Cryptocurrencygovernance: Why you need to care as an investor
Two days only is what was required to raise $100 million during the initial coin offering (ICO) for the venture fund, which was billed as the largest in the crypto history. It was run as a decentralized autonomous organization (DAO), implying that the operations had a flat organization structure and were not tied to a specific geographical area. But what happened next spoilt everything, throwing the entire plans for the project into a rumble. Ultimately, it changed the crypto world!
A hack that exploited the security vulnerabilities in the DAO code culminated in the theft of $55 million worth of ether. Large investors in Ethereum decided it was time to break away and demanded a hard fork.
That is how Ethereum Classic, which took the original blockchain and Ethereum were created. The DAO fiasco brought about serious concerns about blockchain governance. This is why every crypto investor should care. This post digs deeper into On-chain governance to help you make the right decision about where and how to invest in cryptos.
Crypto-governance: Why it is so important?
If you take a closer look at the traditional equity markets, they have clearly defined structures for addressing stakeholders’ concerns. The effect is high investor confidence because they know their investments are protected.
Therefore, executives cannot simply make the decisions resulting in losses or take off with the money. However, cryptocurrencies do not have centralized authorities and are not guided by any authority, meaning that investors can get exposed. This is what happened with DAO.
Blockchains with good governance guarantee better asset protection
As a crypto investor, it is prudent to ensure you only join the platform that guarantees your assets protection. Think of yourself as an investor with rights like those of a shareholder in a publicly-traded company. Therefore, you should have a voice on the way the network is run. If the users in blockchain networks were required to vote for a major decision, issues such as the break of Ethereum to Ethereum Classic and Ethereum or the creation of Bitcoin Cash would not have risen. Voting helps to prevent developers from initiating things they cannot account.
Good governance helps strike balance between interest of investor and blockchain development
Since developers need to work on the platform progressively, a balance is required to ensure that users are involved and prevent abuse of the system. To achieve this, a decentralized form of representation or governance is employed. The idea is to ensure that developers create proposals that must be approved before implementation.
When proposals for development are released, they are comprehensively reviewed and scrutinized to improve the functionality and performance of the blockchain under consideration. Then, they are put to vote.
However, we must indicate that the idea of governance in blockchains is still lagging in some networks. For example, the Bitcoin core team in 2017 stopped the idea of the creation of bigger blocks, which could have improved the blockchain’s efficiency and speed. It appears the team wielded some sort of “veto powers.”
This post has demonstrated that good governance is central to the success of any blockchain, and as an investor, you have to get involved. If a blockchain’s governance is poor, there is a risk of some decisions, such as the infamous hard fork on Ethereum, being made and causing a threat to your investment. So, whether you are thinking of buying crypto coins or working with a certain Decentralized Finance platform, it is important to work only with the best, such as Mantra Dao.