Metagovernance is when a DAO has voting power in another DAO, typically through holding their governance token. For example, if Yearn DAO holds BAL tokens, they have voting power in the Balancer DAO. And if Balancer DAO holds YFI tokens, they have voting power in Yearn DAO.
It’s important for DAOs to diversify their treasuries to withstand the ups and downs of bull and bear markets. One way to do this is holding the tokens of other DAOs, which often carry governance power. This puts the responsibility on that organization to decide how to vote in the other DAO’s proposals.
To help the DAO save time, it may choose to delegate its tokens to a person or group who can maintain context in the other DAO’s governance. For example, Yearn DAO might choose to delegate its BAL tokens to someone actively involved in Balancer DAO, so that person can vote in Yearn DAO’s best interest without Yearn DAO needing to dedicate someone to maintain context of that DAO.
Challenges of Metagovernance
DAOs face challenges when deciding how to use their token holdings in other DAOs. This is because DAOs often lack a dedicated investment team that decides how to utilize the tokens in the treasury.
Metagovernance can be full of coordination failures and hurdles to pass proposals. Assigning someone to keep up with governance alone can be a struggle, much less tasking them with making important voting decisions for the entire DAO.
We, too, have felt these challenges in our own DAO. Over the years of being active in the Ethereum ecosystem, the Aragon DAO has accumulated governance tokens in other projects, and we’ve started working to leverage those tokens. This year, we are exploring how to best participate in metagovernance across the ecosystem in a way that minimizes coordination failures and prioritizes positive-sum actions.
We plan to take a lean, agile approach to metagovernance with a small team with real-world financial management experience. Let’s dive into our new approach to metagovernance!
The new approach to metagovernance at Aragon
A small team of Aragon contributors that have been deeply involved in the Aragon project plans to find and structure paths to strategically leverage the governance tokens already held in the Aragon treasury with the following goals in mind:
Improve resource efficiency: Leveraging token holdings in other projects to promote integrations with Aragon tools and other joint initiatives.
Validate that tokens are a suitable coordination mechanism: Increasing integrations and joint initiatives through positive-sum actions, not at the expense of the other project.
Be a good steward of governance: Bringing voting rates up and move governance forward in the ecosystem as a whole.
If the goals above are met, it will prove that metagovernance is a productive way of advancing the hyperstructure strategy and will pave the way for Aragon to expand its portfolio of governance token holdings in the ecosystem.
As we craft our approach, and explore expanding the portfolio of governance tokens held by Aragon we will keep two implications in mind: the growth of the Aragon DAO treasury and the furthering of the hyperstructure strategy. We will consider these in parallel for a balanced approach. Let’s quickly explore each one.
Protection and growth of the Aragon treasury
The first consideration for metagovernance will be the tokens’ effect on the Aragon treasury. We’ll have to make decisions on how and when the asset should be used to directly increase the treasury of Aragon or secure liquidity.
The metagovernance team will run tests, and if the hypothesis is proved, token holders will vote in a working group to implement the strategy for the given asset, such as selling, staking, borrowing against, or something else.
We want these decisions to be made in a lean, agile way, rather than requiring the entire DAO to vote on every financial decision. So, the team will test hypotheses and share learnings with the token holder working group to identify the best path to take when managing these assets for growth of the treasury.
Furthering the hyperstructure strategy
The next area of consideration is how the asset can be used to advance Aragon’s hyperstructure strategy through governance participation.
Our vision is to create tools that allow governance experimentation at the speed of software, and we believe the best way to realize that vision is to pursue building a hyperstructure for governance. A hyperstructure is infrastructure that runs forever without a centralized party needing to maintain it, like the internet.
One of the ways to build this hyperstructure is to maximize ecosystem compatibilities, so projects can build with and on top of our stack. We’re hoping to work with projects interested in creating DAOs, building on top of the Aragon protocol, and pursuing other joint initiatives.
Our level of participation in these projects will fall into two categories:
Active: creating and stewarding proposals proactively in projects.
Passive: delegating or directly voting on proposals.
The metagovernance team will determine the approach from project to project.
We’re excited about a new chapter in metagovernance
The metagovernance team is excited to pursue a new chapter in metagovernance at Aragon and hopefully help the entire ecosystem grow!
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