The Votes Are In

It’s not just crypto governance that’s messy. The debacle in the Iowa presidential caucuses last night revealed the difficulties of coordinating votes in any democratic system.

Even the freest, most well-established, and highest-stakes voting protocols can sometimes falter. And that’s assuming you agree with their design in the first place (see: the electoral college). Perhaps you can’t envision a future where blockchains are used to displace legacy voting systems, but I’d argue the rules governing these experimental crypto networks offer the most exciting testbed for voting innovation in a few hundred years.

In fact, governance innovation may be the most frequently overlooked public benefit byproduct of the crypto infrastructure investment glut.

In the past year, the DAO concept has witnessed a resurgence, offering a sneak peek into one possible future of public goods funding. We just witnessed the culmination of a year-long (and apparently successful) Zcash governance realignment (see yesterday’s excellent Pro research piece). We even watched a token project community vote to self-destruct last month for the first time. And we’ll probably watch more communities expel their leaders or fork away from dissident stakeholders if they have the proper motivation.

(An in-depth look at the year-long Zcash governance update.)

Sure, there are weaknesses in crypto governance. Validator cartels, miner centralization, and deposit centralization can (and arguably has) led to occasional vote manipulation from whales. But that seems to be a weakness inherent in most political systems.

On the other hand, emergent problems within crypto tend to attract creatives who find solutions quickly.

One problem/solution illustration of this was presented in a recent post by Placeholder GP Joel Monegro, regarding the "cost of a crypto vote.”

Joel says you can ballpark the tangible cost per vote by looking at crypto borrow rates. The longer the hold period required for a given vote and the less liquid the token, the more expensive that vote becomes. You ensure more of your voters are aligned with your mission and have real skin in the game.

It’s pretty basic, but it also makes tangible one of my theses that there *is* economic value to crypto governance rights…provided you're talking about securing systems with real economic value.

Joel says “protocols and DAOs can influence the cost of their governance by changing how long it takes to vote.” Which means something like a minimum holding period for voting tokens could open the door to appeals processes, and communities could implement variable holding periods depending on a vote’s importance.

These fragile systems will get anti-fragile over time as more experiments (and mistakes) are made.

Crypto has always been an explicitly political movement. That’s why I for one will indulge today in Iowa schadenfreude because I know it’s good for the candidate I’ve supported for the past eight years:

“Other.”

-TBI

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