The Tally Newsletter, Issue 50
November 3, 2021
Welcome back for issue 50 of the Tally Newsletter, a publication focused on all things decentralized governance. We’ll keep you updated on key proposals, procedural changes, newly launched voting systems, shifting power dynamics, and anything else you need to know to be an informed citizen.
This week cover:
Ethereum Name Service Launching Decentralized Governance
MakerDAO Backroom Politics Spill into the Open
Plus quick ecosystem and product updates!
Ethereum Name Service Announces Decentralized Governance
TL;DR: ENS has a large treasury to govern, but also faces some of the most complex challenges of any protocol DAO.
Earlier this week, the Ethereum Name Service announced that they would be decentralizing core governance functions through a DAO. Launching next week on October 8, the structure will feature a token distribution to team members and the community, along with a Cayman Islands foundation to represent the DAO’s legal interests and responsibilities.
Source: ENS Blog
Initial 50% token distribution is split evenly between core contributors and past users, with the remaining half of the token supply allocated to the DAO. In addition to ENS tokens from the genesis supply, governance will also control the ETH earned by the ENS root multisig for name registrations and renewals, which should quickly vault ENS into the top tier of organizations by treasury value.
While ENS has a significant head start in terms of financial positioning, the new ENS DAO will face some of the more difficult challenges among any protocol DAOs. The domain namespace is inherently integrated with non crypto native industries, with issues such as honoring trademarks and evicting squatters still largely unexplored in a decentralized context. Forming a DAO may be an important step to build enough legitimacy to be able to take action on these sorts of issues.
To help kickstart engagement in DAO governance, ENS is making a call for delegates over the next week. This follows on from the successful Gitcoin token launch, where users were able to select from many public delegates while claiming their tokens, helping drive voter engagement and a diversity of participating delegates.
ENS has enough real world integrations and entanglements that it may be unavoidable to integrate deeply with the traditional legal system. Nevertheless, the formation of a linked foundation has caused some scepticism among community members, in light of the history of offshore foundations as centralized organizations in many crypto projects.
ENS makes the distinction of giving token governance explicit authority over foundation operations and board membership. This inverts the power dynamic of previous off chain entities and potentially helps avoid some of their pitfalls of poor oversight. If this DAO directed trust structure proves effective, we may see a wave of projects seeking incorporation to benefit from additional clarity on legal and tax issues.
MakerDAO Considers Involuntary Personnel Change
TL;DR: The motion to offboard the real world asset team facilitator ran into controversy, and would be one of the first cases of a DAO firing process.
While Maker is no stranger to backroom politics, it had experienced a period of relative calm in the year since project governance had transitioned to a fully DAO managed framework. But this was recently broken as an internal political conflict broke into the open.
The latest controversy centers on MakerDAO’s real world asset (RWA) team, which reviews and processes applications for offchain assets to serve as collateral for minting DAI. Rune Christensen, cofounder of Maker and leader at the Maker Foundation, submitted a proposal to replace the existing RWA team lead with a new leader.
Rune’s initial post seemed to indicate a mutually agreed split, but it quickly became clear that the facilitator was being forced out. Rune controls the vast majority of currently delegated and active voting power (roughly 47,000 MKR worth), suggesting he may have the ability to force changes through unless there is significant opposition.
This action has also stirred controversy among previous Maker employees who were involved in the “purple pill” controversy from several years ago.
Ashleigh’s response surfaced a few issues, including the possibility of self dealing contracts for managing Maker’s RWA deals through third party “introducer” companies. Rune later acknowledged potential financial interests in Maker counterparties while claiming they should not represent a conflict of interest. But this case shows that the overall level of disclosure may need to improve as Maker engages in more complicated financing arrangements.
While there has been some public backlash against the proposed personnel change, some commenters have voice support for the underlying reasoning. Rune argued the proposals were necessary due to the existing RWA team lead having privileged positions in various Maker related contracts. Giving individuals excessive power within DAO agreements could create risk of organizational capture, even if this was done for expediency rather than any ill intent.
Rune also noted potential issues with the Centrifuge asset origination model. Maker has relatively little protection against borrowers unilaterally changing terms, and the ability to make legal claims for recovery is also unclear. So part of the debate centers on the DAOs risk appetite.
The reassignment proposals will likely go up for a vote within the next month, representing possibly the first case of involuntary personnel change at a DAO. But this could also be an important test of wills and voting power between various Maker constituencies.
Tally Product Update:
Tally now supports POAPs (Proof of Attendance Protocol NFTs) within voter profile pages! Check out the video below for a demo:
We’re focused on bringing the best experience to the DAO community, and POAP offers an additional layer of depth to help users better understand their delegation options. Let us know if there’s any other features or integrations you’d like to see on withtally.com!
In Brief:
Uniswap Proposal 9 is submitted to offer extra low trading fee tier:
MakerDAO activates the direct deposit module, injecting funds into the Aave money market in an innovative cross DAO partnership:
Aave governance votes through fix for vulnerability similar to CREAM’s recent hack:
A pool on Rari Capital’s Fuse suffers oracle manipulation attack, showing added user responsibilities and risks of permissionless lending markets:
NFT DAOs:
Tally hosting NFT DAO event today as part of NFT NYC:
Thanks for joining us for Tally Newsletter issue 50. Be sure to check out the Tally governance app and join us on Discord for the latest updates!
Anything we missed? New developments or protocols you’d like to see covered? Drop us a line at newsletter@withtally.com
Best,
Nate, Tally