Today’s press release proposing the key mechanisms necessary for this transition cemented these efforts following a high-level tweet yesterday from MakerDAO Founder Rune Christensen.
As the community prepares for complete decentralization, these are the key components for creating a self-sustaining MakerDAO:https://t.co/BgrvGUvci2
— Maker (@MakerDAO) April 3, 2020
The Foundation’s proposal goes into detail surrounding core features necessary to make this happen, all of which will be formalized in a series of MIPs in the following weeks. In short, the proposal highlights:
Elected Paid Contributors: The protocol’s workforce dubbed Elected Paid Contributors (EPCs) are hired by the DAO to either build or evangelize the system. EPCs will be paid directly through governance, requiring them to operate with high transparency standards. EPCs may include experienced developers, security consultants, legal advisors, marketing and communications experts, HR and accounting teams, and other roles deemed necessary by MKR holders.
Maker Improvement Proposals (MIPs): The main tool for paving the way to self-sustainability. MIPs act as the primary mechanism for improving Maker Governance and the Protocol at large as any community member can highlight key issues and provide changes or additions to system. The goal is that after several years of iteration, the framework will facilitate fully autonomous community governance.
Vote Delegates: Ability to vote on the behalf of MKR holders who do not wish to actively participate in protocol governance. The addition of a delegation mechanism will allow for more active participation in governance and a stronger signal of community direction – something absolutely vital to the success of the system as the community takes a greater role.
Delegates act as representatives for MKR holders and any community member can try their hand at being a delegate by having an active voice in the direction of the system and vote on key issues.
The end game with this transition would result in the dissolution of the Maker Foundation – the leading team behind building and evangelizing the system today. By reducing the reliance on the foundation, MakerDAO and DAI can proliferate into a fully decentralized protocol governed by MKR holders.
DeFi DAOs Continue to Gain Momentum
There’s a common theme beginning to emerge in the DeFi space – DAOs are acting as a pillar for fully decentralized, self-sustaining protocols. The ability to leverage tokenized governance to efficiently allocate capital towards a range of initiatives via social consensus is a powerful concept beginning to be realized by the broader DeFi industry.
With all of these protocols looking to decentralize and minimize reliance on their respective foundations and core teams, DAOs offer the perfect opportunity to sustainability transition power over to token holders and ecosystem participants at large.
In the next few months, we’ll also begin to see more DeFi DAOs come online.
These include prominent projects like Kyber Network, Synthetix, Compound, and Uniswap to name a few. While Kyber, Synthetix, and Maker will all rely on their existing native tokens for protocol governance, Compound and Uniswap bootstrapped their networks without a token. Now, they’re electing to mint a new application-specific token for protocol governance in an effort to decentralize the project as a whole (*cough* and provide an exit for investors).
– Governing network fee splits
– Participating in epoch cycles
– Delegating to pool masters
— DeFi Rate (@DefiRate) April 2, 2020
Generally speaking, this is an extremely pivotal time for the intersection of DeFi and DAOs. As more DeFi DAOs come online in the next year, we’ll be keen on reporting their evolution towards self-sustainability.
If one thing’s for sure, decentralized governance is no easy task. It will likely require years of iteration in order to fine-tune these systems and their designs to effectively establish a decentralized, self-sustaining protocol.
As we continue to progress towards DeFi’s self-sustainability, we’ll be here to report it.
Analyst at Bankless – one of the leading resources for open finance. Lucas is an active contributor to the DeFi ecosystem with appearances in other notable DeFi outlets including The Defiant and Our Network. He has years of experience working with dozens blockchain and token startups where he focused on token economics, marketing, and growth.