Decentralised community governance is not always so decentralised.
This week, one piece of news really caught my attention: Dharma was criticized for supposedly trying to capture the governance of Uniswap.
Dharma is the company behind a crypto exchange and payment application, a kind of bonus based on Square Cash App Ethereum. Or at least that’s what it used to describe: if you visit the website now, you basically only see mentions of DeFi and some very cool images.
Like Uniswap and Compound, Dharma is backed by some traditional Silicon Valley and Coinbase venture capitalists. It is also one of the most expressive “community governance” members of both protocols, which is shocking, I know.
But I don’t mean to single out Dharma here. They have legitimate interests in the matter given their close integration of products with DeFi, and at Uniswap they are trying to do the right thing for their users who have missed the airdrop.
If you take a walk through the governance control panels at Compound or Uniswap, you will probably see the general problems I see with this kind of “decentralised community governance” protocol.
Most proposals are submitted by a small clique of stakeholders, usually the team or some highly related company (another name that comes up often is Gauntlet, which is funded by Paradigm, Polychain… and obviously Coinbase). It does not help that, to make a proposal in Compound requires a fully trained technical implementation and 100,000 COMP (worth about USD 10 million).
Of course, you can discuss things on the forums as a small owner. But I have serious doubts that those public forums are where the real decision making takes place. To be fair, the Compound and Uniswap forums couldn’t be more different. The former is a place devoid of life or fun, the latter is full of discussion and accusations.
The rich get richer
Somehow, I feel that the token distribution schemes had a very, very strong effect on that disparity. Uniswap’s “rewarding anyone who has used us randomly in the past” was definitely much more equitable than Compound’s “let’s distribute tokens without blockage to whoever gets the most capital”.
In general, there is nothing really fair about yield farming launches: the richer you are, the more tokens you receive and the richer you become.
Above all, this is not inventing anything new. It is a corporate board, plain and simple. Corporate boards benefit the team and the already rich who can devote capital to the company, it’s just that with DeFi you get tokens instead of shares.
Honestly, crypto currencies like Bitcoin Hero have always been oligarchic. And that’s fine, that’s human nature. But if we really want to do something different, we have to realize that our actions are leading us down the same path that formed the modern world.
It may be possible to have a truly decentralised system of government, whatever that means, but it certainly won’t happen when we actively reward wealth with control. (And control with more wealth).
The blame games are getting out of control
One story that made me laugh is the sincere belief shared by some that YFI fell because Alameda Research (the company behind the FTX exchange) shortened it.
The block chain doesn’t lie and CEO Sam Bankman-Fried didn’t exactly deny it, so maybe it’s true.
Of course the logical reason for a bull to be irritated by short positions is that by doing so, the bearishers create additional selling pressure. And that is probably true, but we must also remember that they provide additional buying pressure on the way down. It is quite well established that futures, which make short positions much easier, reduce overall market volatility.
Emotions are running high and anger is usually associated with the bottom of a market cycle, so perhaps this news is really good?
But there is another blame game that makes very little sense and suggests that people are still crazy. Andre Cronje, the founder of Yearn Finance, is once again under attack because people “faked” one of his unpublished projects.
It was basically a proof of concept of non-permanent loss mitigation for other developers to try out. People put up large sums of money and then lost it: one particular address put in 1,000 ETH and got 74 ETH back.
But despite Cronje’s giant, harsh warnings (see below), people continued to criticize this as another example of him “testing in real situations” and making people lose money.
Except that, well, nothing really happened. The system worked completely as planned, nobody was hacked. This is what usually happens when you accumulate in a random intelligent contract.
So, uh, maybe look at the sign. That way there’s no one to blame and we can all enjoy DeFi again.