DeFi's great paradox: VC tokenholders
The Tally Newsletter, Issue 83
Welcome back to the Tally Newsletter, a weekly publication focused on DeFi and DAO governance. We’ll keep you updated on key proposals, procedural changes, newly launched voting systems, and shifting power dynamics in the Tally ecosystem. We’ll also recommend the most important reads and listens of the week to ensure you’re an informed citizen of web3.
I’m coolhorsegirl, a DeFi native and the newest member of Tally’s newsletter collective. With prior experience at Index Coop, I’m interested in DAO governance and general DeFi innovation aimed at maximizing decentralization. In this issue, we’ll cover active, on-chain proposals from Uniswap, ENS, and Nouns DAO, beginning with a deep dive into DeFi’s latest controversy: a16z’s squash of a vote that would have benefited a competitor to one of their portfolio companies.
🤿 Deep Dive: a16z versus the UNI community
On Saturday, VC heavyweight a16z used its 15M $UNI to squash a UNI proposal to launch Uniswap protocol on BNB chain using a Wormhole bridge. This is hugely controversial. But should it be?
The proposal originated in December to authorize 0xPlasma Labs to deploy the Uniswap v3 protocol to the BNB PoS Chain on behalf of the UNI community. Wormhole was selected as the bridging platform just under 2 weeks ago.
A community "temperature check" (read: off-chain) vote to see which cross-chain bridge would be utilized for decentralized exchange Uniswap's third iteration swung decidedly in favor of Wormhole. a16z was unable to participate in the temperature check due to their tokens’ custodial set-up. After, Eddy Lazzarin, partner at a16z said: “To be totally unambiguous, we at a16z would have voted 15m tokens toward LayerZero if we were technically able to.”
The vote remains active until February 11th, but decided, on Tally. a16z’s vote marks a few firsts. It’s:
the first time a16z voted against an Uniswap proposal and
the first time a16z unloaded the entire 15M UNI vote clip.
Now, here’s the controversy: Notably, a16z is an investor in omnichain interoperability protocol Layer Zero, a competitor to Wormhole. They have voted against large community sentiment in favor of the proposal. Because of this, critics accuse a16z of leading an anti-competition cartel in DeFi.
With this exists a greater debate. Objectively, a16z’s 11 wallets owning 41.5M $UNI gives them 4.15% control over UNI’s supply. This is important because 4% is the amount you to achieve a quorum on Uniswap. Simply, a16z’s wallets can collectively change the outcome of any governance vote. Their total power is far greater than the 15M originally presented.
Regardless of your opinion on the ethics of the vote, a16z’s involvement reminds us of a curious paradox of DeFi: If VCs don’t vote, they’re lazy and not committed to web3. When they do vote, the narrative is about overpowering VC control. In some ways, it seems a16z was set up to fail, at least in the eyes of Twitter commentators.
⌛️ On-chain Proposals
On-chain DAOs are decentralized autonomous organizations that operate entirely on the blockchain, using smart contracts and other blockchain-based technologies for its operations and decision-making processes. Tally believes that true DAOs operate on-chain.
[EP3.3] [Executable] Sell ETH to USDC
Summary: This proposal executes a swap of 10,000 ETH into USDC, to ensure ENS DAO has enough to cover operating expenses for 18 - 24 months. The DAO currently keeps almost 100% of its spendable treasury in ETH. While ENS generates protocol revenue in ETH, having so much exposure to a single volatile asset places the DAO in a vulnerable position. The hope is for $13m in USDC to be generated to more safely fund operations.
Voting ends: February 7th
[EP3.2] [Executable] Q1/Q2 2023 Working Group Funding
Summary: This proposal executes all three passed, off-chain Working Group funding requests for Q1/Q2 2023 as passed in EP 3.1.1, EP 3.1.2, and EP 3.1.3.
Voting ends: February 7th
Increase Voting Delay and Voting Period
Summary: Set 'Voting Delay' to 7 days, up from the current 5 days set 'Voting Period' to 7 days, up from the current 5 days. This change is intended to facilitate weekly review and voting on pending and active proposals, something Nouns community members have noted as an area of improvement in the past.
Voting ends: February 10th
Summary: Send 65ETH to Nouns Treasury Management, a decentralized yield-bearing asset manager, for a completely revamped treasury page and a pilot program to generate more revenues from the treasury using NTM.
Voting ends: February 11th
House of Nouns v2: Public Good
Summary: House of Nouns asks for 190 ETH to fund 5 months of development for v2. This is a revision of a previous House of Nouns proposal. Notable changes include goal clarification, significant decrease of budget, and inclusion of product mockups.
Voting ends: February 13th
📝 10 Things To Read or Listen To
Paper: “An Overview of DAO Governance” by DAO Research Collective (overview threads: part 1 and part 2)
Article: “The DAO2DAO Ecosystem” by Emma Kwan
Article: “Not Companies, Not DAOs But a Third More Secret Thing” by Leighton
Article: “Vertical Communities” by Noah Smith
Article: “Quorum Theory and Application to DAO Governance” by mel.eth
Thread: “It wasn't until the 1900s that shareholders-as-investors became more widespread” by Chase Champman
Thread: “Mental health risks of participating in DAOs” by mel.eth
Thread: “I asked ChatGPT why caste systems develop in DAOs” by infinitehomie
Twitter Space: “DAO Governance” from Meme Brains
Podcast: “NBA Owners' Feedback On KH's Pitch” from Krause House DAO
Podcast: “Overthrowing The Network State: An Initial Critique and Alternatives” on The Blockchain Socialist
💫 DAO Talk: On-chain governance is easier than you think | Weekly Ep. 33
🤭 Meme of the Week
Lastly, Juicebox is bringing on-chain governance. Project creators can now opt-in for on-chain governance using NFTs. These NFTs can be used with on-chain governance tools like Tally. Check out this tweet for more context.
Have a great start to your week. And let us know what you think about that big Uniswap vote. See you next Monday!