Klima DAO

Summary This proposal presents the KlimaDAO community with information relating to KIP-40’s Quadratic Voting governance trial, and requests the community to determine whether to formally ratify the implementation of QV, or revert back to the original 1 token 1 vote system.

Rationale KlimaDAO’s mission to enhance the coordination, transparency, and efficiency of environmental commodities markets is critical. The DAO’s governance structure plays a pivotal role in achieving these objectives. In KIP-40, KlimaDAO engaged in a governance trial using quadratic voting, with Gitcoin Passport used for sybil resistance.

This governance trial demonstrated that Quadratic Voting can be used to govern the DAO and be used to ratify economic and policy decisions. However, the trial also experienced some challenges, and did lead to lower governance participation among token holders.

Below, find considerations in favor of reverting

Considerations in favor of reverting to 1 token 1 vote:

Simplicity and Accessibility: A 1 token 1 vote system is straightforward, making it easier for all stakeholders to understand and participate in the governance process. This simplicity encourages higher participation rates, as stakeholders are not deterred by complex voting mechanisms and reliance on third-party solutions (such as Gitcoin Passports) which demonstrably lead to voter drop-out. Direct Stakeholder Alignment: The 1 token 1 vote system ensures that those with a larger stake in KlimaDAO have a proportionate influence on its governance decisions. Incentivizing Governance Participation: By allowing each token to represent one vote, all token holders are incentivized to participate in governance to protect and enhance their KLIMA holdings. No Sybil Risk: Unlike quadratic voting, a 1 token 1 vote system naturally resists Sybil attacks without imposing additional participation barriers. Efficiency and Effectiveness: The 1 token 1 vote system is efficient, with a clear and direct correlation between stakeholder holdings and voting power. This efficiency ensures that governance decisions are made swiftly and reflect the preferences of those most aligned in KlimaDAO’s success.

Considerations in favor of ratifying quadratic voting:

Anti-plutocracy: Quadratic Voting directly counters plutocratic tendencies by making it cost-prohibitive for wealthy entities to monopolize decision-making. This mechanism ensures that governance decisions reflect the broader community’s consensus rather than the interests of a few affluent stakeholders. Enhanced Collective Representation: Quadratic Voting ensures that governance outcomes align more closely with the community’s collective preferences, especially when a majority shares a consistent viewpoint that differs from a few large stakeholders. Nuanced Decision-Making: Quadratic Voting allows for more nuanced decision-making by capturing the varying degrees of preference among stakeholders on a wide range of issues. By facilitating more refined expressions of preference, QV enhances the quality of collective decisions, making it a valuable tool for guiding the DAO’s strategic direction. “Progressivism” Reflected in Governance: KlimaDAO is de facto a conservative system; KIPs are required to enable any changes from the DAO’s existing state. When a vote passes, changes are implemented; without the vote passing, status quo is maintained. Under 1 token, 1 vote, and with current token distributions, progress (i.e. change) within the DAO can be stymied by just two or three entities, as was evidenced in KIP-36. Conversely, the Community has always expressed itself as progressive (i.e. the majority of holders have always been in favor of change when KIPs are presented) - Quadratic Voting has enabled this progressivism to be manifested at Snapshot (e.g. KIP-45 saw more holders vote “yes”, but a greater number of tokens vote “no”).

Challenges faced during KlimaDAO’s QV Trial Small holder engagement: KlimaDAO has seen a group of small token-holders consistently turn-out for voting prior to, and during, the QV trial. This group is numbered in the hundreds, hold between 2 $KLIMA and 0.000001 $KLIMA individually, and collectively hold no more than 1,000 $KLIMA. They collectively vote within seconds of a Snapshot being posted. They consistently vote “yes” or “option 1” on all Snapshot votes. It is assumed these token holders are participating in engagement farming quests. Although this is not an issue per se, under QV these holders have outsized influence on voting, despite apparently playing no other meaningful role in the DAO’s mission or its community. Large holder engagement: Larger token holders (e.g. >1,000 $KLIMA) have gradually reduced their engagement throughout the QV trial. Some holders have expressed that they perceive the value of their vote is reduced through the implementation of QV and have disengaged with the governance process. In KlimaDAO’s most recent Snapshot, only one large token holder participated in governance. Gitcoin Passport Implementation: the first vote after QV was implemented had a lower voter turnout due to a number of community members not creating a Gitcoin Passport prior to the start of the vote. Furthermore, Gitcoin Passport stamps have an expiry date after a fixed 90 day period - a number of community members had not re-validated their stamps and missed out on subsequent KIPs (57 & 58). Voter turnout: overall voter turnout (defined by the number of $KLIMA used to vote on Snapshot) under QV was initially on par with turnout prior to the implementation of QV - with some of the highest turnouts in KlimaDAO’s history occurring under QV - however, more recent votes have seen voter turnout significantly decrease, with less than 100,000 $KLIMA being used. It is unknown if this is a direct impact of the QV / Gitcoin implementation; voter fatigue; or changes in the way that governance proposals are communicated to the community. Holding $KLIMA as a governance token: it has been expressed that community members perceive the value of holding $KLIMA as a means to govern the protocol is reduced under QV, as a smaller amount of $KLIMA is required to exert a similar amount of influence over a given vote. Risk of Sybil attacks: there has been no evidence of sybil attacks on KlimaDAO’s governance under the QV trial - although it has been expressed as a risk by various community members. It appears that Gitcoin Passports with a low threshold (two stamps, with a score of >0) were sufficient to deter any attacks on the process.

Implementation The adoption of a 1 token 1 vote system can be implemented immediately on Snapshot, requiring minimal adjustments to current governance processes. This system will replace the proposed quadratic voting framework, maintaining the integrity and simplicity of the governance process.

In order to continue with QV a number of changes should be implemented to improve the robustness and mitigate barriers associated with QV: Allow Expired Passport Stamps: coordinate with Snapshot to understand if a work around for requiring recurring approvals of Gitcoin Passport can be implemented to reduce voter drop out from unprepared voters, without substantially increasing the risk of sybil attacks. Improved communication: ensure timely communication from the Protocol Team to ensure all token holders are aware that QV is active, and they may need to verify on Gitcoin Passport to participate in votes. Change the sequencing of votes: switch “yes” from always being option 1 in a Snapshot vote, to ascertain whether small holders are engaged with governance, or simply voting option 1 to engagement farm.

Conclusion

Governance of a DAO is a complex endeavor - and there are no right or wrong answers. On one hand, it may be (and indeed has been) argued that small token holders should have the ability to express a meaningful vote – as ultimately these small token holders could represent important beneficiaries of KlimaDAO’s tech and treasury (e.g. a project developer). Nevertheless, it may be just as valid to argue that if a stakeholder wishes to drive change at the DAO in a way they see fit, for their own purposes within the markets, then the DAO should be responsive to that desire (when expressed through the accrual of governance tokens), and QV effectively limits the potential impact of influential stakeholders to drive change through token voting. The alternative for any influential stakeholder would be to embark on the (more challenging) journey of consensus building with the community.

The outcome of this proposal will determine whether QV will continue, or for KlimaDAO’s token voting mechanism to revert to 1 token 1 vote.

NOTE: the outcome of this vote does not preclude a future proposal implementing a different voting system from being advanced.

Polling Period The polling process for this proposal on the future of KlimaDAO’s voting mechanism will begin immediately and conclude one week from today. Per KIP-40, the vote on Snapshot will be executed under 1 token 1 vote.