Governance Mining — liquidity mining for human capital

DeFi found product-market fit in early 2020 and grew parabolically after liquidity mining was introduced. DAOs are finding product-market fit in 2021; it’s now time to begin pouring fuel on the fire to massively grow interest & participation and take DAOs to the next level.

As discussed, the hardest part of this seems to be assessing the value of contributions. In the short-term, this is inevitably quite subjective and requires a largely qualitative assessment. Over time, we’ll be able to design governance mining distribution mechanisms that are quantitatively driven, creating greater efficiency & less subjectivity th... See more

‘Mining’ contributions may dilute the quality of governance activity — Governance is already hard to follow as it stands today. If we begin throwing big money at governance mining, activity might 10x, but not all of that activity will be productive. People may spam governance in hopes of capturing some portion of tokens.

Assessing the “value” of contributions is inherently subjective — A key part of this is the ability for “value” to be accrued over time (suggest an improvement, and if the protocol grows significantly from that, collect a portion of the value created). While some economics can be rigidly defined (like how Yearn incentivizes strategists), many other... See more

-There hasn’t been enough iteration and experimentation in this category — This needs to be treated as a core focus for community leaders, and feedback loops need to be tightened. Governance mining has a lot of promise, but will require time and effort to be perfected.

-The heuristics have been weak — Governance mining distributions we’ve seen seem to prioritize scalability & decentralization over accuracy, making them decent at rewarding the long-tail of contributions but poor at properly compensating the most impactful contributors. Early on, a more centralized distribution mechanism is desirable.

-The incentives have been too small — A few thousand dollars in incentives isn’t going to change contributor behavior; we should be throwing $millions at governance contributors.

In the wild, we’ve seen some form of governance mining introduced in protocols like Balancer, Index Coop, MakerDAO, Friends with Benefits, and likely some others. However, the success of these initiatives so far appears to be quite limited. There are a few reasons for this:

At a high level, here’s how governance mining works: A protocol commits to distribute some portion of token supply to governance contributors over some period of time. Tokens are allocated relative to how much each group/individual contributes, weighted by the value of the outcome of their contribution. The more valuable the contribution, the more ... See more