Quadratic Governance: A Solution for Jupiter DAO or an Overreach?

[Zzullerr]

Jup´s decentralized governance aims to ensure fairness, inclusivity, and collective decision-making. However, Jupuary´s latest governance vote highlights a significant challenge that will continue to exist with every voting.

Despite 84% of voters supporting an airdrop of 700 million $JUP tokens, the proposal failed as it didn´t reach the required 70% approved supermajority.

Voting power is heavily concentrated among whales. This raises an essential question: Is token-weighted governance the best model, or does it stagnate the collective voice of the community?

Quadratic governance could offer a solution, but is it the right fit for Jupiter DAO? Let’s check what’s working, what isn’t, and what challenges lie ahead if we adopt a quadratic governance model.

What’s is Not Working or may Not Work in Jupiter DAO?

1. Whale Dominance
   The current 1 $JUP = 1 vote system favors large token holders, allowing a few whales to control outcomes despite overwhelming community support for certain proposals. For example, the recent failed proposal demonstrates that a majority of DAO users cannot push through decisions if whales dissent.

2. Engagement Inequality
   Jupiter DAO has mechanisms like Active Staking Rewards (ASR) to encourage participation, but engagement is still tilted in favor of those with larger stakes. This deters smaller holders from active involvement in the long term, knowing their votes carry little weight.

3. Community Trust
   When governance outcomes are perceived as skewed or controlled by a minority, trust in the system erodes. Over time, this could alienate the broader community, reducing participation and weakening the DAO.

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What is Quadratic Governance, and How Could It Help?

Quadratic governance adjusts voting power to favor the intensity of individual preferences over sheer token holdings. Instead of allowing votes to scale linearly with tokens, the cost of additional votes increases quadratically. This model emphasizes community-wide consensus and limits the dominance of whales.

Benefits for the Jup DAO:

• Amplifies the Community’s Voice: By making additional votes more expensive, smaller holders can have a proportionally larger impact on decisions.
• Reduces Whale Power: While whales retain influence, their ability to dominate decisions diminishes, creating a more equitable governance system.
• Encourages Engagement: Smaller holders would feel incentivized to participate, knowing their votes carry meaningful weight.

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Challenges of Quadratic Governance for Jupiter DAO

1. Sybil Attacks and Identity Verification
   
   

In open ecosystems like ours, quadratic governance is vulnerable to sybil attacks, where individuals split their tokens across multiple wallets to game the system. Addressing this could require robust identity verification mechanisms, between them:

• KYC (Know Your Customer): Verifying user identities could prevent sybil attacks but raises concerns about privacy and permissionless participation.
• Soul-Bound Tokens (SBTs): Non-transferable tokens tied to unique wallets could act as identifiers but would require significant infrastructure.
• zk-Identity Solutions: Zero-knowledge proof-based identities offer privacy-preserving solutions but are complex to implement.Is KYC Feasible for Jupiter? *

While KYC could ensure sybil resistance, is it the way we want to take a decentralized governance system? Is there room for a hybrid model combining KYC for large stakeholders with more anonymous solutions for smaller participants?

3. Collusion Risks
   Quadratic governance cannot entirely eliminate collusion, as groups could still coordinate to pool resources and influence outcomes. Cryptographic solutions like Minimal Anti-Collusion Infrastructure (MACI) (available on ETH) could reduce these risks, but they depend on assumptions about honest operators.

4. Increased Inequality
   Paradoxically, quadratic funding systems sometimes exacerbate inequality by disproportionately favoring well-organized groups. In the context of Jup DAO, this could mean certain initiatives receive outsized support, marginalizing less popular but vital proposals.

5. Implementation Complexity
   Transitioning to quadratic governance requires significant technical and operational changes, including modifying smart contracts, educating the community, and managing new mechanisms like identity verification.

It takes time, and time is vital in such a fast-moving ecosystem.

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Should Jupiter DAO Move to Quadratic Governance?

The Case For:

• Jupiter DAO’s vision is to create the best decentralized governance system, fostering inclusivity and engagement. Quadratic governance aligns with this goal by amplifying the voices of smaller holders and reducing the influence of whales.

• The DAO’s current model could lose community trust due to perceived inequities.

The Case Against:

• Implementing quadratic governance introduces operational complexity and risks, particularly around identity verification and sybil resistance. These challenges could outweigh the benefits.

• Quadratic governance is not a perfect system. It adds friction to decision-making and may not prevent coordinated manipulation by well-organized groups.

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Is Quadratic Governance Worth It?

Quadratic governance offers a promising path to a more equitable DAO, but it’s not a panacea. The challenges of implementation, especially around sybil resistance and identity verification, must be carefully addressed. For Jup DAO, the question is not just can it adopt quadratic governance but should it.

A phased approach could be the way forward:

1. Pilot Programs: Test quadratic voting on non-critical proposals to assess feasibility and community reception.
2. Hybrid Models: Combine quadratic governance with mechanisms like ASR to maintain engagement and reward active participants.
3. Community Consensus: Ensure any transition is backed by broad community support to avoid alienation.

If the DAO aims to be the gold standard of decentralized governance, quadratic governance could be the bold step needed to achieve it.

References:

I recommend the Dora Hacks lecture a lot

Quadratic Governance: What’s Working and What’s Not?

Minimal Anti-Collusion Infrastructure (MACI) | MACI

Governance

What Is Quadratic Voting and Why Don’t More Projects Use It? | Axelar Blog

[lil_cadet]

@Zzullerr

Despite 84% of voters supporting an airdrop of 700 million $JUP tokens, the proposal failed as it didn´t reach the required 70% approved supermajority.

I’m sorry, I do not understand how you arrived at this conclusion. I have been saying much less comprehensively for some time that the existing voting absolutely favors anyone with whale holdings. That much I do understand. But the start of the argument stating that a 70% majority was not reached needs to be explained further.

[BTC]

“If the DAO aims to be the gold standard of decentralized governance, quadratic governance could be the bold step needed to achieve it.”

Have you considered that the DAO is the gold standard given the Jupuary vote passed with 87% approval after team incorporated live feedback and listened to the DAO?

[lochie2001]

@Zzullerr

What is Quadratic Governance, and How Could It Help?

So this is a great thread. But I have a few concerns.

This will change the whole dianamix of 1 $JUP = 1 $JUP.

Also meow has confirmed that whales are just as important as someone who holds 10 $JUP and I agree.

This system would disincentivise whales. We need them. People will eventually become whales if that compound enough asr, they should be penalised.

Secondly, people could split their JUP over multiple wallets.

Whilst I like the idea, if we don’t like whales dominating the votes like jupuary vote #1 then we need to beat them at their own game! How?!

1. Buy more JUP
2. Stake more JUP
3. Vote with more JUP

This will our possible price pressure

[lochie2001]

So what he means is

The number of wallets (people) voted yes was 85% I believe .

15% of people voted no- but they held a large amount of supply of $jup

[Zzullerr]

I should have taken more time to explain the dynamics of the poll and why it was needed a super majority of 70% of approval. The point I tried to make is that even though “most” people voted in favor of Jupuary it didn’t pass during the first proposal.

Thank you for your comment

[Zzullerr]

I agree the DAO is the gold standard for decentralized governance in SOL, yet it is still so young and has a long way to be the best DAO in the Web3 ecosystem.

Thank you so much for taking your time to read!

[lil_cadet]

Ok I think I get what you are saying. You were referring to the fact that the first vote did not pass with a 70% majority, even though more people voted yes.

[lil_cadet]

Very simple and good logic here my dude

[lochie2001]

Yes that’s what his saying

Here’s one thing I mentioned in the JUP discord during the vote …

Do we prefer the fairness approach or the equality approach?

There is no write or wrong answer

However the correct answer should be the first one the dao agreed upon , upon formation. That is

1 JUP = 1 vote

[Zzullerr]

Buying more JUP is definitely the way, also I like the idea of another 2 Jupuaries since the airdrop will improve the decentralization of the token.

I don’t really think anyone can become a whale through ASR since the same Whales benefit from them as well.

The problem shouldn’t be considering whales as equals to users that stake low amount like 1$JUP but rather we should make the small users also feel as important.

Currently as what it happens with any DAO, small users feel like they have little influence in decision making.

[Zzullerr]

Exactly! Also the point of the article even though I didn’t express the example in the best way I’d asking ourselves if we should ever consider implementing cuadratic voting to the JUP DAO.

[Raven1r44]

You lost me at KYC. #DeFi or nothing. And I am a top 10%staker.

[Zzullerr]

KYC is one of the options but not the only one! I also agree KYC is not the best for the DAO and I wouldn´t like to take it there. It is always worth evaluating all the options like quadratic voting.

[ojo]

wait a second, why do we have to chose between the two?
fairness approach or the equality approach ? no fairness without equality and vice versa. strange argument. i guess it is hard to implement, but its not good reason not to implement it. and how 1 jup=1 vote is equal? you do know some people have more jup . i think you need to rethink your definition of equality. for me zk is way forward. 1 person= 1 vote . whales will always exist for financial reason. they don’t become whales for altruistic reason.

[lochie2001]

Tbh that’s how it should be though. If they want to have greater say they need greater voting power.

This will drive $JUP as a governance token and create a good type of fomo

[lochie2001]

Fairness or equality approach are legit the only two possible approach’s . We aren’t gonna do a randomised approach where certain people get random voting power now are we?

1 JUP = 1 vote is indeed under the equality umbrella “because they share EQUAL voting power”.

Fairness refers not to equity- as in “what is the right thing to do beyond numbers”.

I like the way voting works rn, and you can’t say whales are only whales for financial reasons.

The idea behind JUP is to have a say on the future of the dao.

[Mbolorman]

Well written. I believe this is the right time to have this discussion—not because the current voting system is inherently perfect or flawed, but to allow the community and team to critically evaluate it in comparison to other options. As challenges with the current system arise, this analysis will help determine whether the benefits outweigh the issues. If no better alternatives emerge, the community can move forward with a clearer understanding of the status quo, reducing uncertainty and preventing recurring debates over this issue in the future.

That said, I believe this is a difficult problem to resolve, as any shift from the current voting system is likely to leave one side feeling unfairly treated, and the same holds true for maintaining the status quo. For me, the best approach would be a fair—not necessarily equal—voting system, where it’s validated that those who contribute more or take on greater risks can reasonably expect to benefit more.

[macximus]

I have a few points that just what pop-ed out of my head when reading this.

• We all know there is no way to ultimate decentralization.

• Small fish would always welcome more DAO power while whale is not likely to give away the hard earned DAO power. Its a draw position here.

Like this its maybe better to look from a different angle following the principle: Intelligence means making complex things look simple, not the other way around.

Since quadratic governance could complicate rather than simplify, one way that could make inclusion simpler is to have both big and small vote to be on the same side: let say we need 70% of JUP and 70% of wallets to go through in order to pass. It still pretty simple but might just make it harder to pass until all are aligned on the proposal. Benefit: value & peer unity.

[Workwithnature]

It is a simple fix do away with voting power all together. I like quadratic voting. But I also like giving true users who may have little interest in staking but are big users of the exchange equal voting powers to that of bigger stakers. I have suggested a badge system before because it identifies and involves everyone equally, whether you are a staker or Jupiter exchange user or both. A perc could be making everyone feel part of the conversation through voting obviously and things like super rare Jupiter nft’s, But what you are proposing is great. Perhaps one could implement both.