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The ethos behind DeFi has driven a move to full community governance in a democratic and transparent environment. However, as Curve Finance recently discovered, things do not always pan out as planned.
In its first governance vote, Curve proposed a new liquidity pool for earning Compound’s COMP tokens and a couple of incentives for liquidity providers. However, according to Curve, only 6.7% of its native CRV token has been locked up for voting rights.
Curve voting power is calculated by multiplying the number of tokens by the lock time, with the maximum being four years. So, the longer they’re locked in, the greater the voting rights. These two factors have led to a couple of heavy-laden addresses holding the majority of the voting rights, one of them belonging to the founder.
Curve Founder Grabs Control
In an apparent effort to prevent a Yearn Finance liquidity pool heavy on CRV tokens from gaining over 50% of the voting rights, Curve founder Michael Egorov extended the vote lock on his huge stash of tokens to the maximum of four years in order to regain control.
This effectively granted the founder 71%, which totally negates the entire concept of decentralized community governance.
Yearn founder, Andre Cronje, pointed this out while expanding on the futility of the voting system;
So… @CurveFinance founder just took over 71% of the voting power;
And since founder rewards are significantly higher than LPs and other voters, pretty much locked everyone else out.
So guess voting is pointless now.
Have fun everyone. pic.twitter.com/xgkxNpbjUz
— Andre Cronje (@AndreCronjeTech) August 23, 2020
To their credit, Curve Finance responded with an apology adding that it was an overreaction and that founder will abstain from voting. There is hope that enough CRV holders will pledge their tokens to balance the DeFi voting pot before the proposal deadline on August 28.
Compound Top of the DeFi Governance Pie
Taking this a step further, Cronje has delved into voting power distribution among the top DeFi protocols. According to the findings, Compound Finance is one of the most balanced protocols in terms of governance with almost 33% of tokens allocated.
Doing analytics for different governance protocols. I consider @compoundfinance as one of the gold standards, pleasantly surprised that 32.83% of tokens are participating in governance. And respect to @rleshner for giving up as much control as he did.
Voting power distribution; pic.twitter.com/PuDzox8Qoi
— Andre Cronje (@AndreCronjeTech) August 24, 2020
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Additionally, founder Robert Leshner gave up a lot of that control as did Yearn’s Cronje. Balancer Labs came in strong on distribution but was a bit light on participation with just 2.67% of tokens participating in governance.
A lot of what goes on in DeFi is still experimental but, as with most things crypto-related, the whales still appear to have the greatest powers in the embryonic space. Meanwhile, Curve Finance has become the third-largest protocol with about $1.05 billion in total value locked.