Starting September 1, 2024, following the Chang hard fork, individuals interested in on-chain governance could begin registering as DReps. Concurrently, ADA holders were able to start delegating their voting power to these DReps. Initially, there was a rapid uptake, but growth soon began to stagnate. The numbers are no longer increasing as they did at the start. Join us as we delve into the factors that are hindering people from delegating their voting power. We will also offer some tips to assist with the delegation process.
Current Overview of On-chain Governance
Currently, around 460 DReps are registered, with 50 of them having retired, likely representing initial registration attempts.
Only 5,800 ADA holders have delegated their voting power to DReps, amounting to a total of 482 million ADA. Out of this, 102 million ADA has been delegated to the Abstain DRep, indicating those holders who explicitly choose not to participate in governance.
This means that approximately 1% of the circulating supply is delegated. While 1.3 million ADA holders have delegated to the pool, only about 0.5% have delegated to a DRep. Over 20% of the stake delegated to DReps has chosen the Abstain option, with more than 1,500 ADA holders opting for this choice.
We are still in the early stages, making it challenging to determine whether these numbers are positive or negative. However, we subjectively perceive a certain stagnation in both the number of registered DReps and delegations. It appears that those interested in registering as DReps have already done so, with few new registrations occurring. A similar trend is observed among delegators, although the process of delegation is relatively quick and straightforward.
What is preventing people from delegating to DReps?
Based on our observations and research, we’ve identified several reasons for the low number of delegations to DReps:
- Stakers can't find information about DReps.
- ADA holders' wallets do not support governance.
- Stakers are unaware of GovTools.
- Stakers are confused by the existence of two DRep ID standards.
- Many people are unaware that on-chain governance has been launched or that they have coins on centralized exchanges.
A surprisingly large number of people have expressed difficulty finding information about DReps. They want to understand their motivations, objectives, and qualifications before delegating, which is a positive sign of due diligence.
While almost all Cardano explorers support governance, the easiest way to view detailed information about individual DReps is through GovTools.
When DReps register using GovTools, they have the option to provide additional information about themselves, such as links to their social networks, reward addresses, and even links to their real identities. Therefore, GovTools is the best resource for displaying this data.
Users can navigate to the DRep directory from the menu, find a DRep by its ID (or select one from the list by name), and then click on ‘View details’.
GovTools can be used as a voting power delegation tool. Simply connect a Cardano wallet, which will enable you to click the blue ‘Delegate’ button. Eternl, Yoroi, and Lace wallets are compatible with GovTools.
Eternl and Yoroi support governance directly within their interfaces, so there’s no need to connect to GovTools for delegation. Simply navigate to the Governance section in the wallet, enter the DRep ID into the delegation transaction, and sign the transaction.
If your wallet doesn’t support governance directly and can’t connect to GovTools, there’s another option. If you use a hardware wallet, you can safely and easily use any number of light wallets by importing the public key from the hardware wallet into the light wallet. Many people are unaware of this possibility and wait for their wallets to support governance actions.
This also applies to the Daedalus full-node wallet, which currently does not support governance actions. The IOG team has announced that they are working on adding governance support.
People are often confused by the existence of two standards for DRep IDs: CIP-105 and CIP-129. This results in two different DRep IDs, although both represent the same number on-chain, just displayed differently. Therefore, it doesn’t matter which ID you use.
DReps typically have both IDs on their profiles because different tools or wallets use different standards.
For instance, GovTools prefers CIP-105 IDs, so using an ID derived from CIP-129 will cause the DRep lookup to fail.
Eternl Wallet, on the other hand, can display both DRep IDs and search for DReps according to both CIP-105 and CIP-129 standards.
CIP-105 is published in the Cardano Foundation GitHub as a standard that has been reviewed by the community and elevated by the CIP Editors. So it should be preferred by users, wallets, and tools.
Many people still hold ADA in their old wallets, from which they delegated to staking pools a long time ago. They might not actively follow the cryptocurrency space or Cardano anymore, so they are unaware that they should delegate to DReps. We need to find a way to re-engage these users.
Perhaps wallets should display a prompt informing users that they have not delegated to a DRep.
Additionally, if users hold ADA on centralized exchanges, they cannot delegate to DReps. Some suggest that these centralized entities should support governance, but this is very unlikely. Users should transfer their ADA to their own Cardano wallets and then delegate to both the staking pool and a DRep.
Some people suggest introducing economic incentives for delegation. For example, airdrop ADA to randomly drawn delegators. While I’m not sure if this airdrop method is suitable for Cardano, it’s definitely an idea worth considering. We would need to find a way to provide ADA for this incentive.
After Chang #2, stakers will not be able to withdraw staking rewards unless they delegate to a DRep. They won’t lose any staking rewards, as these will continue to accumulate in the reward account. However, to withdraw them, they must first delegate to a DRep.
This form of incentive could be effective, but it might confuse many inattentive users. They might quickly choose the Abstain option or the first DRep ID they come across, which is often the DRep ID of the team building the wallet.
ADA holders don’t necessarily have to search for a DRep to delegate their voting power. Instead, they can consider becoming a DRep themselves and vote directly. Some wallets and GovTools support this option.
Conclusion
Do not hesitate to delegate your ADA to DReps. It’s in Cardano’s best interest to have as much stake as possible delegated to DReps. This is crucial for building confidence in Cardano’s governance, as a larger voting stake is essential.
Some community members believe that people will start registering when there’s a vote on a significant governance action. This could be the necessary trigger to encourage people to delegate or vote for themselves.
Some ADA holders were unsure if their stake was successfully delegated after delegating to a DRep. To verify, they can use the transaction ID to check it in the blockchain explorer, where they should find a delegation certificate with the DRep ID. Wallets like Eternl can also display these details.