EigenGov: The Evolution of Council-Based Governance
As crypto matures, governance is shifting from token power to council wisdom, building systems on reputation rather than wealth.
⏱️ 5 minute read
TL;DR
In decentralised ecosystems, token-weighted governance has had trouble allocating capital efficiently, which has resulted in low participation, power concentration, and poor follow-through. In response, models that support expert-driven, council-based systems have surfaced, such as Optimism's Retroactive Public Goods Funding (RPGF) and EigenLayer's EigenGov. RPGF uses carefully chosen evaluators to reward demonstrated impact, but it has issues with scalability and accountability. To further balance specialisation and decentralisation, EigenGov introduces modular councils with community veto powers.
Transparency, reputational governance, and thorough outcome tracking must be the main priorities of the next phase of evolution of these models. Proposals include milestone-based capital disbursements, public performance metrics, and rotating council terms. In order to guarantee more robust and equitable governance, Areta supports this evolution by promoting onchain data-driven oversight, improved builder support, and increased stakeholder coordination.
For a long time, crypto's decentralized governance has relied on token-weighted voting, the idea that those with money at stake should guide protocol choices. This stemmed from a good-intentioned vision of wide-ranging, community-centered decision making. But as protocols grew and treasuries swelled to billions, this system started to show flaws. It became apparent that token-weighted voting was not fit for the purpose of allocating capital, a critical function for decentralized ecosystems.
The field is now moving into a fresh stage. Council-based governance models are becoming more popular, offering structure, accountability, and expert knowledge, without giving up decentralization. Optimism's Retroactive Public Goods Funding (RPGF) stands out as a key example in the area, with EigenLayer's EigenGov emerging as an evolution of the model. But how do they stack up? And more importantly, how can we push this model even further?
Why Token Voting Isn’t Enough
While it is not the main mechanism for capital allocation today, token voting has shaped much of crypto’s early governance architecture. But its flaws are well-known:
Low voter turnout leads to decisions dominated by a small minority.
Whale domination undermines the ethos of fairness.
Lack of context and continuity often results in misaligned or short-term decisions.
Limited accountability post-vote, meaning there’s no guarantee of follow-through.
These aren’t just theoretical problems. When applied to capital allocation, especially grant-giving, ecosystem investments, and incentive distribution, the consequences can be significant. High-value decisions need to be well-informed decisions, not popularity contests.
This is why council-based governance has emerged as a preferred alternative: not as a retreat from decentralization, but as a step towards more intelligent decentralization.
Optimism’s RPGF: Merit Over Majority
Optimism’s Retroactive Public Goods Funding (RPGF) is a landmark initiative that rethinks how public goods are funded onchain. Rather than funding upfront proposals, Optimism rewards ‘impact that has already occurred’. It is also one of the leading example of small committee (known as badgeholders) led programs.
How It Works:
Badgeholders are selected by the Optimism Foundation or by existing badgeholders to evaluate and allocate grants based on retrospective impact.
Funding is allocated after results are measurable, reducing speculation and increasing accountability.
Evaluators are human, not algorithmic, with decision-making grounded in subjective but informed judgment.
Benefits:
Reduces misallocation risk by funding based on proven outcomes.
Empowers experts, curating judgment through precise curation of badgeholders.
Drawbacks:
Limited accountability: Badgeholders aren’t directly accountable to tokenholders.
Scalability constraints: The human evaluation model may not scale efficiently.
RPGF represents a shift away from token governance as default and toward delegated expertise, but questions remain about long-term legitimacy, evaluator diversity, and community input.
Additionally, it’s crucial to support promising teams that have a strong proof of concept but haven’t yet launched a product to demonstrate their impact. While recognizing and celebrating teams that have already delivered results is valuable, many early-stage teams lack access to capital, talent, and strategic support needed to reach that stage. Providing support early on is just as important to help these high-potential teams succeed.
RPGF is a compelling step forward in rethinking funding mechanisms but it's not the final form. As we continue to experiment with council-led models, we must also confront their structural shortcomings.
Non-transparent nomination processes can centralize power early on.
Limited mechanisms for tracking individual council member performance reduce accountability.
Council capture, where a small group dominates outcomes, remains a real risk - especially without dynamic turnover or reputational systems.
These issues are increasingly recognized across ecosystems - from Optimism to Gitcoin to Arbitrum - and signal the need for further evolution.
EigenGov: A Blueprint for Structured Decentralization
EigenLayer’s EigenGov is a more structurally ambitious model that blends council governance with community veto power, creating a governance architecture designed to balance effectiveness and decentralization.
How It Works:
EigenGov comprises multiple specialized councils, each responsible for a critical vertical of protocol governance, with EIGEN tokenholders retaining veto rights in a mechanism that checks power without slowing it.
Protocol Council: Evaluates and approves protocol upgrades and ELIPs (EigenLayer Improvement Proposals).
Incentives Council: Adjusts reward parameters and economic models.
Grants Council: Allocates strategic ecosystem grants.
Eigen Council: Sets governance constraints and oversees system evolution.
Key Innovations:
Tokenholder Veto: Every council decision is subject to community oversight through vetoes, preserving decentralization without relying on direct voting for every decision.
Modular Design: Different councils focus on different domains, allowing for specialized expertise and parallel decision-making.
Evolving Independence: Councils are intended to become fully independent, moving from foundation-nominated to autonomous over time.
Why It’s Different (and Better):
Compared to Optimism’s RPGF, EigenGov adds structural clarity and power separation.
Unlike RPGF’s semi-transparent badgeholder selection, EigenGov provides a clear path toward accountable and modular governance.
Tokenholders maintain a direct but non-intrusive role, providing a balance between liquid democracy and institutional expertise.
Evolving Council Governance: Where We Go From Here
If council-based governance is the future and its next evolution must prioritize two things: reputation and transparency. At Areta, we believe that a well-structured grants program combined with transparent performance tracking of grantees can enhance not only existing council models but also broader governance practices.
Ideas for Improvement:
Reputation-Based Position: Introduce onchain or offchain scoring mechanisms where contributor history, community reviews, and past decisions influence future council nominations.
Rotating Terms with Auditable Track Records: Council members should serve defined terms, with public performance dashboards measuring KPIs and alignment with community goals.
Smart Capital Activation Frameworks: Embed impact tracking, milestone-based disbursements, and clawback conditions into treasury grants so that capital not only flows, but flows smartly.
As a member of the Grants Oversight Council, Areta is dedicated to supporting the success of funded teams. Our approach is grounded in the use of independent onchain data, free from presumptions or biases, with a strong emphasis on critically verifying documents and existing information. We aim to implement more robust support mechanisms over time, which will meaningfully enhance the effectiveness of the system:
Launching builder support programs to provide essential services to early-stage teams that lack access to capital.
Developing systems to track team performance using real, onchain metrics to ensure broader ecosystem success.
Participating in key councils as an EigenLayer-aligned entity, ensuring subject matter expertise informs program design and execution.
Maintaining full transparency through regular reporting to the community.
Engaging with various EigenLayer and Eigen Foundation stakeholders to align with their interests and take responsive, coordinated action by creating a positive feedback loop.
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