Voter apathy is killing the sense of community in the DAOs. Mismanagement and indecision have left many decentralized autonomous organizations (DAOs) injured and vulnerable to the crypto equivalent of the 1980s corporate raider.
Even MakerDAO, an early proponent of this new organizational form, is grappling with the lengthy and complex “endgame” restructuring to revive board participation.
The reasons for anemia in many DAOs vary. Regulators and retail investors are often reluctant to participate, especially given the changing – and often murky – regulatory landscape in the United States and other jurisdictions. Or DAO participants who participate enthusiastically may lose interest after the initial wave of enthusiasm passes and prices have dropped.
This article is part of CoinDesk “Strike week.” Taylor Johnson is co-founder of PsyFi.
However, a key driver behind the retreat from governance is the central dilemma that users in many decentralized finance (DeFi) communities face: how to best deploy their assets – and their energy – in an ecosystem.
In networks where there is a clear divide between governance tokens and reward-generating assets, users face an impossible decision: should they stake to earn rewards? Or concentrate on participation in governance?
Too often, it is the desire for personal gain from rewards that trumps helping a project achieve its mission.
But there is a solution to the asset deployment dilemma. To expand. To spare users the Hobson’s Choice of where to place their assets, staking – already one of the most powerful innovations in DeFi, which is itself a construct based on automated incentives – can now be redesigned
As high-profile incidents this year with protocols like NounsDAO, Hector Network on the Fantom blockchain, and Parrot Protocol on Solana have shown, withdrawal can leave DAOs vulnerable to predators who can swoop in and buy up governance tokens from less interested community members . and forcing projects to liquidate their treasuries or take other steps that could decimate a project.
Apathy can have consequences that are less dramatic, but potentially just as damaging. It can sap the energy from a community, leaving DAOs struggling to muster enough votes to pass even rudimentary decisions — let alone mission-critical proposals. The resulting bottlenecks can cause projects to miss opportunities in the rapidly changing DeFi space.
But a renewed commitment, coupled with measures such as greater automation of decision-making and support for delegation, can make a difference.
It’s perfectly possible to build an elegant infrastructure that supports a new dual-purpose form of staking: one that gives strikers a real return in the form of a share of protocol revenue, while also giving community members a voice retained in the way a project is distributed. his income.
With this kind of infrastructure, community members no longer have to choose between having a say and earning rewards. And projects will benefit from improved liquidity, streamlined decision-making and a more productive dialogue with protocol users.
I have always been a strong believer in the belief that a rising tide lifts all ships. If such tools are to help DeFi make a choice towards a better horizon, it must be open source and available for any community on a blockchain to use.
Also see: ENS and the limitations of DAO governance | Opinion
There are such tools in Ethereum and on Ethereum Virtual Machine (EVM) blockchains, but it is time for their transformative power to reach non-EVM networks as well. On many platforms, tokenomics is often fragmented, with a solid divide between governance tokens and assets aimed purely at rewarding users for activities such as liquidity provision or liquidity farming.
A group of us – the development teams behind PsyFi and HXRO Network, another long-standing Solana project – want to change that. We’ve created a free-to-use hybrid staking mechanism that any project in the ecosystem can use.
The longer users lock up their tokens, the more influence they gain over the project direction – and the greater the share of the protocol that generates rewards. This isn’t just a tool for PsyFi; any Solana team can use it, build on it, and adapt it to their needs to better align their token holders and products.
By giving community members a stake in a future that we can all benefit from, this type of infrastructure can reinvigorate user engagement within DeFi, making decision-making faster and more efficient and fending off predators before they strike.