Delegation and Participation in Decentralized Governance: An Epistemic View

TL;DR

This paper evaluates decentralized governance methods using epistemic tests, finding partial abstention effective, highlighting weaknesses in transfer delegation, and exploring how direct participation and auxiliary tools can improve decision accuracy.

Contribution

It introduces epistemic tests to assess governance methods, demonstrates the strengths of partial abstention, and analyzes the epistemic limitations of transfer delegation and supplementary tools.

Findings

Partial abstention outperforms other delegation methods epistemically.

Transfer delegation has inherent epistemic weaknesses.

Direct participation can sometimes negatively impact decision correctness.

Abstract

We develop and apply epistemic tests to various decentralized governance methods as well as to study the impact of participation. These tests probe the ability to reach a correct outcome when there is one. We find that partial abstention is a strong governance method from an epistemic standpoint compared to alternatives such as various forms of ``transfer delegation" in which voters explicitly transfer some or all of their voting rights to others. We make a stronger case for multi-step transfer delegation than is present in previous work but also demonstrate that transfer delegation has inherent epistemic weaknesses. We show that enhanced direct participation, voters exercising their own voting rights, can have a variety of epistemic impacts, some very negative. We identify governance conditions under which additional direct participation is guaranteed to do no epistemic harm and is likely to increase the probability of making correct decisions. In light of the epistemic challenges of voting-based decentralized governance, we consider the possible supplementary use of prediction markets, auctions, and AI agents to improve outcomes. All these results are significant because epistemic performance matters if entities such as DAOs (decentralized autonomous organizations) wish to compete with organizations that are more centralized.