holders have a stake in the DAO’s success.
• Efficient for high-stake decisions – Weighted voting reflects financial commitment.

Cons

• Plutocratic risk – Large holders (whales) can dominate decisions.
• Low voter participation – Holders may not engage in governance.
• Vulnerable to vote buying – Tokens can be borrowed or delegated for influence.

Best Use Cases

• Protocol governance (e.g., Uniswap, Compound).
• DAOs where token ownership closely aligns with decision-making incentives.

Quadratic Voting

How It Works

• Votes are not linear—the cost of casting multiple votes increases quadratically.
• Prevents a single entity from dominating decisions with large holdings.
• Votes cost example:
  • 1 vote costs 1 token
  • 2 votes cost 4 tokens (2²)
  • 3 votes cost 9 tokens (3²)
  • 4 votes cost 16 tokens (4²)
  • And so on…

Pros

• Balances influence – Large holders still have power but at diminishing returns.
• Encourages diverse participation – Smaller stakeholders have a meaningful voice.
• More democratic outcomes – Helps prevent whale dominance.

Cons

• Requires identity verification – Without Sybil resistance, it can be gamed.
• Complex implementation – Needs additional smart contracts and infrastructure.
• Might not work well for all DAOs – If contributors have different levels of expertise, equalizing voting power may be counterproductive.

Best Use Cases

• DAOs focused on community-driven governance.
• Funding allocation (e.g., Gitcoin Grants).
• Public goods funding where fairer representation is needed.

Conviction Voting

How It Works

• Voting power accumulates over time based on how long a participant supports a proposal.
• Encourages long-term commitment rather than sudden voting spikes.
• Conviction formula example:
  • Conviction = Prior Conviction × Decay Factor + New Stake

Pros

• Discourages short-term manipulation – Prevents last-minute whale votes.
• Continuous governance – Members can express preferences dynamically.
• Resistant to vote buying – Requires commitment over time, reducing flash influence.

Cons

• Slow decision-making – Requires time for votes to accumulate influence.
• New participants have less immediate power – Can disadvantage newcomers.
• Might not be ideal for urgent decisions – Some DAOs need faster governance cycles.

Best Use Cases

• Funding allocation decisions.
• Community-driven DAOs with long-term incentives.
• Ecosystems needing gradual consensus formation (e.g., Commons Stack).

Holographic Consensus

How It Works

• A predictive market mechanism is used alongside traditional voting.
• Participants stake tokens to signal which proposals deserve attention.
• If a proposal passes a threshold of attention, it is fast-tracked for full DAO voting.
• Just as a hologram recreates a 3D representation from a 2D medium, this voting mechanism attempts to project the will of the entire DAO through the actions of a smaller group.

Pros

• Scalable governance – Prioritizes important proposals without overwhelming voters.
• Filters out low-quality proposals – Prevents spam or unimportant governance items.
• Efficient decision-making – Only high-impact decisions reach full DAO voting.

Cons

• Requires staking participation – Low engagement can reduce efficiency.
• Can be complex to understand – Requires educating DAO participants.
• Depends on good economic incentives – Poorly designed incentives can lead to manipulation.

Best Use Cases

• Large DAOs needing scalable governance (e.g., DAOstack).
• DAOs where not every proposal should go to a full vote.
• Projects using prediction-based governance models.

Delegated Voting (Liquid Democracy)

How It Works

• Participants delegate their voting power to trusted representatives.
• Delegates can vote directly or pass delegation further.
• Token holders can revoke or change delegation at any time.

Pros

• Encourages expertise-driven governance – Delegates are often more informed.
• Flexible – Participants can vote directly or delegate selectively.
• Improves engagement – Low-effort way for passive members to participate.

Cons

• Centralization risk – Delegation could lead to governance oligarchies.
• Potential misalignment – Delegates may not always represent voter interests.
• Requires trust in delegates – Governance could become too dependent on a few key figures.

Best Use Cases

• DAOs with large, passive token holder bases (e.g., Compound, Aave).
• Complex governance systems needing expert oversight.
• Hybrid models combining direct and delegated voting.

Ranked-Choice Voting

How It Works

• Voters rank multiple options in order of preference.
• If no option gets a majority, the lowest-ranked choice is eliminated, and votes are redistributed until a winner emerges.
• Ranked-Choice voting example:

Pros

• Encourages consensus-driven decision-making.
• Reduces polarization – A broader range of opinions is considered.
• Useful for selecting candidates or multi-option proposals.

Cons

• More complex than single voting – Requires additional computation.
• May not be ideal for binary decisions – Works better for multi-choice votes.
• Potential for strategic voting – Voters may manipulate rankings.

Best Use Cases

• Elections of DAO representatives or council members.
• Decisions with multiple viable outcomes.
• Situations where consensus-building is important.

Choosing the Right Voting Mechanism for Your DAO

Different DAOs require different voting models depending on size, governance needs, and community engagement.