Permissionless Governance Layering
A Defence of Token Bribery
web3 projects are increasingly controlled through permissionless governance layering. This layering of governance—typified by the vote escrow models of the Curve Wars—is incentivised by value capture and enabled by composability.
Entrepreneurs are building vote coordination platforms (e.g. Convex, Votium) that help voters to buy, rent, aggregate and delegate the governance tokens of other protocols.
The permissionless layering of governance platforms could be interpreted as an attack on the underlying community, or even as antithetical to the ideal of decentralised self-governance.
In this post I provide a more optimistic interpretation: vote coordination platforms enable entrepreneurial discovery of bundles of voting property rights, facilitating coordination under uncertainty. And so we should welcome these permissionless governance layers.
An idealistic vision of web3 community governance is single-layered. Token holders control governance at that single layer, typically through a process of proposals and votes.
While these 1-token-1-vote models have been widely criticised—leading to varying aggregation rules (e.g. quadratic) and decision rules (e.g. supermajority)—they are still designed and debated as single-layered governance structures.
Permissionless governance layering is fast making this single-layered vision untenable. Governance now happens in uncontrolled and permissionless layers. That is, we are seeing polycentric governance implemented not just within Layer 1s and DAOs, but layered on top of them (whether they like it or not).
There are two factors driving permissionless governance layering.
Value Capture. When governance token rights have economic value (e.g. to direct issuance or other rewards), there is an incentive for voters to coordinate and trade those rights. The nature of collective decision-making means that value is realised through aggregation, delegation and trade.
Permissionless Composability. Token composability means new coordination infrastructure can be built permissionlessly. Governance innovation is not confined to the native layer. Rather, entrepreneurs can layer new vote coordination mechanisms on top. Composability radically lowers the cost of these entrepreneurial endeavours.
These two drivers propelled the ongoing fight for deep liquidity known as the Curve Wars. I am not going to describe the Curve Wars dynamics in detail in this post (you’ll find excellent explainers here, here and here).
The Curve Wars have been variously described as a land grab, a voting war and a liquidity flywheel. Here I describe them as the discovery of bundles of voting rights through permissionless governance layering.
In short, Curve pioneered a vote escrow (VE) token model. Users could lock up CRV tokens for a variable period of time to boost their rewards, and receive veCRV in return. One of the governance rights attached to veCRV is to direct where CRV rewards flow (and subsequently where liquidity flows). As such, we have both composable tokens with clear economic value.
From this sprung the layering of vote coordination infrastructure. Many different platforms—including Convex, Votium, [REDACTED], Bribe.xyz, Llama Airforce Union—entered the fight for these voting tokens (rights), and the rewards and liquidity that flowed from them. We saw layers upon layers, each with different coordination strategies.
As we explained in our book, Cryptodemocracy, votes are bundles of property rights in a collective choice. Those bundles of rights include the right to vote (or not to vote), to delegate your vote, on what issues, within what timeframes, and so on. Votes can have perceived value depending on those bundles (and different value to different people).
The permissionless governance layering of the Curve Wars is experimentation and coordination in these bundles of voting property rights.
Platforms like Convex and Votium are designed to extract additional value from those bundles of CRV governance rights. They are mechanisms to lower the costs of trade between those who have the rights (apathetic tokenholders) and those who value the rights (e.g. a new project in need of liquidity).
The Curve Wars platforms seek to unbundle and re-bundle voting rights in novel ways. While Convex focused on aggregating CRV and attaching additional rights (including through their own locked governance tokens), other platforms such as Votium emphasised mechanisms for renting voting rights rather than buying them (i.e. bribing), and others still are using new bonding mechanisms to control voting assets.
What the Curve Wars demonstrate is how economic value and composability drive entrepreneurship into the level of voting infrastructure. These platforms entrepreneurially found ways to extract the value from those governance rights because they had the incentive and the tools to do so. Indeed, as economist Harold Demsetz taught us, property rights tend to develop where the benefits exceed the costs in first establishing and enforcing those rights.
The Curve Wars are only the beginning of entrepreneurial and permissionless laying of voting platforms—a process of experimentation and discovery over voting property rights.
Darcy W E Allen is with the RMIT Blockchain Innovation Hub, RMIT University. @DrDarcyAllen