One of the main advantages of DAOs is in allowing their community to make decisions for the DAO via direct voting, which some DAOs do on-chain and some off-chain. What’s the difference and why does it even matter?

On-chain voting

On-chain voting means that each vote is recorded on the blockchain so anyone can see how each DAO member voted (and that record is preserved forever). If a proposal is passed with enough votes, it will become official at the predetermined snapshot of the blockchain. Since on-chain votes need to be added to the blockchain the same way other data is added to the blockchain (by miners in PoW, stakers in PoS, etc.), each vote may require a gas fee, which may make regular voting expensive for some DAO members.

Off-chain voting

Off-chain voting can be as simple as a vote on any website or app. The implementation of a passed proposal can also use the snapshot method or be done manually. There is generally no cost involved for the voter. It is also much easier and faster to implement as opposed to the slower on-chain voting (where the DAO must wait for the votes to be added to the blockchain). However, off-chain voting lacks the historical permanence of on-chain voting — if the website the vote is on decides to delete voting info, it’s gone.

Does it matter which type of voting to use?

In both cases, each voter is usually authenticated with their Web3 wallet like MetaMask to prevent double voting and other fraud.

Which of the two options is implemented should not directly affect the vote as long as fraud and technical malfunctions are prevented. However, the choice has many implications for the nature of the DAO, including transparency and trust, voting dynamics, development costs, and more.

Transparency and Trust

This one is obvious: on-chain voting is visible immediately and forever, so you know who voted for what. Transparency in voting helps to hold people accountable for their governance actions. On the other hand, open voting allows malicious actors to target those whose vote they don’t agree with or to discriminate against them. The recent controversy of the a16z hedge fund single-handedly trying to sway the Uniswap DAO vote in favor of their preferred token bridge to BNB is a case in point. If a16z was able to do so anonymously, there would not be a controversy. Whether that would be a good thing is debatable, of course.

To be clear, off-chain voting can also be transparent. But it would require a higher level of trust since a website (usually running on Web2 tech at this point) is generally much easier to hack than a blockchain.

Voting dynamics

If you see that your friends are voting one way on a proposal, would you be swayed to vote with them? What if it’s a whale or the founder of the DAO? The permanence of a voting record can also have a self-policing effect of making one think twice about their vote.

Another voting dynamic is the ease of casting a vote. On-chain voting requires you to sign your vote, which at the very least requires your Web3 wallet and the blockchain to be functioning at the time you’re voting. In this way, at least, off-chain voting is generally easier.

Development costs

Any on-chain system is generally more costly to implement than an off-chain one based on both blockchain fees and the actual development costs. That being said, there are third-party platforms that can be used for voting, with Snapshot being perhaps the most known off-chain one. Aragon offers a hybrid of off-chain voting with on-chain execution. Plus, the ability to fork the code of many blockchain projects lowers the development costs vis-a-vis Web2 development.

Wen which?

When it comes down to it, the choice of on-chain vs. off-chain is not one of absolutes but based on each DAO’s specific situation and the kind of voting going on. For example, a small DAO may not afford the costs of on-chain voting while also not needing to worry so much about centralization (since there are so few members.

Meanwhile, a large DAO may absorb such costs much more easily and have greater concerns of keeping voting records transparent and voting itself decentralized — with the historical evidence of the votes being inscribed into the blockchain.

The DeXe way

DeXe’s DAO builder is all about flexibility, so we offer both on-chain and off-chain voting options. Better yet, DAO creators can implement variable voting rules for different types of votes. So more routine ones can be done off-line with a lower quorum while a proposal that may fundamentally change the DAO or make significant use of the treasury’s funds can be put to an on-chain vote with a big quorum to make sure it’s truly the will of the people. Members can even delegate their votes to trusted delegators to make sure their voice is heard without being there for every single vote.

As a DAO member, the choice is always yours. At DeXe, our choice was to give you the options for all your choices. That’s the DAO way!

Stay tuned!