DXdao: DeFi Governance Done Right
The DXdao has been picking up steam lately due to the release of its latest product, Omen.eth. Just two months after the launch of the continuous fundraiser, the DXdao is proving to be one of the few beacons of decentralization in the DeFi corner of crypto. However, the DXdao have yet to truly uncover their potential as a decentralized, self-sovereign collective that develops and governs decentralized financial products. This article will explore what governance means in DeFi, and why it matters.
Let’s look at how DeFi companies are carrying out the decentralization of power over their platforms. About 40% of Compound’s COMP tokens will be distributed as a representation of decision-making power to its community of lenders & borrowers- users of their platform. Not long after the launch of COMP, token holders were already given a governance system with proposals ready to be ratified or vetoed. Defi Money Market is following suit with its fork of Compound’s governing system. While they are not live yet, DMG holders will have the power to vote on their first proposal- enabling USDT as an interest-generating asset (mUSDT).
A community develops organically, but effective governance requires formal mechanisms and an informal culture of decentralization. Governing power must be granted simultaneously with a structured system geared for its application- well at least never before it.
Proper governance structure provides the engine for community-backed DeFi products, where stakeholders are strongly incentivized to generate value for everyone within the network.
DXdao has been active for over a year and is slowly building governance infrastructure that can scale in size and complexity. Although there is still a lot of work to be done, DXdao has already established some core cultural tenets and a base layer of governance on- and off-chain. Nevertheless, here are some exemplary cases of productive community-based governance.
Transparency
How often do you become a fan of a blockchain project, and find out you’re able to show up in one of their weekly calls and ask questions? No waiting room, no password, just an open discussion on recaps and developments in the DXdao. It has been working quite effectively. If you’re interested in really participating in the conversations, it may be best to introduce yourself and do plenty of listening to get a feel for the culture and underlying pro-decentralization ethos in the discourse. With that said, the community is very welcoming and encourages attendees of different perspectives to be vocal.
All actions regarding budgeting and signaling within the DXdao are proposed on-chain, which you can view here. This is where the consensus magic takes place. DAOstack’s Alchemy and holographic consensus provide some innovative ways of speedily carrying out voting resolution. While unboosted proposals need a 51% majority to pass, boosting proposals allow for “relative majority” to establish consensus even when they have a lower percentage of members voting on them. (Feel free to read more about it here). While the on-chain portion of the DXdao’s governing system is very significant, a lot of off-chain discourse is had before most proposals make it to Alchemy. This is all visible to the public as well.
DAOtalk and Keybase are two of the main public platforms for internal discussion. While Keybase is more for ongoing, daily workflow conversations, DAOtalk is a place to put new concepts and policies to the test.
You can view this thread as an example of someone’s draft proposal for compensation for work performed by several new developers. After it garnered a positive response, the developers each submitted their proposals (like this one) for compensation. The DXdao’s treasury is locked in a smart contract, which only releases funds when proposals pass. After two product launches, the DXdao still has a healthy treasury of 5400 ETH to dedicate towards its ventures.
Budget Control
One of the DXdao’s heaviest debates was regarding compensation for its developers after it managed to raise over 5000 ETH in its Continuous Token Offering. A standard needed to be set, and thus a proposal for Worker’s Compensation Guidelines was passed. While this is still undergoing refinement, we are now seeing proposals for full-time employees under these guidelines that are on course for ratification.
One thing worth noting- a single blockchain-based platform like Alchemy, Compound, etc., is simply not enough for the most important part of governance- open dialogue. Before something gets voted on, there needs to be some form of a conversation being had before something passes that could affect the entire DAO. There is a forum on Compound Finance, complemented with an active Discord. However, the forum is a little difficult to navigate if you’re trying to find drafted proposals. This necessity for discourse might explain why DAOs tend to use multiple communication platforms, from Keybase, to DAOtalk, to Telegram, to Discord, and weekly calls.
A Product Line with a Governance Edge
As mentioned before, Omen is a fresh new product from the DXdao, and is proving to be their first truly original dApp in their ambitious lineup. While Omen is already attaining remarkable volume in its prediction markets, the DXdao has plenty of exciting tweaks and features to add in the near future. With the help of Kleros court, the DXdao plans to implement market curation to certify the validity of Omen’s prediction markets. This is to ensure that users do not lose money that they may otherwise win, due to technicalities that led to an invalid market.
The DXdao also maintains a registry of whitelisted ERC-20 tokens that are allowed for staking in Omen’s prediction markets. All it takes is a proposal to pass to add a new token. This is an act that anyone, regardless of their voting power, is able to do. However, it might take some discussion and persuasion to get the proposal passed by the DAO, as they are ultimately the ones with voting power. The same can be said for the DXdao’s decentralized exchange, Mesa DEX. While anyone can plug in their token unofficially a la Uniswap, at least the DXdao makes it possible for anyone to propose a token to be a part of their default curated registry, and have it voted on.
Putting out Fires
What’s a team that cannot handle trials and tribulations? The DXdao has been able to handle difficulties, hardships, and bugs in an impressive fashion. There are two incidents that tend to stick out.
Mesa.eth Failing to Resolve on the ENS Server
To summarize, someone created a proposal for an IPFS content hash to resolve on an ENS address (Mesa.eth.link). The ENS migration added complexities which were not fully accounted for by the developers involved in these updates, leading to Mesa.eth not working for about a week. A new proposal had to be made to resolve the IPFS content hash to the correct ENS contract, allowing for Mesa exchange to properly launch. For a short period, users had to be directed to the IPFS link in order to continue trading on the exchange. While not catastrophic, it did prove to be the DXdao’s first speed bump.
Halting Omen’s Release for a Final Bug Fix
Just hours before Omen v1 was about to release, a bug was found regarding the resolution dates. The original proposal was set to pass on June 23rd, 2020. When the DXdao discovered the bug, they mustered enough voting power to override the “For” votes, rejecting the proposed launch date. After a week of final tweaks and rigorous testing, another proposal for Omen’s launch was set and ratified to the delight of the DeFi community. The DXdao proved it had the swiftness and teamwork necessary to catch any final threats that could lead to inadvertently valid markets. The DXdao are not afraid to delay a release for the safety of the users, and this bug could only have been discovered and brought to the DAO’s attention because there was an enthusiastic community behind all of the DXdao’s developments.
When you decentralize products, the lines between the community and the developing team become blurred. A strong community whose voice is heard is one of the most important aspects of building a DeFi product. Giving people platforms and a voice to communicate, put forth ideas, and lift up others is what allows a DAO to create market-leading products that push the limits of open finance.
Follow:
- @Ingalandia on Twitter
- @DXdao_ on Twitter
- DXdao on DAOtalk
- DXdao’s website
This article is for informational purposes only. Please seek independent legal and financial advice in your jurisdiction before making any investment decisions.
