Truly representative governance is vital for crypto projects that want to build up strong, loyal and highly involved communities, but creating the perfect model to facilitate this is not an easy task. The vast majority of decentralized crypto projects today have gone down the well-trodden path of creating voting systems based on token-weighted power, but such models are open to manipulation and do little to foster confidence. 

To achieve true decentralization, projects need to create a way for every single member of their community to feel as if they’re involved in the decision-making process and ensure everybody’s voice will be heard and taken into account. That calls for a governance model that goes beyond the familiar to guarantee that it’s not just those with the fattest wallets who’re calling the shots. 

Checks and balances

Lido DAO is widely considered to be one of crypto’s flag bearers in terms of democratic decision-making thanks to its novel “Dual Governance” structure that enables protocol users to exercise oversight over the biggest token holders. 

The protocol employs a convoluted, token-weighted system for voting on proposals that includes transparent discussions and gas-free off-chain Snapshot voting with LDO tokens, but this is only the beginning, for it also employs innovative checks and balances mechanisms along the way. 

Should anyone in the community decide that a proposal is too controversial or potentially too advantageous to certain factions, they can deposit stETH tokens into a smart contract to trigger a “veto signalling” state, which delays implementation by up to 45 days. They can then encourage others to do the same. If opposition to the proposal reaches 10% of the total supply of stETH, it automatically activates a “rage quit” mechanism, pausing governance until those token holders have a chance to exit the protocol safely with their funds intact. 

The model has resulted in what is essentially a “two-house system”, similar to the U.S. government where there’s both a Senate and Congress, or the U.K., which has both the House of Commons and the House of Lords. While LDO holders are responsible for the decision-making, stETH holders do the job of preventing whales from exercising too much control. 

Community-guided governance

No NPC Society has opted to let its community help devise its ultimate governance model to ensure a smooth, transparent and problem-free transfer of power from its founders to token holders. 

NoNPC is a Web3 movement that’s focused on “NPC behavior”, or the idea that people are living in this world “without awareness”, as if they are “non-playable characters”. Its aim is to spark conversation around ideas of digital consciousness and individual agency and promote a collective awakening among its community members. It also has ambitions to create a kind of on-chain digital identity system for token holders. 

NoNPC was created by its founder and architect, Glitch0, an anonymous programmer who initially held all of the power, but the founder’s role will be finite. The project’s roadmap calls for an imminent handover of operational control and treasury allocation to the community, along with the creation of a verifiable governance model that will be designed by the community itself. The vision is that, over time, NoNPC will be maintained by a team of core contributors in a role that’s similar to Bitcoin’s core developers, who support the system but never own it. 

The first step is to create a DAO governance portal, which the team is working on now, and a number of voting models will be up for consideration. For instance, one idea is a kind of quadratic voting mechanism where voting power grows with the square root of a user’s holdings to reduce the influence of whales. There may also be some kind of delegated voting system, where “delegates” are employed as representatives to suppress voter fatigue. However,  NoNPC also plans to leverage its decentralized identity system to ensure a system of “one person, one vote”. 

Shared choices

Combining community-based decision-making with AI-driven execution, Lightchain AI uses governance as a way of controlling an evolving or “living” AI Virtual Machine. The project’s goal is to integrate AI into blockchain to support the creation of decentralized, privacy-focused and cost-efficient machine learning applications. 

Through its governance process, token holders vote on proposals that will directly influence its AI models and ensure every decision they make is auditable and explainable to foster trust. The system has developed a quadratic voting structure that allows smaller token holders to have a bigger say in the project’s direction, and all decisions are executed by the AIVM, which is also controlled by the community. 

Ultimately, Lightchain AI uses its governance model to make sure that the protocol is run via shared choices, so that every single community member, from the biggest whale to even those who hold just a single token, have their voices heard. It makes sure that the community as a whole directs how the project evolves. By integrating smart machines with blockchain-based voting, Lightchain AI can react quickly and implement proposals rapidly, responding to the fast-moving crypto ecosystem. 

Involve everyone

To establish decentralized governance, projects should avoid the temptation to mimic the imperfect voting systems of the past and instead look to more dynamic and adaptive decision-making mechanisms. Doing so isn’t easy, and every project’s solution will ultimately be unique, but by leaning on their communities for ideas and inspiration, projects should be able to find a fair and reliable solution to keep everyone involved.