Governance Risk protection in a bearmarket scenario

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The discussion focused on potential governance issues for DeFi protocols like AAVE during a crypto bear market, with concerns raised about entities buying up majority voting governance if altcoin values drop significantly. However, counterarguments highlighted the difficulty of acquiring large amounts of tokens due to staking and lending dynamics, and the unlikelihood of a 99% drop, leaving the topic open for further debate.

The discussion primarily revolved around the potential governance issues for DeFi protocols, including AAVE, in the event of a crypto bear market. Venturefounder raised concerns about the possibility of entities with significant capital buying up a majority of voting governance in the event of a substantial drop in the value of altcoins, including governance tokens. They used COMP as an example, explaining that if its market cap fell by 99% as it did in the 2018 bear market, it would be relatively easy for someone to take over 50% voting governance1.

In response, EzR3aL argued that buying up a large amount of tokens would require substantial selling pressure. They pointed out that many people are staking their Aave or have them locked up, which would make it difficult to buy a large amount of tokens. They also expressed skepticism about the likelihood of a 99% drop, as ICOs can now lend their ETH on Aave and earn interest to fund their development, rather than needing to sell their ETH to stay liquid2.

In conclusion, while there are concerns about potential governance issues in a bear market, there are also arguments that the current dynamics of the crypto market, such as staking and lending, could mitigate these risks. The discussion did not reach a consensus, and the topic remains open for further debate and exploration.

Posted 2 years ago

Last reply 2 years ago

Summary updated 2 months ago

Last updated 08/12 04:39