How Voting on Proposals Works

Q.) In our community Telegram it was asked by @eeeit: "A question about voting on a proposal. Do I vote by predicting the outcome? Or by staking currency on the outcome? What is the role of prediction in terms of making sure the process makes sense in the context of a DAO? And the benefits of voting in this way instead of simply clicking yes or no?"

A.) Answered by @Matan [DAOstack Architect]:

  • you are voting on a proposal with your reputation, not your stake. You are simply clicking yes or no on it (if it’s a yes/no question, the simple but good-enough type we start with), and if you have reputation in this DAO your vote counts accordingly (to the amount of your reputation).

  • staking is something anyone can do, external to the DAO, no need for reputation. Staking is done also by cliking a button, expressing your fate that a certain proposal will pass or not pass in this DAO. It also requires you of staking certain amount of GEN on it. If you’re right (*) you’ll gain more of it. If you’re wrong, you’ll lose your stake.

(*) Note that the system is designed such that at first, proposals need people to discover them. Meaning, at the initial stage of a proposal you can only make profit by predicting it will pass. If no one has predicted a proposal to pass, it’ll simply be rejected after a ceratin amount of time. You won’t make profit by identifying a bad proposal if no one has already staked that it’s going to pass. Once anyone has staked for a proposal that it’ll pass, now anyone can also stake against it and gain if it wouldn’t pass (from the positive stake). Note that the positive predictors of successful proposals do gain profit even if no one makes counter prediction — that comes from the DAO pool of GEN offered for exactly this purpose; it’s the DAO collective decision-making costs. The higher the DAO decision-making bounty is, the more it’ll attract the predictors to its decision-making system, the more effective (and scalable and resilient) it’ll be. There will be a competition of DAOs, by putting higher and higher GEN at stake, over the market of high-quality predictors. This will saturate itself towards the highest effective rate of governance, and in the other side will drive a better and better prediction market, and thus more effective governance.

  • predictions make sure that:

a) bad proposals will not gain (and spam) the collective attention. Only if people believe they are good — and willing to put their money where their mouth is — then they’ll gain traction and collective attention.

b) once people staked for a proposal, they also have the incentive to make sure the “right” voters reach voting for its “correct” (as they believe and stake for) outcome.

c) Soon (not yet implemented in current protocol) people could also stake against proposal in later stages, to counter balance the bias early predictors have to call only “positivie” voters.

In short, predictors have two roles:

  1. They’re crypto-economically incentivized (at first stage) to signal for good proposals, and more generally for mismatches between the status of a proposal and the believed outcome of it by the general-majority of DAO.

  2. They’re crypto-economically incentivized to correct for potential mismatches occuring unnoticely.

Together, they’re called for and crypto-economically incentivized to actively navigate the collective attention accroding to its own “will”.