Thus far in our journey of DAO study, we have explored the characteristics of a DAO, different types of DAOs, subDAOs, and most recently, a deep dive into GrapeDAO’s organizational structure, governance processes, and roles of the growing number of subDAOs in the Grape ecosystem. Today, we’ll be studying another leader in the Solana DAO space: Mango DAO. Mango Markets is the first on-chain, non-custodial, decentralized exchange for derivatives trading built on Solana. MangoDAO is the governing body of Mango Markets and was one of the first DAOs created on Solana. Since its inception, Mango has grown into one of the top decentralized autonomous organizations in crypto in terms of treasury balance and transparent decentralized decision-making. Mango has been a leading innovator in the DAO space, so we thought it’d be useful to share what we’ve learned about Mango’s org design and governance processes.
Intro to Mango Markets 🥭
Mango Markets is a DEX (decentralized exchange) on Solana that offers fully on-chain margin trading, borrow & lending markets, and perpetual futures all in one protocol. It was the first decentralized derivatives exchange built on Solana, and it currently has ~150M in deposits, ~41M in borrows, and ~24B in lifetime trading volume from its launch in 2021. While Mango Markets is an impressive DEX, this article will be focused on how MangoDAO operates and governs Mango Markets, not a deep dive into the DEX itself. If you’re more interested in the financial side of things and want to learn how Mango functions as a decentralized trading platform, we recommend checking out their docs here.
Mango helped develop SPL governance (the governance standard on Solana) and developed realms.today, a platform that helps DAOs organize, store funds, and govern themselves on-chain. Mango originally created Realms for its own DAO needs and has since handed over its development to Solana Labs. Mango still contributes to DAO tooling on Solana; however, they are no longer the primary contributors to such tooling. If you’re interested in knowing who is, Emon Motamedi and Sebastian Bor are two lead contributors for Realms.
How Do DAOs Govern?
Before we get into MangoDAO specifically, let’s first acknowledge that DAOs have unique governance processes specific to the goals of the organization. Numerous variables come into play that determine these processes such as the tools available, the blockchain the DAO is built on, the level of community engagement, and the community’s preferences. While each DAO is unique, we have observed a few commonalities between DAOs across crypto. Let’s identify and discuss the purpose of three governance tools that most DAOs use today.
Discord is a common tool for most DAOs and blockchain communities to organize and communicate. While many are very critical of whether Discord will continue to be the de-facto web3 communication tool, thus far it has dominated this category. Discord is commonly used for general conversation between community members, voice-call town halls, dev meetups, and official announcements. Discord is generally the place where informal discussions around governance occur, as a precursor to a governance forum post. Subgroups in communities will come together here to discuss protocol changes they’d like to propose before officially bringing it to the governance forum.
2. Governance Forum
The governance forum is where proposals are presented, discussed, and negotiated. Proposals are first discussed by the community in the forum before they are brought to vote on the blockchain. Forums are the successor to informal Discord conversations and the precursor to official on-chain votes. Proposals are usually well put together with deep details on what should be achieved for the DAO. If they aren’t thoughtful, they will be disregarded by any serious community. More often than not, the outcome of an on-chain vote can be inferred by the conversations happening on the forum. If a gov forum post makes it to an official on-chain proposal, usually it will pass and be implemented.
3. On-Chain Voting
On-chain voting is usually the last step of the governance process for DAOs. Once a proposal has been thoroughly discussed and it becomes clear it will pass quorum, it is brought to an on-chain vote. The community will vote yes or no on the outcome with their governance tokens or NFTs.
MangoDAO: The Governance Process 🏛
Similar to the process we’ve previously described, Mango uses Discord for casual conversations about protocol improvements, a governance forum for formal proposals, and Realms, Solana’s hub for DAO governance, for on-chain voting. Let’s break down how Mango utilizes each of these tools.
The Mango Discord has various channels with different purposes. The general purpose chat for all things Mango is called #mango; and they also have channels for governance discussions, market makers, devs, trading experts, IRL meetups, etc. The devs section is where the core team as well as part-time contributors discuss protocol improvements. Proposals are initially discussed here by small groups of people chatting independently. All these conversations are open to the public to comment on.
The Mango governance forum has four categories in which anyone can create a discussion: governance, listings, grants, and feedback. The “governance” category is for all governance-related discussions, “listings” is used for newly proposed collateral types and markets that should be added to Mango, “grants” is where people can apply for funding from the MangoDAO treasury, and “feedback” is for discussion about the site’s user experience and organization. By separating forum discussions into categories, the DAO can push relevant discussions to the next step quicker than if they were jumbled together. Anyone can participate in the Mango forum regardless of whether you hold MNGO or not, you simply need to create an account with the forum website.
Since Mango Markets is popular decentralized exchange, a common occurrence in the Mango governance forum is for outside entities to submit proposals to list their protocol’s token on the market and add it as collateral. For example, on April 3rd, the founder of UXD Protocol Kentolnami initiated a forum discussion proposing Mango add UXD as collateral on its platform. While the discussion was one of the more popular proposals in the past few months in terms of views and replies, it did not make it past the forum stage to an on-chain vote.
Realms is where Mango stores its treasury, posts and votes on proposals, and pushes program upgrades. By utilizing Realms for these features, almost no protocol operations are done behind closed doors; everything is open for the community to see and scrutinize. To vote one simply deposits MNGO into Realms and the appropriate voting power is designated to your wallet. The max voting time for proposals is 3 days.
$MNGO: How Does the Token Play a Role?
MNGO is MangoDAO’s governance token. MNGO was initially distributed through a public IDO and can be purchased on secondary markets on Solana such as Orca, Raydium, Jupiter, and Mango. While whales are naturally able to buy more governance tokens than the rest of us, the public nature of the IDO allowed for a broader distribution of MNGO as opposed to DAOs that do private sales. MangoDAO currently holds $260M in it’s treasury the 23rd highest treasury out of all DAOs in crypto (deepdao.io). Of this $260M, ~77% is held in MNGO.
MNGO acts not only as a membership token into the DAO but also as a way to delegate decision-making power. Anyone who holds any amount of MNGO can participate in protocol decisions, however; there are tiers of responsibility that grant community members and contributors varying governance privileges based on how much MNGO that person holds. For example, the amount of tokens necessary for treasury allocation is the lowest point of entry for DAO decision-making. To create a proposal on how the MangoDAO USDC/SOL treasury vault can be utilized, one must first hold 100,000 MNGO. This ensures that people voting on the allocation of DAO-controlled funds have proper “skin in the game.” Recently, there was a proposal to swap $10M USDC in the treasury to $BTC for a long term HODL. Not without a thoughtful a discussion in the forum and a Saylor meme on the official vote, the proposal failed; the majority saw this as a poor investment. There are over 150 MangoDAO members that hold at least 100K MNGO, meaning there were over 150 members eligible to vote on this treasury decision. You can see the MNGO token distribution for yourself here.
In addition to community voting tiers based on amount of tokens held, Mango has implemented a similar mechanism to Curve Finance’s “vetoken” mechanism by allowing community members to lock their MNGO over a specific period of time in order to increase their voting power. The game theory is rather simple; if one locks up MNGO for 5 years which gives them the inability to sell their governance tokens for profit, they should be entitled to more governance power since they are (literally) more invested in the protocol than someone who can liquidate his MNGO tokens at any moment. MNGO tokens can be locked for up to 5 years and receive up to 2x increased voting weight. There are three lock up options: cliff, constant, and vested. Cliff signifies tokens will be locked for a fixed duration and are released at the end of this period. Constant means tokens are locked indefinitely, and your vote weight remains constant until the unlocking process begins. The vested option is where tokens are locked for a fixed duration of time and are released back to your wallet over time with your voting weight decreasing and linearly as tokens are released. If you hold MNGO, you can lock your tokens directly in the Realms application.
For decisions that are imperative to the protocol’s success and require extensive coding knowledge, the minimum amount of MNGO necessary to create a proposal is increased. For example, to create a proposal on Realms to amend Mango’s governance program, one must hold at least 7.5M MNGO. Mango also has a seven-person developer council that handles essential protocol settings such as security fixes and the governance program. Each developer in the council must hold a minimum of 1M MNGO. By making it necessary for these devs to hold a large amount of the DAO’s native token, it helps align incentives encouraging the devs to help the protocol succeed. For if they make a crucial coding error, their tokens will likely decrease in value. While some may say this high financial entry point to make program upgrade proposals is centralized, these types of intricate protocol decisions can only be understood by a few top developers in the Solana ecosystem regardless of the MNGO token price. It’s important to protect such critical protocol decisions from those that the core team can trust. Also, putting these decisions to a DAO-wide vote would negatively affect the protocol because it may allow people with insufficient coding knowledge to have more power than they should. Delegation of authority over decision-making in particular domains to those with knowledge in that domain is essential for DAOs to succeed. We discussed this in the previous article when we broke down Grape Protocol’s organization design. Where Grape explicitly defines its subDAOs and the purposes of each, MNGO focuses more on utilizing its native token to separate different levels of community members and contributors.
All in all, MangoDAO is one of the most transparent, decentralized, and functional DAOs in the Solana space. Mango has pioneered the DAO space on Solana leading by example, as well as created innovative tools that allow DAOs on Solana to organize efficiently. After reading this article we hope that you have a better understanding of the mechanics of MangoDAO, as well as the general governance processes of DAOs in general. Until next time, thanks for reading!