This week, one bit of news really grabbed my attention: Dharma getting criticized for allegedly trying to capture Uniswap governance.
Dharma is the company behind a crypto payments and exchange app, a sort of Ethereum-based cousin of Square’s Cash App. Or at least that’s what I previously used to describe it — if you visit the website now you basically only see mentions of DeFi and some very trippy images.
The Dharma website design is now very… daring. And inspired by Uniswap in some ways.
Like Uniswap and Compound, Dharma is backed by some traditional Silicon Valley venture capitalists and Coinbase. It’s also one of the most vocal “community governance” members of both protocols — shocking, I know.
But I don’t mean to single out Dharma here. They have legitimate interests in the matter given their tight product integrations with DeFi, and on Uniswap they’re trying to do right by their users who missed out on the airdrop.
If you take a stroll through the Compound or Uniswap governance dashboards, you’ll probably see the general issues I see with these types of “decentralized community governance” protocols.
Most proposals are submitted by a small clique of stakeholders, usually the team or some highly-related company (another name that often pops up is Gauntlet, which is funded by Paradigm, Polychain... and obviously Coinbase). It doesn’t help that making a proposal on Compound requires a fully formed technical implementation and 100,000 COMP (worth $10 million or so).
Sure, you may discuss things on the forums as a small holder. But I have serious doubts that those public forums are where the real decision-making occurs. To be fair, the Compound and Uniswap forums could not be more different. The former is a place devoid of life or fun, the latter rages with discussion and accusations.
Somehow, I feel that the token distribution schemes had a very, very strong effect on that disparity. Uniswap’s “reward anyone who randomly used us in the past” was definitely much more equitable than Compound’s “let’s distribute tokens with no lockup to whoever manages to pull in the most capital.”
In general, there’s nothing really fair about yield farming launches — the richer you are the more tokens you receive and the richer you get.
Most of all, this is not inventing anything new. It’s a corporate board, plain and simple. Corporate boards benefit the team and the already-rich who can devote capital to the venture, it’s just that with DeFi you get tokens instead of shares.
Honestly, crypto has always been oligarchical. And that’s fine, that’s human nature. But if we really want to make something different, we have to realize that our actions are taking us down the same path that formed the modern world.
Maybe it’s possible to have a truly decentralized governance system — 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 hand
A story that made me chuckle is the sincere belief shared by some that YFI fell because Alameda Research (the company behind the FTX exchange) shorted it.
The blockchain 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 get irritated about shorting is that by doing so, bears create extra selling pressure. And that’s probably true, but one also has to remember that they provide extra buying pressure on the way down. It’s quite well established that futures — which make shorting very easy — dampen the overall volatility of the market.
Emotions are running high, and anger is usually associated with the bottom of a market cycle, so maybe this news is actually good?
But there’s another blame game that makes very little sense and suggests people are still crazy. Andre Cronje, the founder of Yearn Finance, is once again being attacked because people “aped in” to one of his unreleased projects.
It was basically an impermanent loss mitigation proof-of-concept for other developers to try. People put huge sums of money and then lost it — one particular address put in 1,000 ETH and got back 74 ETH.
But despite Cronje’s giant, stark warnings (see below) people were still bashing this as yet another example of him “testing in prod” and making people lose money.
Except that, well, nothing actually happened. The system worked fully as intended, nobody got hacked. This is just what usually happens when you pile into some random smart contract.
So, errr, maybe read the sign. Then there’s nobody to blame and we can all enjoy DeFi again.