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 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. 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, and that making money is what matters. If you hold such a purpose, 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.
Planned economy is generally where the government proposes overall goals for national economic and social development according to a pre-established plan, formulates reasonable policies and measures, arranges major economic activities in a planned manner, and guides and regulates 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 planning."
The above is an excerpt from a description of 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 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 project launch, today, token economic models more often refer to project modes, token mechanics, modifications to project outputs, 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 within 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, etc. 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 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, by implementing quota indicators on sand mining companies, they can only extract 100 tons of sand from the Sahara Desert each day, and the sand mining companies need to apply for licenses through bidding to obtain permission to mine sand. At the same time, designated construction companies can only purchase sand from the sand mining companies and cannot obtain sand from private channels.
It can be anticipated that the price of sand will inevitably rise at least tenfold. Those with connections can release the sand they secretly obtained into the secondary market, and retail investors will fomo in due to the skyrocketing sand prices and start buying. Those at the top who control the sand channels can arbitrarily modify the sand output, thus controlling the price of sand, with the price increase generating fomo sentiment.
However, one can notice 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 of no concern; everyone's attention is entirely on the price of sand.
Putting this little story into 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, thus 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, most 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 large TVL. Most of the Web3 projects I describe in this article are some startup projects, not mature projects.)
Cryptocurrency Referendum (DAO Governance)
Centralization of Developers
Regarding cryptocurrency referendum, it actually needs to start from the developers. And this is a somewhat difficult topic to discuss; I have always believed that centralization and decentralization are a balance that requires trade-offs. In some specific environments, centralization is needed, while in others, decentralization is necessary. Therefore, this paragraph is more about stating some of my views rather than pointing out specific issues.
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 solicits 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, the release of updates needs to be handled with caution.
For example, modifying token output, consumption, or adding or removing ways to obtain tokens—these actions directly affect users, and if not handled carefully, they 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.
For this reason, 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 on non-financial functions.
This is also something I have discussed with some entrepreneurial friends; since many friends are idealistic, 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 functionality, merely catering to user demands without considering its actual capabilities, is 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, serving those users with singular needs 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.
In recent days, while chatting with friends, many people have an obsession with governance, with some extreme individuals attempting to vote on all matters. This includes what functions to implement and what collaborations to discuss, all wanting to incorporate them into DAO governance. Frankly, this is overly formalistic.
Voting governance, or cryptocurrency referendum, is a very undesirable method. From a macro perspective, cryptocurrency referendum lacks feasibility. This includes unavoidable bribery, varying levels of user understanding, and 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 several 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 minting due to UST-LUNA circular arbitrage, and the community actually attempted to solve it by initiating a proposal for voting, which took about 5-7 days, while LUNA went to zero in just three days.
Of course, after the collapse, developers stopped block production to put a halt to it, but it was already too late. If appropriate measures had been taken at the very beginning, although it would have lost effectiveness in terms of decentralization, at least it would not have completely gone to zero.
This can be seen 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 becoming accustomed to downtime, Solana's outages have little impact on its price.
This indirectly confirms that between funding security and decentralization, users prioritize funding security more.
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 pool rewards to attract users and deepen the binding of non-mainstream stablecoins with 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 is one way of governance, but not the only way. Governance methods in the real world advocate for the rule of law, which may correspond to code governance in the cryptocurrency field.
- 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 resolve 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
In addition to infrastructure issues, a greater obstacle to DAO governance lies in the participants.
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 tokens, and very few possess such knowledge. Therefore, very few can make prudent and rational decisions. This can be further 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 the full authority of the multi-signature wallet is not given to project token holders. For instance, it is not common to require 51% of token holders to vote for permission before treasury funds can be used; project teams do not provide users with this choice.
Therefore, in future DAO governance, there may need to be more elements of elite governance involved. These elites could be KOLs, professional scholars, or seasoned practitioners, and their weight in DAO governance will increase.
Moreover, in current reality, the vast majority of proposal drafters for governance in projects are from elite governance. You hardly see any proposals put forth by users who are merely trading tokens.
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: Weisman Notes
Personal WeChat ID: liuyejinghong_
RSS3 Personal Homepage: liuye.rss3.bio
ETH Donation Address: liuyejinghong.eth
Discord: https://discord.gg/6tu2hpwvUh\
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