On-Chain vs Off-Chain
Why should DAOs be on-chain?
With on-chain DAOs, voters don’t need to trust that admins will honor the results of a vote. Smart contracts automatically implement successful proposals.
On-chain votes execute proposals trustlessly. Off-chain votes don't.
Off-chain voting requires social trust.
Smart contracts can be designed to execute proposals automatically based on the outcome of on-chain votes, removing the need for a trusted third party or core team to enact vote results. Examples of on-chain voting systems include MakerDAO, Aave, and protocols built on Compound's governance framework.
- No trusted third party required to count or enact votes
- Passed proposals execute automatically and trustlessly
- Works well for approving protocol changes or other high-stakes votes
The big difference between Tally and off-chain voting tools like Snapshot and others is that Tally supports fully on-chain DAOs.
On-chain DAOs use smart contracts to propose, vote on and execute proposals. That makes DAO operations automated, trustless, and more decentralized.
The Governor smart contract is responsible for managing proposals, counting votes and executing passed proposals on-chain with no human intervention. The benefit of a Governor DAO is that the token holders or NFT membership holders have direct control over the protocol and/or treasury through voting. Holders don’t have to trust their multi-sig signers to execute a proposal vote, and they don’t have to worry about rogue multi-sig signers creating a transaction that wasn’t approved by the voters. The tradeoff is that creating on-chain proposals and voting isn't free: it costs gas.