DAOs, Tokens, and Goodhart's Forest

One of the reasons that there is so much confusion around token design, and value accrual specifically, is that tokens, and the DAOs and protocols that issue them, are so multifaceted. Sometimes, the issuers want them to behave like shares in a corporation. Others issue “governance” rights to skirt regulations while insiders pump the tokens in the ... See more

Governance rights face similar challenges with both fungible and non-fungible tokens: ownership naturally tends to have a power-law distribution so the question becomes: what do you do about whales? This recent essay by Vitalik paints a clear picture for why this will become an increasingly problematic issue for DAOs, both in terms of incentive mis... See more

Without a specific idea of the good to build towards, the financial interests of large tokenholders have become over-represented in protocol governance. In our view, this constitutes a centralization risk.