Guide: Voting in Blockchain Projects

Guide: Voting in Blockchain Projects

Cryptoproject communities have a huge impact on the direction of their development and key decision-making. This is an important feature of the Blockchain industry.

Decentralization of ecosystems as the ideological basis for many solutions in the sector implies not only the technical component in the form of distributed accounting and storage of transaction data on multiple servers, but is often understood in the form of decision-making mechanisms for all community members, writes RBC Crypto.

The most common way for a community to express its will is through voting by token holders. A characteristic feature of such a process is that users who keep more tokens in their wallets tend to get more votes. In this Token feature lies one of the answers to the frequent rebuke of Blockchain assets’ resemblance to funnels – at the very least, some “cryptofunks” allow users to vote, which can be of separate value if the project is successful.

The strength of a user’s vote on the Pancakeswap platform within each individual vote is determined by counting the sum of the user’s CAKE tokens at the time the vote is created. All of the user’s CAKEs are taken into account: tokens on the wallet balance, Tokens stacked in Syrup Pools, and tokens in the CAKE/BNB liquidity pair.

Users will need a vote strength of 10 or more, which is 10 CAKE Tokens, to create their vote. Since the required number of CAKEs to create their vote is not very high and there are no other restrictions, there are a large number of joke-meme and spam polls in the section. Nevertheless, among the plethora of suggestions, one can also consider extremely important community wills, the results of which can also be considered to some extent the platform’s potential plans for the future. Let’s look at a few such examples.

Almost unanimously in favor, the community voted to create a hybrid One stake to earn all stacking pool that would allow rewards in all currently possible Tokens in Syrup Pools at the same time. To achieve a similar result now, you would need to manually enable stacking separately for each reward Token by dividing your CAKE tokens into equal parts.

Here and hereafter we are talking about the voting totals at the time of writing

The proposal to create a Proof of Stake Blockchain algorithm of its own for Pancakeswap Finance was supported by only 1/3 of the votes, while 2/3 of the votes were in favor of developing support for multiple networks within the existing platform as soon as possible. As a reminder, the project currently only works with the Binance Smart Chain network.

Several times the proposal to lengthen the life of Syrup Pools with a proportional decrease in the annual interest was raised and each almost unanimously rejected. The main argument for such a measure was the assumption that too short-lived large pools with rewards desired by many users might lead to sharp drops in the CAKE Token price shortly before and immediately after popular pools end.

Participants in the Decentraland metacommunity vote a lot and often. For this reason, the community page has several sections. Votes are counted using a special Voting Power (VP) formula, which gives users with more Tokens a larger VP. In addition to the usual requests for funding for various initiatives and decisions regarding community development that many ecosystems are accustomed to, MANA has important sections on the issue of locking user names in the meta universe, as well as a register of officially approved clothing items for avatars.

Decentraland’s experience with blocking certain usernames in the meta universe shows a feature of the new paradigm that aims to decentralize decision-making. Instead of blocking all inappropriate names at once (mostly related to misleading words, politics, or violence and pornography), the community votes separately on each name. The results of such votes are always interesting and unpredictable.

In mid-April 2022, the community overwhelmingly voted against blocking the names: Russia and Putin. Last year, the VP voted overwhelmingly to block the name ‘nigga’ in their meta-universe, despite the fact that the word is used in popular music, for example.

On the way to increasing the number of uses of the Token, a voting feature was recently activated for Token holders who wished to enable the stacking feature for their WX Tokens.

Once this feature is enabled, users receive gWX Tokens based on the number of WX Tokens and freeze time. WX Tokens can be frozen for a maximum of 4 years and receive the highest possible number of gWX Tokens. Once gWX tokens are in the account, users have the opportunity to participate in votes on making new projects’ Tokens official.

The decentralized Waves exchange immediately defaults to free trading of all newly created project tokens in any available pairs on the exchange. However, officially verified Tokens have a number of significant technical and image advantages: Tokens can participate in the creation of liquidity pools, receive a “confirmed” Token and a tick in spot pairs, can use bot marketmaking and are also taken into account when displaying the total value of the user’s portfolio in the “wallet” tab.

Two conditions must be met for the new Token verification vote to be successful: reaching a quorum of 500,000 gWX in total participating votes and of course reaching a preponderance of “yes” votes. Winning the vote and verifying your Token is not easy at all; at the time of writing, out of dozens of projects trying to obtain official status, only four Tokens with obvious liquid-stacking functionality have succeeded.

Despite the Crypto-space’s credible desire to involve as many community members as possible in decision-making, the current stage of implementation of this development vector raises many questions. First and foremost, there is a frequent mismatch between the number of users who vote and the total vote power (VP) they collect, which depends on the number of Tokens in the accounts of the users who voted.

If the voting power is determined solely by the number of Tokens, then just a few accounts with a relatively large number of Tokens can easily “pull” any vote in their favor even from thousands of users with a small number of Tokens on their balances.

Considering this fact, we can say that the current formulas for determining vote strength are probably still far from optimal and will undergo many changes in the future.

A separate criticism of cryptocommunity governance models is always the unfortunate fact that despite tens or hundreds of thousands of active users of Blockchain projects, only a small number of enthusiasts take part in voting, calling into question the representativeness of such governance models.

The interaction of development teams with the results of community participants’ will and their own participation in the voting is also seen as an understudied, complex and interesting topic for research.

Despite the above-mentioned doubts about the effectiveness of current decentralized mechanisms of management of cryptocommunities, it is worth acknowledging the fact that the development of such systems is certainly valuable, at least because of its innovativeness, because throughout its history mankind, except for short periods of time and certain subcultural phenomena, has used and improved in most areas only centralized management models.

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Written by Renat
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