Web3 Philosophical Thinking: Debating Encrypted Planned Economy and Encrypted Referendum Governance

Web3 is, in a sense, an idealistic vision, at least for now, a utopia. Although everyone is advocating the so-called decentralization, openness and transparency, community governance and other so-called beautiful forms, in most practical occasions, these are hypocritical masks.

The current Web3, strictly speaking, is only decentralized in the underlying technology, or “can be decentralized”. But in the actual operation of various Web3 projects, everyone does not want to be decentralized. On the contrary, the more centralized the better, and even many projects are dominated by centralized control.

Because of this, the current Web3/Crypto has also become a two-faced person. To those outside the industry, the industry is very innovative and full of geekiness. However, from the point of view of people in the industry, there are very few projects that play a role in promoting. Fundraising.

Therefore, today’s article will criticize the behavior of some industries to a certain extent. But this does not mean that the whole industry is like this. I hope that good coins can drive out bad coins. This is the original intention of my writing.

The following will list some of the problems that arise in many projects and are raised because they largely violate the spirit of Web3.

Of course, many people will think that the spirit of Web3 is meaningless, and making money is king. If you have such a purpose, then please read the article with the mentality of Tu Yile.

Crypto planned economy

“Planned economy, or planned economic system, also known as command economy, is an economic system in which production, resource allocation, and product consumption are planned in advance. Since almost all planned economic systems rely on command planning, planned economy is also called It is a command economy.

The planned economy is generally the government according to the plan formulated in advance, put forward the overall goal of national economic and social development, formulate reasonable policies and measures, plan major economic activities, guide and adjust the direction of economic operation. Planned economy The allocation of resources, including what to produce and how much to produce, is determined by government plans.”

The above is an excerpt of my description of the planned economy. There are countless behaviors like this in the field of encryption, and this kind of planning also has a nice and Web3 name called “Token Economic Model Design”.

Regarding the encrypted planned economy, this is actually not a question of good or bad, but an ironic one. Although at the beginning, the design of token economic model mostly refers to designing the token output model or the incentive model at the start of the project, but today, the token economic model refers more to the project model, token gameplay, project production Modifications, etc.

The most common place for this is in the fields of x to earn and gamefi. Through the artificial control of a certain production link in the project by the project party, the output of tokens in the project is controlled, thereby manipulating the price of tokens in disguise.

Specifically, including but not limited to increasing the consumption of certain props, reducing the output of tokens, controlling the release speed of tokens, etc. No matter how such operations are changed, the essential purpose is to achieve the project party’s control over the tokens. This is also what I call a crypto-planned economy.

“If a planned economy were implemented in the Sahara desert, sand would also 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, then this is a great irony for Web3.

Imagine some such images. In a certain place, through the implementation of quota quotas for sand dredging companies, only 100 tons of sand can be obtained in the Sahara Desert every day, and sand dredging companies need to apply for licenses through bidding to obtain sand dredging access permits. At the same time, the designated construction company can only buy sand from sand dredging companies, not from private sources.

Then it is foreseeable that the price of sand will inevitably rise at least tenfold. Relational households can release the secretly acquired sand in the secondary market, and retail investors will fomo and begin to take over because of the skyrocketing sand price. The upper channel that masters the sand can modify the sand production at will, thereby controlling the price of the sand. It is precisely because of the increase in the price of sand that the fomo sentiment arises.

But you can find that in the whole link, a character, the real user of sand, is completely ignored. In such an environment, whether the sand is used is completely irrelevant, and everyone’s attention is entirely on the price of the sand.

Putting this little story in the crypto space, the same is true. Most people are addicted to the encrypted planned economy brought by the project party, fomo with the tokens rising and falling, thus ignoring whether people are actually using the project.

This may also be a big difference between Web3 and Web2. Users will play Tencent’s games every day, but they don’t care about Tencent’s stock every day. Users generate profits by paying for Tencent’s games, which are reflected in the financial statements and then reflected in the stock price.

But at Web3, users of a project, most of their attention is on the token price, not the project itself. This in turn prompts project parties and users to pay more attention to encrypted planned economy rather than project usability.

(Strict remarks, some leading projects have very reliable usability in products, so they carry a lot of TVL. Most of the Web3 projects I describe in this article are start-up projects, not mature projects. )

Crypto Referendum (DAO Governance)

Developer Centralization

Regarding the crypto referendum, we actually need to start with the developers. And this is a difficult question to discuss. I always think that centralization and decentralization are a balance point that needs to be traded off. In some specific environments, it needs to be centralized, and in other environments, it needs to be decentralized. Therefore, in this paragraph, I am more to state some of my views, rather than to point out some problems.

In many projects, you can see a lot of product version iterations, or the release of product proposals. There will be two situations in which, one is that the project party does not communicate with users and unilaterally releases a new version. First, the project party will issue a revised proposal to solicit user opinions for voting.

These two situations need to be looked at according to local conditions. If the new version is purely functional iteration and has nothing to do with the user’s investment and income, then it is reasonable and understandable for the project side to unilaterally update the version, but once it is related to funds or income changes, then you need to release updates carefully.

For example, it will modify the output and consumption of tokens, and add and delete the way to obtain tokens. These actions will directly affect users. If they are not handled carefully, they will easily receive negative feedback from users.

Developers need some degree of centralization

This is my subjective view. In most cases, many users do not have the ability to develop, nor do they have the ability to audit functions. Even in token economic planning, few people have the corresponding economic ability.

Because of this, developers need a certain degree of centralization to guide users and guide the community. In short, developers need to be very detailed and easy-to-understand instructions for iterative updates, but do not need to open up decision-making to users on non-funding functions.

This is also what I have been talking about with some entrepreneurial friends, because many friends are idealistic, so many functions tend to be feedback from users when planning. In other words, users can do whatever they want.

But this is not a good move. A project does not have its own core function points, and it just blindly caters to the needs of users without making plans based on its own actual capabilities, which is difficult to implement. If a project has 50,000 users, then these 50,000 people have functional requirements, so how to complete it.

Therefore, I think the correct way should be for developers to develop solutions aiming at a single requirement, serving these users with a single requirement, rather than serving all the needs of users. This is also what I call a degree of centralization.

Lack of infrastructure for DAO governance

In fact, this is also a common topic, when to use DAO governance and when to vote.

I’ll give my opinion first, governance votes are only required when trying to make changes related to funds/tokens.

Talking to friends these days, many people will be obsessed with governance, and some extreme ones will try to vote on all matters. Including what functions to do and what cooperation to talk about, I want to do it in DAO governance. Honestly, this is too formalistic.

Voting governance, or crypto referendums, is a very undesirable approach. From a macro perspective, crypto referendums are not enforceable. This includes objective factors such as unavoidable vote bribery and different user awareness levels, as well as the unfair risk of project parties controlling governance through token voting rights.

From a micro perspective, the most fatal thing about voting is that it is not time-sensitive. If there is a financial security problem, it will take a few days to vote on a solution, and the project will already be cold. In many extreme cases, what is most needed is for developers to use permissions in a timely manner to prevent malicious events from happening.

Take the collapse of Terra as an example. At that time, there was an infinite increase in UST-LUNA circular arbitrage. The community actually voted to solve it by launching a proposal. This governance process took about 5-7 days, but it only took three days for LUNA to return to zero.

Of course, after zeroing, the developers stopped the block production by stopping it, but it didn’t help. If it is shut down and dealt with in time at the beginning of the matter, although it will lose its effectiveness in decentralization, at least it will not completely return to zero.

This can be applied on Solana, although Solana is so centralized and often out of blocks that it is called a dead chain, but the price has not returned to zero. Even after everyone is used to downtime, Solana’s downtime has no impact on the price.

This also confirms that between the security of funds and decentralization, users need more security of funds.

Back to DAO governance. In fact, there is already a typical template Curve, which only manages one thing, that is, the CRV incentives of different pools. By locking CRV (i.e. voting), the incentive weights of different pools are modified to increase the pool rewards, thereby attracting users and deepening the degree of binding between non-mainstream stablecoins and mainstream stablecoins.

In other words, I unilaterally believe that the existing DAO infrastructure is insufficient, which includes:

  • DAO tools are seriously lacking . Even widely used tools such as snapshot are very simple and rough in function. Voting is one way of governance, but not the only way. The governance methods in the real society call for the rule of law, so the corresponding code in the field of encryption may be the rule of law.
  • The DAO process is lengthy , and the common governance method now is to initiate a proposal, and then execute the proposal after a period of voting. Then the length of time of this governance cannot solve urgent matters, and the events that really require quick decision-making are major and urgent events, and DAO governance is useless in this regard.

DAOs may move towards meritocracy

In addition to infrastructure, the bigger obstacle to DAO governance also lies in governance participants.

As I said above, based on objective reality and extensive data, existing crypto players are more speculative and profitable. It is very unscientific to conduct DAO referendum governance in such an environment.

Most people will not study the project proposal and think about the economic logic or blockchain logic in it. What I said is a bit harsh. Everyone is a speculator, and there are not many people with this level of knowledge. Therefore, very few people can make prudent and rational decisions. You can read some articles on popular psychology for this.

So would I deprive all participants of the right to govern? No, what I advocate is not to abolish referendum governance, but to increase the weight of elite governance.

This logic is similar to the governance of the treasury in many Web3 projects. Generally, some influential people are selected as the holders of the multi-signature wallet, but all the permissions of the multi-signature wallet are not issued to the project token holders. For example, it takes 51% of token holders to vote for permission to use the treasury. Everyone does not manage wallets in this way, and the project party will not give this choice to users.

Therefore, in the future DAO governance, more elements of elite governance may be required to participate. These elites may be KOLs, professional scholars, or senior practitioners, and their weight in DAO governance will increase.

And in the current fact, the drafters of the governance proposals of most projects are meritocracy. You hardly ever see a proposal made by a user who is purely speculating.

At the end of the article, I need to add that the above contents are all my subjective thoughts and may not be correct. But I hope to play the role of attracting new ideas, and hope that more people will focus on promoting the development of the industry.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/web3-philosophical-thinking-debating-encrypted-planned-economy-and-encrypted-referendum-governance/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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