Activism and the governance of financial commons

Transcript

okay hello everyone so thank you for coming today we're going to talk about activism in financial comments and defy so if you look actually at the painting on the first slide it's freedom led by the people can you actually imagine it without the people it would look chair change strange right so the whole point that we're going to try to make here is that if we do not participate in governance and if we do not participate in decentralize anything it will be pointless quick forward so don't buy anything don't sign anything don't write any contract after what i'm going to tell to

you the whole point here is just to actually understand that we need to change things and we need to start acting so first of all let's start with the basics right so why do we want to build defile why do we want to build new financial privileges is what we have right now not enough well first of all by building permissionless technologies we're actually going to democrat our democratizing financial services this means that we can bank in bank fund the unfunded this allows us to treat finance more as a tool than what it actually is right now which is a tool of concentration of wealth anyone can create a fund anyone can create a bank it means that you can't actually be forbidden and access to financial services this also means that

people who were actually victims of the previous and current financial system can opt out of it because you kind of opt out of the financial system they actually have to up full values to keep the people in this system and because you can opt out in an infinite manner of ways by forking protocols for example it also means that you can customize your risk and the parameters you actually want to use so we're basically creating financial comments which anyone is going to become be able to use and you'll see why i'm not actually using the definition defy which is decentral finance but financial comments it's for one simple reason i think financial comments are much more ambitious than justify because the idea with defy is that we're

recreating financial services where everyone can have their word and they're decentralized there is no central point of focus right but financial comments are so much more than justify in a sense there are primitives that will allow people to actually use the financial system in a much broader way and on a much more long term so if we actually want to deep to build defy the base primitive for finance and if we want to build it on the long term we don't we need to think in commons not just a financial service so activism what is because it's going to be the main topic of the talk so we might as well talk about it right it's just campaigning so activism is basically it can happen in

politics in society or in in business but it's just communication it's expressing ideas it's campaigning for them it's debating around them and it's convincing people so everything is basically marketing and communications to make it very short if you look at the way it works in defy right now um you go on forums you put up you have ideas you can put them on twitter too you talk with people you actually reach consensus you check if consensus is happening you vote on it and once the vote passes it's implemented so that's the way we've actually done it the way it actually works in traditional finance because they are and we have to be honest with it we're much more amateur than them right now uh in the shareholder governance model

basically uh only funds and uh the management of companies actually participated in them and if you look at the problem in defi it's the same it's the core teams and the funds who are participating so what the problem we have is that people who are not actually working in the company or directly working on a protocol or who don't have large stakes in the protocol don't actually care right now the whole problem and the whole thing we actually have to realize in activism is that we need to find ways for people who have smaller stakes or who don't actually spend their life in a protocol to actually participate in it and that's the whole point today with activism and with defy and with financial commons we have an opportunity to change the flow of the of the way it's happening because

if you look at large companies today they have around usually management and funds have even when they're public companies they have over 80 percent of the company right so whatever happens are going to be overwhelmingly majority in the majority but if you look in d5 it's the opposite we as normal user we have 80 and yet we still do not lead the protocols because we do not vote we do not care so let's go back a bit with comments i'm going to talk a lot about this um these are not my own the these principles come from elinor rostrum from managing the commons and the idea is that there's eight different principles

that allow you to manage correctly common so if you actually look at them we are we already have implemented them in almost all of the dows more or less efficiency right efficiently right and the whole point is reaching a maximum capacity on all of these i actually want to focus on three of them because if we i would stock 50 minutes if we had to focus on all eight of them so uh i want to talk about them because it shows the necessity of actually being active into protocols the first one is the rules so rules only work if they're in the context it means that if a certain things happen in define works one way in 2018 doesn't mean it will work in 2021 that's why there's a bull there's a bear case against protocols who have no

governance because they will probably have a hard time in adapting to new situations and the whole point is that it's not up to the core team to choose who is going to uh what the chains are going to be but it's up to the users of the protocol so that's the second thing these rules are defined into parameters and us as users have to give input to change these parameters and that's something that's really important because we're not doing it right now in crypto especially in defy because if we want all users to have a say in a protocol of course they can talk about in a form but most of them can't vote if they don't buy a stake in the protocol that's where liquidity mining is genius basically because it allows people who use the protocol to automatically get a

stake in it which means that you as a user as long as you use the protocol you will have means to actually express yourself on the way the protocol is going to change and there is no one that's better suited to explain how a certain protocol is going to change than the person who's actually using it and the ones who are operating it so it's very important to understand that we will never really have financial comments unless people can actually constantly get a bit of the share of what's of the decision-making power that's the base of commons and we're really not doing it right now in crypto and the last one it's also something we're not doing but that's the hardest it's accountability means that uh any action that's done by this by a stakeholder or someone that's

in the management of the protocol is actually going to have to be like to be held liable for what he's doing so when you do bad decision it's not okay and you brush it over it's the users can choose if you get to stay or not so this happens with councils right but core teams are much more immovable so we have to start thinking about on the long term what's the place of a core team for example in protocol and all these questions actually need to be answered first before we actually want to thrive in governance now let's look at it on the more complex lens how is it actually happening today so the painting is actually quite grim when you look at it because if you look at the three biggest governance protocol so we did the numbers with ave

uni swap and compound you have only 700 people who vote more than once and if you look at who voted more than once twice it's only 300 people so it gets kind of low right it means that 95 of the tokens are not used so over 95 of the people actually do not care about the governance and this means that we are doing exactly the same thing that's what's happening with public companies and corporate governance so we're not recreating we're retreating what already existed another thing that's very confusing is that there's a lot of different governance frameworks and it's going there's going to be a whole lot more of them so it's hard to actually understand what's happening in a protocol and when you understand it you find a new protocol you have to understand everything again

another thing that was really interesting and was on the maker forum you should you guys should spend time on the maker forums they have a lot of data is that you need around it's probably exaggerated let's be honest 40 hours per week to understand truly understand a protocol it means that you actually cannot be active in a lot of protocols right because you can't spend 120 hours just doing governance because it doesn't it doesn't pay right now so there's an information overflow too and one last thing is that there's a lot of money in defy let's be honest and there's even more of money in the treasuries the problem is that the government's infrastructure and our behaviors as governees is not adapted to what's currently

uh the necessary frameworks for this work it means that we are not ready yet to actually manage this kind of amounts and we're actually seeing it we're not doing a good job at it so we have to be more honest about the way it's actually going and we have to find ways to have more people more experts more interested people participating into governance one really important thing is to understand that stakeholders testing that means people holding the token it's all the people are going to participate or affect governance so i actually decided to just put holders in one category it can be the team it can be the investors and also just the people who who just but the token rights but there's a lot of other people because i don't want to put delegates in

the same category for one simple reason what makes you so sure that the delegate has skin in the game for the protocol he's spending time on your protocol yes but does it mean that he actually owns any token there's a lot of different interests for external actors which don't have to be delegates to actually participate in governance and ask to be delegates for example a yearn a core dev could very well be a delegate in git coin or delegate in uh would be more interesting for example in avi because they're using the volts right so they actually need to have a voice but doesn't mean they actually need to have governance tokens they just can have because of their reputation people that already use their uh their protocol giving them voting power so they're not actual actors because they don't us holders because they don't

have skin in the game on the same way and that's something that's very regulated by financial regulation it's influencers you should it's it's actually very uh regulated to talk about price to talk about the health of a company but we have tic tac we used to have at least tick tock videos about it we have twitter we have the forums everyone's able to get their saying on what's happening in a protocol so it's actually very it makes it so governance is very chaotic today and we have to understand that all these people actually participate one way or another on the way governance is actually happening so as long as we don't know where everyone stands and we don't look at the data before actually putting up a vote we don't know who's thinking what which is possible to do right we will be

amateurs in governance and that's the biggest problem right now when you compare professional activists in hedge funds and activists in crypto we're very amateurish in the sense that we do not prepare our votes we do not have strategies beforehand we do not have an idea of what are the current stakeholders and as long as we don't have these ideas we'll never actually be able to currently hold a healthy vote let's uh speed up a bit uh the need for activism basically i just wanted to finish quickly on this we and that's i think very important uh decentralization the whole point is actually having people voting and people participating and people

creating proposal and becoming what intermediaries you used to do in financial services right so if we do not participate if no one participates if just the core team and investors participate it's exactly the same thing as a fine as a traditional financial service so we need activism if we do it's the fuel of governance it's also it's card rail it guarantee guarantees resilience because if someone is doing something wrong like we a lot of people saw in the defy education fund for example what happens is that people will complain and will vote against them but this didn't happen you had six people chatting in the government's forum they voted and then people whine on twitter it was too late the vote was unchained people could have looked at what was

happening and the last thing and we're going to talk about uni swap a bit more to finish with this is that as i mentioned before d5 allows us to have an infinite number of opting out options this means that if you do not agree with the protocol you can just fork the code and create your own community around it and that's a very important lesson of crypto and define general is that if you do not try to build a community if you do not try to go and push for activism well people will just live because they don't believe in your values so let's talk about unisua very quickly because i think it exemplifies a lot first of all uniswap is a great team they built a killer product but right now they're really lacking governance they're trying to fix it

right but they build a financial common uni swap is perfectly permissionless it's open source it does everything well for a financial comment basically but they had no community the core team was just building their thing and no one had a say in it so what happens that people say okay you want to build a common but you're not giving us the governance you're not giving the users uh responsibility of the parameters easy we're going to fork you sushi period so that's what happens either you're an activist if you want to build defy either people or people fork you so today it's actually really important to care and build a community and actually go their way at least a minimum the other part is about distribution we have a lot of stocks about vcs if they should be or not in crypto

if they should invest in the protocols i don't think it's about investing the problem is about what's their governance take and how can they influence something so as long as you know that they can there's a counterbalance with your community it's okay the problem is that it's never okay so that's the thing we have to think about ways for community could to counterbalance large holders in protocols and there's a lot of work that's being done with reputation based models et cetera we actually saw this right in the last uh vote you have six people who voted and had the 99 percent of the year's votes it means you can say okay yes they had overwhelming amount of votes yes but we could have coordinated and voted against them we didn't

so we can only blame ourselves so what's happening um and we actually blame ourselves as team right so with my team paladin we've actually trying to to be thinking about solution how do we actually want to help governance go forward we're trying to create governance liquidity so that people who don't care about voting can just give up their vote to people who care more and who can push for change we want to create new incentive models to actually push because we're in speculative world right especially in defy so if people want money let's find a way to actually give them money and give them the right incentives for the right behaviors because right now incentives and governance are not aligned and the last one we're actually trying to do is create coordination

mechanism to reduce the inequalities between large and minor majority and minority holders okay so if there's actually one thing we can finish on it's really easy basically it's act it's just one thing you need to do you need to vote you need to delegate you need to talk with people if you really care about define not just about the price you need to be in governance because that's where all is happening thank you [Applause] do we have time for questions yes okay so any questions yeah could you just explain a bit more

about what banana do and like more technically and everything yep sure so uh basically uh to give the broader idea we're just trying to democratize activism so this goes through creating coordinating mechanism and i wouldn't say trying to uh burn down the burn down the behaviors in governance so the first thing we're actually doing is creating what we call governance lending which allows people who don't care and who just want extra yield to give up their vote and allow people who want to borrow it to actually access new vote so of course it can be used in a very bad way right and accelerate the behaviors we're actually trying to fight so it's all about building guardrails on the protocols it's about

talking with the community and seeing what kind of behaviors they don't want to be it's about seeing how we can enforce everything on chain what we're actually seeing is that a lot of governance and the idea of defy and financial commons is putting all the important data on chain so everyone can know what's happening right but all the debates everything that's happening in the back room we don't see it on chain and there's a world where we could actually imagine that every backroom deals every deal making thing could happen on china and we could see what's happening in real time because there would be more incentives to do things on china of china and i think that there's a really blue case and that's what we're trying to do in pushing good and bad behavior on china to uh have us to give more access

for anyone to understand what's happening in governance and be able to understand the governance game because that's a it's a game we're playing a game the game of governance and we should show people it's fun because that's the way we're actually going to push people to use it so following up on that in a practical example so say a whole bunch of people delegate their governance power to a single individual for simplicity's sake then in their would you and that group of people happens to disagree with the decision that needs to be based so how would that individual act would they would they go back to create consensus in in so it's a proxy right would the proxy

create consensus within the big group of people who delegated their governance to to them or would it be like majority rule or or how would the proxy represent the group if the group doesn't agree so we're talking about proxy voting right uh not with paladin but in traditional governance system just to be sure to myers is very similar but if it's different you can tell me no so basically uh our product is totally neutral in the sense that the people who relinquish their voting right who basically loan them they don't care about voting so it's not representation it's it's it's transactional and um i think we have to be honest about the way governance is happening today

because the mechanism we're trying to implement they're nothing new this is already happening of chain right and we'd rather have these behaviors on chain and before votes that actually during votes it's actually better to know when you create a proposal and the snapshot happens to know who's actually ready to go to war basically that having some kind of ping-pong game during the governance where you see a someone buying a hundred thousand yes votes we there's actually something really big that happened and that was highlighted in italian newsletter it's really high quality newsletter by the way uh they were saying that justin sun tried to uh that didn't try they borrowed sixty thousand comp tokens so that's around two million dollars i think at current price

and uh basically bought his way to add his own uh stable coin as a collateral in compound and he used it using compound so these platforms have a compound already enable this kind of behaviors right the idea is how do we create a much more specialized landing protocol to actually enclose this behavior correctly so that's what we've been trying to do for the past few months and we'll actually be live with something probably uh before end of summer so i know there's like elastic deodo that is trying to create like fair governance and everything are you like working with them or the way to interact with them or you just want to be

put on top of pretty much every day now and doesn't care about the protocol and the framework so right now we're focused on shareholder type governance right so it's the governor alpha it's basically the biggest one i think elastic dao is a really good concept i'm a very big fan of what lsdan has been doing our current technology doesn't can't work with them it's actually we're going in basically different ways in governance they're basically trying to go on a reputation based where it's not one person one identity but you have a limited cap of the way you can basically act um i love the concept i think it's a bit harder to implement with uh lucrative protocols because where there's money there's the stakes and there's incentives for people to

actually get more more and more shares more and more control so it can it kind of gets counter-intuitive anyway but for example for associations i think it's the perfect model thank you very very much for coming you