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The latest blog post from Ethereum co-founder Vitalik Buterin focuses on the governance system in DeFi applications. He published a blog post titled “Moving beyond coin voting governance” with solutions for helping the DeFi industry grow faster and better.
Decentralized governance is the main focal point of his latest blog post. It’s the latest concept in the blockchain industry, especially in the DeFi sector that wants to give back control of every aspect to the final users. Vitalik talks about DeGov as the new solution for helping the DeFi sector improve faster.
DeGov for Maturing the Industry
The last year was almost all about DeFi and successful platforms like UniSwap, SushiSwap, YFI, Compound, and etc. It even resulted in various blockchains considering to add the smart contract support and help DeFi developers launch their ideas faster.
Ethereum was the birthplace of DeFi and is still the biggest host of these platforms. The complexity of these platforms has resulted in a new idea named decentralized governance or DeGov that helps a community manage and govern a platform or protocol.
The main concept of this type of governance relies on governance tokens. But Vitalik Buterin believes that this type of governance should move to the next step and provide a more mature solution.
Vitalik talks about the necessity of decentralized governance in DeFi platforms in his latest blog post. He points at various use cases for this type of governance. Funding public goods and protocol maintenance & upgrades are two main types that he details in the post.
But Ethereum co-founder also believes that DeGov can be dangerous in its current form. He has talked about these risks before but now is providing a solution for mitigating the risks in DeGov. He proposes three solutions naming them limited governance, non-coin-driven governance, and skin in the game.
He believes that people should be affected by the outcome of their votes in DeFi platforms to be more careful about voting. Vitalik details a strategy for this solution:
“Fork-friendliness is arguably a skin-in-the-game strategy if forks are done in the way that Hive forked from Steem. In the case that a ruinous governance decision succeeds and can no longer be opposed inside the protocol, users can take it upon themselves to make a fork. Furthermore, in that fork, the coins that voted for the bad decision can be destroyed.”
Vitalik Buterin finishes his blog post with some hybrid solutions for better DeGov processes. Decisions like time delays plus elected-specialist governance are combinations of past solutions. But after all, he points that teams should not be limited to choices.
The most important thing is to find a solution for improving the DeGov mechanisms and mitigate risks, no matter what solution they choose.
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