Meta-governance is a powerful concept emerging within decentralized autonomous organizations (DAOs). It occurs when one protocol, Protocol A, holds the governance tokens of another protocol, Protocol B, and uses those tokens to vote on proposals within Protocol B's ecosystem. There is no single standard approach to meta-governance; each DAO tends to develop mechanisms and strategies that align with its unique operational goals.
This guide explores the current state of meta-governance, identifies key participants, and examines its growing range of applications across the decentralized landscape.
What Is Meta-Governance?
At its core, meta-governance is about layered decision-making. It allows a DAO to exert influence beyond its immediate protocol by participating in the governance of other, often complementary, protocols. This creates a network of interlinked governance power, enabling coordinated decision-making across the DeFi ecosystem.
The strategies can vary significantly. Some protocols use tokens accumulated in their treasury, while others design specific products, like index tokens, that inherently bundle voting power.
Active Meta-Governance Participants
Several established DAOs are actively using meta-governance, each with a distinct approach.
Index Coop
Index Coop is a DAO that builds and maintains structured DeFi products and crypto index funds. It is a pioneer in designing effective meta-governance mechanisms.
The DAO currently exercises meta-governance over protocols like Yearn, Compound, and Uniswap. This power is primarily derived from its flagship product, the DeFi Pulse Index (DPI), which holds a basket of governance tokens. The collective voting power of these tokens can form a substantial and influential bloc.
The Index Coop community votes on meta-governance proposals. However, if a 5% quorum is not met, a dedicated five-member Meta-Governance Committee steps in to vote on those specific proposals. This committee serves a five-month term to ensure accountability.
Index Coop maintains a highly transparent process, with all details on committee elections and voting procedures publicly available in its community handbook.
Convex Finance
Convex Finance is a protocol that allows liquidity providers to earn enhanced rewards from Curve Finance without needing to lock CRV tokens themselves. Its primary meta-governance function is managing over 50% of the voting rights in Curve Finance.
Convex accumulates voting power by allowing CRV holders to delegate their tokens to it in exchange for higher yields. This strategy has made Convex the dominant force in directing CRV inflation rewards (via "gauge weights") to specific liquidity pools, effectively deciding where liquidity in the Curve ecosystem flows.
Holders of Convex's governance token, $CVX, actively manage this voting power. The entire process is transparent and guided by clear protocols.
Redacted Cartel
An offshoot of Olympus DAO, Redacted Cartel aims to influence DeFi governance by leveraging Protocol Controlled Value (PCV). It is particularly active in the Curve ecosystem and currently engages in meta-governance for Convex Finance, Curve, and Olympus DAO.
It uses a bonding mechanism to accumulate volatile assets like CRV and CVX in its treasury. Users bond these tokens in exchange for a discount on its governance token, BTRFLY. This has been highly successful, making Redacted one of the largest CVX holders. While its processes are less public than others, its goal is to steer governance across DeFi to align with its objectives.
PowerPool
PowerPool is an Ethereum-based protocol focused on accumulating governance power. Its core product is a liquidity-incentivized DeFi index. It practices meta-governance over a wide array of protocols, including Yearn, Maker, Uniswap, Compound, and Aave.
Its governance power comes from its Power Index (PIPT), which contains various DeFi governance tokens. Holders of PowerPool's native token, CVP, can vote on proposals for the other protocols in the index, ensuring their interests are aligned with PowerPool's success. All meta-governance actions are executed on-chain with full transparency.
Rabbithole
Rabbithole is a "learn-to-earn" protocol that rewards users for completing on-chain tasks to learn about crypto. Its meta-governance power comes from governance tokens held in its treasury.
Through its "Meta-Governance Pod," Rabbithole allows members to vote on proposals from protocols like Aave, Uniswap, Lido, and Compound. The process is transparent: protocol experts summarize proposals and make voting recommendations within the Pod's Discord channel. A full history of past votes is maintained publicly.
DAOs Planning to Use Meta-Governance
A new wave of DAOs is forming with the explicit intent to leverage meta-governance.
Wildfire DAO
Wildfire DAO is a meta-governance collective designed to unify community members from across the crypto ecosystem. It plans to form specialized "squads" to tackle token design, governance, and coordination problems transparently.
Its ambitious roadmap targets meta-governance across four sectors: DeFi (e.g., Aave, Balancer), public goods (e.g., ENS, Gitcoin), the creator economy (e.g., SuperRare, Bankless DAO), and infrastructure (e.g., Rocket Pool, Pocket Network). As it is still in its early stages, its specific activities are yet to fully unfold.
Volta DAO
Operating on the Fantom network, Volta DAO is a decentralized reserve currency protocol backed by a basket of assets. While the exact composition of its treasury is not fully public, its strategy involves offering highly competitive bonding rewards for governance tokens.
By accumulating these tokens, Volta DAO intends to participate in the governance of other protocols, generating streams of passive income to back the value of its VOLT token. It aims to become one of the most influential protocols across the Fantom and Avalanche ecosystems.
Orkan DAO
A sub-DAO of Strudel DAO, Orkan DAO aims to bootstrap liquidity on the Fantom Opera blockchain. It plans to purchase governance tokens by issuing bonds and using liquidity gauges and lock-up mechanisms as incentives.
It has already seen early success by directing rewards to voters on SpiritSwap, significantly increasing market participation and liquidity for its token. Its design is heavily inspired by Convex Finance's model for directing liquidity on Curve.
Apollo DAO
Apollo DAO is a yield aggregator on the Terra blockchain that functions like a decentralized hedge fund. It accumulates governance tokens across the Terra ecosystem to provide enhanced yields to its stakeholders.
Its model is a hybrid of Curve's and Convex's systems. Users can lock their Apollo tokens for up to two years to gain amplified voting power (zApollo). Alternatively, holders of other governance tokens can delegate their voting rights to Apollo in exchange for higher yields, similar to Convex. This allows Apollo to build a treasury with significant influence over where liquidity flows in the Terra ecosystem.
The Growing Uses of Meta-Governance
The investigation into current meta-governance activities reveals several key applications:
- Bootstrapping Liquidity: Protocols like Convex and Orkan use meta-governance to direct emission rewards (e.g., CRV) to specific pools, effectively attracting massive liquidity.
- Enhancing Educational Platforms: Projects like Rabbithole use their governance influence to align with protocols that benefit their users, creating a synergistic learning environment.
- Increasing Product Value: Index providers like Index Coop and PowerPool use meta-governance to help ensure the protocols within their products are well-managed, which in turn supports the value of their index tokens.
- Building Ecosystem Bridges: Meta-governance creates formalized connections between separate protocols, allowing them to coordinate and build a more integrated and powerful crypto ecosystem.
👉 Explore advanced governance strategies
Frequently Asked Questions
What is the main goal of meta-governance?
The primary goal is to allow a DAO to extend its influence and achieve its objectives by participating in the governance of other, often related, protocols. This can be for financial gain, ecosystem alignment, or to bootstrap resources like liquidity.
Is meta-governance a form of a takeover?
Not necessarily. While it does concentrate voting power, it often emerges from voluntary delegation where users choose to give up their governance rights in exchange for better financial rewards. The resulting influence can be used to support the health and growth of the underlying protocols.
How can I participate in a DAO's meta-governance?
Participation typically requires holding the meta-governing DAO's native token. For example, holding $CVP allows you to vote on PowerPool's meta-governance proposals. Each DAO has its own specific process, which is usually outlined in its governance docs.
Are there risks associated with meta-governance?
Yes. The concentration of voting power in a few large protocols could lead to centralization and potential collusion. The key is to build systems with strong transparency and community oversight to mitigate these risks.
Which protocols have the most meta-governance power currently?
As of now, Convex Finance holds the most significant concentrated power due to its control over a majority of Curve's governance. Index Coop and PowerPool also hold wide-ranging influence across many major DeFi protocols.
We are still in the early stages of exploring meta-governance. As the technology matures, more innovative use cases will undoubtedly emerge, helping to realize the full vision of a interconnected and collaborative DAO ecosystem.