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Lisa
@eellaoh99
Title: CompoundDAO's Setback: A Catalyst for Voting Bloc Entropy Propose On July 28, 2024, CompoundDAO’s governance suffered a blow when Proposal 289 allowed a group known as the “Golden Boys” to take control of $24 million from the DAO’s treasury. Though the proposal wasn’t inherently malicious, it exposed a serious flaw in the DAO’s governance system—voter apathy. With only 7% of token holders participating, this case sheds light on the limitations of existing decentralization metrics like the Nakamoto Coefficient, which often misses risks related to how voting power is controlled.
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Lisa
@eellaoh99
1. Token-Centric Metrics Are Insufficient Common metrics like the Nakamoto and Gini Coefficients primarily track how tokens are distributed across wallets, offering a simplified view of decentralization. They overlook critical governance dynamics, like who controls those wallets. Consider WhaleDAO and MinnowDAO—on paper, MinnowDAO appears more decentralized because its tokens are split across more wallets. However, if one person controls the majority of those wallets, real decentralization is a facade. This is exactly how the Golden Boys manipulated CompoundDAO ‘s voting mechanism, controlling multiple wallets but ultimately consolidating voting power. These token-centric metrics also fail to account for practices like bribery, collusion, or even groupthink, which further concentrate power within DAOs. Measuring decentralization accurately requires more than just counting wallets; it needs to consider how influence is distributed and exercised.
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Lisa
@eellaoh99
2. Enter Voting Bloc Entropy (VBE) A new approach, called Voting Bloc Entropy (VBE), addresses these gaps. The metric was proposed by Andrés Fábrega, Jay Yu, Amy Zhao, and Ari Juels. It is their creation and part of their research on DAO governance and decentralization.
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Lisa
@eellaoh99
3. A Path Forward for DAOs VBE is only the beginning of improving DAO governance. As ongoing research continues to refine this metric, DAOs will have access to more sophisticated tools for analyzing and distributing voting power. The ability to prevent governance attacks like the CompoundDAO incident hinges on improving participation, reducing centralization, and fostering diversity in voting blocs. For DAOs, decentralization is one of the most challenging aspects. However, with innovative metrics like VBE, DAOs can move closer to their transparent, inclusive governance ideal. As DAOs evolve, embracing tools like VBE will be key to ensuring that governance structures truly reflect the core principles of decentralization.
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Tr4nquil18
@tr4nquil18
The CompoundDAO's setback highlights the importance of active participation in governance. Voter apathy can lead to unforeseen consequences, emphasizing the need for robust decentralization metrics that account for voting power distribution.
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