Move Over Yield Farming, Proposal Farming Has Arrived….almost
After a hard days work of farming and an inventory filled with tokens, what’s next?
Over the past few months, a number of different projects have started experimenting with the incentivisation of liquidity provision & governance participation. This provides the Ethereum community and wider Web3 ecosystem a unique opportunity to earn governance & tokens via the newest token distribution method.
Liquidity mining as a token distributed method takes influence from the past four years of token distributions; Stakedrops & Proof of Use systems being two distinct points of inspiration behind liquidity mining. Protocol users lock their assets inside different DeFi protocols, and receive governance tokens as a reward.
It’s becoming overwhelming clear that tokens were going to continue to strive towards more decentralized protocol/platform governance as well as more DAO like implementations of tokens. $COMP represents the first native launch of one of these ‘Token as DAO’ structures with day one control.
In order to leverage liquidity mining as a token distribution strategy, a platform has to have a working product. In the case of Compound, introducing token rewards led to a protocol utilization increase of 34x over night.
Compound might mark the first of these types of experiments, but they’ve also started a liquidity war between the DeFi protocols.
This liquidity war will enable DEXs to provide a new level of liquidity within the Ethereum ecosystem. For every governance token launch, we’re building an underlying earnings rate for all of DeFi.
With the launch of many more liquidity mining incentive structures, these systems will continue to build the underlying liquidity of decentralized exchanges, over time building the decentralized liquidity backbone of Ethereum. This premise enables DEXs to compete with more centralized & liquid exchanges — giving the Ethereum community more control and ownership over how assets are exchanged.
Compound have set precedent and begun a incentivisation war which has seen a exponential increase in protocol usage and launched a token which only weeks after launch has amassed a billion dollar marketcap.
Depositing magic internet money into smart contracts to earn different types of magic internet money is great and all, but as an industry what we should be more focused on is the next phase of the yield farming cycle, crop harvesting & genetically modifying our crops.
Participating in the governance systems underpinning these protocols will pave the way for a new wave of decentralized community engagement
🌾🌾 The birth of the proposal farmer 🌾🌾
As a number of these DeFi Protocols launch their governance dashboards, incentives & community empowerment we’ll see a new wave of Proposal Farmers enter the fray. Focused on maximizing ROI for participation inside of these governance frameworks, rather than exclusively maximizing assets under management of the protocol.
These proposal farmers have massive budgets assigned to reward platform governance, just to list a few:
Compound: $180M treasury for governance incentives
Nexus Mutual: 100 NXM rewarded per important proposals
UMA: Earn UMA for voting on the DVM
Kyber: Earn ETH by staking KNC and voting on proposals
Proposal farming will empower community members, bring new outside-the-box ideas to DeFi projects and begin a new experiment in the decentralized governance world.
Proposal Farming will be one of the first major roles these Protocol Politicians play, competing to build the most impactful & widely accepted governance proposals, these proposals will be directly linked to token incentives as well as likely acting as a signalling mechanism for delegation -which again, will likely be linked to future earnings for these Protocol Politicians.
We’re only just starting to understand the full scope, responsibilities and upside of Yield Farming, Proposal Farming and Protocol Politicians but it’s important to remember why we’re entrenched in these communities & technologies. Making ‘number go up’ always ends up controlling the headlines but it’s important to remember that the technologies being utilized & tested are in their absolute infancy; building impactful systems that innovate on a 100 year old monetary & governance system is what we’re aiming for.
Axia Labs is one of the core contributors to MetaCartel & RaidGuild as well as many other DAOs in the space — Axia Labs has been working with innovators, enterprise & token projects since the company’s inception in 2017. We try to interact with every working DApp, DAO & token that adds value to the ecosystem as well as building incentive mechanisms & governance structures for many of the most loved projects in the space!
In the coming months, we’ll continue explore these new DAO models as we look to reinvigorate the spirit of coordinated innovation that we saw back in 2016.
Thanks to Callum Gladstone, Cooper Turley & Lucas Campbell for their contribution to these ideas & this article :D