The Sweet Potato Court - The Daily Gwei #60
Exploring decentralized governance within DeFi.
You may have missed it but something really fascinating happened over the last 24 hours in the world of Yam governance. Protocol activists were able to flip an important proposal from REJECT to PASS by rallying the community around a common cause.
To give some context - there is currently a proposal on Yam to direct 1% of the YAM treasury to the Gitcoin Grants matching pool. This proposal was failing with a 51% REJECT vote and a 49% PASS vote just ~22 hours ago. Then, a bunch of Yam community members got on Twitter and put the spotlight on this proposal which rallied the community to vote in favor of it (David Hoffman also wrote a great piece about it here). Now, the proposal sits at 82.77% PASS and just 17.45% REJECT.
Though, it wasn’t just the Yam community that rallied around this proposal - it was also the YFI community as they too have an active proposal to direct a % of their protocol’s rewards towards Gitcoin. The interesting thing is that their proposal was actually firmly in favor of directing 1% of rewards to Gitcoin which acted like a “public shaming” of sorts for the Yam community. I think this, coupled with the rallying of the Yam community, was enough to swing the Yam vote. Oh and it helped that Andre Cronje (founder of YFI and Yearn) shed some light on the whole thing as well.
This event is just a taste of what we’re going to be seeing play out over the coming months and years as DeFi protocols continue to rapidly decentralize their governance process. We’ll be seeing things like protocols governing over other protocols, DAO’s governing over treasuries using DeFi protocols, the rise of “protocol politicians”, the emergency of Dark DAOs and more.
I do worry that some projects are trying to decentralize themselves too fast which could lead to unforeseen consequences later on but my running theory is that the teams are doing this because they fear regulators. Basically, if the founding team can “hand over” the protocol’s governance to a decentralized set of token holders, they can then argue that they no longer control the protocol if a regulator comes knocking. As I’ve written about before, this sort of defence didn’t fly for those who deployed TheDAO so I’m quite concerned that we may see some regulatory hammers coming down in the near future.
Have a great day everyone,
All information presented above is for educational purposes only and should not be taken as investment advice.