DAO drama has as soon as once more hit Sky (previously Maker) governance, in what’s being characterised as a dangerous energy seize or a “potential governance attack,” relying on who you ask.
The controversy kicked off when GFX Labs’ PaperImperium — a long-time Maker group member and common critic of the venture’s current path — took to X to lift issues over a fast-tracked governance proposal which relaxes restrictions on borrowing towards the MKR governance token.
The modifications which, based on the thread, ”bypassed due course of” would have the impact of “>2x the credit line for MKR holders, and raise the LTV from 50% to 80%”.
PaperImperium additionally claimed that they, in addition to GFX Labs, had been banned from the governance discussion board throughout the proposal.
Threat administration and censorship issues apart, the thread additionally worries that skirting the usual governance course of would “delegitimize” Maker’s reassuring repute for “boring, process-driven governance with its own legal code.”
The submit picked up loads of curiosity in decentralized finance (DeFi) circles, with the proposed loosening of borrowing restrictions possible reminding lots of the dangerous actions of Curve Finance founder Michael Egorov.
After borrowing tens of millions of {dollars} value of stablecoins towards extremely leveraged CRV collateral, Egorov’s positions spectacularly blew up in June final 12 months when he was liquidated throughout a number of DeFi lending protocols.
The context by which the authorised emergency “Out-of-Schedule Executive Proposal for Community Security” was made, nevertheless, was conveniently disregarded of the unique thread.
Recognizing that the proposal “may generate discussion,” the modifications purport to supply “greater flexibility and responsiveness to emerging threats while maintaining community oversight.”
Worries inside Maker about “malicious governance actions” seem like primarily based on “screenshots and whistle-blower reports,” although the proof seems to point “very little likelihood” of success, based on the proposal, which is being made “out of an abundance of caution.”
Nearly all of replies to the proposal referred to as for additional rationalization, however the vote was handed earlier than any extra particulars had been supplied.
The screenshots in query could be discovered on this submit from Phoenix Labs’ CEO Sam MacPherson (a Spark and ex-Maker contributor) and element a plan to build up MKR voting energy and conduct a “takeover” of the protocol’s governance.
Extra screenshots present Maker founder Rune Christensen describing a supposed plan to “force liquidations” of MKR positions, in an effort to choose up low cost governance tokens backed by “a crooked mercenary capital fund” who’ve a historical past of “leeching” off DeFi protocols.
DeFiLlama’s “0xngmi” neatly summed up the rationale behind the modifications from a third-party perspective, saying, “So the concept is that Rune has a bunch of MKR/SKY on Aave and morpho for his loans, however he can’t vote with these tokens.
They added, “He wants to move those loans to Maker so he can vote with them and thus make it harder for others to outvote him in a governance attack against him.”
Governance assault or activist investing?
That is removed from the primary time a DeFi protocol has been caught up in a debate in regards to the accumulation of voting energy in on-chain governance programs.
In 2023, initiatives similar to Rook and Aragon had been focused by a gaggle dubbed the RFV Raiders, who recognized DAOs with treasury holdings valued greater than the worth of a controlling stake of governance tokens.
Right now, the Aragon Affiliation acted on its fiduciary obligation to safe its treasury by repurposing the Aragon DAO right into a grants program.
It is a response to a coordinated assault by the group often called “Risk Free Value Raiders” who took down Rook DAO. 🧵https://t.co/tVp9QXUUsx
— Aragon.eth 🦅 (@AragonProject) Might 9, 2023
Then final 12 months, Compound DAO handed a proposal to maneuver half 1,000,000 COMP tokens (value $25 million on the time) to a brand new vault arrange by a gaggle often called the Golden Boys who had amassed sufficient tokens to vote by means of the modifications.
Nevertheless, the de-facto chief of the group, Humpy, who had beforehand pulled an identical scheme on decentralized alternate Balancer, rejected the accusation of “stealing” funds.
The “Trust Setup” multisig, he claimed, would solely enable for withdrawal of the funds if voted by means of by the DAO, earlier than signing off with, “On that note, I’d like to thank all holders who voted for our proposal.”
