What happens when anyone can be your representative? Testing liquid democracy in web3

Lewis Carroll, author of Alice in Wonderland and, surprisingly, a prolific researcher of voting systems, first proposed something like liquid democracy in 1884. The idea is simple: You can vote directly on issues, or you can delegate your vote to someone you trust. A fascinating idea, but perhaps impractical in the 19th century. In the 20th century, famed economist Gordon Tullock pointed out that new technologies — like television and telephones — were starting to make it possible to try something like liquid democracy at scale. Today, computers and the internet have made it truly easy for communities to implement. 

But should they? My fellow researcher, Sho Miyazaki, and I crunched the data to start tackling this question. Our broader takeaway? Liquid democracy has potential, but it needs the right infrastructure, incentives, and culture to take off. 

Liquid democracy in the web3 wild 

In theory, liquid democracy combines the best of direct democracy and representative democracy, letting people express their personal views, if they want, or letting them defer to experts they trust to know more than them about the issues. 

But whether it works in practice isn’t just an academic question. As technology reshapes society, we need new ways to make collective decisions online — and, one might argue, new ways to leverage technology to improve antiquated voting systems in our civic lives, too. 

Web3 lets us actually see how it might work.

Today, many DAOs use a version of liquid democracy, implemented in the GovernorBravo smart contract or other similar governance smart contracts, to make collective decisions. This gives us a remarkable chance to see how liquid democracy actually works “in the wild” when people use it to make high-stakes, meaningful decisions at scale. 

Sho and I collected on-chain data from 18 Ethereum DAOs from January 1, 2021 through December 31st, 2023, covering over 250,000 voters and 1,700 proposals, chosen because they had sustained governance proposals over a meaningful period of time and used liquid democracy to vote.

Takeaways

Here’s what we found.

Participation remains the most fundamental challenge for both voters and delegates. Only about 17% of voting power was delegated to others for voting. Delegates — defined as addresses receiving tokens from at least one other address — only participate on 33% of proposal votes, on average. 

Delegation can heap on a small number of popular delegates, leading to concerns about “super delegates” with outsized influence on votes. But even the most powerful delegates tend to hold only a relatively small fraction of circulating tokens; the outside share of voted tokens largely reflects that many circulating tokens are not voted at all. 

Medium-small token holders delegate most often. It’s a bottom-up phenomenon more than a top-down phenomenon. 

Addresses with a history of voting more often are more likely to delegate their tokens. Instead of drawing in more of the low-participation token holders, liquid democracy seems to be an additional option that already active voters particularly enjoy availing themselves of, today. 

Voters are not picking randomly, but seem to be acting on at least some information when they choose delegates. More active delegates, defined in terms of their participation rate on proposal votes, get more tokens delegated to them, on average.

Tools matter. When DAOs make delegation easier by building online delegation hubs, participation tends to increase substantially. 

Recommendations 

Based on these findings, here’s what we suggest for DAO governance today.

Build user-friendly delegation hubs. Make it easy for people to delegate their votes.

Help voters make informed choices by getting delegates to provide clear information about their goals, backgrounds, expertise, and priorities. 

Build in incentives for token-holders to delegate, using airdrops or other types of token-based rewards. Just enabling delegation isn’t enough.

Similarly, build in incentives for delegates themselves to vote more often. Reward delegates for high rates of participation, and/or punish them for low rates. 

Encourage a broad distribution of tokens to delegates. One way to do this might be to make sure that your delegation hub website doesn’t sort potential delegates by the size of their existing delegation balances, as this will encourage clumping. 

Experiment and iterate. What works in one community might not work in another. And let us know what you’ve tried and how it works. 

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As we navigate the digital frontier, we need new forms of governance. Liquid democracy isn’t perfect, but it is a promising tool in our governance toolkit.

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Andy Hall is the Davies Family Professor of Political Economy at the Graduate School of Business at Stanford University and a Senior Fellow at the Hoover Institution. He is an advisor to the a16z crypto research team and to the Wearables Business Group at Meta Platforms, Inc. You can follow him on X @ahall_research

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