Governance - forget about whales - Governance - The Maker Forum

Experience has shown us that participation in Maker governance is less than ideal. Forum participation is more or less the same 30 persons discussing all the topics. Onchain polling is even worse with relatively important decisions attracting between 14 and 31 votes the last three weeks. Total MKR involved is 5-6%. Needless to say this is suboptimal and there is reason to analyze why this is the case.

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A superficial application of the theory of rational self interest on Maker governance implies that an individual will be more incentivized to participate in Maker governance the more MKR this individual owns. After all, the more MKR, the more is at stake and the more likely this person will seek to protect and nurture the investment. This application of the theory has however proved to be highly insufficient when it comes to describing Maker’s governance situation.

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First and foremost it is important to realize that it is not the amount of MKR that matter, it is the amount of MKR relative to other assets. It matters little if a person own a thousand MKR if the same person owns two oilfields and a chunk of Tesla on top of that. Due to the relatively low share of MKR compared to total wealth, participation in Maker governance is not going to come high on the agenda for this individual.

At the opposite end of the scale there is obvious little incentive to participate if you are not able to influence either through onchain voting or forum participation. Already there are multiple examples of topics being agreed upon in the forum and then failing when put up for a vote. While discussions can become ecco chambers, it is most likely depressing for new stakeholders to see their hopes dashed.

In between these two groups however, is a large Goldilocks zone where there is sufficient MKR to feel involved but not sufficient to be distracted by capital management. If this is combined with both personal interest and mental ability the community possibly has a contributing and long lasting member.

There is also no denying participation in Maker governance comes at a cost. At present I estimate that it takes between 5 and 10 hours each week with relatively high mental intensity and no small ability to stay on top of things and being able to cast reasonably informed votes. With the participation cost being measured in time it forces the topic of prioritization as each of us, however poor or wealthy, only has 24 hours in a day. It is simply not for everyone to be able to spend this amount of time on Maker.

The superficial application of rational self interest falls especially flat when introduced to the concept of leveraged time versus non-leveraged time. Leveraged time is here defined as time spent making decisions and then multiplying the value of that decision using capital.

The keen observer will have noticed that while the leveraged activities are far riskier, they are also financially a lot more rewarding. As an individual’s crypto wealth increases, so does the gains achieved from leveraged activities as steadily greater amounts of capital can be used to leverage each decision. Eventually the monetary gains from leveraged activities completely dwarfs the gains from non-leveraged activities. At this point it makes little or no sense for a whale to participate in Maker governance, as the time spent cannot be justified from a financial viewpoint. This can to a large extent explain why so little of total MKR can be mobilized for voting, especially when founders and long term investors that have stuck around since the Bitshares days are discounted.

Implications From the viewpoint of building the Maker community into a group that can be functional in a long term perspective there are several implications that can be drawn from the above analysis.

  1. There is no point whatsoever in selling MKR to venture capital funds. Like none. It is probably even detrimental as sardines and tunas feel their input can be wiped with a click.

  2. The Maker community would likely benefit from engaging in a wider search into a variety of online groups just to get inspiration. Does not have to be crypto related. Things to look for are community size, vigor, longevity, turnover and how they attract new members. Right now we do not even know what functioning in a 10-20 year perspective looks like.

  3. Initiatives such as SourceCred should be maintained, expanded or even forked to cover activities that goes beyond the forum. Maker badges are gold, hopefully one day people will be able to put them on their CV to prove consistency and commitment to potential employers.

  4. The present voting system is not the only system that can be used to make decisions. Crypto in general still closely follows real world traditions. Maker’s onchain polls strongly resemble an annual shareholders meeting, although at much higher frequency. Other systems are fully possible.

  5. Every possible method that automates decisions, reduces voting or enables scaling with minimum human involvement should be applauded. It will be most interesting to see what the concept of Instant Access Modules can bring.

Feedback appreciated.