Let’s focus on Metagovernance ⚖️
White Star Capital Digital Asset Fund - newsletter #84
Introduction
With protocols collapsing, yields compressing, and prices falling, many DeFi observers have begun to wonder when, if ever, we’ll begin to realize the potential of an open, permissionless, composable, blockchain-based financial system. There are pockets of DeFi in which its value proposition continues to shine. These flashes continue to prove that DeFi enables things that cannot be done through the traditional financial system.
One such example of this is metagovernance: The act of one DAO participating in the governance process of another through the use of a token. Metagovernance is an emerging strategic lever that digital organizations can pull in order to pursue specific objectives.
How does Metagovernance work?
Metagovernance shares similarities with investment stewardship in traditional finance, where asset managers vote on shareholder proposals of products held within their assets. The traditional counterparts like BlackRock and Vanguard are often in the top three shareholders at public companies. As shareholders, they vote on board members, executive compensation, accounting matters, and more recently, environmental, social, and corporate governance proposals. In traditional finance, this kind of governance activity is referred to as “investment stewardship”, and it is a complicated business. Blackrock has a team of 50+ people that interacts with portfolio companies on governance matters, and in 2020 alone Vanguard’s stewardship team cast votes on 168,000 proposals.
However, metagovernance in DeFi is far more transparent and open. Any holder of a governance token can vote seamlessly. Unlike in TradFi where decision-making is shrouded in secrecy, there is the potential for individual investors to generate alpha from this trend.
Examples of Metagovernance in practice
There are numerous other prominent instances of metagovernance being utilized within DeFi. For instance, the “Curve Wars” are a prime example of metagovernance in action. Holders of — the native token of Convex Finance — utilize metagovernance to vote on allocations of CRV emissions on Curve Finance, the largest decentralized exchange by TVL.
More than 20 DAOs have purchased CVX outright, or pay bi-weekly bribes to its holders to achieve a number of ends. For example: Some stablecoin issuers do so to direct liquidity to strengthen the peg and confidence in their issued currency.
Why does Metagovernance matter?
Most protocols have a governance structure that requires their token holders to vote and pass proposals. In order for votes to move forward, they have to reach quorum. Reaching quorum can be hard to do since many tokenholders aren’t interested in voting (Kevin Owocki recently estimated that DAO voting participation typically hovers around 2%.) This can make it difficult for protocols to make the changes necessary to keep up with the ever-shifting DeFi environment.
Index Coop & Metagovernance!
Because the Index Cooperative’s products are composed of other governance tokens, it holds voting positions on those products, as well. This is what is referred to as Metagovernance. The Index Coop can vote on a handful of protocols within the DeFi Pulse Index (DPI) including Compound, Aave, and Uniswap. Index Coop has already used it metagoverance to help emerging protocols gain a listing on Aave and will continue to help grow the ecosystem. Index Coop can also vote on Balancer and Yearn protocols, which are also part of DPI.
🔦 White Star & Portfolio Spotlight
Exclusible sells out its NFT collection with watchmaker Frederique Constant
The NFTs will come with real world utilities including physical watch redemption and other benefits that unlock over time
Paraswap passes a bug bounty program for white hat hackers
The bounty program will add 1M Paraswap tokens for reward in hats.finance
🏦 Enterprises & Institutions
Revolut plans native token to reward customer loyalty
Revolut plans to launch its Revcoin alongside a non-custodial wallet
Gamestop launches crypto and NFT wallet
This follows its plans to launch a marketplace using Immutable X
JP Morgan uses blockchain for collateral settlements
Blockchain settlements can be
Stripe partners with OpenNode for BTC conversion
The partnership will allow businesses to convert their payments directly into BTC
Nansen acquires ApeBoard, a DeFi investment tracker
Nansen expands its offering by acquiring popular tracker app for an undisclosed 8 figure sum
⚖️ Government & Regulation
Sam Bankman-Fried could spend up to 1 billion in upcoming election
The FTX founder was one of the largest donors in Biden’s previous campaign
UK sets to bolster stablecoin protections following Luna
The initiative will reduce systematic fallout and recommend the Bank of England be given more control
FTX working with CFTC to bring derivates trading to US
The developments lately have shown progress with roundtable discussion happening
Binance Italy wins regulatory approval as crypto service provide
The development will allow Binance to open offices in Italy and grow faster
💰 Funding & Exits
StarkWare raises 100M round at an 8B valuation
StarkWare is planning on expanding its ecosystem with its open zk-rollup layer 2, StarkNet
Merge raises 9.5M round for web3 infrastructure
Merge will allow web3 companies to access banking, payments, risk management and compliance through its APIs
LayerZero Labs seeks to raise at a 3B valuation
FTX Ventures has committed to leading this round for the cross chain interoperability protocol
Flowcarbon raises 70M for blockchain based carbon trading
Flowcarbon is co-founded by Adam Neumann and the round led by a16z
BUD raises 37M for metaverse startup
BUD will team up Bytedance, Tencent, Meta and Snapchat for its metaverse
Bable Finance raises $80M for a crypto lending platform
The raise will put Babel Finance at a valuation of 2B
🚀 Project Launches & Updates
a16z raises 4.5B Crypto Fund 4
The fund will target seed and later venture stage investments
Standard Crypto raises 500M fund
The fund will focus on equity and crypto investments with areas like DAOs in particular
Volt Capital raises 50M fund
Soona Amhaz the founder will focus on early-stage investments
Luna 2.0 relaunches without algorithmic stablecoin
Luna 2.0 will have a fixed supply and is encouraging projects to migrate over
Optimism Token launches with a retroactive airdrop
The retroactive airdrop rewards users of Optimism
🔥 Other Bits We're Excited About
CoinDesk launches DESK social token for upcoming Consensus event
The social token will reward attendees for going to event and are redeemable for merchandise
NFL will partner with Mythical Games to launch its first play to earn game
The play to earn game is slated for release in 2023 with NFT sales coming beforehand