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The Problem When Applied to DeFi dApps Even though DeFi is based on decentralized infrastructures (Ethereum), administrators can still tweak the code. It's common for companies to tweak code to get more transaction fees from Uniswap or Dy DX. Shareholders can leverage their negotiation power to get more value from the DeFi protocol when it grows an... See more

The Solution: Governance Tokens With the governance token, we can introduce a network-oriented offering that maintains fairness between capital providers, demand-siders, and supply-siders even after network effects are present. Token holders can influence protocol decisions and governance parameters.

Ethereum was chuck-e-cheese tokens two years ago, but now it's permissionless financial app. Crypto nerds are amazed at what is now possible with DeFi protocols and applications. A lot of investors think governance tokens are like ICOs. Are governance tokens worth anything or just chuck-e-cheese?

The Problem For every business in the world, they tend to bring together three groups of people:

• Capital providers — those that provide the start-up financial capital and own the shares in the company. They hold all of the decision making power.


• Supply-siders — those that provide the human or machine capital that ultimately creates a good or service.

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So, why is this model better than the legacy business model? Like legacy models, protocols aren't dominated by profit-seeking capital providers. By issuing protocol-specific governance tokens, they may also include users (supply-siders and demand-siders). So the real users get a say when token holders decide whether to charge transaction fees.