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Governance Project Uses ‘Contests’ to Help DAOs Improve Decisionmaking

Maker, Polygon and Aave Test Jokedao’s Humorous Approach to Governing

Governance Project Uses ‘Contests’ to Help DAOs Improve Decisionmaking

Managing DAOs may be one of the most serious issues in decentralized finance. Yet an outfit called jokedao is betting its unorthodox approach, and a dash of humor, may be just the trick. 

Jokedao, a three month-old project co-founded by entrepreneurs David Phelps and Sean McCaffery, has developed a software tool to help DAO members decide on the best course of action in advancing their causes. In a nutshell, it runs a “contest” to solicit ideas from members who get to vote on potential decisions. 

Make Governance Fun

While it may sound like a game, the solution is designed to address one of the thorniest problems in DeFi — how can DAOs balance their cooperative natures with the need to support revenue generating businesses? 

“Really the pitch is, make governance fun,” McCaffery said. “Governance isn’t only the end decision. Use this to cultivate proposals, use this to cultivate grant applications, things like that. That’s really what we’re going for.”

This is no small thing. Two of the most storied DeFi protocols — MakerDAO and SushiSwap — have been struggling for months to sort out governance challenges amid pressure from regulators and the bear market. 

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Maker has taken jokedao for a test run. Aave and Polygon are also supporting the solution with grants.

The idea behind Jokedao, which is a public good project and has hosted 248 contests since then, is a kind of mashup between crowdfunding and old-fashioned brainstorming. 

It lets platforms eager to take a course of action set up contests and solicit submissions from users. They, in turn, get to vote on which idea they like best. Naturally, the participants use tokens to express their views on a per-address basis. 

Forums and Discussions

Anyone can spin up contests and airdrop tokens. The only cost comes from the transaction fees which typically go to the validators who process transactions on blockchain networks, including Polygon, Arbitrum, and Optimism, according to a tweet from the project.

McCaffery told The Defiant that jokedao doesn’t compete with voting protocols like Snapshot. Rather, jokedao competes with the forums where discussions which precede votes on Snapshot happen. 

Right now, forums like Maker’s serve as the town square for conversations about where a DAO should go next. The problem is that forums are generally tough to navigate for all but the most engaged users.

Soft Consensus

Jokedao may bring more order to these forums by facilitating what Phelps calls “soft consensus,” a process that entails making group decisions which aren’t necessarily binding. Jokedao’s contests rank answers, instead of the binary decisions which currently dominate DAO voting. Soft consensus may precede the all-or-nothing votes that dominate Maker and other DAOs’ governance systems.

Jokedao’s creators aren’t limiting its usage to refining the forum-based discussions of DAOs — the protocol lists the winners of grants, endorsements, bounties, user-generated roadmaps, generating ideas, curation, contests, and giveaways as potential use cases.  

Jokedao has caught the eyes of influential DeFi projects. MakerDAO is DeFi’s largest protocol in terms of total value locked (TVL) at $7.2B according to The Defiant’s Terminal. Its stablecoin, DAI, plays a crucial role in the DeFi ecosystem. 

For months Maker has been struggling to reconcile its lending operations and push to integrate real world assets such as corporate debt into its offerings with the risks of regulation. Co-founder Rune Christensen has been pushing for reorganization of the project to make the project less vulnerable to regulatory action. lessen exposure to regulatory risk. This week the DAO’s members are considering a bold plan to break up the organization into ‘MetaDAOs.’ 

Justin Case, to whom holders of Maker MKR token can delegate votes, called for a way to signal disagreement before final votes are cast during a controversial governance decision early this year. 

Instead of the builders having to generate the full idea and scope of how to proceed, the community could generate ideas for what they would want to see.

David Phelps

In September, two Maker delegates pushed to use jokedao and obtain soft consensus on governance questions on the protocol’s forum. So far, Raphael Spannochi, one of the two Maker delegates, has posted a contest to establish which aspects of Christensen’s Endgame plan, the DAO needs to further develop. 

“It’s a great way to surface priorities,” said Spannochi on a Governance and Risk call for the protocol in September. “[Jokedao] is easier to do, more fun to do, and more powerful than a Google Sheet could ever be.”

Drilling Down

David Phelps, jokedao’s other co-founder, believes consensus can be better achieved iteratively through jokedao’s contests, which can serve as sub-votes before the major ones. 

“Instead of the builders having to generate the full idea and scope of how to proceed, the community could generate ideas for what they would want to see,” Phelps wrote in Maker’s forum. “Builders would be able to step up to work on projects that already had clear support.”

Phelps gave the example of using jokedao to define high-level priorities within the DAO, like diversifying into real world assets, which Maker is doing, and then drilling down to what those assets would be with subsequent contents. 

Admittedly, Maker’s first proposal didn’t generate huge amounts of interest — there were only four proposals submitted to the DAOs first contest. Still, jokedao has the support of Payton Rose, who works on the governance-focused team at Maker. 

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“I think the ability to have more access to the governing platform and so much freedom to shape votes and voting weight could be a real game changer for finding consensus and encouraging community participation,” Rose wrote on Maker’s forum. 

For its part, SushiSwap, the No. 6 DEX with $53M in daily volume, has been battling to choose a new leader and deal with the fallout from the failed merger with the then-powerful Frog Nation earlier this year.  

Those two protocols’ governance woes just scratch the surface. Aave, DeFi’s No. 4  protocol with $5.3B in TVL, according to The Defiant Terminal, struggled as large holders of AAVE tokens shaped vote outcomes. And Vitalik Buterin, Ethereum’s co-founder, has skewered the practice of wealthy holders essentially buying voting power in protocols. 

Governance Friction

In response, some entrepreneurs have chosen to run their projects like conventional, top-down businesses — in September, Sifu, the controversial co-founder of a Canadian exchange which lost its customers $190M, said his new protocol is not, in fact, a DAO. He wrote that DAOs are plagued by “governance friction” and “slow results,” highlighting that his money market protocol wouldn’t be subject to such roadblocks.

In short, it’d be hard to find anyone working in crypto to say that DAO governance actually works well at this point.

With the backdrop of dysfunctional governance, jokedao has quietly racked up grants with some of crypto’s biggest projects, including Aave, which actually forked jokedao, according to McCaffery. Forking means copying code, typically with the intention to modify it in some way.

No Strings Grants

Ethereum scaling solution Polygon, and Protocol Labs, the company behind the IPFS file storage system, have given jokedao no-strings-attached grants. “They were just like, hey, we really love what you’re doing, here you go,” jokedao’s co-founder said. 

Jokedao has received another grant from the funding protocol Juicebox, contingent on hitting certain milestones in terms of feature implementation like downvoting. 

Jokedao is currently a public good, meaning it’s more of a free-to-use tool which doesn’t monetize its users. McCaffery sees many avenues for jokedao to make money, such as allowing winning proposals to be minted as an NFT, but says the project’s mission isn’t really financial. 

Were really interested in flipping that script to say, well, what if the community is actually the one which can propose ideas and then the core team builds them.

David Phelps

While the project’s founders may say jokedao doesn’t have a financial motivation, Phelps has few illusions that people respond well to rewards in order to send in useful submissions to contests.

“The successful contests that have been done with us always have some kind of reward, although it’s not necessarily a financial reward,” they said. Examples include podcast appearances. 

For financial rewards, Jokedao is also working on “executable contracts,” which mean that a person can configure a contest to automatically send tokens to a contest’s winner. 

Massive Votes

The amount of people participating in a contest will be much less than the massive votes which seemingly decide the fates of DeFi’s largest protocols. 

The current process for governance in DAOs typically involves a core team submitting a yes-no vote to token holders, a handful of whom may control millions of dollars worth of tokens, and thus millions of dollars worth of votes. 

With jokedao, Phelps wants to shake things up. 

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“Proposals can come from any party you like,” he said. “We’re really interested in flipping that script to say, well, what if the community is actually the one which can propose ideas and then the core team builds them.”

After a user creates a contest, they request submissions for proposed solutions to the contest from a chosen set of users within a set time frame.

Examples of contests are indeed wide-ranging — BanklessDAO, the decentralized organization originating from Bankless, the media organization, has a contest posted to decide the major focus areas for the DAO. 

Packy McCormick, author of the popular newsletter Not Boring and advisor to a16z, used jokedao to solicit ideas for topics to write about. 

And Rehash, which bills itself as a “community driven-podcast DAO,” used jokedao to solicit proposals and subsequently votes for who should be their next podcast guest. Perhaps because of his notoriety as co-founder of the jokedao, Phelps ended up winning.

Jokedao’s founders believe they’re just scratching the surface of the platform’s potential. 

“What the platform is about is enabling bottom-up governance where you can control who can submit and then you can very easily allow people to vote and control who can vote. And anyone can do this,” McCaffery said. 

Options

Jokedao has one other primary contributor named Naomi Hauret, who does engineering and design for the project’s frontend. 

The platform’s form for submitting proposals for contests include options to allow anyone to submit, as well as options to airdrop an optional submission token to a specific party which may or may not be the same party which is voting on the forthcoming proposals.

A screenshot from jokerdao’s interface.

After proposals are submitted, people with voting tokens vote on them. Crucially, jokedao’s contests make it so a voting token is minted for every contest. So as with who can submit proposals to a contest, who can vote is also customizable.

Phelps developed a proof-of-concept called jokerace in December before jokedao’s launch in July. Jokerace is a weekly contest where users vote for the best joke based on a prompt. 

A jokerace from September sought jokes which used AI-visualization software like DALL-E. The most recent one sought jokes about science laboratories. 

A submission to the AI-driven jokerace.

With a functionality outside of jokedao’s typical usage, the jokes are issued as NFTs and have a 2.86 ETH floor price on OpenSea.  

Both Phelps and McCaffery are excited about “vampire attacks,” like SushiSwap’s infamous fork of Uniswap in September 2020. They would like to see projects compete with one another by offering incentives for other protocols.

Native Token

“You could create a DeFi protocol and say, hey anyone from Aave, submit your best idea for us, and we’re gonna reward you with our native token if you have an idea that we vote on and we like,” said Phelps. “You’ve now incentivized other communities to come and join you, and you’ve rewarded their best ideas and their best players.”

It’s also worth noting that both the voting and submission tokens are created on a per-contest basis. So if jokedao really takes off, there will be a lot of tokens, most of which will be used once for the single contest a user created them for. 

Just Code

While they could conceivably have value, McCaffery sees the tokens serving more as a public submission and voting record rather than an asset like Maker’s MKR which has a market cap of $991M as of Oct. 17.

“It’s turning this concept of a token into less of a financial thing and more of just code,” they said. “It’s just code that’s out there and it’s a record of the fact that you participated or that you voted a certain way.” 

Phelps says recording votes are a powerful way to find kindred spirits, and to signal their usefulness or engagement in different communities.

“The real long term benefit of on-chain voting is you’re developing an on-chain resume,” Phelps said. By having a record of successful proposals, a person could develop a reputation as someone with good ideas, especially within a certain vertical. 

“The secret to governance is not who wins first place,” Phelps added. “The secret is the data that is generated about interest alignment among voters and contribution as well.” 

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