Efficiency Analysis of Decentralized Autonomous Organization (DAO) Voting Mechanisms

Abstract

Decentralized autonomous organizations (DAOs), originating from Ethereum, are pioneering entities in the world of Web 3, driven by the decentralization philosophy. In DAO systems, voting mechanisms are essential for decision-making. Their design is crucial for both community development and individual interest protection. While research has explored critical aspects such as decentralization, security, and effectiveness, there is a noticeable absence in analyzing the efficiency of DAO voting mechanisms. To address this, we focus on three key efficiency factors in DAO voting: voter turnout, processing time, and accuracy. Specifically, we identify high voter participation, shorter voting periods, and an approximately neutral approval rate as the primary factors for an efficient DAO voting process. Using a stochastic process model for DAO voting, we explore the interrelationship between these factors. We observe a trade-off between a shorter voting period and an approval rate closer to neutrality, and we also find a positive relationship between increased voter participation and achieving an appropriate approval rate. Finally, in simulations, we examine four common DAO voting mechanisms to determine their most efficient ranges.