The Governator - The Daily Gwei #195
Can we solve governance? No - of course not - but we'll damn well try!
Currently in the Ethereum ecosystem there are many different governance experiments playing out in many different ways. Most protocols are currently trying to decentralize so that they can become truly “community owned” and not rely on a central team to lead the efforts.
Disclaimer for this piece: I own INV tokens.
One experiment that I’ve been watching play out lately has been Inverse.Finance and so fat it’s been fascinating. Some background - the INV tokens were initially distributed in an airdrop and have not been transferable (and therefore not tradable) ever since that airdrop. This was done because the founding team/community wanted to encourage people to actually participate in governance using their tokens - not just simply hold them for speculative reasons. The DAO even went as far as to seize tokens from holders who hadn’t used them to vote in any of the governance proposals. The funny thing is that there was ample warning that this was going to happen and then when it did happen, people who had their tokens seized rushed to the community channels to air their grievances.
Now, there have been multiple governance proposals to make the INV token tradable in the past but all of them had been voted against - until today (as you can see in the tweet above). In less than 48 hours, the token will be able to be moved for the first time since its creation which I’m assuming will lead to some fireworks. As far as I know, this is the first (or at least the most high profile) instance of a token being “launched” in this way so it’ll be fun to watch play out. I’m also not aware of any plans to do an incentivized trading pool for the token so I do wonder if there will be much liquidity once trading begins.
I think there’s still plenty of experimentation left in the governance/DAO space and we’ve really only just scratched the surface of what’s possible. I also believe that there is not a “one size fits all” model but I think that there will be a handful of models that become the “standards” for most projects. We’ve already seen Synthetix experimenting with a “council” model where the community “elects” representatives, Compound is experimenting with a delegate model where people can delegate their tokens to others to vote on their behalf, Ethereum itself uses an off-chain governance system and many other apps experiment with various mechanisms.
I don’t think governance is something that we should strive to “solve” because that’s impossible. Humans have tried to solve governance for thousands of years and the best we could do is come up with democracy (which is amazing, but still has deep flaws). The best we can hope for with decentralized governance is to create a system that is fair, inclusive, and accurately represents stakeholder interests/views - so maybe we’re just going to end up recreating democracy on-chain!
Have a great day everyone,
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All information presented above is for educational purposes only and should not be taken as investment advice.