In Brief

Most proposals at The DAO have under 0.5% participation but need over 20% consensus to be acted on. The highest participation proposal has 2% voting. It's not clear if The DAO will ever fund anything at this size and with these participants.

There is real social and technical cost to voting yes on any proposal which might return funds at this point, I would recommend people hold off, and ideally split out. If The DAO fixes its problems in a graceful way, tokens can always be re-purchased. If not, thin liquidity during a down-turn may make recovering any value very difficult.

Some Background

This week, Emin Gün Sirer, Dino Mark and Vlad Zamfir posted seven attacks on The DAO in a post titled A Call for a Temporary Moratorium on The DAO. The attacks range in severity from 'griefing, probably not a big deal' to 'definitely not what was intended', and largely deal with mismatched incentivization or other process snafus.

With TheDAO officially launched, and proposals open for voting, I was curious how it's going, and reviewed all current proposals. If you want to play along with me, there are a few spots to review them online. I looked at both the official daohub list and MyEtherWallet's list, which has a nicer UI.

At time of writing, only Proposal 5, a proposed Moratorium on all further proposals until The DAO contracts can be upgraded has over 2% participation.

Proposals like Proposal 3 "Should curators only whitelist projects that are related to DAO security for the next 4 weeks?" Have 0.48% Participation.

This is egregiously low, and means basically that nothing is happening right now on the proposal side for The DAO. I consider this either a terrible sign or a sign that DAO token holders are very wise. Evidence points to it being a bad sign, though.

Maybe The Dao Token Holders are Game-Theoretically Sophisticated

A fair comment here is that unless the "Yays" are winning a vote, "Nays" should not vote. For instance, Proposal 3 has a 10:1 No:Yes ratio. There is no need to tie up funds and limit yourself from splitting if you don't want it to happen.

If you have voted at all, until the proposal resolves, you are not able to split, the technical term for the 34 day process to withdraw your ether from the fund.

So, in this sense, voting is strongly disincentivized, especially if you are on the winning side of a 'No' vote.

But, what about a highly supported vote that's under quorum? Surely that should get more voting?

In fact, such a proposal does seem to get a significant quorum boost, but is not sufficient; Proposal 5 is 95% "Yes". It has 10 times the number of votes as almost all other proposals. But it still only has 2% of the required 20%, so it would need another 10x the number of votes in order to pass the quorum rules.

Maybe Everybody Just Wants Out

If you vote, you can't split until the vote is up. So, perhaps voters are wisely not voting because they are putting together proposals to split.

We can see how many token holders want out by totaling the number of votes on "Split Proposals". I would recommend MyEtherWallet's Site for this, they have a handy "Split Proposals" button.

As of May 30, 2016, ~3 million tokens have voted for splits. Some have clever names like "Leave me alone", and others are just called "Split".

There are about 1172 million DAO tokens, so 0.26% of token holders are leaving right now. I think we can safely say this is not a mass exodus.

As an interesting side note, some splits have significant 'no' votes, Proposals 10 and 12 for instance are losing. I am not sure I understand why someone would vote "No" on a split -- the current DAO code gives such people no rights, and merely locks them off from splitting until the proposal ends.

edit Note that Reddit user paleovanguard reminded me that votes from a split are unlinked from number of tokens put into a split -- a token holder can transfer tokens just before the split occurs and take more than were voted -- so more (or less) tokens could be put in than these 3 million at split time.

So, it's probably not that there's a mass exodus right now.

Maybe Sniping Will Be A Thing?

Perhaps the opportunity cost of being unable to split is considered very high right now, and so people will wait until proposals are close to their deadline, like ebay snipers.

There are other reasons to snipe, in particular to push through / vote down a proposal at the last minute that looks like it would have a different result, but it may be there is strong disincentive to vote until, say the day of the deadline, especially now when The DAO is so new.

More research is needed here, expect a followup next week when some of these proposals have expired.

Summary

It is not clear that the voting system is functional at TheDAO. If it is not functional, it is not clear how The DAO can move forward on fixing it, other than essentially encouraging people to split out until a manageable number of stakeholders are left that can come to consensus.

I don't believe this is fatal, but it looks very much like quite a lot of work is going to go into the people / decision side of The DAO before real progress will be made on the investment side.

It might be best if no substantive investments came before The DAO now, actually placing an investment that may have returns will dramatically complicate the decision process in the next few months.