DeFi’s student government problem

Decentralized governance is at the heart of the ideological foundation of crypto: equal participation for all actors. The playbook of progressive decentralization is being followed by more decentralized finance (DeFi) projects. Users and tokenholders can now have more control over protocol parameters, treasury spending, and, in general, the industr... See more

To address DeFi protocol governance, projects such as Compound pioneered the governance token model. Governance tokens provide voting power, allowing token holders to vote on protocol proposals that any community member can submit. Admittedly, this system is not perfect. There are all kinds of problems such as voter apathy, high participation cost

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---------SIGNAL VS NOISE Social governance in DeFi applications is usually coordinated through online forums and Discord channels. Snapshot applications conduct "off-chain" voting before protocol changes are encoded on the blockchain. DeFi governance evolved organically but created a lot of noise because proposals, discussions, and votes spread acr... See more

One less obvious shortcoming of token-based DAOs is their flat structures. By flat structure, I am referring to the fact that token-based DAOs are often direct democracies where every proposal is voted on by all token holders, without any political tools like Parliaments, executive branches, bureaucracies, standing committees, and so on.