This year, the DeFi space is witnessing some exciting governance experiments. From Maker’s DAO racing to push its decentralized stablecoin DAI back on top of Terra’s UST before it collapsed to Lido Finance’s DAO brokering a $15 million deal with venture firm Dragonfly. However, only a few of these experiments have been successful.
One DAO ignored its community’s vote to utilize some of the project’s treasury to compensate hack victims. Kain Warwick, a DeFi guru and the founder of Synthetix, a platform that lets users hold and trade synthetic versions of real-world assets, is not impressed by such a state of DeFi governance and believes it’s getting worse than it was in 2021.
Speaking at the Chainlink SmartCon 2022, Warwick said that he believes governance gets thrown out the window during a bull market. He adds that nobody cares at that time, but Instead, they tend to act as quickly as possible on things that require a lot of critical thinking; therefore, the experimentation gets blown away.
Synthetix Founder Says Governance Theater Problem Needs to be Solved
In that same panel, Warwick also pointed out “governance theater,” a critical problem that crypto governance must address. He specifically targets the issue around the voting platforms like Snapshot and multi-signature wallets. In simpler terms, a multi-signature(multi-sig) wallet is a crypto wallet controlled by more than one person.
Therefore, a majority consensus among its many owners is required to move funds within that multi-sig wallet. Several DAO treasuries use this type of wallet as you do not want only one person to control the funds making it easy to get away with them.
Snapshot, on the other hand, is an off-chain governance tool for the crypto community voting. According to Snapshop founder Fabien, the off-chain framework encourages participation by minimizing gas fees for voters. However, he says that on-chain makes it easier to perform trustless execution but harder to include non-whales.
That tradeoff does not sit right with Warwick. He explains that once you vote on the Snapshot and it sends the signal to the multi-sig wallet, the wallet is not responsible for that signal and could fail to recognize it. Warwick thinks such a DAO tooling is just a rushed, bull market solution to governance.
Snapshot X Could Solve the Governance Theater Problem.
In addition, Warwick says that the industry needs to take time to connect the community’s votes directly to the multi-sig wallet to have proper control over a project’s treasury. The wait may not be that long as Fabien says there could be “Snapshot X” planned to launch later this year, which aims to combine the best of trustless execution and reduced user costs.