Author's Note\
Recently, I've had a lot of personal matters to deal with, coupled with a bout of laziness, so I haven't written much. However, the inspiration accumulated from various trivial events recently has prompted me to compile it into an article today.
From a certain perspective, Web3 is an idealistic vision, at least for now, it is a utopia. While everyone praises the so-called decentralization, transparency, community governance, and other seemingly beautiful forms, in most practical situations, these are just hypocritical masks.
Currently, Web3, strictly speaking, is only decentralized at the underlying technology level, or can be said to be "potentially decentralized." However, in the actual operation of various Web3 projects, people do not wish for decentralization. On the contrary, the more centralized, the better; many projects are primarily controlled centrally.
Because of this, the current Web3/Crypto has also become two-faced. To those outside the industry, this field is highly innovative and full of geek spirit. But for those within the industry, there are very few projects that drive progress; the vast majority simply exploit certain characteristics of Crypto and its unregulated nature, packaging them as high-quality projects to raise funds from the public in various ways.
Therefore, today's article will critique certain behaviors within the industry to some extent. But this does not mean that the entire industry is like this; I hope that good money can drive out bad money, which is my original intention for writing.
Below, I will list some common issues that arise in many projects. The reason for bringing up these issues is that they largely violate the spirit of Web3.
Of course, many people may feel that the spirit of Web3 is meaningless; making money is what matters. If you have such an intention, then please read this article with a light-hearted attitude.
Main Text
Cryptocurrency Planned Economy
"Planned economy, or planned economic system, also known as directive economy, is an economic system where production, resource allocation, and product consumption are planned in advance. Since almost all planned economic systems rely on directive plans, planned economy is also referred to as directive economy.
In a planned economy, the government proposes overall goals for national economic and social development based on a pre-established plan, formulates reasonable policies and measures, arranges major economic activities in a planned manner, and guides and adjusts the direction of economic operation. The allocation of resources in a planned economy, including what to produce and how much to produce, is determined by government plans."
The above is an excerpt from a description of a planned economy. Similar behaviors are countless in the cryptocurrency field, and this type of planning has a nice and Web3-sounding name called "token economic model design."
Regarding the cryptocurrency planned economy, this is not a matter of good or bad, but rather a sarcastic issue. Although initially, token economic model design mostly referred to designing token output models or incentive models at the project's launch, today, token economic models more often refer to project modes, token gameplay, project output modifications, and so on.
The most common place for this is in the x to earn and gamefi fields. By artificially controlling a certain production link in the project, the project team can control the token output, thereby indirectly manipulating the token price.
Specifically, this includes but is not limited to increasing the consumption of certain items, reducing token output, controlling the release speed of tokens, and so on. Regardless of how these operations change, the essential goal is to achieve control over the tokens by the project team. This is what I refer to as the cryptocurrency planned economy.
"If a planned economy were implemented in the Sahara Desert, then sand would be worth more than gold."
There is nothing wrong with reasonable token planning, but adding various thresholds to artificially increase scarcity when it is not needed is a great irony for Web3.
One can imagine scenes like this. In a certain place, sand mining companies are subject to quota indicators, only able to extract 100 tons of sand from the Sahara Desert each day, and the sand mining companies must apply for licenses through bidding to obtain sand extraction permits. At the same time, designated construction companies can only purchase sand from the sand mining companies and are not allowed to obtain sand from private channels.
It can be foreseen that the price of sand will inevitably rise at least tenfold. Those with connections can release the sand they secretly obtain into the secondary market, and retail investors will fomo in due to the skyrocketing sand prices and start buying in. Those at the top who control the sand channels can arbitrarily modify the sand output, thereby controlling the price of sand, and the rise in sand prices leads to the generation of fomo sentiment.
However, you can see that the entire process completely ignores one role: the actual users of the sand. In such an environment, whether the sand is actually used is completely disregarded; everyone's attention is solely on the price of sand.
Putting this little story in the cryptocurrency field is the same. Most people are immersed in the cryptocurrency planned economy brought by the project team, fomoing over the rise and fall of tokens, thereby ignoring whether anyone is actually using the project.
This may also be a significant difference between Web3 and Web2. Users may play Tencent's games every day, but they do not pay attention to Tencent's stock daily. Users generate profits by paying for Tencent's games, which then reflects in the financial statements and subsequently in the stock price.
But in Web3, the majority of a project's users focus their attention on the token price rather than the project itself. This further encourages both the project team and users to pay more attention to the cryptocurrency planned economy rather than the project's usability.
(A more rigorous note: some leading projects have very reliable usability in their products, thus carrying a significant TVL. Most of the Web3 projects I describe in this article are startup projects rather than mature ones.)
Cryptocurrency Voting (DAO Governance)
Centralization of Developers
Regarding cryptocurrency voting, it actually needs to start from the developers. And this is a topic that is not easy to discuss; I have always believed that centralization and decentralization are a balance that needs to be struck. In some specific environments, centralization is needed, while in others, decentralization is required. Therefore, this paragraph is more about stating some of my views rather than pointing out specific problems.
In many projects, one can see numerous product version iterations or the release of product proposals. Two situations may arise: one is that the project team releases a new version unilaterally without communicating with users; the other is that the project team releases modification proposals and seeks user opinions for voting.
These two situations need to be viewed according to the context. If the new version is purely a functional iteration unrelated to users' investments or returns, then it is reasonable and justifiable for the project team to unilaterally iterate and update the version. However, once it involves modifications related to funds or returns, careful consideration is needed before releasing updates.
For example, modifying token output, consumption, or adding or deleting ways to obtain tokens will directly affect users, and if not handled carefully, it can easily lead to negative feedback from users.
Developers Need a Certain Degree of Centralization
This is my subjective view. In most cases, many users do not possess development capabilities or the ability to review functions. Even in token economic planning, very few have the corresponding economic knowledge.
Because of this, developers need a certain degree of centralization to guide users and the community. In short, developers need to provide very detailed and easily understandable explanations for iterative updates, but do not need to open decision-making to users for non-fund-related functions.
This is also something I have discussed with some entrepreneurial friends, as many friends lean towards idealism, so they tend to plan many functions based on user feedback. In other words, they create whatever functions users want.
But this is not a good approach; a project without its core functional points that merely caters to user demands without considering its actual capabilities is very difficult to execute. If a project has fifty thousand users, and all fifty thousand have functional demands, how can that be accomplished?
Therefore, I believe the correct approach should be for developers to target a specific need to develop solutions that serve users with that singular need, rather than trying to meet all user demands. This is what I refer to as a certain degree of centralization.
Lack of Infrastructure for DAO Governance
This is actually a well-worn topic: when to use DAO governance and when to vote.
Let me first state my view: governance voting is only necessary when attempting to modify something related to funds/tokens.
Recently, I have been chatting with friends, and many people have an obsession with governance, with some extreme cases attempting to vote on all matters. This includes what functions to implement and what collaborations to discuss, all wanting to include them in DAO governance. Honestly, this is overly formalistic.
Voting governance, or cryptocurrency voting, is a very undesirable method. From a macro perspective, cryptocurrency voting lacks feasibility. This includes unavoidable bribery, varying levels of user understanding, and other objective factors, as well as the risk of unfair governance due to project teams controlling governance through token voting rights.
From a micro perspective, the most fatal flaw of voting is the lack of timeliness. If a funding security issue arises, and it takes a few days to vote and discuss a solution, the project may already be dead. In many extreme cases, what is most needed is for developers to promptly use their authority to prevent malicious events from occurring.
Take the Terra collapse as an example; at that time, there was a situation of infinite issuance due to UST-LUNA circular arbitrage, and the community actually attempted to solve it by initiating a proposal to vote. This governance process took about 5-7 days, but LUNA went to zero in just three days.
Of course, after the collapse, developers stopped block production to put a stop to it, but it was already too late. If action had been taken promptly at the beginning of the issue, although it would have lost effectiveness in terms of decentralization, at least it would not have completely gone to zero.
This can be evidenced in Solana; although Solana is very centralized and often fails to produce blocks, leading it to be called a "downtime chain," its price has not gone to zero. In fact, after getting used to the downtime, Solana's outages have little impact on its price.
This indirectly confirms that between funding security and decentralization, users prioritize funding security.
Returning to DAO governance, there is already a typical template: Curve, which only governs one thing, namely the CRV incentives for different pools. By locking CRV (i.e., voting), it modifies the incentive weights for different pools, increasing rewards for the pools and thereby attracting users, deepening the binding degree between non-mainstream stablecoins and mainstream stablecoins.
In other words, I unilaterally believe that the existing DAO infrastructure is insufficient, which includes:
- Severe Lack of DAO Tools: Even widely used tools like snapshot are very simple and crude in functionality. Voting as governance is one way, but not the only way. Governance methods in the real world advocate for the rule of law, so perhaps in the cryptocurrency field, it should be code governance.
- Lengthy DAO Processes: The common governance method now requires initiating proposals, followed by a period of voting before executing the proposals. The length of this governance time cannot address urgent matters, while truly urgent events that require quick decision-making are significant and urgent, making DAO governance useless in this regard.
DAO May Move Towards Elite Governance
Aside from infrastructure issues, a larger obstacle to DAO governance lies in the participants in governance.
As I mentioned earlier, based on objective reality and extensive data, existing cryptocurrency participants are more speculative and profit-driven. Conducting DAO public voting governance in such an environment is very unscientific.
Most people will not study project proposals, think about the economic logic or blockchain logic behind them; to put it bluntly, most are just trading coins, and very few possess such knowledge. Therefore, very few can make rational decisions prudently. This point can be explored in articles on mass psychology.
So, will I strip all participants of their governance rights? No, I advocate not canceling public voting governance but rather increasing the weight of elite governance.
This logic is similar to the governance of treasuries in many Web3 projects, where influential individuals are generally selected as multi-signature wallet holders, but not all permissions of the multi-signature wallet are given to project token holders. For example, it is not common to require 51% of token holders to vote in favor before treasury funds can be utilized; project teams do not offer this choice to users.
Therefore, in future DAO governance, more elements of elite governance may need to be involved. These elites could be KOLs, professional scholars, or seasoned practitioners, and their weight in DAO governance will increase.
Moreover, in the current reality, the vast majority of the drafters of governance proposals in projects are elite governance. You hardly see any proposals put forward by users who are merely trading coins.
In conclusion, I need to add that the content above is my subjective thought and may not necessarily be correct. However, I hope it serves as a catalyst for discussion and encourages more people to focus on promoting industry development.
Author: Liu Ye Jing Hong
WeChat Official Account: Weisiman Notes
Personal WeChat ID: liuyejinghong_
RSS3 Personal Homepage: liuye.rss3.bio
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