DeFi and Governance
This global pandemic has exposed tensions and fault lines within our current systems, inciting many to call for change in economic, political, and even cultural spheres.
Only over the past few months, hundreds of community-based movements have challenged legacy governance models and sparked transformative social change. At the same time, Ethereum Decentralized Finance, or DeFi, has opened the doors for innovation around Governance technology.
While blockchain technology remains one of the hottest buzz words in the world of innovative tech, it’s applications in the world of governance and finance are gaining solid ground. In the DeFi space, the issuance of Governance tokens has risen tremendously, offering a new promise to explore shared ownership and the opportunity for community autonomy powered by trustless, secure mechanisms.
Pitfalls and External Powers
While full of potential, these new governance models aren’t as simple as deploying some code and watching the world’s problems disappear. Historical gaps and inequities must be taken into account to ensure a new system is seeded in a way that encourages broad community power & meaningful participation in governance. Many old generation Crypto projects, rushing to catch the hype of Community Governance, have drawn heavy criticism for releasing community governance models that are ‘just for show’. For example, centralised DeFi projects like Compound or Uniswap, historically backed by Venture Capital, have distributed their voting power predominantly to a few ultra-wealthy past investors, making it impossible for everyday users or newcomers to affect any change.
Building Community First
In rethinking governance, beginnings matter. The initial distribution of governance power and the mechanics that sustain a governance operation need to be carefully constructed to support widely distributed power and participation. Leading the pack, a new generation of DeFi projects such as Swerve, YFII, and ZuniSwap are working to build a global community of everyday users and distributing governance power broadly. The goal is simple: allow people to own and control the financial tools they use everyday. For ZuniSwap阻尼币, it goes a step further–build a deep international community on Discord and robust, accessible governance tech before the $ZUNI launch, ensuring a greater degree of community cooperation from day 1.
Coupled with deep initial community building, a few exciting new mechanisms are emerging as crucial to sound DeFi Governance: Synthetic Minnowing, Liquid Democracy, and Quadratic Voting. Originated by EJ Spode, synthetic minnowing focuses on preventing a few, powerful members of society running against community interests. Essentially, it prevents actors with substantial pre-existing resources to implement actions and initiatives that severely go against the quality of life for the common community. Liquid democracy, as its name suggests, allows votes to stay connected to their electoral power throughout the governance process. So, if an elected representative acts against the demonstrated interests of their community, constituents can automatically withdraw their support and effectively remove the official from the office instead of having to wait until the next election cycle and bear the consequences. Zuni is working In collaboration with Xuepeng Fan & ASResearch, one of Asia’s leading blockchain innovation labs, to deploy efficient Liquid Democracy to an Ethereum DeFi project. Quadratic voting helps curtail a problem with token-based voting which occurs when users with large amounts of votes exert their power which is considerably more than other users. This voting system prevents simple, nominal counting and installs a more proportional counting procedure which prevents this skewing of the system and imbalance.
Ethereum and DeFi continue to be the testing grounds for transformative new systems that rethink distribution of political and financial power. Taken together, community building and governance technology innovations are paving the road for better collective participation and community autonomy. First in DeFi, then in the real world.
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