Does Tokenized Governance Really Work?A DeFi platform called B Protocol wanted to be white-listed, so submitted the proposal on October 23. On the 26th several transactions took place gaining the team enough crypto collateral to borrow $7 million in MKR which were used to vote and pass the proposal before being paid back. Although not entirely malicious as the team was transparent with its actions, the move has kicked off the tokenized governance debate again. Maker initiated another proposal to prevent further flash loan exploitation.
“The purpose of this signal is to disincentivise large MKR Holders from providing MKR Liquidity on Lending Platforms and AMM Platforms until such a time as the Maker Governance contracts can be replaced with versions that cannot be attacked using flash loans.”DeFi industry insider Chris Blec, who previously criticized tokenized governance, was equally vociferous with this latest debacle. https://twitter.com/ChrisBlec/status/1321653894032797698
Power to the WhalesThe first Uniswap governance vote was also mired in controversy as the proposer, Dharma, was also one of the largest token holders. At the time it wanted to reduce the quorum which would effectively give it even more control over the voting process. Fortunately for the sake of continued decentralization, the proposal did not achieve quorum despite gaining 98% of the votes (which came through just a handful of whale accounts). Other protocols that claim to be decentralized such as SushiSwap are also governed by whale accounts that raise questions as to the effectiveness of tokenized governance systems. As previously reported by BeInCrypto, most DeFi governance systems mirror those of corporations, with big bagholders acting as the executives and CEOs.
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