The Defiant

RAILGUN DAO Pioneers New Type of Governance Incentives


Incentivizing community-wide vote participation free from lockups


RAILGUN DAO Pioneers New Type of Governance Incentives [Sponsored]

Effective governance incentives are the heart of decentralized systems and one of the greatest innovations of DeFi. Just now RAILGUN DAO has released Active Governor’s Rewards, a ground-breaking way to earn funds through DAO participation as payments from the treasury. DeFi DAOs work best when there is widespread engagement from token holders monitoring new proposals. RAILGUN DAO now provides 2% of its entire treasury per week to the active token stakers, with rewards claimable every 2 weeks, as part of keeping governance highly monitored. The Rewards went live this week and have been described by commentators as a “Very strong incentive alignment”.

What is RAILGUN & how do Active Governor Rewards work?

RAILGUN is a privacy tool for DeFi deployed on Ethereum, BSC, and Polygon. Through on-chain Zero-Knowledge cryptography, RAILGUN is the only DeFi privacy system that can be used on existing blockchain networks without needing to trust bridges or a centralized validator set, mitigating the security assumptions of having these. Essentially, the RAILGUN Privacy System is infinitely composable privacy that can anonymize all the smart contract functions on dApps users already use. RAILGUN users can Shield any ERC-20 tokens or NFTs into a Private Balance, swap tokens, send assets privately, and privately send funds into DeFi protocols to earn yield or do other DeFi magic, all without sacrificing security or liquidity.

As RAILGUN is autonomous, immutable, and open-source smart contract code, it is governed by the RAILGUN DAO which is made up of wallets which stake the $RAIL token. These wallets become Active Governors. The RAILGUN DAO votes on proposals such as protocol upgrades, token minting, and treasury management. As the RAILGUN DAO is a permissionless system, any wallet with staked $RAIL can create a proposal for voting and implementation. This system has proved effective since RAILGUN’s deployment with several key upgrades being passed through governance such as the recent proposal to launch RAILGUN 2.0,a suite of upgrades completely new to crypto privacy tech such as Private NFT support.

To encourage Active Governors to check the RAILGUN DAO governance portal for new proposals, every 2 weeks, 2% of the protocol treasury (mostly stablecoins and WETH, WMATIC, and WBNB) is distributed to Active Governors. These rewards are claimable through the governance portal, tying the receipt of incentives to governance participation. 100% of protocol fees are collected in the treasury, and as adoption of the RAILGUN Privacy System increases, the size of the Rewards pie will grow hand-in-hand with the protocol.

Active Governors will vote on and submit proposals that they believe will increase protocol activity and bolster their future rewards creating a flywheel of participation and increased earnings. The Active Governors Rewards flywheel will also produce long-term participation from token holders without requiring a lockup or decay in voting power, in contrast to the vote-escrowed popularized by Curve DAO and much imitated throughout DeFi. As there is a direct view to increased rewards from voting on beneficial proposals, the key innovation of Active Governor Rewards is to incentivize long-term participation by giving voters a stake in protocol success instead of restricting their capital efficiency in multi-year lockups.

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What problems do Active Governor Rewards solve?

As anyone who has tried to vote in a Uniswap proposal can tell you, traditional DAO models are far from decentralized, with voting power often concentrated in the hands of a few insiders, sidelining those with smaller stakes. This has led to widespread disillusionment with protocol governance in crypto and low participation rates. Uniswap, the largest DAO by treasury size, for instance has a governance participation rate of just under 4% of all token holders. These low voting rates make sense, what’s the point in voting when you can be outvoted by any given whale or VC and you are also aware that other token holders are not taking part?

Without innovative protocol level design, these governance systems will replicate real world centralized oligarchies and abandon the vision for leaderless and autonomous organizations stewarding immutable open-source protocols. At that point, the DAO model would lose its competitive edge over traditional corporate governance. Thus, this problem needs to be pre-emptively solved and considered by protocols.

By tying financial rewards as a condition of participation in governance, RAILGUN DAO can increase the number of individuals taking part. Every Active Governor can vote with confidence in the knowledge that there will be other Active Governors checking in at least every 2 weeks to the governance portal. This provides assurance that proposals that are passed are the actual intentions of the decentralized organization with at least some level of fair participation, further bolstering confidence in the governance process. Confidence in governance is crucial to protocol health and effectively organizing community contributions to long-term protocol success.

Find out more about RAILGUN

The kind of innovative thinking found in Active Governor Rewards underpins all aspects of the RAILGUN DAO and RAILGUN Privacy System design.

Stay up to date with RAILGUN by following @RAILGUN_project on Twitter, read more about privacy, Zero-Knowledge, and RAILGUN in the RAILGUN docs, and try out RAILGUN or the Active Governors Rewards system by heading to the RAILGUN website.