💔 Broken Systems
Market Meditations | December 6, 2022
Vitalik Buterin, co-founder and chief scientist of Ethereum took to Twitter last week to critique the state of decentralised voting systems such as DAOs.
- Vitalik argued that these systems are only benefiting whales such as “millionaires and hedge funds (including attackers)”, at the expense of smaller token holders.
- Vitalik said that DAOs should promote community governance and that the value of a token should not be tied to its democratic utility and stated that using this as a narrative is “pathological”.
- Additionally, he cautioned that tokenised governance may make DAOs susceptible to special interests. He said, “As a regular individual, pay $500 to get a 0.0001% chance to influence the outcome of some votes is just not a good trade.”
- Whilst Vitalik’s stance is valid, it clashes with that of any DeFi project participants who think that governance token rights are essential for separating DAOs from centralised organisations.
- Corina Dolghier of MakerDAO told The Defiant that governance tokens allow projects to exercise collective decision-making in a transparent and decentralised manner. She continued, “this is what makes them different from owning shares”.
- Beth Haddock, a strategic advisor to Balancer, compared this system to voting in a traditional political system. She argued, “you either believe your vote counts or you decide you can’t make a difference.”
Both sides of the debate offer valid arguments, however, it is clear there is still work to be done before decentralised voting systems can be considered a viable alternative.