How does voting right delegation in transactions undermine the decentralization vision of DAO? Does GovernFi have a future?

Decentralized Autonomous Organization ( DAO ) has long been regarded as the ideal model for future governance, but it is now facing institutional challenges. The voting rights delegation platform Lobby Finance is based on GovernFi ( governance finance ), allowing open trading of voting rights, which drastically lowers the threshold for manipulating DAO decision-making, sparking intense debates over governance security and fairness.

Monetizing Voting Rights as a New Business Opportunity: How Lobby Finance Threatens the Order of DAO

DeFi researcher Ignas pointed out that a user named hitmonlee.eth recently spent only 5 ETH (, approximately 10,000 USD ), to acquire voting rights of up to 19.3 million ARB (, worth about 6.5 million USD ).

These votes ultimately supported candidate CupOJoseph's campaign for the Arbitrum DAO's Supervisory and Transparency Committee, even surpassing established participants like Wintermute and L2Beat.

According to reports, Lobby Finance allows token holders to delegate their voting rights to others and choose to sell at a fixed price or through an auction, transforming idle governance tokens into profit tools. Even more shocking is that a user was able to buy over 20 million ARB voting rights for just 0.0652 ETH, significantly reducing the cost of influencing decisions.

The DAO governance crisis behind the huge profits of GovernFi

Taking CupOJoseph as an example, he was elected due to receiving a large amount of voting support. In the next 12 months, he will earn approximately 47.1 ETH and 100,000 ARB as rewards for his OAT committee position, totaling around 66 ETH, and these voting rights were purchased for just 5 ETH, which can be considered quite a good return on investment.

Prediction: within a year GovernFi will be its own market segment like DeFi, GameFi, or SocialFi.@lobbyfinance will be the clear market leader.

— CupoJoseph (@CupOJoseph) April 8, 2025

In this regard, CupOJoseph candidly admits that such low-cost operations are indeed a source of risk for governance attacks, but still holds a positive outlook on the prospects of this type of "GovernFi":

Within a year, GovernFi will become an independent market sector like DeFi, GameFi, or SocialFi.

Ignas further warned that this kind of operation turns DAO governance into a low-cost and high-reward manipulation game. He criticized Lobby Finance for further lowering the attack threshold, citing the past example of Compound DAO being hacked for $24 million due to a large amount of token purchases.

(Compound risk of governance attack! An anonymous whale easily took away tens of millions of dollars in COMP, was it actually a PR operation? )

Community Debate Heats Up: What Should Arbitrum DAO Do?

In the face of controversy, the Arbitrum DAO is internally discussing whether to take measures to restrict the buying and selling of voting rights. Options include

Disqualify ticket buyers from voting

Imposing penalties on the buying and selling of voting rights.

Allow the market mechanism to operate freely.

DAO participant OlimpioCrypto describes it as a "cat-and-mouse" cycle, similar to dealing with the MEV issue; as long as the incentives exist, the buying and selling of voting rights will be hard to stop. Ignas is concerned:

Currently, the returns from delegating tokens to other representatives are far less than directly selling tickets for profit. If reforms are not made from the perspective of the token economic model, similar problems will continue to recur.

Lobby response: It is not a security vulnerability, but a transparent innovation.

In response to external criticism, Lobby Finance also clarified in the message that they are currently the most transparent commission platform, all voting proposals and prices are public, and there is enough time for the community to respond. If the proposal is highly risky, they will also voluntarily remove it and have adjusted their auction model to try to minimize the potential risk:

Our main goal is to revitalize governance, helping the DAO break free from the current oligarchic governance situation dominated by a few parties, making participation in governance more attractive and rewarding, or even both.

(Compound voting rate for the seven proposals is only 5%. Is DAO really the ultimate form of democracy? )

Even if Ignas is confident in his goals, he still warns that once other platforms emulate Lobby Finance with malicious intentions, governance security may completely spiral out of control.

Next step in DAO governance: Is it a free market or institutional reform?

Ignas emphasized that the governance logic of "1 token = 1 vote" has already exposed problems, and Lobby Finance only magnifies existing vulnerabilities. To truly solve the problem, it may be necessary to carry out a fundamental economic reform of governance tokens such as ARB, abolish their income interests, or establish a more positive incentive delegation system.

Incentives determine everything. If the institutional design is not adjusted, the decentralization vision of the DAO may become a tool for capital manipulation by a minority, going against its original intention.

How does voting power delegation transactions destroy the decentralization vision of DAO? Does GovernFi have a future? Originally appeared in Chain News ABMedia.