Why Voting Tokens Are F**king Horrible, And 4 Ways to Fix Them

One idea is to treat the token as reputation, and distribute them using rules one would use for distributing reputation: e.g. if a member did something that helped the organization, give them more tokens, and if someone did a horrible thing then strip away some of their tokens. Ideally, this would result in an organization ruled by those with the m... See more

Indeed, making the voting token non-transferable is a valid method for eliminating market noise as well as providing control over the system incentives.

long as a token is exposed to markets, there will always be noise in its valuation. So why not just make it impossible to trade the token then?

Ostensibly, having a flat organization is a good idea. You know, everyone should be equal and have the same rights, blablabla. But not having a formally defined power structure would only lead to the tyranny of structurelessness, where informal power structures form spontaneously from preexisting social relations between members, producing leaders ... See more

One less obvious shortcoming of token-based DAOs is their flat structures. By flat structure, I am referring to the fact that token-based DAOs are often direct democracies where every proposal is voted on by all token holders, without any political tools like Parliaments, executive branches, bureaucracies, standing committees, and so on.

First and foremost, the unregulated nature of cryptocurrency means that market manipulation schemes, like pumps & dumps, irresponsible hyping, viral campaigns and so on are extremely rampant, and huge bursts of noise are added to prices on a regular basis.

I would argue that in the current crypto market, this assumption couldn’t be further from reality. An oversimplified view of token valuation is that the price of a token = actual value + noise.

Voting tokens are based on one simple assumption: that the price of the token is strongly correlated to the success of the underlying project, so token holders are incentivized to use their tokens to participate in votes and make decisions beneficial to the project’s future development.