Decentralized Governance Died With These Projects

Why Decentralization Alone Cannot Guarantee Fair and Transparent Governance

Russian DeFi
April 14, 2023

In the crypto space, decentralized autonomous organizations (DAOs) were designed to be more transparent, open, and democratic than traditional organizations.

However, one of the biggest hurdles for DAOs is ensuring that decision-making is not controlled by a small group of individuals with a disproportionate amount of voting power.

Unfortunately, some projects have fallen short in this regard. Here are some examples of projects that failed in their attempt to establish decentralized governance.

🧐 Arbitrum

Arbitrum made some bad choices as regards to its first DAO vote and fund use, which didn’t favor community members, and $1B ARB tokens were at risk because of a lack of full on-chain governance. This messy event caused quite a stir among the crypto community.

Arbitrum’s First Governance Proposal Turns Messy, With $1B ARB Tokens at Stake

The Arbitrum Foundation would get to side-step community governance when issuing “special grants.”

www.coindesk.com/business/2023/04/01/arbitrums-first-governance-proposal-turns-messy-with-1b-arb-tokens-at-stake

🐳 Uniswap

If whales like a16z can buy a controlling share, it undermines the idea of decentralization. It's certain that Uniswap must rethink their governance mechanics. DAOs have to explore new approaches to ensure true decentralization.

'Uniswap Controlled by a16z?': Crypto Twitter Split Over VC Firm's Governance Move - Decrypt

With less than 2% of voting power, a16z’s attempt to influence an on-chain vote on Uniswap looks worse than it actually is.

decrypt.co/120653/uniswap-controlled-a16z-crypto-twitter-split-over-vc-firms-governance-move

🚀 Starknet

Latest news reveals that Starknet DAO community members will be responsible for their new protocol update leading to a mainnet launch. The success will be seen soon.

Starknet DAO Heads Toward First Governance Vote

The vote, opening on March 21, will let members approve a new upgrade for the scaling system’s mainnet.

www.coindesk.com/business/2023/03/15/starknet-dao-heads-toward-first-governance-vote

💼 FTX

What happened at FTX is a corporate governance problem, not a crypto problem. After one lawsuit after another, it bounced back to the lack of proper documentation on how customer funds were used.

All The Governance Issues at Stake in The FTX Case

Sam Bankman-Fried stands accused of some serious crimes, so what is the case against him, and what could it tell us about the way FTX was run?

www.morningstar.co.uk/uk/news/230830/all-the-governance-issues-at-stake-in-the-ftx-case.aspx

🕵️‍♂️ SEC

SEC is out again with its lawsuit. Next on the hit list are "governance tokens." All the best to crypto projects who will not face the music for Eisenberg's mistakes.

SEC Mango Markets Crypto Suit Zeroes in on Governance Tokens

Governance tokens appear to be the Securities and Exchange Commission’s next crypto enforcement target.

news.bloomberglaw.com/securities-law/sec-mango-markets-crypto-suit-zeroes-in-on-governance-tokens

🌌 Osmosis

Cosmos fans, you might wanna check this one out. Osmosis governance has decided to merge with Cosmos Hub.

The Cosmos is expanding rapidly.
To further enhance the ecosystem and the community, Osmosis governance has decided to merge with @cosmoshub.
We're thrilled to announce COSMOSIS as the first Conglomerate chain!
🧵👇 Read the entire thread for all the information! https://t.co/YWDCcmB1fv
— Osmosis 🧪 (@osmosiszone)
Apr 1, 2023

🤪 The Warped Joe

The Warped Joe calls DAOs & governance tokens bullshit. But you can't blame a man hurt by the ecosystem meant to.

GM
Go fvck yourself!
Arbitrum Foundation
I like the speed of Arbitrum
It wasn't a request...just ratification
[checks definition of the word]
[doesn't match what they think it means]
Your governance tokens mean shit
DAOs are BS
And most L2s are in-debt to VCs
🧵 1/8
— Joe (@TheWarpedJoe)
Apr 3, 2023

📜 Post Mortem

In conclusion, decentralized governance is still an ongoing experiment, and the crypto community is learning as it goes. However, as these examples show, there are risks and challenges involved in implementing decentralized governance. DAOs must continue to evolve and adapt to ensure true decentralization and democratization.