DAO Governance: A Game of Offense and Defense
Protect the puck, score a goal. Tackle that man, go for the endzone. These are often the tutelage of any little league coach; the dance between offense and defense in any game determines the true champion that day.
But we’re here to talk about DAOs and governance — and this ain’t little league, frens.
The strategy — offense & defense — is key to success in DAOs, and if utilized effectively, can lead to a massive increase in participation and protocol growth.
Finding balance is imperative. At times there is a need to be conservative, and protective of our sacred home. At other times, riskier, and willing to play a game of chance for upside.
You must be able to defend the DAO — and at the same time grow it, and go on the offensive.
Let’s take a look at a few examples. Follow as we view an industry trying to balance both.
What is Offense? How about Defense?
Offense is building partnerships. It’s listing new assets, it’s token swaps, it’s shipping products — — and when necessary, nullifying the threat of competitors and emerging protocols.
Soon, the ultimate move will be mergers and acquisitions.
Offense provides the DAO with increased market share and brand awareness.
Defense is the arduous stuff. Defense is deferring proposals and cutting down extraneous spending. In its best form, it’s treasury diversification. Patching exploits as they arise — albeit, if infrequently — makes governance exhausting and a full-time job.
Defense leads to increased runway and risk mitigation.
Now, let’s take a look at examples of each.
Offense: Paladin
My beloved Frenchies, they build they ship, and they roll the r’sss. Paladin, a younger protocol hoping to capitalize on Curve and lending liquid Governance power, has an agenda for growth.
This quickly transforms into an offensive mentality. Whether it’s for Tokemak, a token swap with APWine, or Marketing / Branding initiatives — Paladin operates with an offensive strategy.
They are ubiquitous in other governance forums; Balancer, Aave, Curve, to name a few.
With a smaller treasury and assets at stake, they are looking to grow and do so with speed.
Defense: MakerDAO
They love their defense. They are the Chicago Bulls ’96. How so, you ask?
A few policies they encourage:
- delegates to participate in “fire drills” to test response times
- security and risk management are paramount within Maker
- votes more frequently nullify a proposal than verify it
As a governance organization, Flipside is committed to assisting in this effort. When needed for an emergency or via conviction, we want to deter bad ideas or threats from becoming worse.
Nobody’s dunking on us (At least I hope not)
This perspective can quickly shift with market sentiment.
As asset valuations and capital flow become more forgiving, the ambitions of the DAO shift to something much greater. This is often a function of the stage of the DAO, as outlined in my super good writing super short novel Decentralization as a Bell-Curve piece.
Who likes defense anyways?
Defense isn’t sexy — there’s no reward, and it’s exhausting. But it’s a pivotal role in any game.
DAO governance is full of junk proposals, undeserving of time and attention. At this pace, DAO’s will soon be buying an island — and a decrepit one:
Yes, I want an island — but I don’t want to share it with 1000 other people!
This may seem like a joke but these proposals are unfortunately much closer to a reality much than we think. The sky is a limit when anybody can create a proposal at no cost.
Enter deposits — requiring users to put money on the line. In Terra (R.I.P.) and now Terra 2.0, deposits have acted as a safeguard against emojis becoming executable and accepted as fact 🪂.
If these do not reach quorum, the deposit is forfeited (~$500) at a loss to the proposer.
Another IBC chain, Osmosis, has seen the effect of this tomfoolery first hard. A slew of Governance proposals happens weekly, both good and bad.
More recently they have been questionable at best:
https://wallet.keplr.app/chains/osmosis/proposals/277
A “gift” to OSMO owners is not the most efficient CapEx — although it would be nice.
When we look toward the long-term scalability of different DAOs it is important to consider the core principles and product. Is it a DEX — cool, let’s focus on slippage, liquidity, and pairs.
Not buying an island — not making merch, nor gifting token holders.
I told you — defense is no fun…
What’s the best strategy right now? Defense.
As global macro conditions remain unknown and the crypto industry bleeds assets, DAOs have thankfully awakened to the importance of more defensive policies:
Treasury management is the most defensive act — and is quickly becoming standard across the industry, along with contested budget cuts or potential mergers.
It’s like a 5–3–2 formation in soccer — protect the net. Except in crypto, and in Maker, we say protect the hat.
As our industry faces more scrutiny and economic loss, it is important to understand this teetering between offense and defense. It’s difficult (welcome to Governance ;)) — but it is important to play both sides.
So, wen Offense?
Soon. We can achieve victory when their defense is weak — when the conditions are favorable.
Trust me young pada(DoK)won — patience is key.
But we must understand our opponent — who are we competing against? Is it other DAOs? Is it the legacy financial system? Dunno.
I have some thoughts but they’re for next time — but like every good coach, we must know who we’re going up against. That leads to the best strategy
In the meantime, I’ll be watching film on whoever [a DAO, or the industry] we must take on next.
