Proposal System

Multi-stage governance workflow mechanism enabling DAO community members to initiate, discuss, deliberate, vote upon, and execute protocol changes through structured processes that combine off-chain deliberation (forums, governance calls), cryptographic signalling via off-chain snapshot votes, and binding on-chain execution through smart contracts, with threshold requirements (token holdings, quorum) balancing permissionless participation against governance efficiency.

Semantic Classification

Content

Proposal systems in DAOs represent the structured mechanisms through which community members initiate, discuss, refine, vote upon, and execute protocol changes, transforming decentralised governance from theoretical abstraction into operational reality through multi-stage workflows combining off-chain deliberation (forums, Discord, governance calls), cryptographic signaling (Snapshot off-chain votes), and binding on-chain execution via smart contracts. Unlike traditional corporate governance where proposals typically flow top-down from management to board approval to shareholder ratification, DAO proposal systems enable bottom-up community initiation whilst imposing significant barriers—governance token thresholds requiring millions in token holdings, technical expertise to encode proposal actions in executable smart contract code, and social capital to mobilise community support through multi-week deliberation processes—creating tension between permissionless participation ideals and practical governance efficiency. The 2020-2025 period witnessed explosive growth in proposal sophistication across major DAOs like Uniswap (processing 50+ binding governance proposals governing $5B+treasuryandprotocolparameters),[[MakerDAO]](1,000+executivevotesmanaging$8B+ DeFi system), Compound (200+ proposals pioneering autonomous parameter adjustments), and Aave (150+ governance proposals coordinating multi-chain protocol deployments), whilst simultaneously exposing persistent challenges: proposal spam and low-quality submissions, voter fatigue and declining participation rates (5-15% typical turnout), governance attacks exploiting quorum requirements, the professionalization of proposal authorship concentrating power amongst technical elites, and the fundamental question of whether formal on-chain governance creates more problems than decentralised coordination solves.

Proposal Lifecycle and Multi-Stage Governance

Modern DAO proposal systems employ multi-stage workflows balancing accessibility, deliberation quality, and execution security:

Stage 1: Ideation and Discussion (Off-Chain Forums)

Initial proposal concepts emerge through informal community discussions:

• Platforms: Discourse forums, Commonwealth, Discord channels, Telegram groups, governance calls

• Participants: Any community member can initiate discussion (no token threshold)

• Duration: Ongoing/indefinite until sufficient interest emerges

• Output: Rough proposal concept, identification of champions willing to formalize

  Example Forums:

• Uniswap Governance Forum (gov.uniswap.org): 10,000+ posts, 3,000+ topics, dedicated categories for proposals, grants, meta-governance

• MakerDAO Forum (forum.makerdao.com): 50,000+ posts, extensive discussion threads on collateral onboarding, risk parameters, protocol upgrades

• Compound Community Forum: Technical discussions on interest rate models, asset listings, security

• Aave Governance Forum: Multi-chain deployment proposals, risk parameter adjustments, treasury allocations

  Stage 2: Temperature Check (Snapshot Signaling Vote)

  Formalized proposal draft subjected to off-chain vote gauging community sentiment:

• Platform: Snapshot (snapshot.org) - off-chain governance signaling using cryptographic signatures

• Requirements:

  • Minimum token holding to create Snapshot (varies: 50K-100K tokens typical)
  • Structured proposal format (title, summary, motivation, specification, voting options)

• Duration: 3-7 days typically

• Voting: Free (no gas costs), uses EIP-712 signatures verified via IPFS

• Quorum: Lower than on-chain (often no quorum, simple majority sufficient)

• Outcome: Non-binding signal; if passes, proceeds to formal governance

  Snapshot Technical Mechanism:

  1. Proposer creates proposal on Snapshot platform
  2. Snapshot records Ethereum block number for vote power calculation
  3. Voters sign EIP-712 messages (off-chain, no gas)
  4. Signatures stored on IPFS (decentralized storage)
  5. Anyone can verify signatures match voter addresses + block balances
  6. Vote tallying occurs off-chain by aggregating signatures
  

  Stage 3: Consensus Check / Refined Proposal

  For proposals passing temperature check, authors refine based on feedback:

• Refinement: Incorporate community feedback, address concerns, add technical specifications

• Legal review: For major proposals, DAOs increasingly conduct legal analysis (regulatory compliance, securities law implications, liability risks)

• Security audit: For smart contract changes, third-party audits verify code correctness

• Economic modeling: For parameter changes, quantitative analysis of expected impact

• Second Snapshot: Some DAOs require second off-chain vote on refined proposal before on-chain submission

  Stage 4: On-Chain Governance Proposal

  Formal binding proposal submitted to blockchain for execution:

• Requirements:

  • Proposal threshold: Minimum governance tokens held/delegated (Uniswap 2.5M UNI, Compound 400K COMP, Aave 80K AAVE)
  • Executable code: Proposal must include exact smart contract function calls to execute if approved
  • Gas costs: Submission costs $50-500 depending on Ethereum gas prices (proposal creation is complex transaction)

• Components:

  • Targets: Array of contract addresses to call
  • Values: ETH amounts to send with each call (typically zero)
  • Signatures: Function signatures to call on each target
  • Calldatas: ABI-encoded parameters for each function call
  • Description: Human-readable proposal text (stored on-chain or IPFS)

• Example Proposal Structure (Compound Governor Bravo):

  function propose(
    address[] memory targets,
    uint[] memory values,
    string[] memory signatures,
    bytes[] memory calldatas,
    string memory description
  ) public returns (uint)

• Voting period: 3-10 days (Uniswap 7 days, Compound 7 days, Aave 10 days)

• Quorum requirement: 3-5% of circulating supply typical (Uniswap 40M UNI = 4%, Compound 400K COMP = 4%)

• Approval threshold: Simple majority (For > Against) plus quorum met

  Stage 5: Timelock Delay

  Successful proposals enter mandatory delay before execution:

• Duration: 2-7 days (Uniswap 2 days, Compound 2 days, Aave 1-7 days depending on risk)

• Purpose:

  • Security review: Community inspects exact bytecode that will execute
  • Fraud detection: Identify proposals with hidden malicious code
  • Exit window: Users opposed to change can withdraw funds, sell tokens before execution
  • Emergency response: If malicious code detected, activate emergency procedures (multisig intervention, migration)

• Transparency: During timelock, exact transaction data is public on-chain, enabling thorough verification

  Stage 6: Execution

  After timelock expiration, proposal executes automatically (or requires permissionless trigger):

• Execution: Anyone can call execute() function (small gas fee) to trigger queued proposal

• Atomicity: All proposal actions execute in single transaction (either all succeed or all revert)

• Finality: Once executed, changes are permanent (barring subsequent proposal to reverse)

• Verification: Community verifies execution matched proposal description

  Real-World Proposal Systems

  Uniswap Three-Stage Governance:

  Uniswap employs rigorous multi-stage process ensuring high-quality proposals:

  1. Temperature Check (Discourse + Snapshot):

• Forum discussion: 2-3 days minimum on gov.uniswap.org

• Snapshot vote: 5 days, 50K UNI threshold to create, simple majority to pass

• Purpose: Filter out low-quality proposals early (free voting encourages broad participation)

  2. Consensus Check (Snapshot):

• Refined proposal: Authors incorporate feedback, add technical specifications

• Second Snapshot: 5 days, 50K UNI threshold

• Purpose: Ensure refined proposal maintains community support before expensive on-chain submission

  3. Governance Proposal (On-Chain):

• Requirements: 2.5M UNI proposal threshold (~$19Mat$7.50/UNI), 40M UNI quorum (4% of supply)

• Voting: 7 days on-chain

• Timelock: 2 days

• Execution: Automatic after timelock

  Historical Uniswap Proposals:

• UGP v0.1 (March 2021): $1.5M grants program, 40M UNI voted, passed 99.97% in favor

• Deploy v3 on Optimism (June 2021): First L2 deployment, 42M UNI voted, passed 99.3%

• Deploy v3 on Polygon (December 2021): Second L2 deployment, 45M UNI voted, passed 99.4%

• Uniswap Foundation Funding (June 2022): $74M UNI to foundation, 52M UNI voted, passed 84.3%

• UNIfication Proposal (December 2025): Passed with 99.9% support (125M+ UNI); burned 100M UNI (~$596M) from treasury, activated protocol fee switch redirecting trading fees to UNI burn, removed Uniswap Labs interface fees, approved 20M UNI annual growth budget

  MakerDAO Dual Governance System:

  MakerDAO uses unique system combining polls and executive votes:

  Governance Polls (Non-Binding Signal):

• Purpose: Gauge community sentiment on proposed changes before formal vote

• Examples: “Should we increase DAI Savings Rate from 1% to 2%?”

• Voting: MKR-weighted, no quorum, typically 3-7 days

• Outcome: Informs executive vote creation but doesn’t execute changes

  Executive Votes (Binding Execution):

• Mechanism: “Spell” smart contracts encoding proposed changes

• Voting: MKR holders vote by staking tokens on preferred executive

• No quorum: Executive with most staked MKR becomes active (continuous approval voting)

• Execution: Leading executive automatically executes when overtaking previous executive

• Unique feature: Voters keep MKR staked indefinitely on preferred executive (not time-limited vote)

  MakerDAO Emergency Shutdown:

• Trigger: 50,000 MKR staked on Emergency Shutdown Module (~$67M in 2024)

• Effect: Immediately halts protocol, allows DAI holders to redeem collateral

• Purpose: Protection against governance attacks, critical bugs, or black swan events

  Historical MakerDAO Proposals:

• Collateral Onboarding: 100+ new collateral types approved (USDC, wBTC, stETH, RWAs)

• Stability Fee Adjustments: 500+ parameter changes responding to market conditions

• DAI Savings Rate Changes: 200+ DSR adjustments balancing DAI demand

• Sky Protocol Transition (2024–2025): Restructuring into Sky Ecosystem; MKR token retired, SKY governance token launched September 2025; USDS replaced DAI as primary stablecoin

  Compound Autonomous Proposals:

  Compound pioneered autonomous on-chain governance with minimal off-chain coordination:

  Proposal Process:

• Direct submission: Proposals can skip off-chain stages and go directly on-chain (though discouraged)

• Requirements: 400K COMP proposal threshold + quorum (4% supply = 400K COMP)

• Voting: 7 days (50,400 Ethereum blocks)

• Timelock: 2 days

• Scope: Interest rate models, collateral factors, reserve factors, asset listings, COMP distribution

  Governor Bravo Innovation: Compound developed Governor Bravo contract (2020), which became industry standard:

• Three voting options: For, Against, Abstain (abstain counts toward quorum but not outcome)

• Proposal threshold checking: Proposer must maintain threshold throughout voting (prevents flash loan governance attacks)

• Timelock integration: Automatic queuing of successful proposals with mandatory delay

• Delegation support: Voting power delegation without token transfer

  Historical Compound Proposals:

• COMP Distribution Launch (Proposal 007, June 2020): Activated COMP token distribution, catalyzed DeFi Summer

• cDAI Interest Rate Model (Multiple proposals): Optimized borrowing costs for DAI market

• Compound III (Comet): New protocol version with different architecture, approved via governance

• Treasury Diversification: Proposals to convert COMP treasury holdings into stablecoins

  Aave Risk-Tiered Governance:

  Aave implements different timelock durations based on proposal risk level:

  Proposal Categories:

  1. Low Risk (1-day timelock): Parameter tweaks within safe ranges
  2. Medium Risk (3-day timelock): Significant parameter changes, new asset listings
  3. High Risk (7-day timelock): Smart contract upgrades, major protocol changes

  Aave Improvement Proposals (AIPs):

• Proposition Power: 80,000 AAVE required to create proposal

• Voting Power: 320,000 AAVE quorum required (2% of supply)

• Voting Period: ~10 days

• Multi-Chain Coordination: Proposals can trigger actions across Ethereum, Polygon, Avalanche, Optimism, Arbitrum

  Historical Aave Proposals:

• AIP-16: Aavenomics (October 2020): Introduced Safety Module staking and AAVE value accrual

• AIP-27: Add GHO (July 2023): Launched Aave’s native stablecoin GHO

• AIP-45: Aave v3 Deployment (March 2022): Deployed v3 across multiple chains

• AIP-60: Treasury Management (2023): Allocated treasury to yield-generating strategies

  Proposal Templates and Standards

  DAOs developed standardized proposal formats ensuring completeness and enabling systematic evaluation:

  Standard Proposal Structure:

# [Proposal ID]: [Title]
 
## Summary
[2-3 sentence overview]
 
## Motivation
[Why is this change needed? What problem does it solve?]
 
## Specification
[Exact technical details of proposed change]
 
### Technical Implementation
[Smart contract addresses, function calls, parameters]
 
### Security Considerations
[Risks, attack vectors, mitigations]
 
### Economic Impact
[Expected effects on protocol metrics, users, treasury]
 
## Voting Options
- **For**: [What voting "yes" means]
- **Against**: [What voting "no" means]
- **Abstain**: [Counted toward quorum but not outcome]
 
## Timeline
- Temperature Check: [Dates]
- Consensus Check: [Dates]
- On-Chain Vote: [Dates]
- Timelock: [Duration]
- Execution: [Expected date]
 
## References
[Forum links, audit reports, economic analysis, prior art]

Specialized Templates:

• Collateral Onboarding (MakerDAO): Risk assessment, oracle configuration, liquidation parameters, debt ceiling

• Asset Listing (Aave, Compound): Market parameters, interest rate curves, collateral factors, supply/borrow caps

• Treasury Allocation (Multiple DAOs): Budget breakdown, deliverables, milestones, accountability mechanisms

• Parameter Changes: Current vs proposed values, expected impact, rollback procedures

• Smart Contract Upgrades: Diff of code changes, audit reports, migration procedures, emergency response plans

  Proposal Authorship and Professionalization

  Creating successful proposals requires significant expertise and resources:

  Barriers to Proposal Creation:

  1. Token threshold: 2.5M UNI ($19M),400KCOMP($37M), 80K AAVE (~$12M) creates economic barrier excluding small holders

  2. Technical expertise: Encoding proposal actions in smart contract calls requires Solidity knowledge, understanding of protocol architecture, testing on testnets

  3. Legal knowledge: Major proposals increasingly require legal review (securities compliance, DAO liability, regulatory implications)

  4. Economic modeling: Parameter change proposals need quantitative impact analysis, simulation of edge cases

  5. Social capital: Mobilizing sufficient community support requires reputation, communication skills, persistence through multi-week process

  6. Time investment: 20-100+ hours typical for major proposals (research, drafting, feedback incorporation, community calls, vote shepherding)

  Professional Proposal Services:

  Specialized firms emerged offering proposal-as-a-service:

• Llama: DAO treasury and governance consulting, authored proposals for major DAOs, provides economic analysis and execution support

• Gauntlet: Financial modeling and risk analysis for DeFi protocols, authored Aave/Compound parameter optimization proposals

• StableLab: Governance participation service, delegates and proposal authorship

• BlockworksResearch: Governance research and proposal strategy

  Implications:

• Governance professionalization: High-quality proposals increasingly authored by paid experts rather than community volunteers

• Centralization concerns: Small number of service providers author large percentage of proposals across ecosystem

• Quality improvement: Professional proposals tend to be better researched, technically sound, legally reviewed

• Accessibility erosion: Smaller community members increasingly excluded from proposal authorship

  Proposal Challenges and Attack Vectors

  DAO proposal systems face numerous challenges and exploits:

  Proposal Spam and Low-Quality Submissions:

  High proposal thresholds mitigate spam, but DAOs still face:

• Self-serving grants: Participants proposing grants to themselves or affiliated entities

• Duplicative proposals: Multiple proposals addressing same issue slightly differently

• Underdeveloped proposals: Insufficient technical specification, no security review, unclear impact analysis

• Attention fragmentation: Too many simultaneous proposals overwhelm voter capacity to evaluate

  Voter Fatigue and Declining Participation:

  Excessive governance burden reduces participation:

• MakerDAO: 500+ annual votes creates fatigue; participation often <10% MKR

• Compound: 50+ annual proposals; participation 8-15% COMP

• Uniswap: Selective on-chain voting (rigorous off-chain filtering) maintains 5-10% participation

  Governance Attacks:

  1. Quorum manipulation: Submit proposals during holidays/weekends when participation is low, exploit minimal quorum to pass self-serving proposals

  2. Proposal rushing: Create urgency around proposals to limit review time, exploit complexity to hide malicious code

  3. Vote buying: Purchase voting power on open market or via bribes (Curve bribery markets openly facilitate governance influence purchases)

  4. Sybil proposals: Create multiple wallets to submit many proposals, exhaust community attention, sneak through malicious proposal during fatigue

  5. Flash loan attacks (mitigated): Early governance systems vulnerable to flash loan voting; modern systems use block snapshots preventing intra-block manipulation

  Governance Gridlock:

  High quorum requirements can prevent legitimate proposals from passing:

• Too-high quorum: If 10% quorum required but only 8% participate, all proposals fail regardless of support

• Competing proposals: Multiple proposals addressing same issue split votes, none achieve quorum

• Controversial changes: Divisive proposals (fee switch activation) may approach but never achieve quorum

  Emergency Proposals and Fast-Track Mechanisms

  DAOs implement emergency procedures for critical vulnerabilities:

  Standard Emergency Mechanisms:

  1. Multisig intervention: Core team or elected multisig can pause contracts, deploy fixes, freeze assets during active exploits (bypasses governance temporarily)

  2. Reduced timelock: Critical security fixes use shortened timelock (1 day vs standard 7 days), reducing exploit window

  3. Emergency quorum reduction: Lower quorum requirements for emergency proposals (2% vs standard 4%), enabling faster response

  4. Guardian role: Designated addresses (team multisig, security council) can veto malicious proposals during timelock period

  Examples:

• MakerDAO Emergency Shutdown: 50K MKR can immediately halt protocol, preventing further damage during critical failures

• Compound Guardian: Multisig can cancel malicious proposals during timelock, veto dangerous parameter changes

• Aave Emergency Admin: Can pause protocol during active exploits, freeze reserves, disable borrowing

• Uniswap Emergency Response: Foundation multisig can intervene if governance is compromised, though never used as of 2025

  Trade-offs:

• Security vs Decentralization: Emergency powers centralize control, contradicting DAO ethos, but necessary for security

• Abuse risk: Malicious multisig could abuse emergency powers to extract value, censor legitimate proposals

• Transition plan: Most DAOs plan eventual removal of emergency powers as protocols mature and ossify

  Proposal Analytics and Tooling

  Specialized infrastructure supports proposal creation, voting, and tracking:

  Governance Platforms:

• Tally (tally.xyz): On-chain governance interface, supports proposal creation/voting for Governor-based DAOs, provides analytics dashboards

• Snapshot (snapshot.org): Off-chain signaling votes, 10,000+ DAOs using platform, supports multiple voting strategies

• Boardroom (boardroom.io): Aggregates governance across DAOs, provides proposal notifications, voting history tracking

• Commonwealth (commonwealth.im): Discussion forums + governance voting integrated platform

  Delegation Platforms:

• Agora (voteagora.com): Optimism governance and delegation

• Karma (karmahq.xyz): Delegate discovery and reputation scoring

• Delegation dashboards: DAO-specific platforms showing delegate voting records, participation rates, alignment

  Analytics and Transparency:

• DeepDAO: DAO governance analytics, tracks proposals, participation, treasury across 1000+ DAOs

• Dune Analytics: Community-built SQL dashboards analyzing proposal outcomes, voter behavior, participation trends

• Nansen: On-chain analytics identifying whale voting patterns, delegation flows, governance influence

  Best Practices for Proposal Systems

  Based on 2020-2025 ecosystem experience:

  1. Multi-stage filtering: Require off-chain temperature checks before expensive on-chain votes, reducing spam and improving quality

  2. Standardized templates: Enforce proposal structure ensuring completeness (summary, specification, security analysis, economic impact)

  3. Sufficient deliberation time: Minimum 7-14 days from temperature check to execution, allowing thorough review and community coordination

  4. Transparent executable code: Publish exact smart contract calls that will execute, enable community verification during timelock

  5. Proportional thresholds: Set proposal thresholds high enough to prevent spam (0.25-4% of supply) but not so high they exclude broad participation

  6. Achievable quorum: Set quorum at 3-5% of circulating supply, ensuring legitimacy whilst remaining achievable (10%+ quorum frequently causes gridlock)

  7. Delegation enablement: Support vote delegation reducing barriers to participation for passive holders

  8. Emergency procedures: Implement multisig guardians or security councils for critical vulnerabilities, with plans to eventually remove

  9. Proposal subsidies: Consider funding public goods proposals or providing governance participation incentives to improve quality and participation

  10. Clear governance scope: Explicitly define what can/cannot be governed, constitutional limits protecting core protocol properties

  Future Developments

  AI-Assisted Proposal Creation: Natural language interfaces enabling non-technical community members to generate executable proposals via AI translation of intent to smart contract code.

  Futarchy and Prediction Markets: Proposal evaluation via prediction markets assessing expected protocol impact rather than direct voting (proposed by Robin Hanson). Early real-world adoption emerged 2025-2026: Optimism conducted a 21-day futarchy experiment in March 2025 distributing 500K OP tokens, MetaDAO’s launchpad enables new DAOs to launch as futarchies from inception, and DeSci DAO research explores policy-binding conditional prediction markets anchored to KPIs.

  Cross-Chain Proposal Execution: Unified governance systems enabling single proposal to execute across Ethereum, Arbitrum, Optimism, Polygon simultaneously via cross-chain messaging.

  Reputation-Weighted Proposals: Non-transferable reputation earned through contribution determining proposal creation rights rather than token holdings, reducing plutocracy.

  Regulatory Adaptation: Clearer legal frameworks distinguishing governance proposals from securities offerings, investment advice, or fiduciary actions.

  References and Case Studies

• BC-0461-decentralized-autonomous-organization

• BC-0462-on-chain-voting

• BC-0463-governance-token

• BC-0464-treasury-management

• BC-0142-smart-contract

• Uniswap Governance Process

• MakerDAO Executive Votes

• Compound Governor Bravo

• Aave Improvement Proposals

• Snapshot Off-Chain Voting

• Tally Governance

Provenance