Governance Mining — liquidity mining for human capital

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:

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

-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.

‘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.

Lack of leadership & poor ability to coordinate — We’ve already seen the teams that built Compound & Uniswap take a step back, leaving the communities scrambling to self-organize. This initially resulted in near stagnation for both protocols. Given regulatory pressures, we’re almost certainly going to see this trend continue. More broadly, communit... See more

The idea is simple: DAOs need things done but are having a really hard time getting people to do those things. Thus, in a similar manner to liquidity mining, DAOs should ‘mine’ human capital to kickstart an active governance community.

So to summarize, there is so much that DAOs could be building, but no one is stepping up to lead teams and contribute because the incentives are weak or nonexistent. As a result, products move slowly, teams don’t grow, and existing DAOs risk being replaced by new teams that move faster. And in tandem, protocols have stupid amounts of money that the... See more

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