Tldr; There are many costs associated with running DAOs, and governance can take up valuable resources. As oSnap optimizes for efficiency and transparency, it helps DAOs operate in a cost-effective manner.
Key takeaways:
oSnap helps DAOs save on gas costs by using Snapshot’s gasless voting then trustlessly executing the results onchain.
oSnap removes the need for multisigs to initiate governance transactions, allowing treasury payments and contract deployments to be made much faster.
oSnap helps DAOs operate smarter and deliver more value for their members.
DAOs offer many advantages over traditional centralized structures, but running them can be challenging. Coordinating at scale while maintaining decentralization is difficult — and often costly. Both DAO members and the organizations themselves can get burdened with these costs.
oSnap, the UMA-powered solution that enables Optimistic Snapshot Execution, helps DAOs lower costs. oSnap uses Snapshot’s gasless voting mechanism with Safe wallets to help DAOs govern themselves without relying on centralized treasury management. It allows DAOs to get governance done efficiently in a trustless manner, something that ultimately makes them more cost-effective.
Leveraging Snapshot’s offchain voting
When DAOs need to make a decision, they have a few options. Ideas are typically put forward as proposals, and the best proposals go to a governance vote. In the past, votes would usually happen onchain, which meant community members had to spend gas to participate. Individuals would have to part with their $ETH, which increased centralization as it favored wealthier voters. In some cases, DAOs would reimburse individuals for their participation.
Snapshot changed this when it arrived on the scene, and today its offchain voting mechanism helps thousands of DAOs vote on governance decisions without running up exorbitant gas costs. As Snapshot voting is gasless, it allows more DAO members to participate. This means DAO voting can be more democratic and decentralized.
But while Snapshot addresses the gas issue, it doesn’t enable trustless governance. Once the community votes on a proposal offchain, someone still needs to execute the decision onchain. oSnap leverages Snapshot’s offchain voting mechanism and enables trustless execution. This means a community of tokenholders can vote on a proposal without spending their gas, and any community member can execute the proposal once a vote passes.
In short, as oSnap uses Snapshot’s decentralized voting tool with optimistic execution, it offers DAOs savings on gas costs while ensuring transactions get pushed onchain.
Efficient governance = cost-effective governance
One of the greatest challenges DAOs face is getting governance done efficiently. When proposals go to a vote, it often takes time for the vote to pass. Once it passes, DAOs can be subjected to long waiting times for executing transactions. If execution depends on a central team and they don’t happen to check the proposal, weeks may pass before anything happens.
As oSnap enables optimistic governance where any wallet address can initiate transactions once they have been securely validated onchain, it helps DAOs operate faster. With oSnap, there are no central blockers since the solution empowers all community members to take care of governance.
DAOs that operate efficiently are also better positioned to save on costs. Let’s say a DAO member puts forward a proposal to deposit $10 million worth of $ETH from the treasury into LSDs to accrue yield. If implemented, this proposal could bring in $800,000 annually. For every day the proposal does not pass and the $ETH sits in cold storage, the DAO loses out on potential yield.
oSnap’s efficiency optimization also helps DAOs save on resources. When the community is responsible for governance and execution, the DAO is less dependent on a central team. This frees up bandwidth, meaning the team can focus on building.
With oSnap, team members needn’t even be involved in a governance vote from proposal through to execution. Once oSnap is deployed, the DAO can run autonomously without falling back to a central team.
oSnap doesn’t just make DAOs more efficient — it can also save them money and other resources.
Trustless treasury management
The biggest DAOs may oversee tens or even hundreds of millions of dollars in treasury funds. To distribute funds across multiple locations, some DAOs store a portion of their treasuries with custodian services like Coinbase Prime. This has benefits, but it creates an additional central point of failure.
Let’s say a DAO’s treasury holds $50 million, and the team can access the funds through a multisig. If the DAO decides to store 40% of the treasury with a custodian service, it still has to trust two parties: the multisig controllers with $30 million and the custodian with $20 million.
Custodian services can also be extremely expensive. oSnap enables trustless treasury management, empowering communities to manage treasuries rather than having to rely on central teams or shell out on costly services.
While oSnap can be implemented with a multisig, the community can oversee treasuries without any team intervention once it’s deployed.
By limiting dependence on central points of failure, oSnap removes the need to spend on expensive custody solutions.
Aligning incentives
In theory, if a DAO operates in a decentralized manner, DAO members should always be able to oversee the way funds are used. However, in practice, this is not always the case. Some DAOs do not operate with full transparency, and decisions may get made without going through governance. In some cases, bad proposals can pass and result in misallocation of resources.
oSnap solves these issues. When deploying oSnap, DAOs must submit proposal rules such as the bond amount and liveness period. This makes it more difficult for bad proposals to pass. oSnap also helps DAOs maintain transparency as governance proposals are open and the rules can be verified via UMA’s oracle dApp.
oSnap also helps tokenholders establish alignment and make decisions on how funds should be used. When tokenholders are empowered to take care of DAO governance, they are all incentivized to make economically sound decisions on behalf of the DAO. This is true for all DAOs that adopt a governance structure, but oSnap goes a step further in aligning incentives by making governance trustless.
DAOs that adopt oSnap can create greater transparency and govern themselves efficiently. With oSnap, tokenholders don’t need to trust anyone — it’s up to them to align and allocate resources in the most effective way.
Trustlessness, efficiency, and cost-effectiveness
oSnap is already helping some of Web3’s foremost DAOs get governance done efficiently without foregoing decentralization. But it also offers DAOs a less obvious benefit: greater cost-effectiveness.
oSnap removes expensive gas costs, delays, and fund misallocation. More than a tool for making DAO governance run smoother, it ensures governance runs smarter.
We believe that Optimistic Snapshot Execution can push the DAO ecosystem forward. In the future, we expect many more DAOs to use optimistic governance to make decisions efficiently and trustlessly, and they’ll save money as they’re doing it.
If you’re ready to integrate oSnap into your project or you’re interested in learning more about the solution, reach out via integrations@uma.xyz, say hi via Twitter or Discord, or fill out our partnerships form here.
Words by @dreamsofdefi
