Design of Governance Token
Design of Governance Tokens
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Moving beyond coin voting governance
When it comes to Governance token design, I don't think it's ideal, but there are several products that operate without governance (such as for profit distribution). So it's premature to assume that having a token means having governance, as not all products can be operated under that model. Here's an example of a possible model: tkgshn.icon*3
- hasu made some good points about governance tokens. According to KentoInami_jp, governance tokens (or what he prefers to call equity tokens) typically give the holder the right to a share of the project's fees and some voting power in its governance. In the case of SushiSwap, providing liquidity entitles the user to receive tokens equivalent to 0.05% of the trading volume. This can be seen as voting power in off-chain governance. There have been many discussions about why tokens are necessary, and recently the direction has been leaning towards their necessity. However, I didn't quite understand the statement I’ll start by steelmanning the first camp’s thesis. It comes down to three main arguments:. tkgshn.icon
1. The existence of governance itself becomes a vector for attacks. Bad actors can change the protocol's rules and potentially steal users' deposits. This goes against the purpose of using Smart contract in the first place. 2. The goal of our encryption is to replace rent-seeking companies and institutions with open and fair protocols. Charging rent from users is regressive and goes against this core value.
3. Since protocols are open-source and can be forked by anyone, the equilibrium rent will always converge to zero. If that happens, the value of governance tokens will also collapse to zero. That's why anyone selling them today is likely a scammer.
- Governance and Security
The value of crypto lies in its immutability, which allows for trust in applications and avoids predictability regardless of the platform. Adding governance through governance tokens to a "governance-free system" (the current ideology of crypto) is a way of using this logic in reverse. Allowing humans to change the system from the top-down makes it less trustworthy. Is that why governance tokens (usage fees) are necessary?
- Rent problem
If it's not excessive, it's okay for talented individuals to receive compensation to sustain themselves, even if it means paying rent. That's the idea.
- Bootstrap problem
Skeptics of token existence argue that since the software itself can be forked, the equilibrium price of tokens will be zero.