Is a decentralized finance platform truly decentralized when one of its prominent executives takes over a staggering 71% of the governance voting power?
In a surprising turn of events, DeFi platform Curve Finance Founder and CEO Michael Egorov took over 71% of the voting power for the platform’s DAO.
Curve, which is an exchange liquidity pool on Ethereum, requires CRV token holders to lock up their tokens and get ‘voting escrow CRV’ or ‘veCRV’ as a return, which essentially represents the individual’s voting power on the protocol. The time duration of the locked-up funds also plays an important role. The longer the token holders lock up their CRV, the more voting power they have.
According to the platform, the vote locking boost is an incentive for the CRV holders to participate in its DAO governance. While the official platform also stated that Curve “strongly believes in the power of decentralization” and wants the “CRV holders to be involved in the protocol’s future“, the latest move of seizing over two-thirds of the voting power by Egorov came as a bolt out of the blue.
What prompted this move?
The token launch took place on August 14th. Since then, only a handful of holders have actually locked their CRV tokens for voting. This left a great deal of voting power in the hands of a few addresses.
According to Egorov, a little less than 7% of the roughly 10 million CRV in circulation, were locked in for voting which implied that there were a few individuals who were actually participating in Curve’s governance DAO. With an enormous amount of voting power sitting idle, it was an easy target for an address controlled by Yearn.finance, which happens to be Curve liquidity pool, to acquire 58% of the voting power.
In reaction to this, Egorov locked up 621,860 CRV tokens, much more than he initially intended. What was even more damaging was that he set a time period for 4 years. While Egorov asserted that he “over-reacted”, it was already too late.
Following this mayhem, Yearn.Finance’s Founder Andre Cronje tweeted,
“Quick CRV <> veCRV required to beat 600k veCRV; Assuming people don’t do 4 year lockups, and only do 1 week lockups; You only need to lockup to 150,000,000 CRV to decrease the founder power to 50%.”
Despite the uproar among the community members, Curve remained optimistic about evening up the voting power in the coming days. Along the same line, it noted,
“While formal voting power is skewed (hopefully not for long) – use that power to vote in accordance with the community soft-vote (similar to governance polls in Synthetix) for that part of voting power.”